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No. 35 Winter 2001/2002

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NEWS

Innovative Financing Mechanisms forConservation and Sustainable Forest

Management

TABLE OF CONTENTS

Preface 1

Table of Contents 2

Organisations - Programmes 3

• I Introduction 3• II International Financial Institutions and 5 Mechanisms• III Market Mechanisms and Enabling Measures 16• IV Financing Carbon Sequestration Services 28• V Financing Biodiversity Conservation 37• VI Financing Maintenance of Hydrological

Services 41• VII Focus on Sustainable Livelihoods and 47

Poverty Alleviation

Internet Features 56

Funding 57

Other News 58

Publications 66

EnclosedInternational Calendar

Editorial

ETFRN News 35/02

Dear readers,

The development of new financing mechanisms to support sustainable forest management is gaining momentum.Income from ecotourism is reinvested into nature conservation, forest concessions are bought by internationalnature conservation agencies, and local communities receive payment for providing plant samples topharmaceutical companies in search of medicinal substances. A few other examples are debt-for-nature swaps,trust funds for nature conservation, payment for watershed protection and carbon mitigation projects. Theseexperiences represent the search for ways to modify market incentives in such a manner that sustainable forestmanagement becomes more attractive than alternative land uses that are associated to forest conversion ordegradation.

This issue of ETFRN News explores innovative financing mechanisms for conservation and sustainable forestmanagement, whether in conceptual stage, under development, or operational. We define innovative forestfinancing mechanisms as new ways and institutional set-ups to transfer financial resources from actors who arewilling to pay for the generation and maintenance of ecological services, to local actors willing to accept payment,in exchange for sustainable forest management, or for refraining from the use of forest resources. The overviewpresented here is not exhaustive, but it illustrates the large variety in mechanisms; the types of actors involved,the specific contexts for which they were designed and the types of benefits from environmental services they arecapturing.

This newsletter is divided into seven thematic Sections. The subject of the introductory article in Section I is therole of economic valuation of forest environmental services in relation to the development of new mechanisms.Market mechanisms and measures enabling the increase of private investments and use of market-basedinstruments, are dealt with in Section II. Section III is dedicated to international transfer payments and the role ofinternational (financial) institutions in facilitating the development and implementation of innovative financingmechanisms. The specific environmental services that seem to have the best potential for channelling financialresources towards sustainable forest management include carbon sequestration; biodiversity conservation; andhydrological services. Sections IV, V and VI present financing mechanisms based on these specific services. Thecorresponding articles often deal with market-based instruments promoting the development of new greenmarkets. Finally, Section VII investigates the role of financing mechanisms supporting sustainable forestmanagement with regard to sustainable livelihoods and poverty alleviation.

We hope you will find this issue a useful source of information on innovative financing mechanisms for sustainableforest management. The wide range of mechanisms and experiences presented gives an impression of the mosturgent and promising issues being addressed today. Furthermore, we hope this information will be used tocontribute to the further development and wider application of existing mechanisms, and that it will inspireresearchers, politicians, resources managers and other actors to design new ones. If properly designed and putto work, including the crucial participation of local stakeholders, financing mechanisms are expected to play a keyrole in investing into nature’s capital, while at the same time contributing to sustainable livelihoods from the localto the global level.

Pita Verweij, Copernicus Institute, University of Utrecht, The Netherlands

We are grateful to Pita Verweij for editing this issue of the ETFRN News. We also thank Tropenbos Internationalfor the idea to address this fascinating theme, and for the support which allowed Pita Verwij to edit this issue.Please note the themes and deadlines for the next issues on the back cover.

Willemine Brinkman, ETFRN Coordinator

ETFRN Coordination Unitc/o Tropenbos InternationalPO Box 232, 6700 AE WageningenThe NetherlandsTel: +31 317 495516 Fax: +31 317 495521Email: [email protected]://www.etfrn.org/etfrn

Editor: Willemine BrinkmanGuest Editors (this issue): Pita Verweij and Erik

Lammerts van Bueren

Editorial assistance: Jacqui McGrath

Cover illustration: Collage of bank notes depicting forest biodiversity

Idea: Pita VerweijCreation: Dineke Romeijn

Preface

ETFRN News 35/02 1

Early in the year 2000 TropenbosInternational suggested to devote this2001/2002 winter issue of the ETFRNnewsletter to "Innovative financingmechanisms for sustainable management oftropical forests". Tropenbos took greatsatisfaction in compiling and editing thisissue.

With the growing awareness of the value offorest goods and services, the past decadeshave produced numerous concepts andmethods for forest valuation. Though thesemethods have contributed to a betterunderstanding of the societal values of theforests, they have not by themselves causeda major change in the course of actual landuse processes in the tropics, characterised bydeforestation and forest degradation. Thedriving forces behind land use processes aresubsistence and direct financial revenues.These processes can not be curtailed by meretheoretical calculations of forest values. In thefirst place the beneficiaries of these perceivedvalues are often different people andinstitutions from those who actually useforestlands. Secondly valuation must betranslated into actual financing mechanismsthat are in the direct interest of the actualforest users and those institutions receivingindirect financial benefits, such asgovernmental agencies which collect timberlicence fees.

More recently the subject of financing forestgoods and services has become the focus ofdebate in international fora. The translation offorest value estimations into actual financingmechanisms is generally perceived as amajor challenge to contribute to theconservation and wise use of tropical forests.There is a magnitude of different forestvalues. Translation into financing mechanisms maynot be possible for the full array. But efforts

are made all over the world to identify thosevalues that can be captured in financingmechanisms. Various concepts have been developed,others are on the drawing table andpractical experiments on the ground havestarted.

The aim of this issue of ETFRN News is totake stock of what has been achieved andwhat is in the pipeline. The interest in thesubject is reflected in the large number ofinteresting responses to our call for papers.I am pleased to note that the result is adocument presenting a variety ofmechanisms that addresses a good mix offorest values. Also the different stages frominception via research and development toimplementation are represented. Finallythere is more food for thought in the form ofindications of possible directions for futureresearch.

This issue will find its way to numerousreaders all over the world. It will also serveas a background document for the jointTropenbos-ETFRN seminar on ForestValuation and Innovative FinancingMechanisms, March 2002. I am convincedthat the content provides meaningful andstimulating information for all concernedwith the conservation and wise use oftropical forest, in support of sustainabledevelopment and poverty alleviation.

Erik Lammerts van BuerenDirector, Tropenbos International

Organisations - Institutions - ProgrammesList of Articles

2 ETFRN News 35/02 1

PageI INTRODUCTION

Introduction 3Valuation of environmental services in relation to financing mechanisms 3

II INTERNATIONAL FINANCIAL INSTITUTIONS AND MECHANISMS

Introduction 5Payment of environmental services: World Bank experiences 6Forest financing strategies: Inter-American Development Bank 7Review of experiences in Africian Countries 10Global Forest Fund 12The approach of consortium financing 14

III MARKET MECHANISMS AND ENABLING MEASURES

Introduction 16Review of market mechanisms 17Green markets in the Brazilian Amazon 19Biocomercio: a facilitating mechanism for entrepreneurs in Colombia 21National forest policies favouring market mechanisms 23Environmental shares, pilot project in Colombia 25

IV FINANCING CARBON SEQUESTRATION

Introduction 28Financing options under Kyoto and UNFCCC 28CO2 and community forest management 30The social meaning of carbon markets, Costa Rica 33Valuation and payment of carbon services, Cameroon 34

V FINANCING BIODIVERSITY CONSERVATION

Introduction 37Conservation consessions, Conservation International 37Guyana Shield Initiative, purchase of nature, NC-IUCN 39

VI FINANCING MAINTENANCE OF HYDROLOGICAL SERVICES

Introdu0ction 41Voluntary agreements, hydropower generation, Costa Rica 42Reforestation, hydropower generation, Philippines 44Drinking water companies, municipal level, Equador 45

VII FOCUS ON SUSTAINABLE LIVELIHOODS AND POVERTY ALLEVATION

Introduction 47Sustainable livelihoods and integrated watershed management 48Multiple Objective Forest Management and poverty alleviation 51Revolving funds and integrated watershed management, India 53

Organisations - Institutions - Programmes

ETFRN News 35/02 3

I INTRODUCTION

This issue of ETFRN News presentsexamples of how in different countries andcontexts, experiments are taking place withthe development of innovative financingmechanisms aimed at the valuation of singleor multiple ecological services. Theintroductory article below focuses on therelation between economic valuation andfinancing mechanisms. Other articles dealingwith this relation are those by Bruno Locatelliand Guillaume Lescuyer in Section IV, and byVirginia Reyes and co-authors in Section VI.

Capturing the value of forestenvironmental services into financingmechanisms

By Pita Verweij

Several decades of intensive research ontropical forest ecosystems have generated awealth of information about their values andfunctions. Economic valuation of forests hascontributed to this knowledge, throughassignment of qualitative and quantitativevalues to its goods and services. Besidesproducing goods for human consumptioncorresponding to direct use values, forestsfulfil a range of regulation functions. Forestecosystems play a key role in the regulationof climate, nutrient and energy flows,hydrological cycles, erosion andsedimentation processes, and natural hazardmitigation. Indirect use values of forests areclosely related to these regulation functionsand also include value for recreation. Aspecial category of use value is option value,which is related to potential future uses.Examples of non-use values of tropical forestsare the existence value or ‘intrinsic’ value ofoccurring species, the information value of

biodiversity to scientists, aesthetic andsocio-cultural values. For the realisation ofvalues outside the direct use category,markets are mostly absent or poorlydeveloped.

Accounting for non-market valuesAlthough among scientists and politiciansthere is increasing awareness that theoverall value of forests to mankind ismostly underestimated, this knowledge hashardly led to sustainable use andconservation of tropical forests. Sustainableforest uses have in most cases beeninsufficiently attractive from the economicpoint of view. Commercial timberexploitation, oil palm plantations, andlivestock production are held responsiblefor the continuously high rate ofdeforestation. The financial profitability ofalternative uses should therefore increase.A common assumption is that if non-marketvalues of forests (indirect and non-usevalues) would be adequately accounted forand captured into financing mechanisms,this could promote sustainable forestmanagement. The question however is, towhat extent economic valuation canactually be used as a basis for thedevelopment of operational financingmechanisms. How can theory be put intopractice?

Market prices of forest goods andservicesSeveral monetary valuation methods suchas cost-benefit analysis are based onmarket prices and related proxy variables.These methods are therefore appropriate toevaluate direct use values of those forestresources that are traded on existingmarkets. For timber and fish for example,(local) markets are often well developed.When direct use values are not realised,this is frequently related to open accessresources or poorly defined property or use


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rights. In those situations, timber and non-timber forest products are often exploited atrates that are ecologically unsustainable,leading to the rapid decrease of the resourcebase and its corresponding value.

Limitations of cost-benefit analysesFor cost-benefit analyses based on marketprices, an important limitation is that mostenvironmental goods are not traded inmarkets, so their economic value is notrevealed in market prices. Another type ofcriticism on both methodology and outcomesrefers to a variety of market imperfections.Environmental costs are hardly internalised inthe establishment of market prices. Adversegovernment subsidies that promoteunsustainable land use practices tend todistort markets and the same holds true fortrade barriers. A lack of information can alsocontribute to the inadequate functioning ofmarkets, resulting in markets that lag behindthe possibility of profitable and sustainableproduction of goods and services.

Furthermore, outcomes of cost-benefitanalyses are very much dependent onchoices regarding the time horizon andapplied interest rate. How can the costs ofcurrent carbon sink projects be compared withtheir benefits that will extend over centuries?Future interest rates cannot be assumed toremain fixed. Newell & Pizer (2000) showedthat including the effect of interest rateuncertainty could raise valuation outcomes byas much as 95% relative to conventionaldiscounting at a constant rate.

Contingent valuationFor the assessment of indirect values, non-use values and option values, different typesof valuation methods are required. Thecontingent valuation method is frequentlyused to assess people’s willingness to pay forthe conservation of nature areas, oralternatively, the willingness to accept

negative impacts on the natural resources.Contingent valuation is the method mostcommonly used to elicit quantitativeinformation on aesthetic, ethical andspiritual benefits, but the method as such israther controversial. Because validation ofwillingness to pay is hardly possible interms of real payments, the subjectivity ofthese inventories is criticised, as is the casefor its strong dependency on contextualfactors.

Innovative financing mechanismsThe realisation of non-market valuesrelated to forest environmental servicesrequires new financing mechanisms thatare additional to the more traditional marketmechanisms based on direct use values.Innovative forest financing mechanismsrepresent new ways and institutional set-ups to transfer financial resources fromactors who are willing to pay for thegeneration and maintenance of ecologicalservices to local actors willing to acceptpayment, in exchange for sustainable forestmanagement or for refraining from the useof forest resources. A complicating factor isthat the costs of maintaining forestenvironmental services are generally borneby few, while the benefits accrue to a widevariety of stakeholders at different levels. Ifproperly set-up, innovative financingmechanisms have the potential to increasethe monetary value of forests, thusproviding sustainable forest managementalternatives to local communities.

Valuation and land use decisionsA challenge for the future will be to linkobjectives of biodiversity conservation andlocal development to the generation ofadditional ecological services. The land usesystems involved are key elements inachieving this. Those forest managementsystems that are able to fulfil a range offunctions, and thus generate a variety of


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benefits, are expected to be financially morecompetitive in the long run. Existingsustainable management alternatives shouldform an important starting point. In theevaluation of alternative uses and decisionoptions, economic valuation provides policymakers with a useful tool by comparing andmeasuring the various benefits fromalternative (forest) uses.

Participation and financing mechanismsThe actual land users are expected to baseland use decisions on criteria of tangiblefinancial benefits rather than on promisingvaluation outcomes (which might be related topotential economic benefits in the future).Accordingly, development of practicalfinancing mechanisms is considered crucial.Financing mechanisms are often set-up in atop-down fashion. But the success of theirimplementation will depend on the choices oflocal actors to adopt sustainable forestmanagement systems or to contribute toconservation. Therefore, participation of localcommunities in the development of effectivefinancing mechanisms should be ensured.Incentives for sustainable forest managementand conservation can only be effective ifproperty rights are well defined and if landusers are entitled to receive benefits arisingfrom the ecological services they maintain.

Local actors should not only receive economicbenefits in return for their contribution to thepreservation of ecological services, but theirsocio-cultural values and dependency on thenatural resource base of forests forsubsistence should also be taken intoaccount. The forest values as perceived bylocal communities, government institutions,NGOs, private companies, and the globalcommunity should be addressed in theinstitutional set-up of proper financingmechanisms. In this context, valuation has animportant role to play in facilitating soundinvestments into nature’s capital.

Reference:Newell, R.G. & W.A. Pizer, 2000.Discounting the distant future: how muchdo uncertainty rates increase valuations?Resources for the Future Discussion Paper00-45. Resources for the Future,Washington, DC.

Dr. Pita A. VerweijCopernicus InstituteUniversity of UtrechtPadualaan 143584 CH Utrecht, The NetherlandsTel: +31-30-2537605, Fax: +31-30-2537601E-mail: [email protected]

II INTERNATIONAL FINANCIALINSTITUTIONS AND MECHANISMS

This section of the newsletter is dedicatedto financing initiatives at the internationallevel. Two examples of the role played byinternational financial institutions areprovided. Gunars Platais presents theexperiences of the World Bank in promotingthe payment for environmental services inLatin America, by supporting the design andimplementation of related projects. KariKeipi of the Inter-American DevelopmentBank describes the mechanisms of debt-for-nature swaps involving internationalenvironmental NGOs and nationalgovernments, and green venture capitalfunds. Other examples of financingmechanisms, in which international natureconservation organisations are involved, aregiven in Section V (Financing biodiversityconservation). Adrian Whiteman presentsthe findings of an FAO project aimed atcollecting and exchanging experiences fromdifferent countries of the African continent.Maharaj Muthoo proposes the set-up of anew international fund, the Global ForestFund. Finally, Barin Ganguli advocates the


ETFRN News 35/026

approach of consortium financing as a co-operative effort of international fundinginstitutions aimed at sustainable forestmanagement.

Current work on environmentalservices at the World Bank

By Gunars Platais

Environmental services originate in naturalassets (soil, water, plants, other livingorganisms and the atmosphere) providingmankind with economic, financial, ecologicaland cultural benefits. More often than notthese benefits are taken for granted. Thehydrological services provided by forests,such as clean and regulated water flow, andreduced sedimentation, for example, are onlynoted when natural disasters, flooding,siltation of reservoirs and scarcity of wateroccur as a result of the removal of forestcover.

That such services should be lost despite theirvalue is easy to understand: land userstypically receive no compensation for theservices their land generates for others, andconsequently do not take them into account inmaking land-use decisions. Recognition ofthis problem has led to efforts to developsystems in which land users are compensatedfor the environmental services they generate(Pagiola, 2000). This typically would createadditional income streams for land users whoare often poor and would make benefits ofenvironmental and natural resources explicit.The World Bank is assisting various countriesin this endeavor. Thus far this work is mostlyfocused on Latin America although initiativesin other regions are currently being explored.

Costa Rica has the most advanced system ofpayments for environmental services. Landusers who protect natural forest or reforest

their land receive payments of about US$50 per hectare per year. These paymentsare financed from energy taxes, the sale ofcarbon offsets, and the internationaldonations for biodiversity conservation.

In Ecuador, municipal authorities in Quito,Cuenca and Pimampiro, recognizing theenvironmental services provided bysurrounding ecosystems are allocating partof their revenues to financing protectionactivities in the watersheds from which theyreceive drinking water (see Hofstede andAlbán in this issue). The World Bank isassisting the government in the preparationof a project on payments for environmentalservices from private lands. The project isdesigned to work on different ecosystemsand is expected to provide input to thefurther development of other such initiativesin the region.

El Salvador, which recently experienced thedisastrous effects of Hurricane Mitch andseveral earthquakes demonstrated theimportance of integrating natural resourcesmanagement into the decision makingprocess. The World Bank is assisting thecountry in the design of a project whoseobjectives are to enhance and protect theenvironmental services generated by ElSalvador's natural ecosystems andconserve the globally significant biodiversitythey contain, through the development of asystem of payments for environmentalservices and the consolidation, expansion,and restoration of natural protected areas.

In Brazil, the Prototype Carbon Fund issupporting an innovative mechanismthrough which biodiversity conservationbenefits are expected. The Plantargreenhouse gas emission reduction projectis expected to enhance biodiversityconservation in inexpensive, quantifiableways, providing an additional benefit to


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project investors. The Plantar properties thatwill produce charcoal for pig iron smeltingwith new plantations of high-productivity,clonal Eucalyptus stands, also supportcerrado savannas in various stages ofrecovery. The global importance of cerradoecosystems is high. Plantar’s most importantcontribution to biodiversity conservation is itsexisting system of fire surveillance andcontrol, which is allowing cerrado remnantson its properties—and perhaps onneighboring properties—to partially recovertheir original plant and animal composition(Nepstad 2001).

Gunars Platais PhDSr. Environmental EconomistEnvironment Department, World Bank1818 H StreetNW. Washington D.C. 20433 USATel.: +202-473-2627, Fax: +202-522-1142E-mail: [email protected]://worldbank.org/biodiversity

References: Hofstede, R. & M. Albán.Drinking watercompanies, municipal level, Equador 2002.ETFRN News 35

Nepstad, D., 2001. Biodiversity benefits of thePlantar Fuel Substitution Project. PrototypeCarbon Fund internal mission report.Washington D.C.

Pagiola, S., 2000. Environment Matters.World Bank. Washington D.C. http://www-esd.worldbank.org/envmat/http

Innovative forest financing in LatinAmerica 1

By Kari Keipi

Forestry can be a profitable business inLatin America. This is evident in theincreasing flows of internationalinvestments in the forestry sector of theregion. In looking at the profit issue, thequestion of time horizon is of utmostimportance. The time frames forsustainable forest practices are often longerthan for other types of investments, andaffect their relative profitability comparedwith other land uses. Yet the returns on thistype of investment accrue much morebroadly than solely to the private investor’spocket book. The returns also accumulatein the form of ecological and environmentalbenefits to local, regional and globalsocieties.

Many types of investment strategies involvethe public sector, the internationalcommunity and various public/privatepartnerships. This article focuses on twomechanisms: debt swaps used mostly atnational level and private sector investmentvia venture capital funds for individualcompanies.

Debt related mechanismsIn certain cases, a debt situation can beused by a nation to leverage financialresources for conservation investments. Forinstance, the debt can be bought at adiscount on secondary markets by a thirdparty (usually an environmental NGO) andbe swapped with the debtor government forconservation activities. It is also possiblefor the creditor government to agree toforgive or exchange the debt (at a discount)in return for local currency to be used inconservation. This is known as a “debt buyback” or “debt forgiveness”. Since the firstdebt for nature swap in 1987, some US$1billion has been leveraged at global level forconservation. Bayon et al. (2000) list 26debt swap operations with an average face


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value of US$ 4.3 million in eight countries ofLatin America and the Caribbean (1987-1996). The purchasers were internationalnature conservation organisations orgovernments such as Japan, TheNetherlands, Sweden, The United States, andFinland.

The IDB has participated in one debt-relatedissue, to finance the Ecological ConservationProgram of Mexico City in 1992. TheGovernment of Mexico used a US$100 millionloan to extinguish an outstanding foreign debtby redeeming its long-term bonds in thesecondary market. These bonds were sold ata discount, which in this case is 82.5% of facevalue. Hence, for the amount loaned by theBank, the borrower could retire US$ 121million of outstanding long-term foreign debt.All proceeds of the transaction and anadditional US$100 million of local counterpartfinancing were used for the funding of theMexico City Ecological ConservationProgram. The key activities were investmentin urban trees and park management in orderto reduce the negative environmental impactsof urban sprawl and air pollution.

Green businesses and certificationThe past ten years have seen the creation ofcompanies with missions favouring bothbusiness and the environment. An increasingnumber of business leaders now agree thatthe environment (and its problems) can belooked upon as one of the most importantcommercial opportunities of the comingdecades. In order to support the developmentof green businesses, appropriate regulatoryframeworks should be in place and newfinancial instruments are to be developed.This will be especially important when itrelates to innovative small and medium-sizedbiodiversity-based enterprises operating indeveloping countries, because the collectiveimpact of these enterprises on the economy -and on the global environment - is expected to

be huge.

In this context, certification systems suchas those for timber and organic productsare crucial. Certification often allowsenvironmentally friendly products to be soldat a premium. The so-called “green trade”that certification promotes helps pay for theadded cost of sustainable productionmethods and improves potential investorreturns. Increasing demand for theseproducts has helped establish venturecapital financing for the firms involved intheir production and trade.

Venture capital fundsA way of addressing the special needs ofgreen businesses is through equity orquasi-equity investments via venture capitalfunds or sector investment funds. Liketraditional venture capital funds, these toolsare designed to provide capital in return forequity or quasi-equity positions inpromising nature-based businesses. Whilegreen venture capital funds can be high-risk/high-return operations, they can alsoserve to provide much needed capital andbusiness expertise to small conservationbased enterprises. Two recent examples ofventure capital funds promotingconservation and the sustainable use ofbiodiversity are the regional Latin AmericanTerra Capital Fund and the CentralAmerican EcoEnterprises Fund. Both arepartially financed by the MultilateralInvestment Fund (MIF) of the Inter-American Development Bank.

These funds are pioneering initiativesdesigned to experiment with the role thatventure capital can play in supportingbiodiversity conservation. Depending ontheir success and profitability, they mayhelp stimulate similar undertakings in theregion. The two initiatives are also mutuallysupporting. Whereas the EcoEnterprises


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Fund will focus on start-up ventures, whichtend to be smaller, riskier and more difficulttransactions, Terra Capital Fund will probablyend up working with larger projects. Thismeans that projects started by EcoEnterprisesmay eventually “graduate” into support fromTerra Capital Fund.

Elements to increase forest financingThe demand for financing largely depends onexpected profitability. Consequently, it shouldbe clearly shown how forestry sectoroperations could be made profitable andcompetitive with other sectors. The purpose isnot to create new direct subsidies throughlower interest rates and other softer financingterms. Neither is the goal to establishexpectations of lower profitabilityrequirements for these investments but todirect the financing to areas with high levelsof private and socio-economic profitability.Because of the strong role of positiveexternalities, which are present in many forestinvestments, there is a need to broaden theview of profitability assessments beyond thetraditional timber management investments.

