Environmental Systems Analysis

Investing in nature (restoration) pays !

„Every dollar

invested ....

saves any-

where

between 7,5

and 200 US$

in damage &

repair costs“ TheEconomist

(23 April 2005)

- Reward/Pay providers of “free services”

-“Punish” environmental damage (liability)

1. Government run finance mechan. (public incentives: subsidies/taxes) - Agri-environmental schemes [“farming for nature”]

- Conservation payments (e.g. EHS, watershed-prot. [NYC], employment progr.

- REDD+ (forests->blue C. & restoration)

- Other (eg. tax-incentives for green investments)

2. Government supported market creation - Offsets, eg Carbon credits [Ecosystem Market Place]

- Other “eco-assets” (eg. salinity credits, wetland banking, high-rise buildings(!))

3. Private market arrangements [PES – payment for use of ES] - Biorights (comp. local people for not damaging ES, e.g. cons.easement)

- User fees (eg. resources (water), eco-tourism, bioprospecting)

- Ecolabelling: Cert.Agr.Products, FSC: 5 billion, Fair Trade, etc)

- ES as business case

4. Private, non-market arrangements (donations, regional fund, microcr)

1.1 Public Financing: agri-environm. measures

“Agri-environment measures provide payments to farmers who subscribe,

on a voluntary basis, to environmental commitments related to the

preservation of the environment and maintaining the countryside”

(EU-late 1980’s)

4 types of services

-Landscape

-Nature & environment

-Cultural History

-Education & access

Points for degree of

Service provision

Each point is 10 €

5.812,50 € (example)

http://ec.europa.eu/agriculture/envir/measures/index_en.htm

2007 – 2013: nearly 20 billion EUR or 22 %

of the EU expenditure for rural development

Geerts et al., 2008

“Een beloningssysteem voor

beheer van landschap en natuur

In Nationaal Landschap

Winterswijk” (Alterra rapport)

1.2 Conservation (& restoration)

“Current” expenditures on all Protected Areas (incl. bilateral

agreements, GEF, etc): < 10 billion US$/y (1

Needed : 45-50 billion $ (2

1) EASAC, 2009, 2) Balmford et al., 2002. Science, 3) TEEB, 2010

Valentines day in USA

2012: 17 billion US$

Globally on cigarettes:

2009: 50 billion US$

Global GDP: ca 50 Trillion US$ (2009) (1

< 0.1%

Benefits: >> 1,5 - 4,5 trillion (3

(return 1: 30-100)

still seen as a cost …

Building on the results of the Member States questionnaire,

the annual costs of implementing the Natura 2000 network

were estimated as €5.8 billion per year for the EU-27.

(Gantioler, 2010)

Question: is money spent on,eg employment a “cost’? ....

NATURA 2000 COST estimates

Marine sites:

< 3 €/ha/y.

Average: 63€/ha/y (range: 10 – 800€/ha/y) incl. acquisition & infrastructure dev. (30%) + management

Natura 2000 BENEFITS “A number of examples have demonstrated that the

benefits can be 3–7 times larger than the costs”

According to a study in Ireland, the aggregate benefits provided by the

Burren park’s limestone pavements and the orchid rich grasslands were

estimated to amount to €4,420 / ha / year . The total benefit from the Park is

estimated to be €65 million per year or about 3 times as much as the cost

of Government support (Gantioler, 2010)

The protection of all 300 Natura 2000 sites throughout Scotland was estimated

to have an overall benefit cost ratio of around 7 over a 25-year period

(Jacobs, 2004). Total benefits were estimated at £210 million per year,

however, 99% is non-use value (Gantioler, 2010)

In 2008 a study was carried out in France to determine costs and benefits of

the Natura 2000 site ‘Plaine de la Crau’. The calculated overall net benefits

amounted to €142ha/year, which was around seven times higher than the

costs associated with the site. (Hernandez & Sainteny, 2008).

De Loonse en Drunense Duinen (3500 ha)

(The Netherlands)

Cost per ha: 142 euro/yr Benefits per ha: 15.338 euro/yr Important Ecosystem Services Recreation Air filtration Real estate value increase (proximity to Natura 2000) CO2 sequestration Water-filtration

100 x

Environmental Systems Analysis

1.2b Public Financing: Employment Programs

ARISE – S.A. Employment program to restore ecosystems

and their services, eg. water regulation (> 100.000 people)

1.2c) Public financing: watershed

protection

Either built new water

purification plant

(costs > 6 billion US$)

Or

Invest in ecosystem

rehabilitation upstream

(cost less than 1 billion

US$ => saving 5 billion)

New York City- Water Supply

Catskill Mountains – upstream NY

www.nycwatershed.org

REDD as part of the solution (5:54 min)

http://www.youtube.com/watch?v=PYHldt9gfMw

31 March 2014 (www.ecosystemmarketplace.com)

REDD finance is one of many pay-for-performance mechanisms designed to jump-start

climate-safe agriculture across the developing world, but it’s emerging slowly and uncertainly.

