Institutional Arrangements for Ecosystem Services with Global Benefits: GEF

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Institutional Arrangements for Ecosystem Services
with Global Benefits GEF
Presentation by André Aquino Global
Environmental Facility (GEF) University of
Maryland School of Public Policy
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Global demand for Environmental Services

• Problem Local payments may not be enough to
  finance the reservation price for generating
  ES.
• It may also not be fair, since ES with global
  benefits are not paid for (free riders).
• Institutions should work at the level of the
  problem. Nevertheless Inexistence of global
  institutions to channel flow of payments to ES.
• Willingness to pay exists and can be measured by
  donations to environmental NGOs. It could also
  be increased.

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Challenges

• Need for flow of payment global markets for ES.
• Ongoing discussions about definition and
  measurement of global environmental benefits.
• Attribution problem How to link behavior change
  and ES?
• Possible tools to induce WTP in developed
  countries incentives for voluntary donations,
  tax breaks, awareness raising, etc.)

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Global Environmental Facility (GEF)

• Mechanism to provide new and additional funding
  to meet the agreed incremental costs of securing
  global environmental benefits.
• Focus on Global Environmental Benefits
• GEF orientation from MEA (CBD, UNFCCC, UNCCD
  and Stockholm Convention) and Council.
• Focal Areas BD, CC, IW, LD, POP.
• Project-based funding ? FSPs, MSPs, Enabling
  Activities and Small grants program.
• Implementing Agencies 10 (WB, UNDP, UNEP, FAO,
  IFAD, UNIDO, IADB, ADB, AfDB, EBRD)
• Budget Around US4 billion for next 4 years
  (GEF 4). Approved by Council.

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GEF Current Changes

• Resource Allocation Framework RAF (in BD and
  CC). GEB and Performance Indexes.
• New project Cycle being discussed at present
  (Joint Evaluation of Activity Cycle and
  Modalities - GEF EO 2006).
• Incremental Cost requirements being revised (IC
  Evaluation GEF EO 2006).
• New strategies for Focal Areas (including
  discussion of PES).

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GEF and PES

• GEF has funded over 30 PES projects (Ecomarkets I
  and II, Silvopastoril, El Salvador and Mexico
  PES, Kenya, SA, etc.)
• Current study with FAO Interest in role of
  Private Sector in conservation
• Role GEF could play in PES Short-term
• Financing initial costs of establishing a PES.
  Restrictions project has to be in GEF priority
  areas, within RAF restrictions, endorsed by
  national government and must go through the GEF
  Project Cycle.
• Providing upfront funds for setting up a
  conservation fund that can later pay for ES
  (FUNBIO, RedLAC, etc.).
• One of the few sources of funding for
  biodiversity conservation.
• It may fund studies (through a global MSP, e.g.).
  UNDP leading such an initiative.

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GEF and PES (II)

• Role GEF could play in PES Long-term
• The GEF may lead a long-term discussion between
  countries providing global benefit services and
  countries demanding those services to set up a
  global system of PES.
• For Discussion
• GEF is seen worldwide as a funding source and not
  as paying for global environmental services. No
  flow of .
• Could GEF have a more active role in channeling
  demand for ES with global benefits in developed
  countries?
• Should the GEF have a CDM-like operation, i.e.,
  paying for GEB directly measured and observed
  (critical problem how to measure GEB)
• How to harmonize the global markets for ES (CDM,
  voluntary carbon markets) so that bundled
  services can be marketed? (to avoid the problem
  of lack of additionality/incrementality).

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Conclusion

• Need for global flows of payment as long as
  service is provided, it must be paid.
• GEF is the existing global institution that could
  brige the inexistence of market for GEB, along
  with carbon markets.
• Developing countries should start discussion at
  GEF Council and other international fora.
• Need for research in valuing GEB, especially BD.
• WIndow of opportunity
• Changes in GEF.
• Global discussion about PES has gained momentum
  (especially linked to climate change discussion).
• Post-Kyoto discussions.
• Discussion on avoided deforestation.

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Thank You!

• André Aquino adeaquino_at_worldbank.org

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Local institutional arrangements

• Role of the government
• Setting regulations (which can create demand for
  services)
• Defining property rights and enforcing them
• Directly buying and/or providing services
• Setting up institutions to make payments
  (FONAFIFO)
• Coordinate buyers and sellers to reduce
  transaction costs
• What else should government do?
• How could government promote demand for ecosystem
  services from citizens and private sector?
• In LAC are the governments in the region ready
  to take up that role?
• What are the main challenges?

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Local Institutional Arrangements (II)

• Role of NGOs
• Intermediary in market transactions (organize
  service buyers and providers)
• Monitoring of ecosystem services
• Reducing transaction costs
• What else could they do?

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Local Institutional Arrangements (III)

• Role of the private sector
• Demand for ecosystem services
• Providing credit for initial costs landholders
  must incur to provide ecosystem services
• Selling services in international markets (like
  the Chicago Stock Exchange)
• Role in certification.
• How can government create demand for ecosystem
  services from private sector (regulations, e.g.)?

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Local Institutional Arrangements (IV)

• Role of academia
• Science (make explicit and measurable the link
  between ecosystem conservation, service provision
  and human well-being).
• Education and awareness raising
• How to transform complex ES concepts into readily
  applicable policy tools that can be understood by
  decision-makers at all levels (municipal,
  province, national)?
• How to create a common framework to assess and
  value ES across countries? (some work already
  done)

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Local Institutional Arrangements (V)

• Role of donors
• Traditionally they have been providing the funds
  to pay for ecosystem services.
• Involved in many experiences around the world
• GEF incremental cost principle
• Can donor grants be considered payments for ES?
  How to guarantee a constant flow of resources?

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PES Implementation and Transaction Costs

• Implementation -gt Conservation/ restoration
  practices may result in high initial costs
  (reforestation, managements plans, etc.)
• Transaction -gt Setting up monitoring systems,
  negotiating contracts, setting up a financing
  mechanisms, etc.
• How can implementation and transactions costs be
  reduced?
• How to address transaction costs for
  global-benefit ES?

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Ecosystems beyond forests?

• Most of research so far has focused on services
  provided by tropical forests. How about other
  ecosystems?
• Coastal, marine and mangrove ecosystems are
  extremely valuable and research community could
  give input on how PES schemes could protect them.
• Mountain ecosystems, e.g., are very important for
  water services.