Other key measures to induce private sectorinvestments in forestry are related to reducingbarriers to sustainable forestry due toinadequate policy frameworks. Nationalpolicies and legislation need to provide aninternationally competitive and conducivebusiness environment. Secure land tenure isfundamental but tax reforms and reducingunnecessary regulations and bureaucracy arealso important issues in many countries of theregion. However, a conducive businessenvironment does not mean laissez-faire.Adequate forest management standards needto be in place and enforced to ensuresustainability.

The forest sector's capability for self-financingis significant, but the potential is far frombeing reached due to the undervaluation of

forest resources. Private sector operationscan range from timber production to non-timber forest products, ecotourism, andproducing various services (such aswatershed protection and prevention ofnatural disasters). Emerging new financinginstruments in support of the trade ofbenefits from forest environmental serviceshave unexplored potential. The funding roleof businesses in the private sector shouldbe enhanced through innovative financinginstruments, two of which have beenpresented in this article. New privatesources and mechanisms are needed aspublic sector funding is falling short of thefinancing demands for SFM andconservation.

Bayon, R., S. Lovink & W. Veening, 2000.Financing biodiversity conservation.Sustainable Development Department,ENV-134. IDB, Washington, D.C.

A full reference list can be obtained fromthe author:

Kari Keipi Ph.D.Senior Natural Resource SpecialistEnvironment DivisionThe Inter-American Development Bank(IDB)1300 New York Avenue, NWWashington, DC 20577, USATel.: +202-623-1939, Fax: +202-623-1786 E-mail: [email protected]

1The opinions expressed in this article do not necessarilyreflect the official position of the Inter-American DevelopmentBank.


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Fiscal policies in support of the forestrysector in Africa

By Adrian Whiteman

As part of an EC-FAO Project on sustainableforest management in Africa, FAO is workingwith African countries to examine the effect offiscal policies on the implementation ofsustainable forest management. Twenty-eightcountries have participated in this project sofar and produced reports on their forestrevenue systems and government expenditurein the forestry sector. In total, these reportscover most of the African countries withsignificant forest resources. As part of theirreports, authors were asked to examineissues such as: the effects of their forestrevenue systems on sustainable forestmanagement; the effects on forestry of fiscalpolicies in other sectors; and innovativesources of finance for sustainable forestmanagement.

Current status of innovative financingThe country reports produced for the projectrevealed that innovative or new sources offinance to support investment in the forestrysector are currently not very well developed inAfrica. However, a few countries did reportsome innovative mechanisms that they havebeen exploring. In Africa, the main sources offinance for forestry administrations can becategorized as: charges levied on the majorforest products and services; the state budgetallocation to the forestry administration; anddonor grants and loans for forestry projects.There is no precise definition of innovativefinancing, but this can be broadly describedas any mechanism by which the forestryadministration attracts new sources ofinvestment in forest management outside ofthese traditional channels. Three mainsources of innovative financing for forestryadministrations were identified: revenues from

new types of forest products and services;charges collected from other sectors; andnew sources of public and privateinvestment.

New types of forest products andservices It is generally accepted that forests producea wide range of goods and services, butthat markets do not exist for many of theseoutputs. Attempts have been made in anumber of countries to try to developmarkets for some of these outputs, butprogress in Africa has been limited to date.This approach tends to work best where theconsumers of these products or servicescan be clearly identified and an agreedvalue or price for the output can beestablished.

In terms of revenues from new types ofproducts and services, the forestryadministration in Malawi has started to rentunused forest workers houses to forestvisitors. In Tanzania, forest land can beleased for a wide range of commercialactivities (such as telecommunicationfacilities, mineral water extraction facilities,hydropower and large-scale irrigationfacilities). Nearly all other African countriesonly collect forest revenue from traditionalwood and non-wood forest products andservices. The collection of charges fromecotourism activities is quite common in anumber of countries (for example inEthiopia, Burundi and Niger), but therevenue from these activities is mostly verysmall and it is questionable whether thiscan be considered as an "innovative"source of finance.

Charges collected from other sectors Some of the non-market outputs fromforests are more general and it is notpossible to identify precisely who benefitsfrom these outputs or to establish markets


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for them. An alternative to trying to charge forthese outputs individually is to collect chargesin the sector that benefits from the forestrysector and to transfer this revenue to theforestry administration.

An example of this is provided by BurkinaFaso, where there is a regulation that statesthat 3% of the revenue collected from taxeson tobacco, matches, petrol and oil should beput into the Forestry Equipment Fund.However, the report from Burkina Faso notesthat this regulation has not beenimplemented. There is also a proposal in TheSeychelles that tourists would have to buy a"Gold Card" for US$ 100 when they enter thecountry. The card would be valid for life andwould allow them to enter recreation sites(including forests) for free. The revenue suchgenerated would be used to supportmanagement activities at these sites. Otherthan these two examples, all of the othercountries only seem to collect revenue fromthe forestry sector.

New public and private sources ofinvestmentThe two examples above have described newtypes of revenue. Another form of innovativefinancing is to encourage new types ofinvestors into the forestry sector. Forexample, partnerships can be developedbetween the state and the private-sector ornon-governmental organisations (NGOs) toinvest in forests for benefits other thancommercial timber production (e.g.conservation, recreation or water catchmentprotection). In the commercial sector, thereare new types of investors who are looking foropportunities to invest in environmentallyfriendly wood production. In addition, thepriorities of donors are changing graduallyover time. Funding for traditional forestryprojects is declining as donors focus theirattention on broader environmental concernsand poverty reduction. The forestry sector can

contribute to these programmes, butforesters must develop new and innovativetypes of projects that will attract suchfunds.

The country reports do not mention anymechanisms to attract new types of privateinvestment in forestry. However, there aresome examples of new types of fundingpartnerships in countries, such as forestparks that are managed with the support ofinternational NGOs (e.g. ConservationInternational’s work with local counterpartsin Kakum National Park in Ghana). Ifbroader revenue-sharing and joint forestmanagement with local communities isconsidered as an innovative source offinance, several African countries haveeither already implemented such schemes(Niger for example) or are planning to do so(Zambia) and many of the country reportsdescribed such schemes. A few countrieshave obtained funding from majorinternational environmental funds, such asthe Global Environmental Facility (GEF),but most foreign assistance to the forestrysector still comes in the form of loans andgrants for traditional forestry projects.

Regional workshop in Abuja, NigeriaIn November 2001, countries discussedhow they could improve the financing ofsustainable forest management at atechnical workshop on fiscal policies andthe forestry sector in Abuja, Nigeria.Amongst other topics, the potential forinnovative financing mechanisms in theforestry sector in the region was examinedand countries produced some ideas abouthow this might be developed further.Countries discussed the potential todevelop new sources of finance, theconstraints that they might face and thesorts of technical assistance that might behelpful.


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Countries suggested that the following newsources of finance might have the mostpotential: charges on non-wood forestproducts (e.g. bee-keeping, fruit, traditionalproducts), charges on non-forest uses offorest land (livestock grazing, ecotourism andg e n e r a l t o u r i s m d e v e l o p m e n t ) ,bioprospecting, carbon sequestration,watershed protection, and debt-for-natureswaps. Another interesting suggestion wasthat taxes might be levied from consumers offorest products rather than producers.Countries noted that most of the barriers tosuch developments were likely to be politicalor institutional (e.g. conflicts of interest,uncertainty over land tenure, lack of politicalsupport) rather than technical. In terms ofsupport, countries felt that assistance toovercome some of these problems would bemost useful in the form of training and localand international networking to shareexperiences and learn from each other. Theserecommendations will be followed-up by FAOin selected countries in the current year.

Further information can be found under "Planning andStatistics" at:http://www.fao.org/forestry/fo/subjects/subj-e.stm, orcan be obtained from:

Adrian WhitemanFAO, Room D423Via Terme di Caracalla00100 Roma, ItalyTel: +39-06-570-55055, Fax: +39-06-570-55137E-mail: [email protected]

Global Forest Fund to combattropical deforestation and ruralpoverty

By Maharaj Muthoo

The Millennium Summit has resolved "tointensify our collective efforts for themanagement, conservation and sustainabledevelopment of all types of forests". Of allthe forests that continue to be lostirrevocably are those in the tropics -at therate of over ten million hectares annually,i.e. an area slightly larger than the size ofPortugal.

One of the challenges facing the worldcommunity thus is to combat tropicaldeforestation and the concomitant loss ofthe earth's richest biodiversity resource,and to create mechanisms for thesustainable management and conservationof the remaining forests in the tropicalcountries. Most of these countries arehowever beleaguered by poverty, disparitiesand debt. For example, 27 countries thatbetween them account for 97 percent of theremaining tropical forests owe some US$670,000 million. The burden of debtservicing and repayments not only pre-empts any opportunity for investment inforest conservation, but the forest is seenas a source of green gold to deal withtoday's pressing plight. Not only do weneed a global forest funding mechanism toembody debt-for-nature swaps, but also toadopt sector-wide approaches (SWAps) forharmonisation and donor co-operation vis-à-vis the priority requirements of the needydeveloping countries.

Needs of forest dependent peopleIn forest dependent communities in theSouth, there are about 500 million poorest-of-the poor with an income of less than a


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dollar a day. The people living in and aroundthe forests include nomads, tribal people,indigenous groups, small entrepreneurs,shifting cultivators, pastoralists, and joblessand landless rural people. They are amongthe most powerless and disenfranchised, andoften witnessing unsustainable logging withalmost no stake in the forest sustaining theirlives. They use four fifths of wood harvestedfor fuelwood, without having access to othersources of energy. Forest dependentcommunities are vulnerable to violence,disease, hunger and ignorance, and comprisea large number of ecological and economicrefugees.

Sustainable livelihoodsResources are lacking in the tropicaldeveloping countries to promote sustainablelivelihoods for the landless and joblessmillions eking out their existence from theoverexploitation of non-timber forest products,overgrazing and shifting cultivation in forestclearings. Concerted international assistanceis warranted for the measures that they mustinstall to aid and empower local communitiesand to break the vicious circle of deforestationand destitution. This is also needed to createconditions which motivate and compensatedeveloping countries for the protection of highconservation value forests, and for managingtree cover to promote carbon sequestrationand mitigate climate change.

It must be recognised that povertyeradication, good governance and sustainableforest management are mutually dependentand reinforcing. This gives clues to innovativefinancing mechanisms, which need not berestricted to forestry issues per se. With aholistic approach to environmental, social andeconomic dimensions of sustainable forestmanagement, financing for tropical forestconservation and development shouldbecome available from the increasinglyimportant poverty alleviation and sustainable

human development programmes. Insupport of this, capacity should be createdfor those concerned with forests andforestry in order to present their proposalsin a cross-sectoral context, both tointernational donors and to the nationalauthorities.

Global Forest FundThis calls for a global vision with localaction in a multidisciplinary manner, withsynergies among institutions andstakeholders concerned about the securityof the planet. A Global Forest Fund (GFF)is proposed to combat tropicaldeforestation and to create an enablingenvironment for the conservation andmanagement of the remaining tropicalforests by simultaneously reducing povertyand vulnerability of the poor forestdependent communities. Resources for theproject portfolio to be financed through GFFcan be drawn not only from theenvironment, poverty reduction and ruraldevelopment programmes of multilateraland bilateral donors and InternationalFinancial Institutions (IFIs), but also fromenlightened foundations, NGOs and othercivil society stakeholders. Collaborativepartnerships and alliances will beestablished with them and other playersinterested in the issues of GFF orcomplementary with its goals andobjectives. Examples are GEF, UNFF,UNCCD, UNDP, UNEP and FAO, orTropenbos, CIFOR, ITTO and ICRAF, orWWF, IUCN, FOE, Greenpeace, SierraClub, Conservation International, ODI,OXFAM, Actionaid, or Novartis, Ford andRockefeller Foundations, or academicinstitutions and centres of excellence inpertinent subject matters, including WRIand WBCSD.

Aid and trade benefitsWith heightened awareness among


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consumers -which the GFF should aim topromote, among other things- about theprevailing unethical trade in tropical forestproducts, about the impact of unscrupulouslogging, mining and oil exploration, andinappropriate infrastructure projects in fragiletropical forests, GFF should be attractive tothe private sector in view of the emergingethos of corporate social responsibility. Thismay be linked to certification as a market toolfor sound forest management, importantlynoting that foreign direct investment indeveloping countries and emergingeconomies is more than ten times that of theODA, which has been hovering at aroundUS$55 billion. In view of the recent resolve ofthe international coalition, it is hopednevertheless that the donor fatigue of thenineties may soon be replaced by areinvigorated flow of aid and trade forbenefiting the poor in order to stemdisparities, to build an overarching solidarityand to safeguard the society.

It is proposed to launch the Fund at theJohannesburg World Summit for SustainableDevelopment with some commitmentsalready obtained for a revolving fund of US$one billion.

Dr. Maharaj Muthoo(Former Executive Director FSC)Via Teosebio 44Casalpalocco00124 Rome, ItalyTel.: + 39-335-634 5919E-mail: [email protected]

Consortium funding aimed atsustainable forest management

By Barin N. Ganguli 1

Relative to Overseas DevelopmentAssistance (ODA) as it is currentlydelivered, achievement of “new andadditional financial resources” for forestry ingeneral and sustainable forestmanagement (SFM) in particular will haveto come from the private sector. Aconsortium approach, involving co-operation in funding SFM among publicbilateral and multilateral institutions and theprivate sector (profit and non-profit) is beingproposed as a potential mechanism thatmay deserve systematic effort. Thisconcept was discussed in the ExpertMeeting on Financing SFM in Oslo inJanuary 2001, organised by the UnitedNations Forum on Forestry (UNFF). Thepresent article describes the consortiumapproach as a way to more effectivelymobilise international funds for SFM. Someexamples of successful consortiumarrangements in SFM with particularreference to tropical forest and naturalresources are given. Its advantages anddisadvantages in comparison to singledonor funding are evaluated, and someissues to enable further debate on thesubject are listed.

The consortium approachA consortium in the context of financingSFM can be defined as a broadly inclusiveco-operative effort, among all relevantfunding institutions, aimed at assistingcountries (notably developing countries andcountries with economies in transition) toachieve SFM by leveraging new, additionaland stable funding to enable investment inactivities that hitherto could not beaddressed by (groups of) funding bodies.


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Consortium as a concept for fundinginvestment is not new. Successful consortiahave been formed by multilateraldevelopment banks, bilateral donor agenciesand governments for bridging the financinggap of irrigation projects, natural resourcesdevelopment projects and also in feasibilitystudies of investment projects, in principlewith a commitment to finance the ensuinginvestment projects. However, these consortiaare normally formed ex-post after the projectshave been formulated. Currently, successfulconsortia are being formed to combineresources of the governments, developmentbanks, commercial banks and privateinvestment funds to finance projects oninfrastructure, energy and industries. Inseveral countries of the world, the privatesector has also formed successful consortiumpartnerships for financing oil and gaspipelines.

Examples of consortium fundingThree illustrative examples of successfulconsortium funding of natural resourcesprojects in tropical countries are provided tovalidate the argument:• The Integrated Pulp Mill Project in

Indonesia, with an annual capacity of420,000 tons. The project involved seveninstitutional lenders and 24 commercialbanks in a consortium that provided US$994.37 million out of US$ 1.34 billion,which was the total cost of the project. Theproject was aimed at sustainable harvestfrom plantations; the integration ofbiodiversity preservation aspects in themanagement of the 250,000 ha of forests;and sustainable logging.

• The Coral Reef Rehabilitation andManagement Program (CORMAP) inIndonesia. The preparation of this programhas brought the World Bank, the AsianDevelopment Bank, Global EnvironmentalFacil ity, Australian Agency forInternational Development and Japan

International Co-operation Agency under abroad funding arrangement. The objectiveof the program is to develop a coral reefmanagement system in Indonesia. • Protection and Management of Critical

Wetlands in the Lower Mekong Basin(LMB). This multi-national and multi-donor project preparation for an ensuinginvestment project focuses on twowetlands of regional importance in theLMB. Financing agencies are JapanSpecial Fund through the AsianDevelopment Bank (US$ 1 million), theGovernment of Finland (US$ 0.65million), and Cambodia and Laos (US$0.42 million). The cost of the totalinvestment project may be of themagnitude of US$ 35 million.

Pros and consSeveral advantages of consortium fundingcan be mentioned. If well implemented, theconsortium approach could contribute bothto mobilisation of new and additionalfinancial resources. The magnitude of thechallenge to achieve SFM is overwhelmingfor any one donor. Furthermore, it couldraise the effectiveness of existingmechanisms: the approach is considered apotentially superior alternative ineffectiveness to donors operating “all bythemselves” in development co-operation.Funding agencies, including the privatesector tend to lean towards a limitednumber of aspects of SFM, however SFMrequires a range of skills and capacitiesthat few, if any, development agencies cansingly deploy with any confidence. Finally,donors working separately, each withdifferent calendars and reporting needs,procedural requirements and shiftingpriorities tend to create insupportableburdens upon the beneficiaries.

The disadvantages of this approach arisewhen partners are individually insistent on


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each retaining their prevailing modusoperandi. This makes it difficult to beresponsive in a unified manner. Anotherdisadvantage is that large developmentprojects often pay inadequate attention toenvironmental sustainability and socialaspects. This argument was used byenvironmental organisations in Indonesia tocriticise the Integrated Pulp Mill Project. Thus,a consortium approach does not necessarilyavoid or reduce negative environmental andsocial impacts of large projects.Issues for further deliberationIn order to explore the idea further, thefollowing are considered issues for furtherdeliberation: • Improving understanding of the

consortium approach;• Elaborating working arrangements for

consortium approaches;• Building a constituency for SFM through

the consortium approach for forestry ingeneral: in this way, interest in fundingshould grow;

• Making private sector involvement inSFM a paying proposition so that thispotentially major player can becomeengaged; and

• Ensuring environmental sustainabilityand participation of local communities.

Contact details:

Barin N. GanguliI-1783 Chittranjan ParkNew Delhi-110019, IndiaTel.: +91-11-648-9775 /91-11-641-2947E-mail: [email protected]

1. Former Senior Forestry Specialist, Asian Development Bank,Manila

III MARKET MECHANISMS ANDENABLING MEASURES

This section focuses on marketmechanisms that contribute to payment formultiple environmental services, and policyand other measures that enable or facilitatethem. On the basis of a large number ofcases, Natasha Landell-Mills and co-authors review the experiences with thedevelopment of market mechanisms, andtheir role with regard to poverty alleviation(see also Section VII on sustainablelivelihoods and poverty alleviation). Vag-LanBorges analyses the potential for furtherdevelopment of green markets for non-timber forest products in the BrazilianAmazon. Aurelio Ramos describes theBiocomercio programme, a facilitatingmechanism in support of the developmentof green enterprises in Colombia. JyrkiSalmi who has been involved in theformulation of National Forest Programsand forest sector financing strategies invarious countries, reviews the lessonslearnt in creating enabling environments toincrease private investments and the use ofmarket-based instruments. CarmenzaRobledo describes a pilot project inColombia involving different partners, whichis aimed at the development of the financingmechanism of environmental shares toenhance private investment in sustainableforest management. Finally, Sections IV, Vand VI of this issue also present examplesof market mechanisms, which arerestricted to the delivery of specificenvironmental services.


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Silver bullet or fools' gold?Developing markets for forestenvironmental services and the poor 1

By Natasha Landell-Mills, Ina Porras & JoshuaBishop

Market approaches to environmentalmanagement are increasingly common in allsectors of the economy. Forestry is noexception. As forestry sectors around theworld have opened their doors to the privatesector, governments have been increasinglyattracted to market-based instruments astools for guiding private investment. Of themany instruments available to policy-makers,by far the most ambitious to date is thedevelopment of markets for forestenvironmental services, such as carbonsequestration, biodiversity conservation,watershed protection, and landscape values.Markets are thought to offer an efficientmechanism for promoting and financing forestprotection and sustainable forestmanagement.

Gaps in knowledge on marketdevelopmentHowever, policy-makers’ enthusiasm formarket development is not matched bypractical understanding. Very little guidance isavailable on the mechanics of marketevolution, or on the impacts of markets forhuman welfare. Of particular concern is thelack of knowledge related to what marketcreation means for the poor. This is both amoral and a practical concern, asgovernments are charged not only withprotecting the environment but also reducingpoverty.

By undertaking a global review of emergingmarkets for carbon sequestration, biodiversityconservation, watershed protection andlandscape beauty, a forthcoming review paper

seeks to shed light on five key questionsrelating to market development: • What form do markets take?• Why do markets evolve?• How do markets evolve?• What does market development mean

for human welfare? • What do markets mean for the poor?

In total, 287 cases are reviewed from arange of developed and developingcountries in the Americas, Caribbean,Europe, Africa, Asia and the Pacific. Whileexperiences vary, the review points toseveral key lessons:

Defining commodities is fraughtWhile commodities in existing markets areeasily identified, this is often one of themost challenging aspects of marketcreation. It is also one of the mostimportant steps for determining whether ornot the market will take off and besustained. In the case of environmentalservices, commodities must overcome thehurdles of non-excludability and non-rivalryto make the service marketable. They mustalso move in line with services such thatpayments for the commodity translate intopayments for the service. Achieving thesetwin goals is extremely difficult.

Markets are multi-stakeholder affairs While the private sector tends to be themain player, local NGOs, communities,governments, international NGOs anddonors also play key roles as buyers,sellers, intermediaries and suppliers ofancillary services.

Markets remain immature, butmomentum is growing In the majority of situations markets remainnascent affairs characterised byunsophisticated payment mechanisms, lowlevels of price discovery, high transaction


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costs and thin trading. Yet, the picture ischanging. Growth in pooled transactions hasgiven the market a boost as more and morebuyers come together to spread risks and theemergence of ‘over-the-counter’ tradesreflects a growing confidence amongstsuppliers. Gradually, case-specificnegotiations are being replaced by tradingsystems that seek to promote a greatervolume of payments at lower costs.

Global services do not require globalmarkets The extent of the market depends on thenature of the service and on market design.Given the difficulties of defining propertyrights and regulatory oversight, local levelmarkets for global services may offer the beststarting point for market development.

Markets are nested Markets do not exist in isolation, but aremoulded to fit existing institutionallandscapes. Successful markets often dependon the emergence of supporting regulatoryand co-operative arrangements. Thepromotion of markets without reference totheir broader institutional context is likely tofail.

Market drivers evolveJust as markets develop, the factors drivingtheir emergence alter over time. Whiledemand-side drivers are most closelyassociated with market creation to date (e.g.based on a growing appreciation of benefits,awareness of threats to supply or companypublic relations exercises), suppliers arebecoming increasingly forthright indemanding payment, often supported bygovernment environmental regulations.

Market development takes time and effortA number of steps are involved in establishingpayment mechanisms. Services need to beidentified and clearly linked to forestry

activities that ensure delivery, willingness topay established, commodities defined andthe trading infrastructure set up. Time isalso needed for feedback and gradualimprovement. The process can be long andmay involve setbacks. Market benefits are widely applauded,while costs are poorly recorded Very few thorough assessments of thecosts and benefits of emerging marketsexist. For the most part, marketdescriptions are general, ad hoc and vague.Moreover, because literature tends to bewritten by proponents of markets, there is aheavy emphasis on benefits, and littlecritical analysis of costs.

Markets may or may not benefit the poorThe lack of critical analysis is particularlyprevalent when it comes to impacts for thepoor. There are a number of reasons forconcern. Because the poor often lackproperty rights, they are likely to strugglenot just for a share of business, but theywill have to fight to retain control over, andaccess to, the resources on which theydepend. The poor also lack the requisiteskills and resources to participate inemerging markets. Transaction costs,which are already high, are even higher forpoorer players. Ultimately, however, thepoor lack power. Where poor groups havelittle voice there is a real risk that they aremarginalised from market benefits. Yetrisks that markets will further entrenchexisting inequities must be set againstpossibilities that markets will provide acatalyst for change. By helping poor groupstransform natural capital embodied inforests into financial flows, markets providelocal people with greater flexibility inexploiting their natural assets and help toreduce vulnerability by diversifying incomebase. Guidance on how to ensure marketsenhance rather than detract from, poor


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peoples’ welfare is urgently needed.