REDD+ bonds, however, can help states and other sub-national jurisdictions harness tomorrow’s

funding today.

Norway, Germany, the UK and the US drew headlines at December 2013 climate talks in

Warsaw when they unveiled a new financing mechanism designed to help developing countries

save endangered rainforests. Their mechanism kicks in over a period of years, and it works by

promoting climate-safe agriculture. Its funding will be contingent on tons of Reduced Emissions

from Deforestation and forest Degradation, which technically makes it a “REDD+” initiative. Its

sponsors, however, have made it abundantly clear that it’s a development mechanism and not

an offsetting mechanism. That means it won’t be able to harvest pools of private funding from

companies looking to reduce their carbon footprints.

Because such payments for performance are more certain than offsetting, they present an

opportunity for regions in tropical rainforest countries that have made progress in reducing rates

of deforestation to lock in that progress now rather than risk backsliding.

1.3 REDD: Reducing emissions from deforestation & degradation

REDD+ ....... and safeguard Biodiversity [& ES]

Code REDD (2:54 min)

https://www.youtube.com/watch?v=cCe7X492q_w

Destruction of Mangroves costs up to US$42 billion in economic damages annually - UNEP Report* Monday Sept. 29, 2014

http://www.unep.org/publications/

C-storage: > 1000 ton/ha [climate change mitigation] Waste treatment: > 1.500$/ha/year (Potengi Estuary, Brazil) Coastal protection and safety (“hurricane holes”) Local livelihoods/fisheries Many other services (in addition to being a Biodiversity Hotspot)

* “The importance of Mangroves to people”

Blue Solutions

GIZ, IUCN, UNEP, http://bluesolutions.info/

Environmental Systems Analysis

(1.4) Public Financing: tax incentives

Most banks now have such funds, mainly focussing

on investing in renewable energy and “green

technology” (not much (yet) in Natural Capital …)

Higher taxes on polluting &

Degrading activities

“Vliegtax” (10-40 €/ticket)

“Make polluter/user pay”

Lower taxes on Green

Investment funds Reward the investor/provider

2) Government Supported

Market Creation

Environmental Systems Analysis

2.1) Mitigation banking schemes

to compensate loss of ecosystem services eg.

wetland mitigation banking (>> 1 billion in US)

Friday, August 8, 2008

“Wetland mitigation bank

set to dig in, sell credits at

$100,000 a piece” Tampa Bay Business Journal

“Because of wetlands’ environmental and

other values, developers who destroy wetlands

compensate for the destruction by buying

credits from wetland mitigation banks.

Buying credits from banks can be expensive but

may be cheaper for developers than trying to

recreate and maintain wetlands on their own”

Environmental Systems Analysis

2.2 Permit trading („cap-and-trade“ systems)

18,05 € for right

to emit

1 ton CO2

(Nov. 2008)

“During 2012, the

market for voluntary

carbon credits reached

101 million tonnes of

carbon offsets.

But the average price of

voluntary carbon credits

fell from US$6.2 in

2011, to US$5.9 in

2012.”

www.ecosystemmarketplace.com

to limit harmful activities (or trade „right to pollute“ ?)

-carbon credits (global) – 30 billion US$ (2008)

-salinity credits (Australia)

Environmental Systems Analysis

“The US Department of Agriculture (USDA) has

announced the creation of the

Office of Ecosystem Services and Markets

(OESM)”

-> encourage U.S. farmers and ranchers to

protect wildlife, filter water and sequester

carbon through incentive-based conservation.

Ecosystem Marketplace [Jan 2009]

Ecosystem Services Markets ....

Ecuador changed its constitution in 2008 which is the

first in the world to recognize legally enforceable

“rights of Nature, or ecosystem rights”

March 2014:

... only $13m (£8m) of the $3.6bn goal had been given, ... "the world

has failed us”, giving the green light to drilling.

On Thursday, environment minister, Lorena Tapia, said permits for

drilling had been signed for the 6,500-square-mile reserve, known as

block 43, and oil production might begin as soon as 2016.

