Chronically Underfinanced – Mobilization of Additional Resources for Biodiversity,
Workshop, 30 January 2010, Bonn
Payments for Environmental Services
and Ecological Fiscal Transfers:
Examples and perspectives for the future
Irene Ring
Department of Economics, UFZ
Outline
Introduction: TEEB Background
Payments for Environmental Services (PES)
Ecological fiscal transfers (EFT)
International PES, REDD+ and EFT
Conclusions
Irene Ring: PES and EFT – Examples and perspectives
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About TEEB…
About TEEB…
 An “Open Architecture” project… over 500 contributors across
partner institutions, universities, individuals…
 An international and diverse “Community” of economists and
ecologists…
 Makers of “Global Public Goods”: the TEEB Report suite
 Some of our key partners….
Irene Ring: PES and EFT – Examples and perspectives
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3
TEEB D1: TEEB for International and
National Policy Makers
Part I
The need for action
Chapter 1 The global biodiversity crisis and related policy challenge
Chapter 2 Framework and guiding principles for the policy response
Part II Measuring what we manage: information tools for decision-makers
Chapter 3 Strengthening indicators and accounting systems for natural capital
Chapter 4 Integrating ecosystem and biodiversity values into policy assessment
Part III Available solutions: instruments for better stewardship of natural capital
Chapter 5 Rewarding benefits through payments and markets
Chapter 6 Reforming subsidies
Chapter 7 Addressing losses through regulation and pricing
Chapter 8 Recognising the value of protected areas
Chapter 9 Investing in ecological infrastructure
Part IV The road ahead
Chapter 10 Responding to the value of nature
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Available at
www.teebweb.org
Payments for Environmental Services
 A voluntary transaction where a well-defined ecosystem
service (ES) (or land use likely to secure that service) is
‘bought’ by at least one ES buyer from at least one ES
provider, if and only if the ES provider secures ES provision
(conditionality).
(adapted from Wunder 2005)
 Broad range of schemes for various ecosystem services and
land uses in many countries and at different spatial scales:
Public, public-private and private schemes at local, regional
and national levels.
 Important: regulatory baselines and additionality – PES will
always be part of a policy mix!
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PES: Opportunities and Challenges
 PES can help make the value of ES more explicit and thus
modify and potentially reverse incentives for resource users
 Sequence of measures: First, remove perverse subsidies!
 Voluntariness is a key feature – but legal/regulatory
underpinning essential
 Potential to scale up existing PES, e.g. from local initiatives to
national coverage, and to implement them in more countries.
 PES schemes face constraints:
 investment in information and capacity building, e.g., mapping supply
and demand of ES, engaging stakeholders, training administrators
 PES are not appropriate everywhere: need of sufficiently defined
resource tenure and use rights, equal bargaining power between
stakeholders
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PES example: Costa Rica
 Among the first national PES programmes in developing
countries
 Well-cited example, but therefore also well-studied and
permanently improved
 Set up in 1997, it remunerates landholders for providing
carbon sequestration services, hydrological services, for
preserving biodiversity and landscape beauty.
 Source of funds: national (fossil fuel tax) and international
(Norway, World Bank, GEF, KfW) – partly IPES
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Challenge: Land-use transition ’path dependency’’
MACRO
NATIONAL
Forest cover
LANDSCAPE
&
FOREST STAND
Stage 1:
Undisturbed/little
disturbed forests
Stage 2:
Forest frontiers;
high deforestation/
extraction rates.
Stage 3:
Forest mosaics with
stabilised cover;
(low or zero
net deforestation)
Sources: Flores Rodas, 1985; MINAE; FONAFIFO n.y. in Kleinn et al. 2002; CATIE
Irene Ring:
David
PES
Barton,
and EFT
NINA.
– Examples and perspectives
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Stage 4:
FOREST
Increasing forest cover TRANSITION
and quality due to
STAGES
afforestation
and reforestation
Time / Space
Recent review: Some propositions
 PES is more effective in promoting forest recovery than
preventing deforestation (Sanchez-Azofeifa et al. 2003; Arriagada 2008)
 PES is only cost-effective in the last stages of the forest
transition, in a landscape mosaic with land-use specialisation
at forest stand level (García-Fernández et al. 2008)
 Land cover, land use and institutional contexts appropriate for
PES represent a minor part landscape and biodiversity
variation under threat. Protected area buffer zones play a key
role in increasing PES effectiveness (Calvo-Alvarado et al. 2008)
 Carefully check where use of PES is most (cost-)effective!
 Role of spatial targeting
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Another Challenge: Addressing the opportunity cost
of conservation of both private and public actors
 PES literature has largely increased in recent years
 Focus on the opportunity cost of conservation for land users:
local private actors
 Largely missing: Addressing the opportunity cost of
conservation for local public actors
 However, municipalities and local communities are important
actors for implementing conservation policies at the local level
(spatial planning, PAs as development obstacle)
 Ecological fiscal transfers as a suitable instrument:
Include ecological indicators into intergovernmental fiscal
transfers to the local level
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Intergovernmental fiscal transfers
Taxes
Distribution to
state and local levels
Public revenues
e.g., Governmental levels in the German or Brazilian
federal systems:
Federal
States
Local
Fiscal transfers to
the local level
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Fiscal transfer systems to the local level
Substantial source of income for municipalities:
30% in West-Germany, 50% in East-Germany
Fiscal compensation today:
Urban agglomerations
Rural and remote areas
Not considered:
Ecological services involving
spatial externalities: spillover benefits
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Ecological fiscal transfers – Experiences
Portugal: since 2007, under investigation
Brazil: since 1992, has gained positive experiences with
ecological fiscal transfers: ICMS-Ecológico
*
 Compensation for land-use restrictions
 Incentive to create and maintain protected areas
or commonly also called:
Ecological value-added tax
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States with ICMS-E legislation
in Brazil (2008)
Ecological indicators

