IADB, November 19 th, 2007 Richard Huber Claudia S. de Windt Poverty and Environment Partnership-PEP Meeting: Infrastructure, Growth and Poverty Reduction:

IADB, November 19th, 2007

Richard Huber

Claudia S. de Windt

Poverty and Environment Partnership-PEP Meeting: Infrastructure, Growth and Poverty Reduction: The Role of Ecosystems and Natural Resources

Private Sector Views and Experiences on Ecosystem Services, Environment and Poverty, Session 2: What

Division of Labor among Main Stakeholders would foster private sector investment in environment and

livelihoods?

Conversion of forests to farmlands in Santa Cruz, Bolivia

• 1975: Forested landscape

• 2003: Large corporate agricultural fields transform the landscape

Shrimp farms replacing mangroves in Gulf of Fonseca, Honduras

1987-1999: shrimp farms and ponds have mushroomed, carpeting the landscape around the Gulf of Fonseca, Honduras, in blocks of blue and black shapes

RegulatorsThe Law

Plants

Government: Create Market Conditions and Climate for Investment. Regulator/Mediator Regulatory Standards

Market-based Instruments Legal Liability

State

PowerPower Social NormsSocial Norms NegotiationsNegotiations NGOs Maximize NGOs Maximize

Impact on people Impact on people and specific groups and specific groups and information and information awareness awareness NGOs

Plants

Citizens

Community

…and Other Actors are Important

ReputationReputation ProfitsProfitsConsumers

Investors

Plants

Markets

State

Markets Community

The New Model:Multiple Agents, Multiple Incentives

Payments for Ecological Services: Trends in the Americas

Database compiled from Rainforest Alliance Eco-Index, Katoomba Group, Ecosystem Marketplace

Original Transation sources like FONAFIFO (Costa Rica) and PSA-H (Mexico), Chicago Carbon Exchange.

Tries to assess PES trends in the marketplace – • Price paid/HA/year, price/ton/yr• # projects/country/year, • type of project, • are # of projects increasing or

decreasing/country.

No. PES Schemes in Database by CountryBrazil4%

Colombia3%

Costa Rica12%

Ecuador6%

Mexico26%

USA42%

Others7%

PES Trends in the Americas

Momentum or stagnation?

Watershed PES Schemes In South American Projects

0

1

2

3

4

5

6

7

Bolivia Brazil Colombia Ecuador Peru Venezuela

Advanced proposal Ongoing

4 Countries have more proposals than ongoing.

Watershed PES Schemes In Meso American And Caribbean Projects

02468

10

Costa Rica DominicanRepublic

El Salvador Guatemala Honduras Jamaica Mexico Nicaragua Panama St Lucia

Advanced proposal Ongoing

No. Carbon Sequestration Projects by Country4% 4%

25%

4%

11%4%4%

11%

4%

7%

4%

4%

14%

Belize Bolivia BrazilChile Colombia Costa RicaDominican Republic Ecuador HondurasMexico Nicaragua Trinidad and TobagoUnited States

Mar

gina

l Cos

t ($/

ton

of C

)

Individual or comunal land tenure security

Taxes and fees that restrict cattle expansion and logging

Restrict soy expansion by elimination of subsidies for energy inputs, pesticides, fertilizers, and irrigation water

Millions of Tons of Carbon Emissions Avoided

Marginal Cost Policies for Reducing Forest Carbon Emissions

Policies that reduce Forest fires

Establish tradeable permits to protect strategic forests

Policies that have no net financial costs for Governments and that contribute to both economic efficiency and environmental protection.

Public and private investments that have positive net economic benefits but require institutional monitoring

Eliminate subsidies for logging and ranching

Establish certified tradeable offset carbon sequesration program

PES program subsidized by global benefits

Are Governments creating the right conditions for PES schemes to be

profitable and sustainable?

Detailed country Analysis

Bolivia Chile Costa Rica Colombia DR Ecuador Panamá Perú

Laws and Public Policies that facilitate or inhibit PES

Environment Forest

management, Water resources

management, biodiversity and protected areas

Fiscal and tax Laws

Public utilities, Property rights

Are Governments creating the right conditions for PES schemes to be

profitable and sustainable?

I ncentives for PES in Environment Legal Frameworks

5

3

3

3

2

2

Exemptions or fiscalincentivesFee for ES

Bonus or Prize

Incentive Certificate

TradeableEmissions PermitsPublicAcknowledgements

Are Governments creating the right conditions for PES schemes to be

profitable and a sustainable approach to conservation?

Property Registration

0102030405060708090

100

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

Number of Procedures (left axis)

Duration in Days (left axis)

Cost: Percentage of PropertyValue (right axis)

http://www.doingbusiness.org/

Next Steps:

Conceptual and Policy discussion on enabling conditions

Need to refine concepts on property rights, legal nature of ecosystem/environmental services and parties to a PES agreement (Institutional Framework)

Lack of systematic information (Valuation) Need to remove perverse incentives Private Sector Trends and role Best Practices Hemispheric Approach?

Thank You!

www.oas.org/DSD