As with any desk study, the review isrestricted in what it can achieve by theavailability and quality of written material.Nevertheless, by providing a comprehensivereview of existing material on emergingmarkets, it provides a sound basis for drawingout preliminary insights and identifying gapsfor more detailed investigation.

Natasha Landell-MillsInternational Institute for Environment andDevelopment (IIED)3 Endsleigh St.London, WC1H 0DD United KingdomTel: +44 (0)207 388 2117Fax: +44 (0)207 388 2826Email: [email protected]

1 Based on forthcoming review paper

Market systems for non-timber forestproducts in the Amazon

By Vag-Lan Borges

Since 1996, this research in the Amazontropical rainforest of Brazil has focused on theanalysis of the dynamics of the economy offorest products, particularly non-timber forestproducts (NTFPs), and its institutionalarrangements. During the nineties, foreign aidwas a dominant instrument in financing thelivelihood of forest dwellers and forestmanagement in the Amazon. However, in thesame period the economic and social livingconditions of forest people became worse andthe depletion of forest resources continued.The conclusion of the research is that theinstitutionalisation and strengthening ofmarkets and household economy for the tradein sustainable forest products represents asimpler, cheaper and more efficient way topromote human development, self-reliance,

and biodiversity conservation in theAmazon. This institutionalisation shouldinclude the definition and enforcement ofproperty rights, technological innovation,technical training, standardisation ofprocesses and products, and betterinformation diffusion to reduce marketasymmetries and imperfections.

Economic importance of NTFPsAlthough all theoretical approaches agreeon the high ecological and economic valuesof forests and also on the necessity to planand assure their multiple use, this tacitagreement is not the case for the stricteconomic issue of the NTFPs. On the onehand, neoclassical economists and theirfollowers postulate that non-timberextraction is a primitive and transitoryeconomic activity. According to them, it willgive way to species domestication andlarge-scale cultivation or will be substitutedby similar products, for the reason of itssupply rigidity and increasing shortage inview of demand growth. On the other hand,Brazilian environmentalists recognise theeconomic importance of this kind of forestextraction, which involves about 16% ofrural inhabitants of the Brazilian Amazon,and the low impact and non-exclusivecharacter of this activity. They thereforedefend a new type of governmentalintervention through fiscal and creditsubsidies that privilege this economicsector, thus contributing to the conservationof forest resources. This article presents athird approach for the analysis of this issue,by postulating that the ecologicallyimportant NTFPs are also economicallyviable. Therefore, the better way to financetrade in sustainable forest products is byimplementing and using marketmechanisms and instruments.

Competition by substitute productsOn the basis of time series data of


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production of several NTFPs of the Amazonand field-research evidence, one perceivesthat after the beginning of competition by a‘substitute product’, the production of theNTFP does not finish completely. This meansthat a non-timber product cannot be entirelysubstituted. If substitute products respond toexpectations of some demand segments, thisdoes not hold true for others, thus evidencingthe existence of diverse demand segments.

Within the context of markets, NTFPs havespecific qualities that distinguish them fromsubstitute products, whether cultivated,synthesised or industrially processed.Although supply rigidity of NTFPs implies thesubstitutability for some demand segments,other segments remain able to buy them,since these products respond to marketexpectations of quality, quantity, supplynormality and price. The correspondingmarket segments are the “green markets” andthe “organic markets”. The “green markets”represent the group of consumers who willpay more for products that contribute toconservation and ecological sustainability,whereas the “organic markets” representthose consumers (both firms and individuals)who demand products from native source,with a high genetic variability, and producedwithout using toxic inputs. These two marketsegments are distinct niches that are willing topay more for specific qualities of non-timberproducts, whether or not substitute productsare available. These observations lead to thededuction that for these markets a non-timberproduct does not compete with substitutes.This also implies that if the production of anon-timber product initially falls when thecompetition of a substitute product starts,suppliers can search for specific niches.

Improving market mechanismsThus, within this economic environment, theimprovement and perfecting of markets

networks is the better and most importantstrategy to f inance sustainabledevelopment and forest managementincluding biodiversity conservation. Thisrequires changes in four interrelateddimensions of forest economy: • Improve the flow of information; • Facilitate the spread of technology and

rural credit; • Co-ordinate the design of regulations;

and Assure property rights, landconcessions and tenure.

Poor access to information is an importantbottleneck in the development of the tradein NTFPs. It constrains the capacity ofextractors to obtain optimal prices for theirproducts. Often, rural credit is expensiveand technology does not develop at thenecessary pace. While improvinginformation flow, governmental initiatives toorganise this sector need to promote thecreation and implementation of newtechnologies to improve marketacceptability. New regulations are alsonecessary to ensure that each NTFP attainsacceptable standards of quality and that themanagement of the resource is sustainable.Finally, government must provide securityin the area of property rights, concessionsand tenure over natural resourceallocations.

ConclusionThis theoretical framework has been usedand implemented by programs and projectsfinanced by the Brazilian government andENGO in the Amazon, aimed at promotingrural development and sustainable forestmanagement, based on trade in non-timberforest products. The framework may alsobe a true policy alternative to stimulaterevival of an economic sector that meetsobjectives of income and wellbeing ofextractive populations and internationalexpectations to conserve biodiversity.


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Contact details:Vag-Lan BorgesProf. of Contemporary economy at IESB, andConsultant of Brazilian Government forEnvironment and Development in theAmazoniaQd. 2, Conjunto D 15, Bl. C, Apto. 20573015-020 Sobradinho, DF, BrazilE-mail: [email protected]. http://www.iesb.br

Biocomercio: A path towardssustainable development

By Aurelio Ramos

Colombia is endowed with many of the richestecosystems in the world. The country has ahigh overall species diversity as well as manyendemic species. In biological richness, thecountry is surpassed only by Brazil, a nationseven times the size of Colombia. Thegeographical position and the variety ofecosystems, which include tropicalrainforests, savannahs, wetlands, tropicalislands, Andean forests and high mountaingrasslands, contribute to the country’simmense biological diversity.

Biodiversity lossThis abundance is being lost at a high rate. Ata national scale, more than 400,000 ha areannually deforested. Water supplies are alsobeing contaminated, erosion is threateningthe agricultural productivity and forestconversion is the principal cause of theproblem of biodiversity loss. The cultivation ofillicit crops contributes in an important way tothis negative process, which has become aproblem in about 80% of the departments ofColombia. New economic alternatives need tobe developed in these areas of conflict.

Biocomercio Sostenible at workThe objective of the programme Biocomercio

Sostenible is to create and promotemechanisms that enhance the investmentand trade of products and services derivedfrom the country’s biodiversity, according toecological and social sustainability criteria.Biocomercio Sostenible (“Sustainable Bio-commerce”) works as a facilitatingmechanism that gives commercial andmarket information; it provides technicalassistance to entrepreneurs andcompanies; and supports companies todefine adequate sustainability criteria fortheir production systems. Biocomercio is aprogramme of the Biological ResearchInstitute “Alexander von Humboldt” andoperates in co-ordination with theColombian Ministries of the Environmentand Foreign Trade and the BIOTRADEInitiative of UNCTAD. It is a mechanismthat can be used in areas producing illicitdrugs in order to help the coca growers tofind new economic alternatives. Theproducts and services on whichBiocomercio currently focuses areagricultural products, wood products, non-timber forest products, and ecotourism.

Areas of BiocomercioThe programme is divided into sixareas: 1. Biocomercio Information SystemAn information system has been designedparticularly for entrepreneurs and otherorganisations interested in “bio-businesses.” and is currently availableonline.

2. Entreprise developmentThis area facilitates the creation andconversion of firms that want theirproduction process to meet ecological andsocial sustainability criteria. The area isdivided into three sub-components ofecological, social, and economic principlesand criteria. Special projects include


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incentives to entrepreneurs and firms wishingto apply the sustainability criteria, such as thepartial coverage of technical assistance costs,seed capital investment and soft loans. Fivelocal offices have been created in support ofthis area.

3. Market researchThe area of market research defines andfocuses on products and services that arestrategic for the development of the country.Much of the research is done in response tothe specific needs of enterprises. Theinternational market research is done in co-ordination with Proexport (the TradePromotion Office of Colombia), CBI and theInternational Trade Center OMC/UNCTAD.National market research is developed withlocal universities and experts. Research alsofocuses on topics relevant to Biocomercio,such as intellectual property rights,certification, legislation, sustainability criteria,and available investment tools. The resultsare presented to the public through theinformation system.

4. Pilot projectsPilot projects on topics relevant toBiocomercio are developed together withentrepreneurs.

5. Investment and financial toolsThis area facilitates the access ofentrepreneurs to traditional and newinvestment tools. It has the task of designinga fund and searching for investors in order tohelp entrepreneurs develop their businessplans and obtain seed capital to start thecompany.

6. NetworksTo this area belong different networksoperating in Colombia, each involving morethan 30 institutions. They specialised in a typeof product or service such as non-timberforest products, certified wood, organic

agriculture and ecotourism. Biocomercioworks closely with these networks and triesto enhance their social and ecologicalimpact.

Current projectsThese projects are designed for differentgeographical areas or productive sectors.The following examples of current projectsillustrate the Biocomercio approach.

Na tu ra l i ngred ien ts fo r thepharmaceutical and cosmetics sectorThis is project is developed by CBI,Proexport and the Humboldt Institute. Itsobjective is to assist at least 30 Colombianenterprises in their trade promotionactivities by giving them technicalassistance in biological and socialsustainability criteria, marketing and tradingfacilities, and economic incentives. Sincethe start in February 2001, six enterpriseshave been selected already and areparticipating in the process.

Enterprise development in theColombian Amazon RegionThis project developed by Biotrade-UNCTAD, 12 institutions of BolsaAmazonia Colombia and the HumboldtInstitute, aims to provide technicalassistance to the private and communalenterprises in the Colombian Amazon. Itstarted in January 2001 and 30entrepreneurs have been selected for acapacity building course of three monthsstarting in January 2002. The two bestprojects will be provided with seed capital,while Bolsa Amazonia Colombia willsupport the other projects.

Andes projectThe Humboldt Institute and other nationalinstitutions are developing the Andes


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project, with financial support from GEF, thegovernment of The Netherlands, and severalColombian institutions. It is a six-year projectthat will help to expand the tools developed byBiocomercio in several locations of theColombian Andean Region.

Biocomercio’s national contestCorporación Andina de Fomento (CAF) andthe Humboldt Institute took the initiative toorganise a national contest. Business plansare being developed by more than 100entities. The aim is to give special soft loansto the best three Biocomercio projects. Thewinners will be identified in February 2002.

Aurelio RamosBiocomercioInstituto von HumboldtCalle 37 #8-40, MezanineBogota, Colombia

National forest sector financingstrategies – lessons learnt

By Jyrki Salmi

The IPF(Intergovernmental Panel onForests)/IFF (Intergovernmental Forum onForests) processes identified the NationalForest Programs (nfps) as a major frameworkfor channelling, prioritising and increasingfinancing to the forest sector with specialreference to sustainable forest management(SFM). The International Forest AdvisorsGroup recommended that the nfp exercisesshould include the preparation of a specificforest sector financing strategy. Suchstrategies or related studies have now beenprepared in Vietnam, Malawi, Costa Rica,Tanzania and Guyana. The present articlesummarises the lessons learnt from thesecountry-level exercises. The objective of thearticle is to disseminate these lessons, and toencourage the inclusion of specific financing

strategy elements into ongoing and plannednfp processes in other countries.

National financing strategiesIn the past, the planning of funding ofnational sectoral development programmeswas essentially based on gap analysis.Comparing the quantitative estimates ofresource needs with actual funding levelsidentified funding gaps. ODA was usuallyresorted to fill the gaps, with varyingdegrees of success. With the evolution ofthinking on aid, the international policydialogues on forest-related issues, and thework of different public and privateorganisations, this mechanistic approachhas been questioned. It is progressivelyreplaced by increased emphasis on thecreation of frame conditions conducive toinvestment, based on the qualitativecharacterisation of the needs. The role ofprivate investments, market-basedinstruments, resource ownership and policyreforms is increasingly recognised as entrypoint, often beyond the forest sector itself,which determines the financing of SFM.

These developments led to the emergenceof the concept of financing strategy. Despitesignificant conceptual development, thefinancing issues remain politically sensitive,and the mobilisation of financing and theoperationalisation of financing instrumentstechnically complex. A national financingstrategy is a tool for informed decisionmaking in this regard. It should be linkedwith a nfp process, and needs to becountry-specific and flexible. It identifiesand coordinates interventions from global,regional, national and local levels. The goalof the financing strategy is to raise thenecessary resources for the implementationof a nfp. The objectives are to mobilise newand additional resources, and to useexisting sources and instruments moreefficiently through the creation of enabling


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conditions.

Lessons learntCountry level experience on financingstrategies available from Vietnam, Malawi,Costa Rica, Tanzania and Guyana confirmthe importance of addressing financing issuesat the same time as a national forestprogramme is being formulated. Decliningpublic sector financing to forestry has been ageneral trend in all of these countries, mainlydue to constant budget deficits andsubsequent public sector retrenchment.Similarly, ODA has been declining. Althoughthe information is very scarce, it is estimatedthat the private sector is presently the onlygrowing source of financing for the forestsector. Consequently, the national levelfinancing strategies are focusing on: • increasing the public sector revenue that

can be used for self-financing of publicsector institutions and development ofvarious types of retention schemes;

• improving the efficiency andeffectiveness of ODA by introducingSector Wide Approaches (SWAps),which focus on developing unifiedimplementation mechanisms andfinancing delivery systems;

• improving business environment byremoving barriers for profitable privatesector investments in SFM, and therebyattracting new and additional domesticand foreign investments in the sector;and

• tapping new international mechanismsand instruments such as those linkedwith CDM, CBD, and green ForeignDirect Investment.

VietnamThe main conclusion of the study in Vietnamwas that the government forest financingstrategy has focussed too heavily onsubsidies. Instead, more attention should begiven to removing barriers for investments in

profitable sustainable forestry. Suchbarriers include: (i) unclear and weaktenure rights, (ii) restrictive and controllingenterprise and business developmentpolicies and legislation, (iii) high taxation oneconomic activities, (iv) administratively settimber prices that distort the markets, (v)poorly developed national financing sector,and (vi) non-competitive policies andlegislation regarding the foreign directinvestment and international portfolioinvestments. These issues are presentlybeing developed further under the jointgovernment-multi-donor Forest SectorSupport Program, which can eventuallylead to a Sector Wide Approach (SWAp).

Costa RicaThe Costa Rican case is characterised byvarious schemes and projects based oninnovative instruments (also see Reyes etal., this issue). This has provided a "criticalmass" of information, knowledge andexpertise. Various important instrumentsand mechanisms developed include: (i) thenow dissolved Forest Development Fund,(ii) National Fund for Financing Forestry(FONAFIFO), (iii) INBio support tobiodiversity development through smallenterprises, (iv) the IDB supported CentralAmerican Environmental Fund located inCosta Rica, (v) ecotaxes, and (vi)watershed conservation fees.

MalawiIn Malawi the key recommendationsincluded: (i) introduction of performance-related revenue systems for forestry, (ii)partnerships in forestry, (iii) establishmentof an autonomous forestry entity, (iv)introduction of forest funds, (v) improvingthe pricing and marketing of forestproducts, and (vi) introduction of forestproduct grading and certification.

Tanzania


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In Tanzania the financing study found that theestablishment of a retention scheme had beena major achievement. It enabled the gradualdevelopment of the sectoral self-financing.The study made detailed recommendations inthe following areas: (i) expansion of revenuebase, (ii) improvement of revenue collection,(iii) improvement of forest produce pricingsystem, (iv) promotion of stakeholderinvolvement in domestic private sectorinvestments, (v) increasing foreign directinvestment, and (vi) optimising the use offoreign assistance and increasing theownership. Regarding the last point, the studyproposed the introduction of SWAp, which ispresently being discussed by the governmentand key donors.

GuyanaIn Guyana, the liberalisation of the economyand the removal of trade barriers andobstacles have significantly improved thebusiness environment. Similarly it wasassessed that the Guyana ForestryCommission should be significantlystrengthened. The narrow human resourcebase remains the major bottleneck. Theprivate forest sector has been facingadjustment to open and more competitivebusiness environment, which has been painfulto many companies. On the other hand, thenew situation provides opportunities for wellmanaged companies. The study proposedfurther work on the following topics: (i)concession bidding and auctioning, (ii)performance bonds, (iii) certification of forestsand chain-of-custody certification of products,(iv) micro-financing, (v) public/privatepartnerships, (vi) domestic-foreign jointventures, (vii) clarifying existing propertyrights, and (viii) the establishment of anational forest fund.

ConclusionIn all the above cases, the preparation of afinancing strategy or related study has

contributed towards breaking with thetradition of relying on aid as the onlysolution for improving the sectoralfinancing. A wider selection of solutions isbeing introduced, including various nationalfinancing mechanisms and instruments.This is an important development, whichmay lead towards increasing self-financing.At the same time, the financing strategiesare providing a basis for forest sectorSWAps that are expected to increase alsothe impact of external assistance.

Jyrki SalmiIndufor OyKulmakatu 15 EFIN-00100 HelsinkiFinlandTel: +358-9-6840 1110, Fax: + 358-9-135 2552E-mail: [email protected]

Environmental shares in support ofsustainable forest management inColombia

By Carmenza Robledo A.

Sustainable forest management does notonly imply sustained yield forestry andsustaining a wider array of forest functions,but furthermore a high degree of economicfeasibility and social acceptance. With thischallenge in mind, the Swiss FederalLaboratories for Materials Testing andResearch (EMPA) and the forest group ofthe Worldwide Fund for Nature developeda project idea in 1998 with the aim toexplore options for long-term financing ofsustainable forest management in tropicalregions (Robledo, 2000).

Environmental share-issuing companyAs a result, the project proposes thecreation of a Sustainable Management


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Entity (SME) that operates as anenvironmental share-issuing company. Withinits area of influence, the SME is responsiblefor the conservation of natural forests and forthe sustainable management of degradedforests and forest plantations, as well as forimproving the living conditions of thepopulation. In order to address this goal theSME will implement an integrated financingmethod that combines three financingsources:

• Private investment in EnvironmentalShares;

• income derived from sustainablemanagement of forest goods includingtimber and non-timber forest products;and

• payments for forest services, includingcarbon storage, watershed managementand other forest services such asbiodiversity conservation.

Environmental SharesEnvironmental Shares are shares issued bythe SME. A maximum of 49% of the sharesare tradable at the international stockexchange. The remaining 51% of the sharesrepresent the tenure rights and stay in thehands of the local landowners. Theinternational business community and otherinterested parties can buy EnvironmentalShares. The acquisition of shares allowsshareholders to obtain an "EnvironmentalAcknowledgment" - issued by aninternationally recognized organization -which can be used for advertising andpromotional campaigns. At present it isadvantageous for investors, especially fromthe industry community, to be committed tosustainable management of naturalresources. The possibility of using anEnvironmental Acknowledgment in advertisingis widely recognized as an excellentinvestment.

Currently, there are various approaches tomonetarize forest services. A newopportunity is provided by the recognition offorest sinks by the UN Convention onClimate Change (also see Skutsch in thisissue). Afforestation and reforestation havebeen recognized as accountable forprojects under the Clean DevelopmentMechanism (CDM). The project includesCertified Emission Reductions (CER) as acore element in financing a SME. Otherpossible payments for forest services, suchas those for watershed management orbiodiversity conservation can be considereddepending on the specific conditions of aSME.

Pilot project in ColombiaIn early 1999, four partners engaged in theformulation of a pilot project: the WorldBank’s forest team, the InternationalTropical Timber Organization (ITTO),EMPA and CORNARE, a Colombianinstitution in charge of sustainabledevelopment at the regional level. Theinitial project of 18 months titled“Alternative Financing Model for theSustainable Development of the Area ofSan Nicolás” was financed through theITTO project cycle in November 1999(ITTO, 1999). The main objective of thisproject is to further develop the concept andto test the feasibility of the financingmethod at field level.

The project was implemented in an Andeanmountain area in Central Colombia. Thetotal project area comprises 72,000 ha,including 30,000 ha for conservation and42,000 ha of multiple-use forest. The pilotproject has three specific objectives: (i) todevelop an investment and financing planfor the SME; (ii) to formulate a forestmanagement plan with participation of thelocal community; and (iii) to ensure thebasic social and institutional conditions


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required for the implementation of the pilotproject.

Current situation The socio-economic conditions in the regionare characterized by intensive land-usechanges, deterioration of the living conditionsof the local population and the existence of aviolent conflict that has deeply affected civilsociety. These problems have also resulted inforest degradation and deforestation, as wellas in a reduction of the hydrological potentialin the region. In addition, a decline of priceshas influenced wood processing andmarketing of wood products in recent years.

A positive factor is the high degree oforganization of the local community.Furthermore, a CORNARE (CorporacionAutonoma Regional del Reinegro-Nare)inventory indicated that there are importantforest assets in the region, comprising areaswith high potential for sustainable forestry andsubstantial water resources. With theseassets in mind, SFM activities are planned,based on the participation of different sectors.The activities will include forest management(for conservation and multiple-use) and socialdevelopment, for example through generationof local employment, and equitabledistribution of benefits. In order to promotemeaningful participation, a Regional Forumhas been established. This Forum steers thecreation of the SME and is composed of localstakeholder representatives, as well asnational and international experts in charge ofthe technical aspects.

The pilot project relies on a number oftechnical, social and institutional conditions:• The legislative resolution 016 of 1998,

establishing forest conservation areas andmultiple-use forestry areas;

• The opportunities offered by the CleanDevelopment Mechanism consideringafforestation and reforestation activities

within the multiple-use forestry areas 1;• The implementation of a participatory

and integrative Regional Forum; and• The reputation of CORNARE and its

international partners in terms oftechnical capacity and impartiality.

Future developmentThe main output of the current projectphase will be the business plan of the SME.This plan will include the results of acomprehensive forest inventory, a forestmanagement plan, the definition of thebaseline and the project scenario, aprogram in capacity building, a monitoringsystem (for both SFM and carbon forestry),as well as the identification of investmentsopportunities, costs and benefits. Theproject partners are optimistic about theimplementation of the pilot project. Afollow-up phase to further develop theinvestment plan is under consideration. Theproject welcomes new partners that areinterested in the proposed innovativeapproach to put sustainable forestmanagement into practice.

Dr. Carmenza Robledo A.Wood DepartmentEMPA Duebendorf CH 8006 Duebendorf, SwitzerlandTel: +41 1 823 43 21E-mail: [email protected]

References:ITTO, 1999. Alternative financing model forSustainable forest management in SanNicolás, Project proposal to ITTO PD 54/99Rev.2 (F), International Tropical TimberOrganization (ITTO),Yokohama.

Robledo A., C., 2000. Environmentalshares and carbon bonds for sustainableforest management in tropical regions.EMPA, St. Galo, 35 pp.


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1. Due to the fact that the role of avoiding deforestation for followingcommitment periods is not yet clear the potential emission reductionsfor conservation will be accounted separately in the pilot project

IV FINANCING CARBONSEQUESTRATION SERVICES

This section is dedicated to the potential forfinancing carbon sequestration services, andpresents some experiences in this area.Margaret Skutsch reviews financing optionsfor community forest management under theKyoto Protocol and UNFCCC. Peter May ofthe Brazilian NGO Pró-Natura describes apractical carbon sink project based oncommunity forest management in MatoGrosso. The social meaning of carbonsequestration activities and the institutionalcapacity building aspects of this green market,are illustrated by Miriam Miranda and co-authors, in the case of another carbon sinkproject in Costa Rica. In their article, BrunoLocatelli and Guillaume Lescuyer evaluate thepotential for payment of carbon services insupport of sustainable forest management inCameroon, and relate this to outcomes ofeconomic valuation. Finally, we refer to thearticle by Carmenza Robledo in Section III onenvironmental shares, aimed at financingcarbon sequestration and other services

Access to finance for communityforest management under theUNFCCC and Kyoto Protocol

By Margaret M. Skutsch

A previous article in ETFRN News reviewedthe potential for funding for forestry underinternational climate agreements,particularly under the Kyoto Protocol(Skutsch, 2000). Since then, furthernegotiations have taken place and thisarticle aims at giving an overview of thecurrent situation.