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“Conservation Units”: officially
registered protected areas for nature
and biodiversity conservation

Watershed protection areas

Solid waste disposal

Sanitation systems and sewage
disposal

Slashing and burning control

Soil protection

Local environmental policy
Paraná: Increase in conservation units
Protected areas
Until 1991
[ha]
Created after
1991 [ha]
Total by 2000
[ha]
Increase
[%]
public
Federal
289.582
50.846
340.428
18
39.859
13.804
53.663
35
1.429
2.740
4.169
192
306.693
905.631
1.212.324
295
RPPN
0
26.124
26.124
Other
0
53.607
53.607
637.563
1.052.752
1.690.315
State
Municipal
private/mixed
APA
Total
APAs (Environmental Protection Areas) can be designated at federal, state or municipal level. RPPNs
(Private Natural Patrimony Reserves)
can be designated at federal or state level.
Source: May et al. 2002; Ring 2008
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165
Fiscal effects of ICMS-E on municipal budget
Paraná:
São Paulo:
Minas Gerais:
1994 – 2000
1994 – 1996
1998 – 2000
50 Mio. R$ annually
23 Mio. R$ annually
15 Mio. R$ annually
06/2001:
R$ 1,00 =
US$ 0,41
Paraná:
 Piraquara (100% water reserves + CUs): local income increased
by 84% until 1995
 São Jorge do Patrocínio (52% CUs): 71% of ICMS transfers based
on CUs (2000)
Minas Gerais:
 Marliéria (55% CUs): 68% of ICMS transfers based on CUs;
Increase of transfers from R$ 36.648 (1995 before ICMS-E) to R$ 811.335
(1996 after implementation of ICMS-E)
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Transfer potential of Brazilian model to Germany
Consideration of conservation areas within the intergovernmental
transfer system to the local level – possible scenarios:
Brazilian model:
Set aside a definite budget in
advance and allocate according to
share of conservation units within
municipal territory
Alternatively:
Consideration of conservation units
as part of the additional approach
to allocate lump-sum transfers
(analogous to area, pupils, etc.)
Corresponding scenarios are calculated at UFZ
for the Free State of Saxony
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KFA Saxony 2002 - Scenario 1:
Lump-sum transfers considering conservation units
Percentage change
of general lump-sum
transfers in Saxony
1 ha
Conservation unit
=
1 inhabitant
GIS: A. Kindler & H. Hartmann
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KFA Saxony 2002 - Scenario 2:
90 Mio. € set aside for conservation
Relative change of
unconditional
conservation transfers
and lump-sum
transfers in Saxony [%]
90 Mio. Euro set
aside for
conservation
(corresponds to
compensation of
road burden)
GIS: A. Kindler & H. Hartmann
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Ecological fiscal transfers: A promising way to go?
1. International transfers (IPES), e.g., Indonesia:
Role of local governments in forest conservation. Need to
combine REDD and fiscal transfers to the local level based on
cost and benefits of forest conservation.
2. National scale, e.g., Portugal, communal financing law
Since 1 Jan. 2007: introduced Natura 2000 and other
protected areas as indicators for fiscal transfers from the
national level to municipalities.
3. State level, e.g., the ICMS-Ecológico in Brazil,
acknowledging conservation units for redistribution of state
value-added tax revenues to local governments
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Conclusions: Challenges and prospects
 PES
 Transfer and upscaling of successful schemes
 Consider constraints, policy mix and check applicability
 Ecological fiscal transfers
 Adress local governments in their role for biodiversity
conservation and protected area management
 Brazil/Portugal: Transferability of approach to other countries
 International PES and national REDD(+) implementation
 combine biodiversity conservation & climate mitigation policies
 careful checking of co-benefits
 go for broader range of actors and instruments
 do not forget local governments –
role of ecological fiscal transfers!
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