towards more sustainable and market-based payment for ecosystem services a pilot project in lijiang,...

Towards More Sustainable and

Market-based Payment for Ecosystem

Services

A Pilot Project in Lijiang, China

Lu Zhi

How does CI approach payment for ecosystem services programs? Target areas for payment for ecosystem services and

determine opportunity costs Integrate ecological processes and development

needs into payment mechanism design across priority landscapes

Replicate and scale up successful models, and share new tools and results with key decision-makers

Foster enabling conditions: provide data on service flows, value of services, policy frameworks, governance, market development, and structure implementing entity

Target areas: Bundling services in Madagascar

Each individual ES layer was:

• Z-normalized (mean=0 and standard deviation=1)

• Combined using equal weights

• Scaled between 0 and 1

BUNDLED ES: percent overlap of three services

Target areas: Opportunity costs in Madagascar

PROBABILITY OF DEFORESTATION

ADDITIONALITY: Bundled ES * Probability of deforestation

HIGH OPPORTUNITY COSTS

TARGETED PAYMENTS FOR ES

BIODIVERSITY: number of mammals, birds & amphibians weighted by threat status

CARBON: above- and below-ground biomass

WATER: water quality weighted by human population, rice & mangroves

BUNDLED ES: percent overlap of three services

WATER: water quality weighted by human population, rice & mangroves

Incorporate ecological processes and services into land use planning and decision-

making: Landscapes

Integrate hydrological processes within a systematic conservation planning framework

Bundle biodiversity and ES into conservation and development

Leverage ES into sustainable financing for conservation landscapes

• Generate a body of knowledge and analytical lessons in:

• Mapping key features of ecosystem processes and services• Addressing issues in scale and management (biomes and institutions)• Incorporating ES into land use and development planning (costs and trade-offs)• Economic valuation and design of PES mechanisms (markets, stakeholders, policy)

• Understanding ES and landscape resiliency with change

Case Study: China

• China, with 1.3 billion people, is listed as one of the 13 most water-deficient countries in the world.

• China pollution trends are threatening economic growth, human health and watershed ecosystems. (63％ of monitored sections in 7 major river basins can not meet standard for drinking water resource’s quality)

• Water distribution is extremely uneven in time and space.

The root causes of issues…and solutions

• The environmental benefits and relevant economic gains have been allocated unfairly between the protectors, beneficiaries, the destructors and victims.

• PES (Payment for Environmental Services) is the generic name of a variety of arrangements through which the beneficiaries of ecosystem services pay back to the providers of those services.

Existing applications of PES or eco-compensation in China

• Huge conservation incentive programs exist in China (the planned investment for the Natural Forest Conservation Program and the Grain to Green Program is $100 billion)

• These schemes are based on top-down government decisions, with little attention to the demand or supply forces (market) behind the implementation and public participation

Key words

Environmental Storm

Government investment on Env.

Establish long-term mechanism

Introduce market mechanism

Market-based PES mechanism• a new market is created and revenues are collected

• an explicit link is made between those who benefit from an environmental service and those who provide the same services

Financing Mechanism

Payment Mechanism

BeneficiaryBeneficiaryBeneficiaryBeneficiaryBeneficiaryBeneficiaryBeneficiary

Land userLand user Land user Land user Land user Land user Land user

Governance structure

Environmental

Financing Mechanism

Payment Mechanism




Financing Mechanism

Payment Mechanism



Financing Mechanism

Payment Mechanism





Environmental services

Factors determining the ease or difficulty of establishing a PES system

• The “distance” between cause (providers) and effect (beneficiaries)

• The numbers of service providers and service beneficiaries

• Collecting beneficiary payments and making transfers payments to service providers (channel availability)

• The legal and institutional framework

• The outcome monitoring system

Illustration of a potential PES application: the cases of Lijiang

The environmental servicesES Service Service

providersService

Beneficiaries

Improved water quality for landscape services

Farmers around Lashihai lake

Visitors to the old town

Maintenance of biodiversity


Visitors to Lashihai

ES Service Service providers

Service Beneficiaries

Improved water quality for landscape services


Visitors to the old town

Maintenance of biodiversity


Visitors to Lashihai

ES identification

ES valuation

Payment level

Institutional arrangement

ES identification

ES valuation

Payment level


•Global benefits are traditionally not included in local PES schemes. •The payment collecting channel of visitors was available – easy to implement

Quantification of the ESES

identification

ES valuation

Payment level


ES identification

ES valuation

Payment level


Services Median WTP (US$)

Annual visitors Value of ES

(US$)

Water improvement

1 4,000,000

(Lijiang Old Town)

4,000,000

Bird biodiversity

1 65,000

(Lashi NR)

65,000

Services Median WTP (US$)

Annual visitors Value of ES

(US$)

Water improvement

1 4,000,000

(Lijiang Old Town)

4,000,000

Bird biodiversity

1 65,000

(Lashi NR)

65,000

• Estimating the costs of provision (minimum level) ► Water improvement (Agriculture income losses to farmers): 0 ► Birds biodiversity (Losses to farmers from the bird sanctuary): US$250,000• Estimating the theoretical value (maximum level)

Potential PES options• Environment friendly agriculture through

carefully designed capacity building campaigns and extension services

► Lower fertilizer and pesticide inputs and

improved land use

► Organic farming under proper

conditions (may influence birds due to

greenhouse)

ES identification

ES valuation

Payment level


ES identification

ES valuation

Payment level


Proposed compensation standard(based on WTP)

ES identification

ES valuation

Payment level


ES identification

ES valuation

Payment level


Water improvementDomesticvisitors

Internationalvisitors

Total

Increase to current entrance fee

0.25% 1.25%

Amount (US$) 0.05 0.25

Funds generated (US$/year)

115,785 27,420 143,205

Water improvementDomesticvisitors


Total

Increase to current entrance fee

0.25% 1.25%

Amount (US$) 0.05 0.25


115,785 27,420 143,205

Bird biodiversityDomesticvisitors


Total

Collect entrance fee(US$)

1 5


50,000 75,000 125,000

Bird biodiversityDomesticvisitors


Total

Collect entrance fee(US$)

1 5


50,000 75,000 125,000

Institutional set up

• Special fund

► financial transparency

► public participation

• Coordinating body• Outcome monitoring• Enhance public awareness

ES identification

ES valuation

Payment level


ES identification

ES valuation

Payment level


Growth creates environmental risks….

…but also opportunities for innovation and reformation

Thanks!

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