Carbon mitigation projectsAt the Conference of Parties in The Hague(COP6) in November 2000, the inclusion ofsinks as a means of carbon mitigation wasdiscussed. Despite initial opposition, thisprinciple was accepted at COP6 part 2 inJuly 2001 in Bonn. On one hand, sinkshave been accepted as a means ofreaching CO2 reduction targets in the North(with caps limiting this). In developingcountries, afforestation and reforestationprojects can also be included and financedunder the Clean Development Mechanism(CDM). These activities, referred to as ARDprojects (Article 3.3 in the Kyoto Protocol),can be used to offset up to one percent ofthe carbon emissions of an Annex I country1 (UNDP, 2001).

Clearly, this provides scope for thefinancing of certain types of forestryprojects in tropical regions. However, thereare a lot of limitations. First of all, themodalities, rules and regulations as regardshow a project can qualify for CDM statusstill have to be worked out, which will occurat COP9 in 2003. The peculiar situation hasarisen that the decisions of COP7 inMarrakech in November 2001 give way forthe immediate start of CDM projects,


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provided that these will meet the technicalrequirements to be decided upon in 2003.

Secondly, it is important how the terms‘afforestation’ and ‘reforestation’, areinterpreted. Article 3.3 is restricted toplantations and similar types of projects thatinvolve a clear land use change, such as fromnon-forest use to forest, or from deforestedareas back to forest. These definitionsobviously leave room for multipleinterpretations, which leads to continuousdiscussion 2 (IPCC, 2001). Projects involving improved management ofexisting forest are at present not eligible forCDM status, as they are categorized as‘additional activities’ (Article 3.4 in the KyotoProtocol). This means that for example JointForest Management, and community forestmanagement or cooperative forestmanagement projects, where the objective isusually sustainable forest management ofexisting but degraded or degrading forest,cannot be funded as CDMs, at least duringthe first accounting period (2008-2012). Thisis unfortunate as such projects often havedirect benefits to the local population, andtherefore contribute more to localdevelopment than plantation schemes thattend to involve mono-cultures of fast growingspecies. In some cases, plantation projectshave led to total exclusion of local peoplefrom the forest area, to safeguard the carbonstock. Even though more participatory andenvironmentally sensitive approaches are ofcourse possible in such plantation projects, itis unlikely that these will be used: obviouslythe primary investment criterion for mostAnnex I countries, who are providing thefunding, will be least cost carbonsequestration. Most ARD types of projects willprobably not measure up to the kind ofstandards for sustainable forest managementunder CDM as proposed by CIFOR (2000).

Thirdly, there is the question of the practicalavailability of funds for CDM. The

development of the market for CDM is stillhard to predict, in particular now that theUSA departed from the Kyoto agreement.

Bio-energy generationAn alternative route for CDM financingmight be to manage forests for bio-energyin order to replace fossil fuel consumption.A simple example is provided by dendro-thermal electricity production. Projectsbased on existing forest could perhapsqualify not as sinks per se but rather as aform of alternative fuel supply, although therules for this kind of mechanism are farfrom being agreed yet. A more complicatedcase could be argued by developingcountries that sustainable management offorest for the production of fuelwood andother benefits could in itself represent apowerful means of carbon mitigation. Atleast 2 billion people use firewood orcharcoal as their primary cooking fuels.Provided it is produced in a sustainablemanner, the main energy use of thesepeople can be carbon neutral. If forests aredepleted, this will lead not only to therelease of additional carbon into theatmosphere, but inevitably also to a long-term shift to fossil fuel consumption whichis inherently unsustainable. There is anurgent need for research aimed atdeveloping the approach of forestmanagement for bio-energy generation andto bring test cases to the UNCCC. Even ifpilot projects are not accepted in the currentaccounting period, they can pave the wayfor inclusion in the second.

Adaptation fundsBecause of the initial belief that CDM wouldbe a big money spinner, many forestersplaced their hopes for major support toforestry in that line. In the long runhowever, the ‘adverse effects’ and‘adaptation’ articles of the climate treatiesprovide better opportunities as far asforestry is concerned. These articles are


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intended to support projects or programs thatcounteract the adverse effects of climatechange, particularly aiming at the morevulnerable countries.

An Adaptation Fund to be paid for by apercentage levy on all CDM projects hadalready been agreed at Kyoto and wasrecently set at 2% of the value of the carbonsavings in CDM projects. At COP6 part 2, twonew funds have been set up under UNFCCC:a Special Climate Change Fund, and a fundfor Least Developed Countries (mostly inAfrica). These are complementary to existingGEF funds and represent new money, that isto say money not already included in ODAbudgets. The EU, Switzerland and Canadahave pledged themselves to donate from2005 onwards US$ 420 million per year tothese funds, of which US$ 10 million isspecifically to start up the Least DevelopedCountries Fund. However, contributions tothese funds are made entirely on a voluntarybasis. The rules for qualification of projects asadaptation projects are even less defined thanthe rules for forestry under CDM but are likelyto be much less stringent, as there will be noproblems of leakage or lacking baselines,which have bothered the negotiations onsinks. Clearly all kinds of forest managementactivities could be justified in terms ofadaptation to climate change, since forestscan deliver such services as watershedprotection and the regulation of hydrologicalcycles, diversification of local economies, etc.Projects that are primarily designed foradaptation are expected to fit better into thedevelopment policies of countries in the Southand will probably get better accepted thanCDMs, which are more demand-driven.Besides money for adaptation, the funds alsocover technology transfer and assistance tovarious sectors. Although the funds on offer atthis point in time are limited, the potential ofadaptation projects certainly is worthexploring. Test cases need to be developed

and submitted so that the boundaries of thepossible become clear.

References:CIFOR, 2000. Forest carbon for locallivelihoods. Bogor, Indonesia. IPCC, 2000. Land use, land use changeand forestry.w w w . g r i d a . n o / c l i m a t e / i p c /land_use/249.htm

UNDP, 2001. Africa must seize newopportunities offered by climate changebattle. Press release.

Skutsch, M.M. 2000. Forestry, Africa andClimate Change Protocol ETFRN News 26.

Margaret M. SkutschTechnology and Development GroupUniversity of TwentePO Box 2177500 AE Enschede, The NetherlandsEmail: [email protected]

1 Annex 1 (to the UNFCCC) is a list of all countries which haveaccepted carbon emission quotas, which include the OECDcountries and Economies in Transition, Annex 11 countries areessentially the wealthier of this group including the EU countries,Switzerland, USA, Canada, Australia, New Zealand, Japan etc.The non-annex 1 countries are the developing countries that donot have emission quota (yet).

2 The IPCC’s perferred definitions are - afforestation -“planting ofnew forests on land which, historically, have not containedforests” and - reforestation - “planting of forests on lands whichhave, historically,previously contained forests but which havebeen converted to some other use”. What percentage of treecover is recognised as “forest” is a thorny problem still.

CDM and sustainable land reform inthe Brazilian Amazon

By Peter H. May

As a response to the landless peoples’movement that has aroused worldwidesympathy, thousands of families havereceived forest lots in the Brazilian Amazon


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over the past decade. But many of theseprojects constitute little more than landdistribution. Settlers are rapidly cutting theirlots into the wilderness, often many hoursfrom the nearest road, school or health post.After exposing poor soils to intense seasonalrains, and lacking markets for their crops,many soon fail and move onward into thereceding tropical rainforest, cutting andburning as they go. This process provokesCO2 emissions, contributing to globalwarming.

As part of the Kyoto Protocol, the CleanDevelopment Mechanism (CDM) provides thatappropriate land uses and particularlyreforestation and afforestation may enabletemporary storage of terrestrial carbon,helping global society buy time to reducefossil fuel combustion. Avoiding the polemicthat surrounds this issue, a project underwayin northwest Mato Grosso, Brazil, seeks todemonstrate that Amazon colonists can bothstore carbon and achieve stable andsustainable settlement. Rather than being partof the problem, they can become part of thesolution to global warming.

Colonization processes in Mato GrossoToday, nearly 100,000 people live innorthwest Mato Grosso, an area of 108,000km2, which is approximately the size ofPanama. Until the late 1970s, only nativeIndians and rubber tappers occupied thisregion. The migrants were enticed to theregion by colonization companies that offeredcheap land and promised access toagricultural markets. But government road-building and technical assistance did notmaterialize. Most settlers soon converted theircoffee plantations to pastures, and manyabandoned their lots to look for work in aburgeoning but often destructive timberindustry. Due to its similarity to othercolonization areas along the Amazon rim theregion was selected for projectimplementation by Pro-Natura, a non-profit

global environmental organization foundedin 1986 in Brazil. Since 1992, Pro-Naturahas been engaged in this region insustainable agroforestry demonstration andinstitutional strengthening, in support oflocal producer associations and municipalgovernments.

Innovations towards sustainabledevelopmentIn late 1998, the French auto manufacturerPeugeot-Citroën announced its decision toinvest about $10 million in a majorcommercial carbon sink in northwest MatoGrosso. Peugeot and its technical partner,the Office National des Fôrets (ONF), aFrench government institution responsiblefor managing public forests, chose thisregion at Pro-Natura’s suggestion. Thecarbon sink is planned to cover 5,000 ha ofdegraded pastures and involves testing oflarge-scale reforestation with species nativeto this part of the Amazon, never beforetried at this scale.

The carbon sink project complements Pro-Natura’s continuous efforts to introducesustainable agroforestry and forestmanagement systems throughout theregion. This complementarity wasrecognized by the Global EnvironmentFacility (GEF) in its support to a seven-yearprogram of partnerships led by Pro-Natura.The program is focused on bioregionalplanning and local capacity building forsustainable use of biodiversity, and totalsover $6.5 million.

Stimuli toward local sustainability Pro-Natura observed a number of importantstimuli toward local sustainability that canbe traced to the advent of carbonsequestration initiatives in this region:• Transformation in the local land

market: land values suddenly shiftedand the real estate market becamemore flexible and competitive, as


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landowners began to respond not only toa local demand for beef and timber butalso to global demand for environmentalservices;

• Creation of a market for native forestseed: small farmers and indigenouspeoples found they could earn acomplementary source of income bysupplying quality seed to environmentalreforestation projects – Pro-Naturafrtifiedthis by training them as certified seedgatherers; and

• Expanded opportunities for localemployment, e.g. in local nurserycapacity, land preparation services, andreforestation consulting firms, and skilltraining in reforestation of degradedlands, including on-the-job training forfield laborers in seedling preparation,planting, management, weed control, andfire prevention.

Not only did these stimuli promote efforts torestore degraded sites, but also led to anincrease in the perceived value of thestanding forest. Smallholders respondedenthusiastically to donations of fast growingnative seedlings from the project, and optedto establish their own agroforestry plantations,rather than engage in further deforestation.

Local income generationPro-Natura is now seeking ways to benefit itspr imary stakeholders direct ly bydisseminating reforestation techniques forcarbon sequestration and local income.Recent land reform beneficiaries in the GEFproject region now number on the order of10,000 households on over 250,000 hectares.Although some of these settlements werecarved out of the tropical forest, othersoccupied large ranches that were expropriatedor sold to the government land reformagency, and composed large areas ofdegraded pastures in various stages ofsuccession. Pro-Natura is hence working with associations

of agrarian settlers to recover degradedsites within their common lands, with theobjective of establishing permanentagroforestry and timber resources for localincome generation. Responsibility for theconceptual basis and financial structuringfor this effort lies with Eco-Carbone, aninternational services firm specialized ininnovative landscape management forcarbon capture and biomass energythroughout the developing world.

Carbon credits and other benefitsIn today’s risky carbon market, the projectdoes not yet envisage sharing of eventualcarbon credits as a means to convincefarmers to participate. Instead, all tangibleproducts of investment would accrue to aparticipating landowner /settlementassociation, while any ensuing carboncredits would be placed at the disposition ofthe external investor. These arrangementscould change in future as carbon creditsachieve greater credibility in the market.Costs of land preparation and seedlings areborne by the investor, but the landownerparticipates in the land preparationoperations as well as in the maintenanceand protection of the planted resources.Pro-Natura and the sister NGO Friends ofthe Earth-Amazonia are training settlers inforest fire prevention and combat, throughmunicipal “protocols against fire”. Carbonmeasurement, verification and certificationare the domain of Eco-Carbone and itsfinancial partners.

The project envisages that these replantedforests will achieve permanence in anemerging landscape mosaic ofagroforestry, managed forests and intactbiodiversity, providing clear benefits forlocal sustainability and the global climate.

Peter H. May, PhD Executive Director Instituto Pró-Natura


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Av. Presidente Wilson, 164, 13º andar20030-020 - Centro - Rio de Janeiro, BrasilTel.: +55 21 2262 8214,Fax: +55 21 2533 1777http://www.pronatura.org

The social meaning of carbon marketsInstitutional capacity building for agreen market in Costa Rica

By Miriam Miranda1, Carel Dieperink2, PieterGlasbergen2

1) Universidad Nacional, Centro Internacionalen Política Económica para el DesarrolloSostenible (CINPE), Costa Rica2) Utrecht University, Copernicus Institute forSustainable Development and Innovation, TheNetherlands

This article introduces the thesis that carbonmarkets must be turned into ‘green markets’in order to constitute a tool for localsustainable development. A successful greenmarket is analysed: the implementation of thebilateral treaty between Norway and CostaRica signed in 1997. This treaty combines thesocial ethic of NGOs and the commercialapproach of business in a new kind ofpragmatic consensus. Besides a review ofsecondary information, several interviews withmain stakeholders and experts from differentsectors were conducted in order to collectempirical data. The research is part of anongoing PhD project entitled “Developinggreen markets: Institutional capacity buildingfor carbon markets”.

During the second part of the last decade, aninternational debate on advantages anddisadvantages of Activities ImplementedJointly (AJI) and the Clean DevelopmentMechanism (CDM) developed. Thesemechanisms were introduced aiming at thereduction of greenhouse gas emissions linkedwith objectives of sustainable development,

and created a potential for carbon markets.Ethical, moral, economical andenvironmental arguments are broadlyacknowledged. While some researchersregard AJI and CDM as win-win situations(Pearce, 1999; Richards, 1999), othersstrongly criticised them (Dutschke &Michaelowa, 1997; WRM, 2000).

Pioneer carbon market agreementIn 1997, Costa Rica signed a pioneercarbon market agreement with Norway. TheReforestation Conservation ActivitiesImplemented Jointly Project (RFCAIJP)represents one of the first transactions onthe emerging carbon market, betweengovernments of a developing and adeveloped country (OCIC, 1996). It can beregarded a clear example of a green market(Rodriguez, 2001). The main goals of theagreement are to rehabilitate the degradedwatershed of the Virilla River and toimprove the efficiency of the hydro-energypower plant located at the Virilla River,through interactive involvement ofstakeholders.

ImplementationThe progress made to date is promising.After 4 years, 2500 hectares of forest areahave already obtained a protection status,83% of the final goal of 3000 ha to bereached in 2007. By the end of the year2000, more than 783,000 trees of nativespecies were planted on an area of 494hectares. This is 49% of the number ofhectares that should be planted in 2007.

The Costa Rican-Norwegian case illustratesthat a carbon market can have a broadersocial meaning for a developing country,resulting in more benefits than carbonsequestration alone. Different stakeholdergroups in this case benefit from theintroduction of the carbon market.

New sources of income


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Farmers benefit due to the extra andguaranteed income. Over a five year periodthey receive 45 US$/ha per year forconservation activities and 577 US$/ha peryear for reforestation. They also receivedtraining to start a new economic activity andbecame familiar with measures to rehabilitatewatersheds, to reduce water pollution and toplant and manage trees. So far, 27 farmershave signed contracts to start reforestationactivities and 30 farmers concerningprotection activities.

Multiple income streams from forests alsodeveloped for people outside the Virillawatershed. This is a common tendency inCosta Rica: economic activities such as eco-tourism, extraction of minor or non-woodproducts as fruits, plants, and flowers havebrought new sources of income for thousandsof Costa Rican families, thereby improvingtheir quality of life.

Capacity buildingAs part of the implementation of theagreement, local communities participated intraining activities. Five communities ingeneral as well as 14 elementary schools, 54teachers and 350 children have actively beeninvolved in environmental education. Severaltraining seminars on integral management ofsolid waste, recycling, production of organicfertiliser and lectures on watershedimprovement were organised (PLAMA-Virilla,2000).

Hydropower generationAnother important stakeholder that benefitsfrom the introduction of the carbon market isthe local electricity company. Thanks toforeign funding the electricity company couldimprove its efficiency and intensify itsactivities to improve the watershed. Treeswere planted, thereby reducing erosion andimproving water quality. As a result thecompany not only acquired a green image butwas also able to produce far more

hydropower. Since October 1999, the mainBrasil plant produces 28 MW, about 27times more energy than before. In the nearfuture, six plants downstream-located mightalso enlarge their capacities. Now, theelectricity company is an example for otherprivate companies with similar ambitions,not only in Costa Rica but also in theCentral American region.

Green marketThe creation of a carbon market itself goesbeyond the economics of exchanges ofcommodities. It includes a new kind ofsocial organisation, regulated by more orless well-defined social rules, embeddedwithin a larger social context. Theconstruction of the market will depend onthis context and also on its effects. Inaddition to carbon credits for one party andfunds for the other party, performanceconsequences include new opportunities forinvestment. Through a carbon market adeveloping country might be able to bothpreserve its natural environment and, justby preserving it, to make this environmentproductive. This productivity should not beunderstood in economic terms only, butrelated to social and other environmentalaspects as well. From our point of view,what initially might be labelled, as a carbonmarket might better be understood as amore encompassing ‘green market.’

Therefore, the traditional economic view onthe construction of carbon markets is a toosimplistic one, particularly because itneglects the social meaning of a carbonmarket for developing countries. From theirviewpoint as suppliers of carbon creditssuch a market has a broader meaning. Itmust be seen as a social mechanism forimproving both the living conditions of localpeople and a more encompassingimprovement of the environment thanclimate as such.


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Miriam MirandaCentro Internacional de Política Económicapara el Desarrollo Sostenible (CINPE)Universidad NacionalP.O.Box 555-3000 Heredia, Costa RicaE-mail: [email protected]

References:Dutschke, M. & A. Michaelowa, 1997. Jointimplementation as development policy – The case ofCosta Rica, HWWA-Diskussionspapier nr. 49.HWWA, Institut für Wirtschaftsforschung, Hamburg.

OCIC, 1996. Costa Rica-Norway Reforestation andForest Conservation AIJ Pilot Project, San José, CostaRica.

PLAMA-Virilla, 2000. Informe annual, CompañíaNacional de Fuerza y Luz. San José, Costa Rica.

Rodriguez, 2001. Los servicios ambientales delbosque: Estudio de caso Costa Rica. Int. Seminar ‘ElSector Forestal en el Siglo XXI’, Santiago de Chile, 7-10 Agosto 2001.

WRM, World Rainforest Movement, 2000. Boletín No37 del WRM.

Carbon sequestration by tropicalforest: Materialising an intangiblebenefit ?

By Bruno Locatelli & Guillaume Lescuyer

Over the past decade, the economic value oftropical forest has been much debated at theinternational level. On one hand, discussionsfocused on the concepts underlying theassessment of the value of this globallyimportant ecosystem and on the valuationtechniques to be used (e.g. contingentvaluation, travel cost method). On the otherhand, the application of these theoreticalnotions and tools to tropical forests gave riseto much controversy.

Valuation study in Cameroon

This discussion is resumed with a particularcase study in the east province ofCameroon, where a cost-benefit analysiswas conducted to design the optimal forestmanagement scenario (Lescuyer, 2000).This semi-deciduous forest presentscommon features for Central Africa as it isclaimed both by local populations for thepurpose of “traditional” resource extractionactivities and by a logging company toexploit timber resources. The applicabilityof the monetary valuation techniques in thiscontext was evaluated through thecalculation and estimation of direct usevalues of the forest (timber, traditionalmedicines and food products) and ofindirect use and non-use values. The resultindicates the advantage of a conservationscenario of the forest over a timberproduction scenario. This outcome canmainly be attributed to the high economicvalue of the benefits of carbonsequestration (net present value of 7.5US$/ha) in comparison to the net presentvalue of timber benefits of about 5 US$/ha,the other values being minor.

Limitations of monetary valuationOn the basis of this experience, twocriticisms are developed. First, theapplication of monetary valuationtechniques to societies with minor marketrelations requires making arbitrary andeventually misleading assumptions. Forinstance, beyond the technical difficultiesassociated with valuation of environmentalassets, it appears that money is not anadequate indicator to reveal individualpreferences in this context. Humanbehaviour regarding forest managementcan hardly be interpreted in terms ofmonetary mechanisms, as market relationsare almost non-existent among villagers.Second, the estimated economic values areof little use in the decision-making process,as local stakeholders neglect them incomparison to real financial incomes


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generated by forest use. An example isprovided by the ecological function of carbonsequestration: according to the monetaryvaluation, this service appeared to representthe highest economic benefit. However,benefits from carbon sequestration are hardlyconsidered when designing forestmanagement plans.

Implications of recent CDM developmentsThe “Clean Development Mechanism” (CDM)as defined and promoted in the FrameworkConvention on Climate Change and the“Kyoto Protocol” provides a new possibility totranslate the economic value of carbonsequestration into real financial benefit.Before the resumed session of the sixthConference of Parties in Bonn (COP6 bis),CDM was expected to become a substantialsource of additional revenues for sustainabletropical forest management. As a matter offact, during the pilot phase of “activitiesimplemented jointly”, many conservation andmanagement projects in relation to tropicalforest were funded, aiming at sequesteringcarbon and testing the implementation ofCDM. The review of such projects indicates awide spectrum of assessed carbonsequestration costs, as they depend on thetypes of forest ecosystem, on the proposedactivities (conservation, restoration ormanagement) and on the methods used(Dixon et al., 1991; IPCC, 2000). Moreover,the concrete prices per ton of sequesteredcarbon are far below any theoreticalassessment of its economic value estimatedat 10-50 US$ (Lescuyer & Locatelli, 1999; Tolet al., 2000).

The Bonn conference halted the trend towardan extended CDM in relation to tropicalforests (also see Skutsch in this issue). It wasrather decided that CDM is limited toafforestation and reforestation projects, atleast during the first commitment period(2008-2012). Thus, unexpectedly, thismechanism will not constitute an important

contribution to financing sustainable forestmanagement. Nevertheless, other fundssuch as GEF and the adaptation fundsdecided at the Bonn conference would dealwith forestry projects where carbonsequestration is not the main objective butmay be indirectly associated to biodiversityprotection or local development. In thiscontext, the role of economic valuation intropical forestry will probably be limited, asthese financing mechanisms are notexplicitly aimed at capturing the intangiblebenefit derived from carbon sequestration.

References:Dixon, R.K., P.E. Schroeder & J.K. Winjum(eds), 1991. Assessment of promisingforest management practices andtechnologies for enhancing theconservation and sequestration ofatmospheric carbon and their costs at thesite level. US Environmental ProtectionAgency, Corvallis, USA, 140 pp.

IPCC, 2000. Special report on land use,land-use change and forestry. R.T. Watson,I.R. Noble, B. Bolin, N.H. Ravindranath,D.J. Verardo & D.J. Dokken (eds).Intergovernmental Panel on ClimateChange, Meteorological Office, Bracknell,United Kingdom, 377 pp.

Lescuyer, G. & B. Locatelli, 1999. Rôle etvaleur des forêts tropicales dans lechangement climatique. Bois et Forêts desTropiques 260: 5-18.

Lescuyer, G., 2000. Evaluation économiqueet gestion viable de la forêt tropicale.Réflexion sur un mode de coordination desusages d'une forêt de l'est-Cameroun. PhDthesis, Ecole des Hautes Etudes enSciences Sociales, Paris, 417 pp.

Skutsch, M.M., 2002.Forestry, Africa andClimate Change Protocol ETFRN News


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Tol, R., S. Fankhauser, R. Richels & J. Smith,2000. How much damage will climate changedo? Recent estimates. World Economics 1(4):179-206.

Contact details:Guillaume LescuyerCIRAD ForêtTA 10/DF 34398 Montpellier cedex 5, FranceTel: 33-4-67 59 37 57, Fax: 33-4-67 59 39 09E-mail: [email protected]

V FINANCING BIODIVERSITYCONSERVATION

This section contains two articles that focuson financing mechanisms aimed primarily atbiodiversity conservation in the South. Theglobal community’s willingness to pay for thisglobal environmental service is the basis fornew financing mechanisms developed byinternat ional nature conservat ionorganisations. Markets for biodiversity arethus being created. In different ways, theneeds and interests of local communities aretaken into account, and linked with objectivesof nature conservation. Further information onmarket mechanisms can be found in SectionIII, and on sustainable livelihoods and povertyalleviation in Section VII of this issue. In hisarticle, Richard Rice describes howConservation International has developed andis actually implementing the mechanism ofconservation concessions. Nationalgovernments and/or local communities arebeing paid as a compensation to foregocommercial resource exploitation. Esther Blomand co-authors present two othermechanisms developed by the NetherlandsCommittee for IUCN: the creation of a TrustFund for conservation and sustainablemanagement of the Guiana Shield ecoregion,and ‘Purchase of Nature’, a small grants

programme supporting local NGOs inpurchasing threatened nature areas ofcritical importance.

Conservation concessions - conceptdescription

By Richard Rice

Conservation can present a challenge tonations wishing to develop their naturalresources for economic ends. Resourcedevelopment activities offer the prospect oftangible economic benefits, but are oftenenvironmentally destructive. Althoughsustainable resource management seeks toprovide these benefits while conservingnatural ecosystems, experience suggeststhat a number of obstacles limit both theadoption of sustainable practices and theirusefulness in conservation strategies.

To address this problem, the Center forApplied Biodiversity Science atConservation International (CI) has beenworking in collaboration with Hardner &Gullison Associates, LLC, to develop theconcept of a "conservation concession", anovel approach that seeks to directlyreconcile resource protection withdevelopment.

PrinciplesConservation concessions hold thepotential to protect a wide variety of criticalterrestrial and marine habitats, rangingfrom vast tracts of Amazonian rain forest tosensitive fisheries and coral reefs in theSouth Pacific.

Under a conservation concessionagreement, governments or local resourceusers agree to protect natural ecosystemsin exchange for a steady stream ofstructured compensation. The opportunitycosts of foregoing natural resource


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exploitation, including lost employment andgovernment revenue from taxes, may serveas a basis for determining the amount of thepayment. Payments may also reflect othercosts, for instance government administrationand enforcement burdens required as a partof concession operations. The benefits thatare preserved by maintaining resourcesintact, such as traditional uses or watershedprotection as well as the low-risk nature of theconservation payments should also beconsidered.

In its simplest form, a conservationconcession might be modelled after a timberconcession, whereby a logging company paysthe government for the right to extract timberfrom public forestlands. Rather than log theconcession area, the conservation investorwould pay the government for the right topreserve the forest intact. The conservationconcession thus presents an alternativeopportunity for countries to capitalise on vasttracks of forest or other areas of highconservation value. With ultimate objectivesthat include both the long-term protection ofbiodiversity and the stimulation of economicdevelopment, this new mechanism offers aland use alternative that conservationists,development agencies, governments, andlocal communities alike can support.

First agreementsCI’s efforts to establish conservationconcessions have met with groundbreakingsuccess in a number of countries. InSeptember 2000, CI obtained an “exploratorypermit” from the Government of Guyana toestablish a conservation concession that willprotect approximately 80,000 hectares ofpristine forest. In April 2001, the IndonesianMinister of Forestry issued a publicdeclaration in support of conservationconcessions. In Peru, the governmentrecently approved new regulations for itsForest and Wildlife Law that for the first timeenable conservation bidders to compete for

the land-use rights of its 67.6 million-hectare forest estate. In late July 2001, thecountry's first conservation concessionunder this law was granted to ACCA, aPeruvian NGO.

Components of a conservationconcession agreementA conservation concession requires anegotiated agreement between an investorand a government or other resource owner.Negotiated elements of the agreementmight include:• The amount of payments intended to

compensate for setting an area asideor foregoing specific uses;

• Duration of the concession agreement;• The investment portfolio where these

payments will be directed; and• Norms and guidelines for monitoring

and enforcing natural resourceprotection.

Benefits and limitations of theconservation concession approachConservation concessions are one of manypossible conservation interventions and aremore appropriate in some situations thanothers. Conservation concessions may notbe appropriate, for example, whereguaranteed permanence is of pre-eminentimportance or payments are impractical forpolitical or institutional reasons. It istherefore important to view conservationconcessions as a complement rather thanas a replacement to national parks andother traditional protected areas.

Nevertheless, the use of conservationconcessions for resource protection offersa number of distinct benefits.

Stable source of funds for economicdevelopment: Many economic activities,including conventional natural resourceextraction yield revenue flows that aresubject to unpredictable fluctuations.Alternatively, a conservation concession


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offers regular, low risk payments of a knownamount, denominated in a stable foreigncurrency, for as long as the terms of theagreement are met.

Direct, transparent conservation investments:A conservation concession yields immediate,transparent conservation that can be easilyidentified on a map and monitored based onreadily verifiable norms. Althoughinternational willingness to pay forconservation is substantial and increasing,there is a growing trend emphasisingoutcome-based rather than process-basedindicators of effectiveness of conservationfunds. The methodology and concretegeographic basis of conservation concessionsrespond to this trend.

A market mechanism for conservation: Undera conservation concession, conservationbecomes a product that can be purchaseddirectly and provided according to clearlyestablished criteria. In combination withpayments, the limited term of a conservationconcession makes it an attractive option forresource owners. At the same time,permanent protection is possible because ofrenewable terms, low opportunity cost, andhigh willingness and ability to pay.

Next stepsThe conservation concession approachcreates a new market for biodiversity, amarket that is now in its infancy. Severalparallel efforts are needed to move thismarket forward. First, the search forconcession opportunities must deliberatelytarget a diversity of ecosystems andgeographic locations, and demonstrate thewide range of possibilities for this biodiversityconservation mechanism. For example, CI isexamining the potential for a conservationconcession in Namibia’s biologically diversearid coastal region, as well as marineconcessions in Southeast Asia. Second,exploring a variety of partnership

arrangements with governments,development agencies, NGOs, indigenousgroups, and private corporations willexpand the number of market participantsand draw on the strengths of various actorsin conservation and development. Third, onthe supply side, market development willrequire the creation of appropriateinstitutional, legislative, and regulatoryinfrastructure in host countries, such as thelegal instruments CI has promoted in Peruand Guyana. Finally, initiatives to leveragenew sources of funding could catalyse thedemand side of this budding market forbiodiversity, for example by targetingprivate sector companies seekingenvironmental offsets.

This comprehensive set of efforts, whichcombines research and development withdirect implementation of the conservationconcession approach, is expected toexpand the horizons of the market, clarifythe potential roles of different participants,and set in motion this novel market forbiodiversity conservation.

Richard Rice Ph.D.Chief EconomistCenter for Applied Biodiversity ScienceConservation International1919 M Street, NW Suite 600Washington, DC 20036, USAE-mail: [email protected]

F i n a n c i n g m e c h a n i s m f o rconservation in the Guiana Shieldand purchase of nature: experiencesof NC-IUCN

by Esther Blom, Dave Zwaan and WillemFerwerda

The Netherlands Committee for IUCN (NC-IUCN) manages several programmes forconservation and sustainable use of nature.Innovative financing mechanisms play an


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important role in two specific programmes:the Small grants for the Purchase of Natureand the Guiana Shield Initiative. After a briefintroduction, these programmes are furtherelaborated to illustrate the specific financingmechanisms concerned.

Small grants programmes of NC-IUCNInternational Union for the Conservation ofNature (IUCN) is the world's largest natureconservation organisation, bringing togetherboth state members and NGOs. Since 1948,it has promoted nature conservation in a justworld. The Netherlands Committee for IUCNis a co-operative agreement between theDutch members of IUCN and those of sixinternational IUCN commissions. Memberssupport and interact with each other in pursuitof IUCN's mission. One of the core activitiesof NC-IUCN is (co-)financing of local natureconservation projects in the framework ofsmall grants programmes, based on theecosystem approach of the Convention onBiological Diversity. Currently, four smallgrant programmes are operational:• the Tropical Rainforest Programme that

supported over 600 projects in the field ofconservation and sustainable use oftropical rain forests worldwide, from 1994to date. The annual budget is about €2.2million, with a maximum amount perproject of €75.000;

• the Small Grants for WetlandsProgramme that supports projects onconservation and wise use of wetlandsand was created in 2000. The annualbudget in the pilot phase is about €1million with a maximum of €75.000 perproject;

• the Benin Programme that supportsbiodiversity conservation projects in Benin(created in 2000, annual budget€180.000); and

• the Small Grants for the Purchase ofNature, which has recently started andcontributes to conservation of biodiversityby supporting the purchase of threatened

nature areas.

Small grants for the Purchase of NatureThe programme Small grants for thePurchase of Nature provides financialsupport to local NGOs for strategicpurchase of nature areas in tropicalcountries, Eastern Europe and theCommonwealth of Independent States(CIS). The National Postcode Lottery isfunding the programme with an amount of€453.800 per year. In principle, nature areasshould not be for sale according to theviewpoint of NC-IUCN, for these areasbelong to everyone. In practice however,purchase appears to be a strong instrumentin saving highly threatened nature areasfrom destruction.

Since the overall magnitude of the fund andthe money granted per project (maximum€75.000) are limited, the purchases need tohave a strategic significance for theconservation of local biodiversity. Anexample of a strategic choice is theacquisition of an area that links up twonature reserves, thereby increasing theconservation value. Purchases with apolitical, policy or urgent character are alsopossible. Most NGOs applying areexperienced in nature conservation andseek support to – now or never – buy apiece of land in order to prevent conversioninto other land uses such as agriculture,plantations and infrastructure. Obviously, astrict condition of the programme is that thelegal system of the country involved shouldallow purchase of nature by NGOs. Todate, three projects have been assigned agrant: in Poland, Costa Rica and Ecuador.

The Guiana Shield InitiativeAn entirely different initiative aimed atfinancing nature conservation is the GuianaShield Initiative (GSI). The Guiana Shieldcovers the countries of Suriname, Guyana,French Guyana and parts of Colombia,


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Venezuela and Brazil. The Shield is one of theoldest geological formations in the world,containing unique flora and fauna.

The countries of the Shield share commonproblems and threats such as mining, timbercutting and infrastructural development.Another reason to address the Guiana Shieldas an ecoregion is the transboundary natureof indigenous peoples’ territories and of majorriver systems. The GSI aims to develop aninnovative financing mechanism for theconservation and sustainable management ofthe Guiana Shield ecoregion. One of the mainpremises of the GSI is that the internationalcommunity should compensate the countriesof the Guiana Shield for providing ecologicalservices to the world. These ‘public good’services, such as the mitigation of the effectsof climate change, the conservation ofbiodiversity and the regulation of hydrologicalcycles, can only be provided by keeping thevast forests of the Guiana Shield intact.Alongside and in conjunction with the publicgood services is the development of privatesector activities. The GSI intends to promotethe development of sustainable businessactivities, such as sustainable ecotourism, theproduction of non-timber forest products forlocal and regional markets, and possiblysustainable timber extraction.

The structure of the financing mechanism isin its earliest stages, as input is needed fromthe region and from the international donorcommunity. The general concept is that theecological goods and services would bedelivered by local ecosystem managers, suchas local communities, forest managers, parkauthorities, (semi-) government institutionsand environmentally responsible businesses.In doing so they would be eligible for incomegenerating payments and financial incentivesprovided by the regional financingmechanism. At present, the interpretation ofthe concept of the financing mechanism is stillsomewhat general and it can still develop in

many directions. Until now, the basic ideais to develop a Trust Fund in which privatecompanies as well as donors canparticipate.

The first phase of the GSI is currentlyunderway with funding from the DutchMinistry of Foreign Affairs (DGIS). Thecentral activity of Phase I is to prepare aproposal for a more extensive programmeto be submitted to the Global EnvironmentFacility (GEF). Other Phase I activitiesrelate to the compilation of baselineinformation necessary to set up sustainablemanagement and conservation activitiesunder a regional financing mechanism.These activities include: organising aregional conservation priority-settingworkshop (in partnership with ConservationInternational and the UNDP); examining thepossibilities for generating income underthe Kyoto Protocol of the Climate ChangeConvention and establishing the regionalcarbon baseline; assessing the currentsituation and potential for developingNTFP, timber and ecotourism projects; andassessing the feasibility for ecosystemmonitoring.

For further information, please contact:

Esther BlomNC-IUCNPlantage Middenlaan 2b1018 DD Amsterdam, The NetherlandsTel.: +31-20-6161732, Fax: +31-20-6279349E-mail: [email protected]://www.nciucn.nl

VI FINANCING MAINTENANCE OFHYDROLOGICAL SERVICES

This section provides examples of paymentmechanisms in relation to hydrologicalservices. The article of Virginia Reyes and


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co-authors starts with a brief introduction onthe Costa Rican government programme forPayment of Environmental Services, and thenfocuses on the mechanism of voluntaryagreements with hydro-electric powercompanies. Economic valuation is used toassist in the assessment of the amount ofpayment forest owners should receive for themaintenance of hydrological services. In ThePhilippines, hydro-electric power companiesare also promoting reforestation activities oflocal communities, which is described byDanilo Mero. In Ecuador, the maintenance ofthe quality of drinking water is pursued bymunicipal water companies. In their article,Robert Hofstede and Montserrat Albándescribe the mechanisms of water taxes andwater funds for three Ecuadorianmunicipalities. Furthermore, we refer to thearticles of Rob Hope and co-authors and ofDiwakar Sinha (Section VII), in whichmaintenance of hydrological services alsoplays an important role.

Valuation of hydrological servicesprovided by forests in Costa Rica

By Virginia Reyes1, Olman Segura1 & PitaVerweij2

1) International Center of Economic Policy forSustainable Development (CINPE),Universidad Nacional of Costa Rica2) Copernicus Institute for SustainableDevelopment and Innovation, UtrechtUniversity, The Netherlands

In 1996 Costa Rica created Forest Law 7575in order to accomplish new strategies tosupport the development of the forestrysector. This forest law evolved from a periodof three decades of forest policies andintroduced the concept of paying owners offorested property, or property in the processof reforestation, to compensate for theenvironmental services provided by their

activities to society in general. Theacknowledged environmental servicesinclude regulation of hydrological cycles,scenic beauty, carbon sequestration, andbiodiversity conservation.

Payment for Environmental ServicesThe implementation through a program ofPayment for Environmental Services (PES)comprises two types of mechanisms.Firstly, it includes monetary compensationby Costa Rican society to privatelandowners either for maintenance ofprimary forest, establishment of forestryplantations, or forest management.Secondly, different types of voluntaryagreement with hydropower companieswere established and they are in theprocess for a brewery company, severalhotels and tourism agencies.

From 1997 to end of 2000, the PESprogram included 251,226 hectaresbelonging to private landowners (4.9% ofCosta Rican territory). Of these, 212,333 hacorrespond to forest protection, 15,202 hato forestry plantations and 23,691 ha toforest management. The forest ownersreceive payment from the National ForestryFinance Fund FONAFIFO that works withfunds provided by the national government.Of the taxes collected from fossil fuels,3.5% goes to FONAFIFO, which permitsthe compensation to private landowners. Inaddition, the existing voluntary agreementsalso provide financial resources, resulting inthe payment of 17,611 ha.

Research in support of PESFONAFIFO needs a solid basis fornegotiation of voluntary agreements. Boththe Forestry Law (1996) and BiodiversityLaw (1998) define the criteria for paymentof environmental services but do not definethe type of financial instrument nor themonetary amount that should be paid.FONAFIFO should establish these


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mechanisms on the basis of scientific studies,of which the following is an example. Theresearch project on “Parameters for theeconomic valuation of the hydrologicalservices provided by forest and forestryplantations in Costa Rica” is currentlydeveloped by CINPE. This study reviews theCosta Rican experience in the establishmentof PES agreements for hydrological servicesand develops economic valuation tools inorder to create or renegotiate settlements withprivate or governmental organisations.

Voluntary agreementsVoluntary agreements can be classified intotwo categories. On one hand, there areprivate agreements established between anNGO and a private company. An example isthe agreement since 1998 between thehydropower company La Esperanza and theconservation organisation AsociaciónConservacionista Monteverde, where thecompany pays 10 US$/ha per year to theNGO for hydrological services of forests in thePeñas Blancas watershed. On the other hand,FONAFIFO established agreements withprivate companies. The following are threeexamples this kind of settlements. • Energía Global has two hydropower

plants in the Volcán and San Fernandowatersheds and pays 10 US$/ha per yearduring five years since 1997.

• The Empresa Eléctrica Platanar locatedin San Carlos has recognised anexpenditure of 15 US$/ha per year duringfive years. In addition, this companysigned an extension in 2000 that includespayment of 30 US$/ha per year tolandowners, including those withoutofficial land titles, for a period of 10years. The Compañía Nacional deFuerza y Luz signed an agreement in2000, where 47 US$/ha per year iscompensated to landowners with orwithout land title during 10 years in threewatersheds.

Fee on drinking waterAnother interesting case is the hydrologicalfee established in the year 2000 by thedrinking water Company of Heredia in threeminor watersheds in the Central Valley ofCosta Rica. There is no institutionalagreement with FONAFIFO or the Ministryof Environment. The company collects0.0057 US$/m3 for consumed water, to bereinvested in forest conservation andreforestation within the same region.

Economic valuationThe valuation study focuses on hydropowerand domestic consumption, and aims toestimate the value of the hydrologicalservices provided by forests in fourwatersheds: Peñas Blancas, Reventazón,Savegre and Pejibaye. The first two riversdrain to the Atlantic coast and the other twoto the Pacific coast of Costa Rica. Thesewatersheds are home to importantcommunities, whose sources of livelihoodinclude coffee production, double-purposeand dairy cattle ranching, forestry, andcultivation of flowers and ornamentalplants. Furthermore, the feasibility ofsetting up new hydropower plants is beingevaluated for all four rivers.

The study considers social, biophysical andeconomic aspects of valuation ofenvironmental services. In order to estimatethe economic value of the ecologicalservices provided by forests, the costs ofchanging from the main agriculture activityto forest are assessed, as well as the costsof maintenance of forest cover. Theopportunity costs include the costs andbenefits of forestry activities andenvironmental education. Market prices areused as these are based on available andreliable data.

Valuation resultsA range of values has been estimated forthe overall ecological services provided by


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forests in the four watersheds. Based onreplacement and maintenance cost, thesevalues1 are estimated at 100 US$/ha per yearfor Peñas Blancas, 133 US$/ha per year forReventazón, 138 US$/ha per year forSavegre, and 176 US$/ha per year for thePejibaye watershed. This implies that if theprovision of hydrological services is to beguaranteed in the long term, the landownerswould have to receive at least 100 US$/ha peryear in terms of additional income in order toprotect forest cover or commit themselves toreforestation activities. Of course hydropower companies would bewilling to pay only for the hydrologicalservices related to hydropower generation. Ifother forest ecological services would also bepaid for, by means of benefits fromecotourism, carbon sequestration orbiodiversity conservation, the amount couldincrease to meet the opportunity cost.However, in the case of Pejibaye watershedfor instance, it should be questioned whetherthe internalisation of benefits from forestcover could form a competitive alternative tothe current highly profitable coffee cultivationactivities. There, it seems worthwhile toexplore the possibilities of adaptation of theexisting land use (e.g. by changing to coffeewith shade trees).

PerspectivesThe research will result in the description ofproper mechanisms for implementation ofPES in relation to hydrological services. It willprovide tools in support of policy mechanismsthat will encourage FONAFIFO negotiationswith private and governmental organisationsthat consume water. In a broader sense, it willgenerate practical recommendations to policymakers of Costa Rica and other countriesinvolved in the development of financinginstruments in order to improve theeffectiveness of local and national forestrystrategies.

Comments are welcome. For further informationplease contact:

Virginia Reyes or Olman SeguraCentro Internacional de Política Económica para elDesarrollo Sostenible (CINPE)Universidad NacionalP.O.Box 555-3000Heredia, Costa RicaE-mail: [email protected] [email protected] Note the values correspond to the present value of the netbenefits (discount 9.8%)

Financing reforestation for improvedwatershed management in thePhilippines

By Danilo C. Mero

In 1992, the National Power Corporation(NPC), a government operated andcontrolled corporation, secured funds forthe development of about 1,000 hectares oftree farms within the Lake Lanao – AgusRiver watershed reservation in Lanao delSur, Philippines. A financial contribution ofabout 1.1 million US$ was made by theMindanao Association of ElectricCooperatives. This amount representscorporate investment of industries andutilities for the improvement of hydro-electric power generation. It was used tofinance development activities inreforestat ion and environmentalrehabilitation for improved water yield, indetermined areas within the watershedreservation. A description of the highlightsof the said project can probably lead to abetter understanding of the socio-economicissues and concerns in watershedmanagement.

Objectives of tree farm developmentThe general aim of the reforestation projectwas to ensure stable hydro-electric powergeneration of the Agus plants throughimproved water yield of the Lake Lanao –Agus River watershed reservation on asustainable basis. The specific objectives of


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the project were: • to develop about 1,000

hectares of tree farmswithin the Lake Lanao –Agus River watershedreservation in three yearsfrom 1993 to 1996;

• to raise the level of awarenessof the stakeholders on the valueof the watershed and the needfor i ts protect ion andconservation; and

• to gain the support of thestakeholders for the project.

NPC played a key role in the watershedmanagement of the Lake Lanao – Agus Riverarea. This role can be viewed from twodifferent angles. In the first place, theirinterest was of course to sustain the operationof the six Agus hydro-electric power plants,which according to NPC was linked with aninternal corporate dr ive towardsenvironmental excellence. Secondly, theyplayed a role as a catalyst in the processtowards balanced overall development withinthe Lake Lanao – Agus River watershed andthe Island of Mindanao. NPC’s linkages withand active participation in the Lake LanaoWatershed Protection and DevelopmentCouncil proved to be elemental in achievingthis.

Community participation in reforestationCommunity participation was ensured aftersix to nine months of social preparation priorto the initiation of the project. More than 150individual cooperators representing theirhouseholds participated by way of a contractfor the development of their area into treefarms. Technical support and assistance wasprovided by the Paper Industries Corporationof the Philippines (PICOP). More than 1,500hectares of private land were developed intotree farms and were planted with Acaciamangium, Durio zibethenus and otherindigenous tree species. Non-cooperatorsrequested seedlings from the project for their

own reforestation activities, thus supportingthe project.Post-project monitoring and evaluation ofthe established tree farms indicated a veryhigh tree survival rate of 98 percent andfavorable growth rates. In 1996, the projectwas transferred by PICOP to NPC who thencontinued the rehabilitation effort throughinternal funds. By the year 2001, most ofthe Acacia mangium trees are ofharvestable age. NPC is in the process ofassisting the tree farmers in the optimalutilization of their trees. This innovativeexperience in financing reforestation ismuch of a success story, overshadowingthe government’s performance related toefforts by the Department of Environmentand Natural Resources.

For further information, please contact:Prof. Danilo C. MeroCollege of Forestry and EnvironmentalStudiesMindanao State University Marawi City 9700, PhilippinesTel.: +63-063-520978, Fax: +63-063-520959E-mail: [email protected]

Payment for hydrological services inthe Ecuadorian Andes: Water taxes and water funds atmunicipal level

By Robert Hofstede and Montserrat Albán

In Ecuador, a small country with a highbiodiversity in the Northwest of the SouthAmerican continent, almost the entirepopulation of 12 million people depends onthe environmental services provided by theAndean natural ecosystems. Particularlythe fresh water supply, regulated by 30,000km2 of remaining Andean forests and12,600 km2 of high altitude páramograsslands, is of utmost importance for


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irrigation, drinking water and electric powergeneration. Nevertheless, the pressure on thenatural areas of the Andes is high anddestruction of forests and páramos is a majorthreat to the sustainable production of areasdownslope.

Different initiatives are being developed toprovide local farmers with an alternative tounsustainable forest and páramomanagement. In three municipalities ofdifferent size, systems of payment forenvironmental services are beingimplemented. The purpose is to assure natureconservation for the regulation of water flows.Probably due to the differences in local reality(different size of the municipalities anddifferent economical, historical andinstitutional contexts), each of the threemechanisms is unique and they have differentlevels of success and disadvantages.

In Quito, an estimated population of twomillion people benefits from the water thatoriginates from the páramos in five protectedareas around the city. Supported by severallocal NGOs, international donors and theMinistry of the Environment, the municipalwater company (EMAAP-Q) identified theneed for integrated and long-termmanagement of these protected areas. Theconservation of this so-called "Bioreserva delCondor" should be executed by localorganizations and with participation of thelandowners, according to a collectivelydeveloped management plan. Theimplementation of the management plan wasto be financed by the interests of the "Fondode Agua" or water fund created in 1998(Echavarría & Granizo, 2000). This fundreceived an initial donation of internationaldonors and is planned to increase by a levy of(on average) 1% on the price of drinkingwater and by voluntary donations of majorwater consumers in agriculture and industry.The structure of the water fund appears to bepromising, efficient and transparent.

Furthermore, the decision to invest intoconservation activities instead of a directpayment to landowners for conservation iswell chosen in this area. Nevertheless, thefund is still far too small to generatesufficient interest. A strong economicrecession struck Ecuador shortly after thecreation of the Fund, decreasing thewillingness to pay of the city inhabitantsand large consumers, and no agreementcould be reached on the percentage of theraise.

In Cuenca, a city of 300,000 inhabitants inthe South of the Ecuadorian Andes, themunicipal water company (ETAPA)achieved an initial 7% raise of the grosswater price in 1996, which was directed totheir environmental unit. The money wasused to purchase three areas of naturalAndean forests and páramo grassland inthe buffer zone of the El Cajas nationalpark, which covers a large part of thecatchment area for drinking water ofCuenca (Turcotte et al., 1999). The threereserves, comprising 9000 ha are fullyprotected, allowing only limited recreationactivities. Since 2000, the Ministry of theEnvironment transferred the responsibilityfor management of the entire El Cajasnational park to the Municipality of Cuenca.The management is executed by ETAPA. Inthis experience, the protection of naturalareas appears to be assured, but voices ofdiscontent among local inhabitants arenotable due to the narrow focus on waterresources and the status of absoluteprotection.

In the North of Ecuador, the smallmunicipality of Pimampiro (22,000inhabitants) did not have a proper drinkingwater system. Most inhabitants receivedwater only during two hours every day. Bydigging a tunnel, water became availablefrom a spring at a distance of 15 km,located in an Andean mountain forest. This


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increased the service to six hours per day.Meanwhile, the environmental division of themunicipality created the "Fund for thePayment for Environmental Services",assisted by a local NGO for ruraldevelopment (CEDERENA et al., 2001). Thisfund received an initial 15,000 US$ ofinternational donations, and is growingthrough a 20% levy on the price of drinkingwater. The population’s willingness to pay ishigh because of the strongly improved waterservice. The interest of the fund is dividedamong the landowners of the capture area,under an umbrella agreement defining asustainable management scheme for thearea. The payment equals to 1 US$ permonth per hectare of forest, and 0.50 US$ perhectare of páramo grassland. Theimplementation of the system started in June2001 and received many positive reactions.However, the fund is still not large enough topay all farmers, and those who receivecompensation complain that it is insufficient.

These three examples all represent initiativesin which charges on water consumption aredirectly invested into the conservation offorests and páramo grasslands in thewatersheds concerned. The mechanismsdiffer in the way of financing (through a waterfund versus direct revenues), the actorsinvolved (international donors, NGOs,municipalities, Ministry of the Environment)and the destination of the money(conservation activities, purchase of land anddirect payment to landowners). Probably, themechanism of Quito is the most promising onthe long term, that of Cuenca the mostefficient in terms of actual conservation, andthat of Pimampiro the most socially justified.The main lesson is that none of the systemsis perfect but that each of the initiatives isadapted to a specific local reality: successfulexperiences are therefore only in partapplicable to other areas.

For further information, please contact:

Robert HofstedeProyecto Paramo - University ofAmsterdamÚltimas Noticias N37-78 y El ComercioQuito, EcuadorE-mail: [email protected]

References:CEDERENA, Municipio de Pimampiro, FIA, 2001.Unidad de Medio Ambiente y Turismo, Boletín No.1, Mayo 2001. Pimampiro, Ecuador.

Echavarría, M. & T. Granizo, 2000. Valoración delagua en los páramos. Pp. 174-175 in: J. Recharte,J. Torres & G. Medina (Eds.), II Conferenciaelectrónica sobre usos sostenibles y conservacióndel ecosistema páramo en los Andes. CONDESAN,Mountain Forum.

Turcotte, P., L. Medina, C. Díaz & A. Peralta, 1999.Metodologías aplicadas para el manejo yconservación de los páramos con énfasis en elrecurso agua: la experiencia de ETAPA. Pp. 5-14in: C. Josse, P. Mena & G. Medina (Eds), Elpáramo como fuente de recursos hídricos. SeriePáramo 3, GTP/Abya Yala, Quito, Ecuador.

VI FOCUS ON SUSTAINABLELIVELIHOODS AND POVERTY

ALLEVIATION

This final section of the newsletterelaborates on financing mechanisms insupport of sustainable livelihoods andpoverty alleviation. In their article, Rob Hopeand co-authors analyse two forest/waterpolicy instruments aimed at improvement ofthe livelihoods of poor people and protectionof the resource base, for a pilot watershedin South Africa as part of the CAMP project.One is a compensation mechanism ofpayments for water consumption of forestryactivities upstream to poor water usersdownstream, while the other aims to controlalien species to increase the productivity ofthe resource base. Paul van Gardingenhighlights new research opportunities within


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DFID’s Forestry Research Programme: theMultiple Objective Forest Management clusteraims to increase the range of goods andservices provided by forests, and paysattention to economic and financialinstruments. The article by Diwakar Sinhadescribes the implementation of revolvingfunds at village level in India, in relation tointegrated watershed management includingreforestation activities. Other articles in thisissue also pay attention to sustainablelivelihoods and poverty alleviation incombination with other objectives: e.g. that ofNatasha Landell-Mills and co-authors (SectionIII), and the articles in Section IV on carbonsequestration.

Saving the trees and the poor? Catchment Management and Poverty(CAMP)

By R. Hope1, I.R. Calder1, J.W. Gowing1, N.Laurie2, P-J. Dixon3, C.A. Sullivan4, N.A.Jackson4, G. von Maltitz5, J. Bosch5, D.LeMaitre5, P. Dye5, T. Netshiluvhi5, N. Hatibu6

and G. Paterson7

1 Centre for Land Use and WaterResources Research (CLUWRR),University of Newcastle, UK;

2 Department of Geography, University ofNewcastle, UK;

3 Department of Anthropology, Universityof Durham, UK;

4 Centre for Ecology and Hydrology (CEH),Wallingford, UK;

5 Centre for Scientific and IndustrialResearch (CSIR), South Africa;

6 Sokoine University of Agriculture,Tanzania;

7 Forestry Department, Government ofGrenada

In water-stressed environments, thelivelihoods of poor people are directly affected

by their access to natural resources,including water and forests. Policyformulation and evaluation seldom linksland-use planning across the catchmentscale to poverty alleviation goals at thelivelihood level. Concern exists over theinadequate consideration given to theimpact of forestry operations, and in somecases the escape of alien species, on wateravailability and the subsequent livelihoodimpacts.

The CAMP (CAtchment Management andPoverty) project is investigating IntegratedWater Resource Management (IWRM) andSustainable Livelihoods (SL) approaches toland and water management within theLuvuvhu catchment, South Africa, as ameans towards identifying policyinstruments that both improve thelivelihoods of poor people and protect theresource base. The project employs macro-scale hydrological and economic modellingcombined with household-level SLassessment to examine the effects ofalternative policy instruments relating toforestry and water allocation. Theapplication of modelling methodologies willbe later tested in Grenada, and stakeholderconsultations in Tanzania will provideadditional insight into the transferability ofproject outputs.

Two forest/water policy instruments arecurrently being investigated within SouthAfrica. Stream Flow Reduction Activities(SFRA) recognise that forestry in SouthAfrica generally has an adverse impact onwater resources. Following the NationalWater Act (Act 36, 1998), land uses suchas commercial forestry have beendesignated as a SFRA and land owners willbe charged in accordance with theestimated flow reduction that these landuses incur. The Working for Water (WfW)programme aims to remove alien invaderssimultaneously freeing-up water resources

ETFRN News 35/02 49


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by removing the threat to indigenousvegetation and providing a source of incometo the poor.

The manner in which the application of thesepolicy instruments affects catchment waterresources, economics and livelihoods is themain focus of the CAMP study. CAMP willseek to identify and prioritise the keyinteractions between these impacts and willseek at the minimum a qualitative, butpreferably a quantitative, modellingframework for assessing the policy outcomes.(Figure 1)

Research catchmentCAMP’s study site is the Luvuvhu catchmentin Northern Province, covering 5940 km² andforming part of the larger Limpopo system.The catchment is characterised by theSoutpansberg range to the north-west with ahigher precipitation regime (>1000mm) andplantation forestry and commercial agricultureas the dominant land-use, falling easterly tothe main urban settlement (Thohoyandou,population 450,000) and then to drier(<500mm), fragmented, rural communitiesthat lead to the border of the Kruger NationalPark, finally draining into the Limpopo at theZimbabwe/Mozambique border.

The catchment is predominantly populated byVenda speaking communities thatrepresented one of the ‘homelands’ under theapartheid regime before the new dispensationin 1994. Xitsonga is the other major blacklanguage spoken with Afrikaans dominantamong the white community. NorthernProvince is one of the poorest regions withinSouth Africa under almost every socio-economic classification.

With the implementation of the NationalWater Act, efficient, equitable and sustainablewater management are the key aims underwhich devolvement of water resource

management, delivery and maintenance isbeing ceded to 19 water managementareas, within which CatchmentManagement Agencies (CMAs) and WaterUser Associations (WUAs) are in theprocess of being formed. Integral to thisprocess is the priority status of theecological and human ‘Reserve’, whichensures that environmental and equitabledistribution of the water resource hasprimary consideration. The efficiency-equityinterface of the NWA fits closely with thethematic tension in CAMP’s research intohuman versus resource-first policies andoutcomes.

Innovative financial mechanismsSFRA and WfW offer two potential policymechanisms for conservation andsustainable forestry management (seehttp://www.dwaf. gov.za). The former wasclarified within the NWA and recognises theintegrated nature of catchmentmanagement, particularly upstream-downstream linkages between competingwater users. The main commercial alienspecies are wattle, pine and eucalypts.Within the Luvuvhu, upstream water usersare primarily white-run forestry plantationsand commercial agriculture, whilst in themid and lower reaches the majority of waterusers are blacks with limited or no accessto the water resource. SFRA as acompensation mechanism for this unequalaccess to a public good may mitigateinequalities and aid poverty alleviation.Water licensing is now mandatory and thekey mechanism that the new watermanagement paradigm is championing asthe key to efficient and equitable waterresource management. The process ofnegotiated payments from key land-usegroups (notably forestry) is fairly advancedwith a payment vehicle per species/hectarebeing proposed on completion of thelicensing programme.


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The WfW programme began in 1995 with theaim of controlling alien species to achievewater security, ecological integrity and socialequity through job creation. National run-offsimulations have predicted a 73% reductionwithin a 20-40 year time-frame if no action istaken against alien invaders. WfW qualifiesas a financial mechanism due to its beneficiallinkage between optimising the productivity ofthe resource base (land/water) by the publicworks removal of alien species. The netfinancial benefits to South Africa plc areconsidered significant. The social componentof the programme has gained moreprominence within the ‘new’ South Africatargeting women, youth and disabled groups.The WfW programme embodies the resource-human interface particularly within the poorestcommunities where reliance on the naturalresource basis is the most pronounced.

Results to dateCAMP is currently developing innovativemethodologies to model water resource andecological impacts, a resource economicmodel of the net precipitation value, andlivelihoods’ analysis from quantitative andqualitative research at the catchment scale.Reports and analysis are available at theCAMP website.

For further information, please visit the projectwebsite: http://www.cluwrr.ncl.ac.uk/projects/camp/index.html or contact:

Prof. Ian Calder or Rob HopeCentre for Land Use and Water ResourcesResearch (CLUWRR)University of Newcastle, UKE-mail: [email protected]

Yield regulation and Multiple ObjectiveForest Management

By Paul van Gardingen

Weaknesses in the theory and practice ofyield regulation often result in the rate ofextraction of goods and services exceedingthe ecological capacity of the resource torecover. As a result, the extent and qualityof forests decline and there is increasingconflict between stakeholders who aredependent on forests for their livelihoods.The Forestry Research Programme (FRP)of the United Kingdom Department forInternational Development (DFID) issupporting research to develop tools andapproaches to regulate the yield of goodsand services from forests. The first phaseof this work has focused on theimprovement of tools for growth estimationand yield prediction. This has involved thedevelopment of the SYMFOR framework(Silviculture and Yield Management toolsfor tropical FORests) and MYRLIN(Methods for Yield Regulation with LimitedInformation). See also www.symfor.organd http://www.myrlin.org

Financial viabilityThe methods developed by these FRPprojects are being extended to address theneeds of a wider range of stakeholders. Aseries of pilot studies are being conductedwith groups in Indonesia, Guyana, FrenchGuyana, Brazil and Ecuador. The pilotstudies are linking growth and yieldestimation tools with methods for economicand financial analysis. The first study inIndonesia demonstrated that forestmanagement practices proposed for areasof logged-over forest would not befinancially viable (McLeish & Farida HerrySusanty, 2000). More recent work showsthat alternatives may result in a “win-win”situation, where good forest managementcan maintain the forest resource whilst stilldelivering financial returns with an internalrate of return exceeding 10 percent. Two workshops were held during 2001 andidentified constraints to effective yieldregulation in a range of countries. Major


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challenges remain in many tropical countriesbecause of the prevalence of forest piracy andthe lack of incentives for sustainablemanagement of forests. Alternative land usesare often more profitable, resulting in highopportunity costs associated with theadoption of improved forest managementpractices. Furthermore, some options forsustainable forest management may maintainor increase the marginalisation of stakeholdergroups leading to increased conflict andpotential for illegal harvesting or destructionof the forest resource.

Development of sustainable alternativesNew research initiatives are required toprovide financially viable and sociallyacceptable alternatives to bad managementand piracy. Future research on timber yieldregulation needs to be integrated with aconsideration of the policy, financial,economic and social environments that willinfluence behaviour. This has implications forforest researchers as well as policy makers,planners and managers. Future activitiesneed to address the following issues: • The legitimate roles of a wider range of

stakeholder groups; • The potential for a wider range of goods

and services from forests to contribute toincome, livelihoods and povertyalleviation; and

• New ways of working that break downtraditional barriers between professionalgroups, disciplines and social groups.

Multiple Objective Forest ManagementDFID’s Forestry Research Programme ismeeting this challenge by designing a clusterof research projects for yield regulation forgoods and services from forests entitledMultiple Objective Forest Management(MOFORM). The following topics will be included in arestricted call for proposals: 1. Establishment of multiple stakeholderpartnerships in partner countries

The cluster will seek to develop a numberof partnerships in Asia, Latin America andAfrica. These partnerships will form thefocus for research, training anddissemination activities of the MOFORMcluster in each country or region.2. A state of knowledge review on yieldregulationA review of theory and practice for timberyield regulation is proposed for 2002.Among other things, the review willconsider the needs for new approaches foryield regulation resulting from theinvolvement of a wider range ofstakeholders in forest management and theproduction of a wider range of goods andservices from forests. 3. MOFORM ToolboxThe toolbox project will adapt existing, ordevelop new tools and approachessupporting multiple objective forestmanagement. The topic will includemethods for yield regulation of non-timberforest products to meet needs identified ata previous joint FRP-ETFRN workshop heldin Rome during 2000 (Wong, 2000). 4. Economic and financial tools andinstruments supporting MOFORMThis topic will produce a guide to whicheconomic and financial tools andinstruments are most appropriate underspecific circumstances. Conceptsillustrating this topic are given below.

Common currencyThe fourth topic will explore thedevelopment of a common currency thatallows rational debate betweenstakeholders who exclusively use methodsof monetary valuation and those who alsoconsider social and cultural values. The“common currency” will be applied to theaim of reaching a consensus on decisionsthat produce the greatest net social benefit.This in turn should lead to decision supportsystems that are less reliant on researchdata and will help to rationalise decisions


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on changes in forest and land use.

Compensation mechanismsResearch related to the fourth topic will alsoconsider compensation mechanisms thathave potential to transfer value captured bydownstream users and consumers of goodsand services, to benefit those forest managerswho adopt sound land and forestmanagement practices upstream. This mustinclude the development of equitablemechanisms for the capture and distributionof benefits (value) resulting from sustainableforest management. The decision supportsystems may include water, carbon andbiodiversity markets. In addition, a morerational approach should enable greaterconsensus to be obtained on taxation regimesfor forests and lands in marginal areas.

Partnerships The MOFORM yield regulation cluster willwork closely with partners in both developingand developed countries. We are mostinterested in hearing from any individual ororganisation that is interested in contributingto any of the above research themes includingthe establishment of multiple stakeholderpartnerships in potential target countries.

For more information please visit theMOFORM website (http://www.moform.org) orcontact:Dr. Paul van GardingenCentre for the study of Environmental Changeand Sustainability (CECS)The John Muir BuildingThe University of EdinburghMayfield RoadEdinburgh, EH9 3JK United KingdomTel: +44 (0)131 650 7253, Fax: +44 (0)131 650 7863E-mail: [email protected]

The revolving fund mechanismadopted for watershed managementin India

By Diwakar Sinha

Forests in India used to be consideredprimarily as productive entities. They werelooked upon as sources of fuel, fodder andtimber together with minor forest productssuch as bamboo, grasses, fibres andhoney. In the late seventies, the adoption ofthe concept of sustainable management offorests led to a growing interest in theregulation functions of forests. The NationalForest Policy of 1988 introduced theconcept of participatory forest managementon usufruct sharing basis. The newapproach included active participation ofvillage communities and voluntary agenciesin sustainable forest management andsocio-economic development. This resultedin the development of Joint ForestManagement (JFM) programmes in 22States. By now, about 36,130 ForestProtection Committees are managing atotal of about 10.25 million ha of forests.Additionally, a programme on NationalWatershed Development Projects for Rainfed Areas (NWDPRA) was launched in1990, covering 25 States and 2 Unionterritories. The programme aims tosustainable biomass production andrestoration of the ecological balance in rainfed areas. In this framework, internationaldonors assist watershed and agriculturaldevelopment projects. Most projectsprovide incentives and training to thevillagers to bring about changes in attitudestowards the use of forests and theenvironment.

Community participation in watershedmanagementThe Doon Valley Integrated WatershedManagement Project is one of the leading


ETFRN News 35/0254

watershed management projects of NorthIndia. It is a nine-year project ending in 2001led by the Ministry of Agriculture. The projectis implemented in 303 villages covering anarea of about 2508 km2. The principalproblem addressed by the project is that thefragile ecosystems of Doon Valley suffer fromincreasing human pressure. The urbanpopulation is increasing and agricultural landsare rapidly encroaching steep hill slopes,thereby degrading the forest resources. Theextraction of firewood and fodder from theforests further contributes to the degradationprocess. In the past, state governmentinvestments in reforestation were largelyineffective. Being open access lands, neitherthe government nor the communities protectthe forests. The project is meant to motivatethe villagers to become economically self-sufficient and less dependent on the forestresources. The main project components areagriculture, horticulture, animal husbandry,minor irrigation, soil conservation, energy andforestry. On the long term, the project shouldreduce the on-going degradation of the DoonValley ecosystems, improve the livingconditions of the rural people, and ensuretheir participation in managing theenvironment. The immediate objectivesinclude sustainable natural resourcesmanagement, increasing productivity of landand water resources, strengthening ofcommunity part icipation, and theimprovement of the socio-economicconditions of disadvantaged groups,particularly women. The village is treated asa basic unit that manages its naturalresources through community participation.Village plans evolving from participatory ruralappraisal play an important role.

Revolving fundsIn each village, a revolving fund is developedto ensure optimum utilization of the availablefinancial resources and sustainability of thecreated assets. The purpose of this fund is tomeet the small needs of the local people and

self-help groups. Rules have been framedin support of the effective functioning of thisfinancing mechanism. Any loan from thisfund is given on easy terms and withoutsecurity or legal formalities. The rate ofinterest is nominal and decided by thecommunity itself. Studies have revealedthat the percentage of defaulters regardingrepayment of these loans is very low.Group and social pressures are consideredthe main cause. All villagers contributeregularly to the common fund as definedand accepted by the whole community in ageneral meeting. The general body thatmaintains and operates the revolving fundis known as Gram Resource ManagementAssociation (GAREMA). Gram in Hindilanguage means village. GAREMA has amale and a female representative from allvillage households. In some progressivevillages, revolving funds are linked up withnational bank, which has proved to be aboon for the local people.

Alternative sources of income andenergyWith the project in its last year of operation,marked changes are visible. Subsidies andloans have supported the start of income-generating activities such as cultivation ofhigh-income cash crops, poultry and dairycattle keeping, fruit preservation practices,pickle making, sewing and stitching, lightbulb making, and fish cultivation inindividual as well as community tanks.Savings/credit groups with revolving fundshave been established, supported bycontributions from the villagers and theproject. Training activities emphasize theinterrelation between the environmental andeconomic dimensions of sustainability.Here it is important to note that the use ofnon-conventional energy devices and liquidpetroleum gas have proved their worth insaving forest on one hand and generatingtime for the people on the other. People arededicating this time saved to income


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generating activities and other importantaspects of life like health, hygiene andeducation.

Lessons learntDuring project implementation, a majorproblem was in the first place to influence theattitudes of the villagers towards optimal useof the available resources. A secondimportant aspect that required considerableeffort was the capacity building of the villagepeople. The third problem was that they werereluctant to redefine the daily work scheduleand adopt innovative technologies in order toutilise the time efficiently to generate morebenefits. Demonstrations, training sessions,and subsidy for adoption of new technologieswere used to tackle some of the problems.Furthermore, there were awarenessprogrammes, and people were stimulated toparticipate in the different phases ofdevelopmental programmes including self-evaluation. This has helped the villagers totake constructive steps in the direction ofoptimum utilisation of the available resourcesfor socio-economic development incombination with sustainable forestmanagement. The use of revolving funds hasplayed a significant role in this process. Themechanism of revolving funds is consideredof great significance to other developing

countries having similar problems andbiophysical conditions.

Diwakar SinhaAssistant Conservator of Forests, UttarPradesh6/4, Indranagar Forest ColonyDehradun – 248006, Uttaranchal, IndiaE-mail: 1) [email protected]

Internet Features

ETFRN News 35/0256

By Jelle Maas

Forest World at www.forestworld.com is anonline marketplace for certified forestproducts. It also offers information oncertification & sustainability, forest industryand woods of the world.

www.prototypecarbonfund.org/ is the site for theWorld Bank's Prototype Carbon Fund, a newproduct that aims to demonstrate how project-based emissions transactions can mitigateclimate change. The site is an integral part ofthe PCF's aim to gather, analyse, anddisseminate knowledge gained from a "learn-by-doing" approach.

Resources for the Future (www.rff.org) is anonprofit and nonpartisan think tank based inWashington DC conducting independentresearch on environmental and naturalresource issues. Their site includes thefollowing articles on biodiversity prospecting:Capitalising on Biodiversity - about Brazil'sexperiences in biodiversity prospectinghttp://forests.org/archive/brazil/brcbiodb.htmBiodiversity Prospecting: Shopping the WildsIs Not the Key to Conservation by R. DavidSimpson www.rff.org/resources_articles/files/biodprospect.htm.

The Programme for Forests (PROFOR) ofUNDP provides several (PDF) publications onfinancing sustainable forest management:www.undp.org/seed/forest/pages/ publications/financing_SFM.html

The Biodiversity Economics Libraryhttp://biodiversityeconomics.org/index.htm by IUCN business and biodiversityinitiative:http://iucn.org/themes/business/index.htm

The IIED Forestry and Land Use Programmehas a project on Instruments for SustainablePrivate Sector Forestry which has produced

several reports that can be downloaded fromtheir publications webpage. www.iied.org

The African Forest Economics Newsletter ofthe FAO is available at www.fao.org/forestry/fon/fons/financing/afe_2_en.htm A FAOsynthesis paper summarising the informationpresented in 26 country reports comparesand contrasts the many different ways inwhich forest revenue systems are designedand implemented in different Africancountries and presents estimates of the totalfinancial flows between government and theforestry sector www.fao.org/DOCREP/003/X6830E/ X6830E00.HTM.

Ecological Economics www.elsevier.nl/locate/jnlnr/05100 published by Elsevier, isthe Transdisciplinary Journal of theInternational Society for EcologicalEconomics www.ecologicaleconomics.org/

ForVal online (short for Forest Valuation) isan online forestry investment calculatordeveloped by Steven Bullard of theMississippi State University. www.cfr.msstate.edu/forval/

The Journal of Forest Economics is ascientific journal published by the SwedishAgricultural University in Uppsala. Index:www.sekon.slu.se/~oca/eng/publ/jgeneral.htm

The African Centre for Technology Studies,an international inter-governmental policyresearch and training organization in Nairobi,Kenya, focusses on implementation ofAgenda 21 and conventions on biologicaldiversity; climate change; and desertification.www.acts.or.ke/

Documents for the Second SubstantiveSession of the United Nations Forum onForests ( San Jose, Costa Rica, 4-15 March2002) are available at:www.un.org/esa/sustdev/unff2001_ omdoc.htm.

Funding

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“Small grants programme foroperations to promote tropicalforests”

The official launch of the “Small GrantsProgramme for Operations to PromoteTropical Forests” (SGP PTF) was madethrough the Regional Inception Workshop inearly December 2001 in Los Banos,Philippines. Funded by the EuropeanCommission (EC) the SGP PTF is managedby the United Nations DevelopmentProgramme (UNDP) through the ExecutingAgency, the SEAMO Regional Centre forGraduate Study and Research in Agriculture(SEARCA).

The overall operation is for five years with ECcontribution via the Tropical Forest BudgetLine of 15,132,500 Euros. Operations willtake place initially in four countries (Pakistan,Philippines, Vietnam, Thailand) with thepossible expansion to other countries in Southand South East Asia when conditions arepropitious.

The SGP PTF will complement the existingGlobal Environment Facility Small GrantsProgramme (GEF SGP) and related financinginstruments to benefit poor andunderprivileged forest user groups bypursuing the following key objectives: (a) actas catalyst to promote and demonstratecommunity-based management and resource-use in tropical forests; (b) draw lessons fromlocal experience and support the spread ofsuccessful community-level strategies andinnovations; (c) build grassroots levelcapacity to tackle problems that arecontributing to forest destruction anddegradation through partnerships andnetworks.

The principal thrust of the SGP PTF will bethe execution by civil society organizations at

country level of small (20,000 – 200,000Euros) forest related projects.The programme will benefit from theexperience acquired both by the GEF SGPand by EC forestry programmes in theregion. The community focus of the SGPPTF will be further enhanced throughextensive networking and collaboration todraw on the expertise of a number ofinstitutions in the region with richexperience in community-based tropicalforestry.

The SGP PTF will be implemented in twophases with an initial start up phase inwhich the technical, administrative andfinancial framework for the operation will befinalised. It is during this phase, to becompleted by March 2002, that country-specific guidelines for the selection of localproject proposals will be drawn up. Thisprocess, carried out in close collaborationwith local stakeholders, will be coordinatedthrough National Steering Committees andmanaged by PTF Coordinators. Thecompletion of this phase will be announcedwith a formal call for proposals detailingeligible organisations and thematic areas;the application and selection procedures;and the roles and responsibilities of thegrantees and the SGP PTF.

For further information on the SGP PTFplease contact;

Mark SandifordRegional Programme CoordinatorEC/UNDP SGP PTFSEARCACollegeLaguna 4031PhilippinesTel: (63-49) 536 2290 loc. 395 or loc.418Fax: (63-49) 536 7097Email:[email protected]

Other News

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Courses on Environmental Servicesat the World Bank

With reference to the article in this issue titled“Current work on environmental services atthe World Bank” (page 6 ) The Bank is alsoaware of the need for capacity building andtraining and has developed a two weektraining course for senior level technical staffof government agencies on environmentalservices.

Non-governmental and private sectororganizations are encouraged to participate.The training course is very much a hands-onand case study centric exercise. The where,how and why specific tools work or do notwork is presented in an intensive participatoryworkshop environment.

The benefits envisioned are increasedgeneration of valuable services to the countryand their protection. With an eye towardsfinancial sustainability payments forenvironmental services should be madeprivately viable where possible. Two courseshave thus far been imparted (Ecuador andVenezuela) with three others in the pipeline.

The Bank welcomes those who are interestedin pursuing this training course in theircountries to contact the author of thenewsletter article.

Gunars Platais PhDSr. Environmental EconomistEnvironment Department, World Bank1818 H StreetNW. Washington D.C. 20433 USATel.: +202-473-2627, Fax: +202-522-1142E-mail: [email protected]://worldbank.org/biodiversity

Forest Conservation in theForgotten Philippines

By Craig Turner

The Philippines is recognised as a globalbiodiversity hotspot and considered aninternational conservation priority.However, conservation is arguably beingled at the local level. On one island, theNegros Forests and Ecological Foundation,Incorporated (NFEFI) has formed a uniqueconservation partnership with Coral CayConservation (CCC), a UK based NGO, tofund and facilitate sustainable conservation.

NFEFI and CCC have established theNegros Rainforest Conservation Project(NRCP) in the highly threatened Negros-Panay faunal region of the centralPhilippines. The NRCP aims arecomparative to other biodiversityconservation projects in montane forestareas. However, it is the mechanism bywhich it achieves these goals that makesthe project unique. CCC provides theresources to the project in terms of highlyqualified scientific and technical staff,equipment, and a constant year-roundstream of self-financing conservationvolunteers. Under the guidance and trainingof the project staff, the volunteers (includingsponsored local students and in-countrycounterparts) are provided with thenecessary knowledge and technical skills toundertake natural resource assessmentsand contribute to the overall education,restoration and sustainable managementobjectives of the project.

The project is therefore participatory on anumber of levels. NFEFI further facilitatesliaison with local community groups, localgovernment bodies and other NGOs,ensuring integration of all otherstakeholders. The project promotes local

Other News

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ownership, involvement and benefit, and theoperational structure (utilising self-financedvolunteers) means there is virtually no cost tothe host country or local NGO, and nodependency on external funding agencies. Ata time when all conservation organisationsstrive to achieve financial sustainability, theNFEFI/CCC partnership offers one possiblesolution.

CCC is continually recruiting volunteers forthe NRCP and for more information, pleasecontact:Craig Turner (Terrestrial Science Co-ordinator)Coral Cay Conservation The Tower, 125 High Street, Colliers Wood, London, SW19 2JG, UKT: +44-(0)20-8545-7722F: +44 (0)870-750-0667E: [email protected]: http://www.coralcay.org/

Prototype Carbon Fund ReleasesEcoSecurities Market IntelligenceReport on emerging greenhouse gaspolicies

EcoSecurities Ltd. is pleased to announce therelease of the World Bank Prototype CarbonFund’s “Carbon Market Intelligence Report:Issue 2.” Commissioned by the PCF Plus,this report details the emergence of carbonmarket policies up to COP 7. The focus ofthe report is on the development ofgreenhouse gas emission reductionrequirements and associated policies atvarious national and sub-national levels.

Svetlana Morozova, a senior analyst forEcoSecurities and principal author of thereport, says “The report will benefit thegrowing audience of private and public groupsinterested in the uneven progress of

greenhouse gas reduction policies acrossthe many jurisdictions of North America,the European Union and the rest of Annex1”.

Following on the first PCF MarketIntelligence report released in July of 2001,the second installment of the projectextends a number of topics. It reviewsAnnex I’s national greenhouse gasemissions profiles, analyzes new policypositions of various EU jurisdictions andassesses implications of the Bonnagreement. In addition, the second reportprovides an in-depth review of variouslegislative proposals concerning reductionof greenhouse gas emissions in a numberof American states, following the officialwithdrawal of the United States from theKyoto Protocol.

In the course of report preparation,EcoSecurities has interviewed more than100 public officials and private-sectorstakeholders in the United State andEurope, including representatives of the USregional energy commissions, the US EPAand a number of European agencies,among others.

Both reports, supplemented by a series ofAppendixes, are available through thePrototype Carbon Fund “PCF PLus”website, in the research section. For directaccess to the 2nd report, clickhttp://www.prototypecarbonfund.org/docs/ecosecurities_2nd_report.pdf To access theearlier report, please go tohttp://www.prototypecarbonfund.org/docs/ecosecurities_1st_report.pdf. The third andfinal report is expected for release in thefirst quarter of 2002.

EcoSecurities is an environmentalinvestment and advisory firm thatspecializes in services to facilitateinnovative environmental finance solutions

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for renewable energy and otherenvironmentally sustainable processes.For more information, please go towww.ecosecurities.com

For more information, please contactSvetlana MorozovaSenior AnalystTelephone: (1) 909 621-1358 Fax: (1) 909 621-7438Ema i l : sve t l ana@ecosecu r i t i es . commailto:[email protected] In Europe, contact: Paul SoffeSenior Analyst, Tel: (44) 1865-202-635Fax: (44) 1865-251-438Email: [email protected]

FLOWS - addressing issues in andbetween land use, hydrology, forests,economics, water resourcesm a n a g e m e n t , s o c i a l a n denvironmental sustainability

FLOWS is a free service, developed andproduced by Bruce Aylward and SylviaTognetti, with support of Forest Trends,www.forest-trends.org, and the EnvironmentalEconomics Programme of the InternationalInstitute for Environment and Developmentwww.iied.org\enveco\ .

FLOWS provides an independent perspectiveand commentary on key papers addressinghydrology, economics, and the developmentof markets, policies and institutionalarrangements for watershed services.FLOWS was created to keep its readership upto date and informed regarding:• the hydrological impacts of land use

change and their socio-economicconsequences;

• efforts to achieve cost-effective,

environmentally sound and sociallyequ i tab le so lu t ions to landuse/forest/water problems; and

• the potential role and scope ofecosystem management and market-based instruments as options fori m p r o v i n g w a t e r r e s o u r c e smanagement.

For an example of FLOWS messages,please see the news items on Useful myths(p.60 ) and on the new E-journal on landuse and water resources research (p.62 )

FLOWS will be issued (in English andSpanish) once or twice a month, or whenthere are papers that merit a widecirculation. To sign up for FLOWS pleasesend a message to [email protected] the message SUBSCRIBE FLOWS inthe text (not the subject header).

General comments on FLOWS arewelcome. Please send them [email protected].

Useful myths and Intractable Truths:The Politics of the Link betweenForests and Water in CentralAmerica

Source FLOWS List (see above)

Decisions to support watershedmanagement programs often have beenjustified based on generalizations: thatforest cover reduces flooding, increases dryseason flow, increases rainfall, and reducessedimentation. The discerning reader willrealize that one of the reasons why thislistserve exists is that reality is much morecomplicated than this. David Kaimowitz,the new Director General of theInternational Center for Forestry Research(CIFOR) brings this point home in a

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thought-provoking paper entitled “UsefulMyths and Intractable Truths: The Politics ofthe Link Between Forests and Water inCentral America.”

Kaimowitz provides a pithy review of thescientific literature on hydrological responseto change in forest cover and then goes on toexamine four Central American cases. Hisconclusion? That these generalizations andthe accompanying claims of high medium-term costs of degradation of hydrologicalfunction are often overstated. His analysissuggests that such claims have served as aconvenient means of justifying investments inwatershed management - in particular soilconservation and tree planting - therebysupporting the agendas of many agencies,NGOs and international donors. Hence, theseclaims have gone largely unquestioned. Inthese examples from Central America,watershed management concerns go back tothe early part of the last century but did notget placed at the top of political agendas untilthey were linked to the sedimentation ofhydroelectric dams (which could threatenurban energy supplies), to the operation of thePanama Canal (with its benefits to globalcommerce and the U.S. military), and toreduction of vulnerability to disasters(following the "apocalyptic rampage" ofHurricane Mitch).

Kaimowitz coins the term “useful myths” forthese claims because despite the marginalability of the resulting projects to achieve theirwatershed management objectives they have“generated a favorable climate for addressingenvironmental issues” in the region.Kaimowitz feels that the value of this shouldnot be understated given the “intractabletruth” that it is difficult to link on-farmactivities to landscape level problems andeven more difficult to convince policymakersto attend to long-term environmentalproblems. The case studies make fascinatingreading, providing windows on the practical

(and often convoluted) technical andpolitical machinations of the watershedmanagement “business.” Indeed,Kaimowitz raises a rich set of questionsand issues - to the point where some of theexamples he cites could cause an anxioustaxpayer to raise the question of what is theappropriate boundary between doing theright thing for the wrong reason and doingthe wrong thing for the wrong reason.

To take just one of many issues raised inthe paper, Kaimowitz returns repeatedly tocritique the utility of standard, discountedcost-benefit analysis as a useful tool forassessing the long-term threat posed bysedimentation (even if less than is claimed)to the lifespan of large dams (the El Cajon,Cerron Grande and Panama Canal damsare the topics of three of the case studies).Indeed, the pitfalls of cost-benefit analysiswith respect to dams is well-established, forexample the World Commission on Damshas recently concluded that it is anecessary but not sufficient means ofassessing dam projects.

As long-lived capital investmentsKaimowitz cites a recent figure that CerronGrande still has 172 years to go - the use ofzero or low discount rates to place morevalue on future costs and benefits makesthe benefits of dams enormously attractive.Of course, large dams have their owncomplex set of social and environmentalimpacts so that fiddling with the discountrate may not be the solution. However, it isworth noting that as with the decision toinvest in soil conservation, the decision toengage in watershed management is not aone-time only decision, rather it is an optionthat can be taken at any point along thelifespan of a project. Using a moredynamic options approach to valuingsedimentation impacts (see the reference tothe papers by the WCD and Walker below)might thus serve as a more meaningful and

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practical way of providing advance warning ofthe point at which the benefits of acting willoutweigh the costs of waiting.

Papers:The paper by Kaimowitz can be obtained fromInna Bangun mailto:[email protected] comments on the paper can be sent tomailto:[email protected]

The World Commission on Dams report canbe downloaded from www.dams.org and thethematic paper on economic analysis of damswhich includes chapters on discounting andthe options response to the problem ofuncertainty, timing and irreversibility in projectinvestment can be downloaded fromwww.dams.org/thematic/ tr31.htm

For more on the options approach toinvestments in soil conservation see Walker,D.J. 1982. A Damage Function to EvaluateErosion Control Economics.American Journal of Agricultural Economics64 (11): 690-698.

E-Journal on Land Use and WaterResources

This is to draw your attention to a new E-Journal on Land Use and Water ResourcesResearch edited by Ian Calder. The firstissue, now available on-line at http://www.luwrr.com, contains a reassessment of thehydrology of tropical montane cloud forestsby L.A. (Sampurno) Bruijnzeel, and a series ofarticles on various aspects of problemsassociated with invasive alien species. Theseinclude their hydrological impacts andeconomic costs, integrated approaches tocontrolling them,and economic instrumentsand institutional arrangements that couldpotentially be used to support these efforts.The issue also featuresSouth Africa's Working

for Water Programme (designed toeradicate invasive alien species to improvewater supply while also reducing povertyand unemployment), including anevaluation and a discussion of the inherentsocial challenges.

Source: FLOWS List see Pg 60

New IUFRO Working Party onSustainable Management andGenetic Resources of Meliaceae

The IUFRO (International Union of ForestResearch Organizations) working party -1.07.19 "Sustainable management andgenetic resources of Meliaceae" serves asa forum for exchange of information on thesustainable management and geneticresources of Meliaceae, particularly theSwietenioideae (mahogany, Spanish cedar,etc.). Our principal means ofcommunication is a mailing list, maintainedby the Center for Research and HigherEducation in Tropical Agriculture (CATIE),Costa Rica. Please join us!

The announcement about the working partyand email list is available at: www.catie.ac.cr/catie/DirFun/Listas/iufro. htmin Spanish, English, French, andPortuguese. Please tell your friends andcolleagues!

If you have any questions or comments,please contact Sheila Ward at:[email protected]

ForestSAT Symposium onOperational Tools in Forestry usingRemote Sensing Techniques.

The British Forestry Commission isorganising an international symposium in

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Edinburgh the 5th to the 9th of August 2002, toraise awareness about existing remotesensing technique tools between forestmanagers. This event intends to bring alongthose tools currently used worldwide and toshow their potential application in Europeanforestry. This symposium is partly funded bythe EU LIFE programme FORESTSAFE,which covers the main organisation and thepublication of the proceedings. In addition, weare planning parallel activities such as a one-day seminar about optical, radar and lidarsystems with their possible applications inforestry; and exhibits with commercialproducts like software, data capture andconsulting. After the symposium, we want tocompile the most relevant applications in apeer-review publication.

ObjectivesRemote sensing techniques have beendeveloped over the last decades andnowadays some of them constitute importantoperational tools for forest management.Remote sensing methodologies are rapidlypenetrating a number of application domainssuch as forest inventory, management ofabiotic hazards, health monitoring, pollutioncontrol, timber extraction, production forecast,landscape architecture, the provision ofrecreation facilities and many others. Inaddition, remote sensing techniques are avaluable source of spatial information whencombined with the Geographic InformationSystems. Remote sensing data areextensively used in spatial models fordecision support in forestry. The symposiumprogramme intends to address all the remotesensing techniques such as aerialphotography, radar, lidar, optical systems andthermography. Additionally, the workshopwould like to invite solutions for primary datatransfer including the use of the World WideWeb, data compression techniques,visualisation and mobile computing.

Who should attendThe purpose of the symposium is to showforestry managers, forest practitioners,policy makers, planners and scientistsexamples of operational tools developedfrom remote sensing techniques. Theorganisation of this symposium would liketo bring together developers and users ofthese technologies into a common forumwhere both can be informed about thedevelopment and application of those toolsregarded as operational. The symposiumwould also provide an opportunity for usersto provide feedback about theirrequirements in future tool's developments.

Call for papersPapers are invited on the topics outlined inthe main areas of interest and others fallingwithin the scope of the meeting. Abstractsof no more than 300 words should besubmitted to the Symposium Secretariatbefore the 28th of February 2002.

Each paper will be allocated 20 minutes, 15minutes for presentation and 5 minutes forquestions and discussion. Each abstractwill start with an invited keynote speaker.Abstracts should clearly state the purpose,results and conclusions of the work to bedescribed in the final paper. Finalacceptance will be notified by the 31st ofMay 2002. Full-length papers will besubmitted before the 30th of June.

The language of the symposium will beEnglish.

Abstract submissionPlease submit your abstract including yourname, full address and symposium topicsRegistration forms are available in the SymposiumOfficial Web site www.forestry.gov.uk/ForestSATEmail: [email protected] Submission: +44 (0)131 445 5124Mail: Abstracts should be sent to:

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Juan C. Suáárez, ForestSAT symposiumForest Research, Northern Research StationRoslin, Midlothian EH25 9SYUnited Kingdom

VenueHeriot Watt University in EdinburghDuration: Three days conference, one dayoptional seminar and one day for a fieldexcursion.

Exhibitors InformationThe organisation of the symposium havemade available a limited number of space forexhibits. These facilities are ideal fororganisations wishing to exhibit software,hardware, products, services and literaturerelating to the theme of the symposium.Further details are available in the exhibitorspage and the symposium secretariat (+44(0)131 445 2176)

Preliminary seminarPrior to the symposium, there will be anintroductory seminar on the fundamentals ofthe most relevant remote sensing techniquesapplied to forestry like radar, optical systemsand lidar. The seminar will be conducted atEdinburgh University on Monday the 5th ofAugust 2002. Attendance is optional. Furtherdetails are available in the seminar page andthe symposium secretariat (+44 (0)131 445 2176)

ForestSAT Symposium in Edinburgh. August 5-9th 2002 'Operational Tools inForestry using Remote Sensing Techniques'

INTERNATIONAL AGRICULTURALCENTRE (IAC) WAGENINGEN, THEN E T H E R L A N D S T R A I N I N GPROGRAMME ON LEADERSHIP ANDADAPTIVE MANAGEMENT IN FORESTENVIRONMENTS

Duration: 1-11 weeksPeriod: September- November 2002

We are pleased to inform you about IAC’snew training programme on collaborativeadaptive forest management (CAFM) andbiodiversity conservation (BC). The courseis designed for managers, co-ordinators,senior staff, policy-makers, trainers andresearchers, involved in the policy andpractice of collaborative forestry and naturemanagement. They wish to renew, broadenand strengthen their professional andleadership qualities and share experienceswith colleagues from other countries andcontinents, and are committed to criticallyassess their own work and environment.

Course FocusCollaborative adaptive forest managementaims to achieve a balance between theconservation and utilisation of forestresources in the pursuit of ruraldevelopment and sustainable livelihoods incomplex and dynamic environments.Therefore, foresters who work in CAFMrequire a balance of social and technicalskills and insights. In response to this needthe programme covers the following broadareas of interest: collaboration anddecision-making between stakeholders,integrated land use, sustainable adaptiveforest management, biodiversityconservation, poverty reduction, equity andempowerment. Training is based onexperience-based and task-orientedlearning, which participants and resourcepersons develop together.

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Outline of the programmeThe training programme offers five shortcourses and one seminar, addressingdifferent aspects of collaborative adaptiveforest management. Although each of thecourses is designed to stand alone, theprogramme permits various combinations.The full course program comprising all sixelements provides a comprehensive packageon collaborative forest management and bio-diversity conservation. The programmeconsists of the following short courses:

Professional qualities for facilitation andcollaboration in NRM, 9-20 Sept.

Leadership, organisational change andinteractive planning for adaptive forestmanagement, 23 Sept-4 Oct.

Design, management and evaluation ofcollaborative forestry programmes, 7-18 Oct.

Seminar on science, learning and socialchange in forest management, 21-23 Oct.

Sustainable forest management and bio-diversity conservation, 28 Oct-8 Nov.

Integrated land use planning & environmentalimpact assessment, 11-22 Nov.

More information and application forms canbe obtained from our website or from theaddress below:IAC, P.O. Box 88, 6700 AB Wageningen, TheNetherlandsTelefax: + 31 317 495 395 E-Mail: [email protected]

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By Bert van der Linden

Indigenous people conserving the rainforest?

J.Demmer & H. Overman

(Reviewed by Miriam Ros)

The creation of markets and trade plays acentral role in strategies that aim to mergeconservation goals with improved localwelfare. But increased wealth and exposure tomarkets may have unforeseen side effects.Josefien Demmer and Han Overman studiedthese effects among Tawahka Indians inHonduras. TBI published the results. The Tawahka Asangi Biosphere Reserve inHonduras was created in 1999 to reconcilethe conservation of biodiversity withsustainable use and the protection ofindigenous land rights. Despite this protectedstatus, the Tawahka territory is not free fromthe effects of the market. The results of thisstudy suggest that people intensify their useof forest resources as their links with outsideeconomies and wealth are strengthened.

Differential impactsIncreasing levels of wealth and integrationinto the market appear to result in higher percapita pressure on forest resources. Somespecies face more pressure than others,however. Plants that provide thatch andtimber for canoes and board, in particular,face more intensive exploitation withincreased integration and wealth, while redbrocket deer, peccaries, spider monkeys andsome birds are among the animal speciesthat are more intensively hunted. The effects of integration into markets cannotbe assessed, however, on the basis ofextraction data alone. The authors argue thatthe effects of income-generating forest use

and increases in the area of cultivated landshould also be taken into account. Forexample, cash generated by ecotourismmay have negative side effects on theforest, because of agricultural expansion.There are also the dynamics of foragingeconomies. Most of the wealthier and moreintegrated Tawahka households haveabandoned forest-based activities for moreprofitable occupations (e.g. agriculture,shops, wage labour). It is also highlyprobable that more prosperouscommunities increase in population size.The authors therefore conclude thatincreasing wealth and integration intomarkets are likely to lead to theconcentration of people in one place, aswell as to higher rates of per capitaconsumption. They expect that “sooner orlater, the need for management andcollectively accepted agreements on forestresource use will be required.” In order to reduce pressure on certainspecies, the two researchers suggest:

• exploring the possibilities for setting uppig farms;

• discouraging sales of canoes andboards to outsiders;

• establishing mixed tree plantations andintroducing wood preservatives, lesser-known species and Amazonian canoe-building techniques.

IncentivesDemmer and Overman demonstrate thatthe annual value of the forest accruing tothe Tawahka ranges from US$ 17.8 to 23.7per hectare. This combined value ofconsumption and the sale of forest goods isonly a small fraction of the value that theglobal community attaches to services ofthe forest like climate regulation, CO2

absorption and erosion reduction. Thisleads to the conclusion that the globalcommunity should consider compensating

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villagers for foregone benefits if they would bewilling to refrain from activities that lead todeforestation and forest depletion. This wouldincrease the financial incentives forconservation as well as raise local welfare.The specifics of such mechanisms should benegotiated between policy makers, NGOs andindigenous groups. Demmer and Overmanbelieve that this could be a promising long-term management strategy for indigenousreserves, because it covers the directinterests of the stakeholders.

Reference:Demmer, J. and Overman, H. (2001).Indigenous people conserving the rain forest?The effect of wealth and markets on theeconomic behaviour of Tawahka Amerindiansin Honduras. Tropenbos Series 19. TropenbosInternational, Wageningen, the Netherlands.ISBN: 90-5113-053-8.

This publication can be ordered at:Tropenbos International, PO BOX 232, 6700 AE Wageningen, The Netherlands.Tel: +31-317-495500;Fax: +31-317-495520;e-mail: [email protected] http://www.tropenbos.nl

ASB’s Policy Briefs series

The Alternatives to Slash-and-BurnProgramme (ASB) is a global partnership ofover 50 institutions around the world with ashared interest in conserving forests andreducing poverty in the humid tropics. Theglobal programme unites research institutes,NGO’s, universities and other partners. Oneof its objectives is to provide fora forexchange of information, developingconsensus and managing conflicts. Themethods already used by ASB to disseminateknowledge and experience include workshops

and detailed project reports focusing mainlyon specific countries. But until now theconsortium has had no vehicle for distillingthe lessons derived from experiences at thelocal or national level for a broader,international audience. The new ASB PolicyBriefs series is meant to be the vehicle todeliver relevant, concise information to keypeople whose decisions will make adifference to poverty reduction andenvironmental protection in the humidtropics.

Topics that will be covered in the seriesinclude the quantification of carbon storageand the trade-off between biodiversity andprofitability in different land-use systems,the relationships between property rightsand land use, and the measures that canbe taken to control smoke from landclearing.

ASB can be contacted at:ASB Programme, ICRAF,P.O.Box 30677, Nairobi, Kenya.Tel: +254 2 524139/524000 or +1 650 833 6645. Fax: +254 2 524001 or +1 650 833 6646. Website: http://www.asb.cgiar.org.Email: [email protected].

ODI Natural Resource Perspectives

This series is published by ODI, anindependent non-profit policy researchinstitute (UK), with financial support fromthe UK Department for InternationalDevelopment (DFID), formerly theOverseas Development Administration(ODA). Natural Resource Perspectives(NRP) present accessible summaries of thelatest research and analysis on policyissues in the natural resources sector. Theauthors are leading experts in their fields.

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The papers have been published since 1994and are issued approximately four times ayear.

NRP covers a broad range of issues, varyingfrom case studies on specific items like localfinancing schemes for small-scale renewablenatural resource development in Ghana toitems of a more general character such as theexamination of prospects and performance ofbiotechnology in the natural resources sector.

NRP are sent to a wide audience of policymakers, researchers and people working inthe non-governmental sector. Readers areencouraged to quote from them or duplicatethem, but as the copyright holder ODIrequests due acknowledgement. The editorwelcomes manuscripts for the series.

NRP are available on ODI’s website:www.odi.org.uk/nrp/. It is also possible toreceive NRPs by post, free of charge. If youwish to be included on the mailing list, pleaseprovide name. Position, organisation, address(email-address is optional) and send it to:Editor, Natural Resources Perspectives, ODI,111 Westminster Bridge Road,London SE1 7JD, UK,or to [email protected].

DFID issue: Biodiversity, a crucialissue for the world’s poorest

The Department of International Development(DFID) is the UK government departmentresponsible for promoting development andthe reduction of poverty. DFID seeks to workin partnership with governments, business,civil society and the research communitycommitted to the International DevelopmentTargets agreed by the United Nations in the1990s. One of the Targets is to makebiodiversity work for the poor.

In its publication on biodiversity DFIDdescribes some of the many different waysin which poor people rely on the diversity oflife, and the potential of biodiversity forreducing poverty. It also provides anoverview of DFID’s approach tobiodiversity, highlighting strategies thatpromote both poverty reduction andsustainable use of natural resources.

To find more about the programmesdescribed in this publication see:DFID’s Renewable Natural ResourcesResearch Strategy at www.dfid.gov.uk/public/what/advisory/group6/rld/rnrr.html, or contact:

Environmental Policy Department,Department for International Development,94 Victoria Street, London SW1E 5JL, United Kingdom,Tel: +44 (0)20 79177000; Fax: +44 (0)20 7917 0679; Email: [email protected].

Biodiversidad, Conservación yManejo en la Región de la Reservade la Biosfera Estación Biológica delBeni, Bolivia

Edited by O. Herrera-MacBryde, F.Dallmeier, B. MacBryde, J.A. Comiskeyand C. Miranda (2000)

This book is the result of cooperationbetween various actors who are involved inefforts in and near the UNESCO BiosphereReserve Beni Biological Station. The bookintends to capture the main workaccomplished since the Station was createdin 1982 and make the information availablefor a wide audience.

The book contains many detailed research

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reports ordered in 21 chapters, which cover abroad range of topics arranged in 5 sections.The introduction is followed by a section onvegetation, flora and ecology. Fauna andecology are the subject of the next section.The human factor is dealt with in the sectionon local communities and resourcemanagement. The last section analysesconservation efforts and their effects. Much ofthe research presented in this book is basedon inventories and studies, especially of flora,fauna and ecology. Most research was carriedout inside the Reserve, but some took place innearby areas. Areas studied, methods usedand results acquired are presented, usinggraphs, tables and other figures. Some of thechapters are baseline reports. Chapters arewritten either in English, with a summary inSpanish, or in Spanish with a summary inEnglish.

ISBN # 1-893912-03-5., SI/MAB Series no.4,Smithsonian Institution, Washington D.C. Forfurther information contact:

Miguel Clüsener-Godt,UNESCO Division of Ecological Sciences,Man and Biosphere Programme (MAB),1, rue Miollis, 75732 Paris, Cedex 15,France. Tel: 33.1.45.86.41; Fax: 33.1.45.68.58.04. Email:[email protected] http://www.unesco.org/mab/theMabnet.html.

Co-management of Natural ResourcesOrganising, Negotiating and Learning-by-Doing

G. Borrini-Feyerabend, M. T. Farvar, J.C.Nguinguiri and V. Ndangang (2000)

In a joint effort the German DevelopmentAgency (GTZ) and the World Conservation

Union (IUCN) published a report that isintended to serve as a practical manual fornatural resource managers interested innegotiating multi-party agreements andinstitutions, and in learning by doing. Thepublication is based on five presentationsgiven at a workshop of the Co-managementNetwork in Maroua, Cameroon, in January1999. It offers guidelines, checklists,concepts, ideas and a range of methodsand tools to facilitate a co-managementprocess. In this publication co-managementis defined as a situation in which two ormore social actors negotiate, define andguarantee amongst themselves a fairsharing of the management functions,entitlements and responsibilities for a giventerritory, area or set of natural resources.The report contains 6 chapters, eachcomprising one of the phases discerned inachieving the goal of co-management. Inthe first chapter the concept of co-management and concepts and approachesthat contribute to understanding andpractising co-management are analysed,followed by the preparatory phase inchapter 2. The negotiation phase is dealtwith in the third chapter. Negotiation isfollowed by learning-by-doing in chapter 4.Chapter 5 provides a summary view on theco-management process. Finally, chapter 6lists lessons learned and tips for action.Illustrations in the form of outlines, tablesand case studies boxes are used tocomplement the text. The considerableannex provides much additionalinformation.

ISBN 3-925064-30-3, 95 p., KasparekVerlag, Heidelberg, Germany.

Available from: GTZ-ABS/LISTRAProtected Area Management and TransitionZone Development Project,Postfach 5180, 65726 Eschborn,

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Germany.Fax: +(49) 6196 79 6190.

Email: [email protected]@gtz.de, [email protected].

Conflict and Natural ResourceManagement

Violet Matiru (2000)

This publication is one in the series of theFAO Community Forestry/FTPP ConflictManagement Series, which deals withdisagreements and disputes over access to,and control and use of, natural resources. Itaddresses in general terms why conflictsarise, how they manifest themselves and howthe actors involved deal with them. Inaddition, general strategies and approachesto management and resolution of the conflictsare mentioned.

For further information contact:Senior Community Forestry Officer, Forestry Policy and Planning Division,Forestry Department, FAO, Vialle delle Terme di Caracalla, Rome 00100, Italy. Fax: (39-06) 5705-5514.Email: [email protected]/forestry/FON/FONP/cfu/cfu-e.stm.

Social Criteria and Indicators forSustainable Forest Management, Aguide to ILO texts

Peter Poschen (2000)

This guide has been prepared by GTZ, theAgency for International Cooperation of theGerman government and the ILO, theInternational Labour Office. Many initiativeshave been undertaken to formulateindicators and criteria for sustainable forestmanagement. From the beginning, thisprocess has suffered from a bias towardsenvironmental concerns and economicinterests. Social aspects were undervalued.Also, the lack of comparability of criteriaand indicators internationally hampered theformulation. It was suggested that ILO textscould provide a basis for shared criteria andindicators. This publication intends to fill thegap in knowledge on content and nature ofrelevant ILO texts that apparently existsamong many of the fora discussing criteriaand indicators for forestry.

Intended users of this guide are:governments and other stakeholdersdefining SFM in national policy orlegislation, participants in the regionalforest policy processes, and individuals andorganisations involved in certificationschemes and initiatives, whether throughsetting criteria and indicators, implementinga standard or monitoring compliance. Theguide comprises three parts. Part I clarifiesthe concepts of the terms used such associal, principles, indicators and criteria,and social and labour aspects ofsustainable forest management. Part IIintroduces relevant ILO texts and discussestheir application to forestry. Part III presentssuggested criteria and indicators based onILO texts and identifies possible ways inwhich they can be used to develop orcomplement standards at the national andforest management unit level. The annexeswhich make up more than half of the 86pages present verbatim extracts of the ILOdocuments referenced in the guide and give

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an overview of the ratification of relevant ILOConventions by member countries.

Working Paper 3, 86 pages, ILO & GTZ.

For further information contact:International Labour Office (ILO), Sectoral Activities Department,4 route de Morillons, 1211 Geneva 22, Switzerland. Email: [email protected]. Internet: www.ilo.org/sector, or:

GTZ Forest Certification Project, Postfach 5180, 65726Eschborn,Germany.Email: [email protected]. Internet:www.gtz.de/forest_certification.

CIMAT (Criteria and IndicatorsModification and Adaptation Tool)Version 2

CIMAT is a computer software packagedesigned to help users modify, customise andadapt the CIFOR (Centre for InternationalForestry Research) C&I generic template andC&I sets of CIFOR plantation, CIFORcommunity managed forest, InternationalTropical Timber Organisation, ForestStewardship Council, African TimberOrganisation and the Indonesian EcolabellingInstitute to meet local conditions andexpectations. CIMAT allows its users todevelop and entirely new set of C&I from anempty set and provides guidance forassessment of C&I using multi-criteriaanalysis. CIMAT can also be used as alearning tool for those who are merelyinterested in exploring the C&I knowledgestored on it.

The CD-ROM contains a comprehensive

tutorial to help users learn CIMATinteractively and step by step, followed bysome case studies. As it is equipped withvoice, audio devices will be required.Besides, a user’s manual is also availablewhich helps the user to install and use theCD-ROM. Finally, the CD-ROM alsocontains a collection of CIFOR’s C&Iresearch outputs, grouped into fourcategories; C&I Toolbox, C&I Papers, otherrelated papers and CIMAT related papers.

CIMAT and all-corresponding documentswill be updated regularly to keep theknowledge as current and accurate aspossible. To be notified when updates areavailable, check the CIMAT homepage athttp://www/cifor.cgiar.org/cimatweb/ie4/acm/htm.

For further information contact:CIFOR, P.O.Box 6596 JKPWB,Jakarta 10065, Indonesia.Tel.: + 62 (251) 622622; Fax: + 62 (251) 622100.Email: [email protected]: http://www.cifor.cgiar.org

Auditing of Sustainable Forestmanagement A practical guide fordeveloping local auditing systems basedon ITTO’s Criteria and Indicators

S. Appanah & M. Kleine (2000)

The purpose of this guide is to distill apractical tool for assessing the performanceof forest management under specific localconditions out of general auditingguidelines. It is intended to assist indeveloping local, site-specific auditingsystems for sustainable management ofnatural tropical forests that are based on

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the ITTO C&I. The auditing systemexclusively deals with forest management atthe FMU (forest management unit) andoperational levels.

The guide provides tools for:• Formulating aspects to be assessed for

each individual indicator,• Describing how to obtain and evaluate the

relevant information;• Identifying the means (e.g. documents,

sources) used for data collection andevaluation;

• Developing norms or audit criteria for thevarious aspects to be assessed as basisfor comparison and evaluation, and,

• Designing a scoring and weighting systemin order to synthesise individualevaluation results to an overall audit resultfor the entire FMU.

In addition, the guide describes the process ofdeveloping the auditing system includingauxiliary provisions that need to be in place inorder to ensure successful implementation ofthe auditing system. The content of the guideis organised according to the sequence ofactivities that need to be undertaken in orderto develop the complete auditing system andmake it operational in the field. After anoutline of the overall conceptual frameworkand structure of the audit system in Chapter2 the technical aspects of the auditing systemdevelopment is described in Chapter 3,presenting how assessable parameters andnorms for each individual indicator can beidentified. In Chapter 4 the process of auditingsystem development is briefly outlined.Finally, Chapter 5 presents some additionalprovisions, necessary to ensure meaningfulapplication of the auditing system in the field.

Working Paper 4, 75 pages, GTZ ForestCertification Project, Postfach 5180, 65726Eschborn, Germany.

Proyectos forestales andinosExperiencias y lecciones aprendidas

This publication presents a synthesis of thelessons learned in forestry activities carriedout in the Andes region of Bolivia, Ecuadorand Peru during the past two decades. TheSwiss Organisation for Development andCooperation (Intercooperation) has beenparticipating actively as executing agency inforestry development programs in the threecountries. The operational experience ofthis organisation gained in a dozen projectswith forestry components forms the basisfor this document.

In the introduction of the book the Andesregion and the forestry activities in the areaare described. The results of allexperiences are presented in the form offour lessons that were learnt, such as thefact that the actors in forestry developmenthave been changing over the years. Otherlessons concern the land tenure and ruralproduction, economic aspects of forestry inthe Andes region, and strategic technicalaspects such as native forests and themarket for forest products.

For further information contact:Thomas Stadtmüller, Intercooperation, Maulbeerstrasse 10, Postfach 6724, CH-3001 Bern, Switzerland.Tel.: +41 31 382 0861. Fax: +41 31 382 3605. Email: [email protected]: http://www.intercooperation.ch

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Tranquilidad and hardship in theforest: Livelihoods and perceptions ofthe “Camba” forest dwellers in thenorthern Bolivian Amazon

A.B. Henkemans (2001)

This PHD-thesis is the result of a study oflivelihood assets of Camba forest dwellers inthe Northern Bolivian Amazon and thepeople’s perceptions of the role of forest intheir development. The study was carried outwithin the Programa de Manejo de Bosquesde la Amazonía Boliviana (PROMAB). Theaim of the study was to determine the scopefor sustainable forest livelihoods in the regionfrom the perspective of Camba forest-dwellingpeople and their livelihood objectives andbased on long-term forest managementpractices. The study focuses on the differentcomponents of the people’s livelihoods andthe contribution of the forest in the form ofassets and services.

The book contains nine chapters, includingintroduction and conclusions. First, theconceptual framework for the analysis offorest livelihoods is presented, followed by ageneral description of the research area, itshistory of forest extraction and the currenttransformation of forest settlements. Twosettlements are presented in detail. The studyelaborates on the forest dwellers’ access to,categorisation and use of forest resourcesand analyses and calculates the maincommercial and subsistence benefits of theforest resources. Moreover, the contribution ofthe forest to the forest dwellers’ socio-culturalwell-being is discussed. Finally, importantconcepts that have emerged and that aredetermining for the development ofsustainable forest livelihoods in the region arehighlighted.

ISBN: 903932905-2, 285 p. PROMAB

Scientific Series 5.

For further information contact:PROMAB, Casilla 107, Riberalta,Bolivia.Email: [email protected]: www.bio.uu.nl/promab/promab ,or: c/o Department of Plant Ecology, Utrecht University,P.O.Box 80084, 3508 TB Utrecht, the Netherlands.Email: [email protected] .

Paving the road for forestdestruction Key factors and drivingforces of tropical deforestation inBrazil, Ecuador and Cameroon

H. Cleuren (2001)

This comparative study analyses the drivingforces of deforestation in Brazil, Ecuadorand Cameroon. The research focuses onthe dynamics of forest conversion and theadaptability and mobility of the peopleinvolved. The study has three components:a theoretical review of the issue of tropicaldeforestation; three case studies, in Brazil,Ecuador and Cameroon, focusing on thekey factors involved in the process of forestdecline; and finally an analytical synthesis,in which theories are tested against dataand conclusions drawn regarding thedeeper mechanisms of forest conversionand the relationships between differentactors.

The book is divided in seven chapters. Thefirst component of the study is presented inthe first two chapters. The first chapterdescribes the different categories of tropicalrainforests and patterns and causes ofdeforestation. The second presents a

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theoretical perspective on deforestation. Thethird, fourth and fifth chapter present the threecase studies. In chapter six the three casestudies are compared and finally in the lastchapter a number of solutions that have beenproposed for better management of thetropical forest are summarised. In the endgeneral conclusions are drawn and policyrecommendations made for more efficient andeffective collaboration for sustainablemanagement in the Amazon and Congobasins.

ISBN: 90-5789-068-2, 261 p. CNWSPublications no.118. Leiden DevelopmentStudies, New Series, Vol.1. Research Schoolof Asian, African, and Amerindian Studies(CNWS), the Netherlands.

For more information contact: Department CA/SNWS, Faculty of Social Sciences, P.O.Box 9555, 2300 RBLeiden, The Netherlands.or email: [email protected] .

Research advances in restoration ofIroko as a commercial species in WestAfrica

J.R. Cobbinah & M.R. Wagner (Eds) (2000)

Iroko is considered as the most generallyuseful timber species with distributionstretching across the entire width of humidAfrica. In the late 1980s the Iroko Project wasstarted as a mono-institutional project at TheForestry Research Institute of Ghana(FORIG) to develop strategies for thesustainable development of Iroko. It grew outto become a multi-country, multi-institutional,and multi-disciplinary study by the mid 1990s.

The papers of the closing workshop in

November 2000 are presented in thispublication. The papers deal with fivethemes: distribution patterns of Iroko,growth in relation to ecophysiologicalfactors, screening for phenotypic andgenetic resistance, mitigating the impact ofPhytolyma lata, and deployment of resistantlines.

For further information contact:Director, Forestry Research Institute ofGhana University, P.O. Box 63,Kumasi, Ghana.Tel: (051)- 60122,- 60123 60373.Fax: 051- 60121.

The Prosopis juliflora-Prosopispallida Complex: A Monograph

N.M. Pasiecznik (2001)

Prosopis juliflora and Prosopis pallida aretwo of the most economically andecologically important tree species in aridand semi-arid zones of the world.Therefore, considerable literature on thesespecies exist in various languages.However, few attempts have been made tosynthesise this information intocomprehensive, concise and authoritativereviews. This monograph draws on all theavailable sources with approximately 650bibliographic references included. Alongwith the associated outputs of a referencedatabase (on CD-ROM) and a technicalmanual aimed at the Indian context, thispublication provides information which aimsto improve the management and utilisationof this valuable natural resource.

The book is divided in four chapters. Thechapters can be read in any order. The firstchapter opens by stating the importance ofthe P. juliflora-P. pallida complex and how

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and why these species were selected forspecial attention, before describing the genusin general and its relationship to mankind.Chapter two covers the complicated area ofProsopis taxonomy. Chapter three describesin detail the P. juliflora-P. pallida complex as ahuman resource, the composition, roles andproduction of tree products. The final chaptercovers the management of the trees asresources, including nursery production,establishment, managing native stands andweedy invasions, and processing treeproducts.

This publication is an output from a researchproject funded by the United KingdomDepartment for International Development(DFID) for the benefit of developing countries. Copies of this publication are available freeto people and organisations in countrieseligible for UK aid, and at cost price to others.For request please contact:PJC Harris, NM Pasiecznik,HDRA, Coventry CV8 3LG,United Kingdom.Tel.: +44 (0) 24 7630 3517. Fax: +44 (0) 24 7663 9229. E m a i l : p h a r r i s @ h d r a . o r g . u k o [email protected]

Programme SAFORGENRéseau “Espèces LigneusesMédicinales”

O. Eyog Matig et al (2001)

The SAFORGEN programme stands forresearch on the genetic resources of Africa’sforests south of the Sahara. This publicationpresents the results of research on the woodyplant species with medicinal properties inreports from 9 countries, complemented bypapers on issues like biodiversity, exploitationand the development of the sector ofmedicinal plants. The reports and papers

were presented at a meeting of the so-called “network on medicinal woody plantspecies” in 1999 in Cotonou, Benin, whichwas attended by 30 experts from 12countries.

ISBN 92-9043-470-8, 131 p. For moreinformation contact:

IPGRI Regional Office for sub-SaharaAfrica, c/o ICRAF, P.O.Box 30677, Nairobi,Kenya

Journal of Bamboo and Rattan

J.J. Jansen (Editor-in-Chief)

This new quarterly journal has beenlaunched to provide a forum for scientificarticles and reviews on all aspects of fastgrowing, multi-purpose pliable species. Thescope of the journal encompasses incomesecurity, craft industry, small to mediumsize enterprises, industrial fibre and fuel.Articles related to natural distribution andconservation of species, genetics andbiotechnology, harvesting and productionsystems, and environmental applicationsare also included, as well as papers onmarketing and policy restraints in relation tobamboo, rattan and related species.

The price for Volume I (2001/02) is EUR114/US$ 132 for institutions and EUR68/US$ 79 for individuals.

Price includes postage and handlingcharges, as well as access to the electronicversion. Dispatch of issues/electronicaccess will commence only after receipt ofcorrect payment.

Subscription orders should be sent to:

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Brill Academic Publishers,P.O.Box 9000, 2300 PA Leiden, the Netherlands. Email: [email protected].

For further information contactthe editor-in-chiefJ.J. Jansen at Eindhoven University,P.O.Box 513, 5600 MBEindhoven, the Netherlands. Tel.: +31 40 247 2948. Fax: +31 40 243 8575.Email: [email protected] visit the website of the publisher atwww.vsppub.com.