The Ishpingo-Tambococha-Tiputini region of

Yasuni contains more species in a hectare

than all the wildlife in North America

Yasuni Biosphere Reserve

Oil ex- ploration

3.6 Billion$ to keep oil in the ground

“For rent: 830.000 ha pristine tropical forest” -Rich in wildlife (forest elephants, gorilla’s)

-Price: 1.6 million US$/year

- “Conservation tenant preferred but extractive forestry

also considered”

-Please apply to the Cameroonian Minister of Forestry

“Cameroon wants to sell a forest,

but conservationists don't want to buy it”

The Economist

14 Febr. 2008

“Traditionally” land would be leased to a logging company

but since 2001 Minister Joseph Matta tries to find a conservation

group willing to turn it into a “conservation concession” but

they find it too expensive …

Analyse co-benefits from ES + engage all stakeholders

How solve this dilemma ?

Only 40$/ha/year (<-> real TEV of 2.000$

3. Private market arrangements [PES – payment for use of ES]

- Biorights

(compensate local people for not damaging ES,

- User fees

(eg. resources (water), eco-tourism, bioprospecting)

- Ecolabelling

(eg. Cert.Agr.Products, FSC, Fair Trade, etc)

- ES as business case

Definition of terms PES: Payments for Ecosystem Services

MES: Markets for Environmental Services

RES: Rewards for Ecological Services

(incl. non-financial compensation)

Beneficiaries [or polluters] should compensate the

providers [or “losers”] of ecosystem services

= internalization of positive [or negative] externalities]

(1) Carbon sequestration [climate]

(2) Provision of habitat for endangered species [biodiversity]

(3) Attractive landscapes [recreation/cultural values]

(4) “Watershed protection” [water & soil / erosion prevention]

Author: Florence BERNARD

Supervisors: Dr. Dolf de Groot (Wageningen University)

D.José Joaquin Campos (CATIE)

Environmental System Analysis Group

Wageningen, 11 July 2005

ECOSYSTEM SERVICES AND FINANCING MECHANISMS

FOR PROTECTED AREAS

Case Study of the Tropical Rainforest National Park

Tapanti-Macizo de la Muerte, Costa Rica

Water Supply

(150 rivers > 6500 mm rainfall)

Recreation and tourism

(20.000 visitors/year)

Maintenance of biodiversity

(high % endemism)

SELECTED ECOSYSTEM SERVICES

58.000 ha (2000), 2002: Model Forest

Problem: Financial constraints

Budget: 245.000 $ (87% public funding), need + 100.000/year

Ca 325 interviews

-100 local (villagers, farmers,

NGO´s, authorities, etc)

-50 business dep. on tourism

-175 tourists

Social Economic

Lack of

- Programs of

environmental

education and

awareness

- Project

development with

local communities

to find viable

economic

alternatives

environmentally

friendly

From the economic

point of view,

protecting Tapanti

NP only benefits to

some people

(assimilated to

“winners”)

≠ local communities

(assimilated to

“losers”)

Deterioration

of the

infrastructure

(drinkable

water takings,

picnic areas,

garbage

collector,

trails and road

to Tapanti

NP)/ lack of

material

Lack of human

resources and

qualification/traini

ng which reduces

the capacity of

dealing with some

necessities of

Tapanti NP.

Risk of future deterioration of the

ecosystems of Tapanti NP and of its buffer

zone

Risk of land use

changes (buffer

zone)

Ilegal extraction

of fauna and

flora

Risks of

fires

Ecological

Lack of knowledge

(Research),

monitoring, evaluation

of the current state of

natural resources and

of the different

ecosystem processes

which occur in

Tapanti NP

Leads to a local socio-

economic deterioration of

the buffer zone of Tapanti

NP Feelings of injustice

People working in Tapanti NP are seen as

“fueros” = “foreigners” in some communities

Installations, material and equipment are not

maintained in optimal conditions of operation, cleaning

and security.

Less possibilities

of protection and

restoration of

ecosystems

There is no

recognition of the

economic value of

ecosystem services

provided by

Tapanti NP by the

society.

Reduction of benefits provided by Tapanti NP for the future generations and

impact on the “option” and “existence” values of the natural capital

Lack of a financial

strategy

to convert the economic

value of the ecosystem

services in a flow of

incomes which would

allow Tapanti NP to

invest and operate more effectively

Insufficient Budget

to meet the needed

requirements of

Tapanti NP

Financial

dependence on the

Costa Rican

Government

Lack of communication and

cooperation with groups benefiting

from ecosystem services and with

the local communities to

strengthen interaction between

Tapanti NP and the socio-

economic activity of its

surrounding.

Lack of funds to autofinance efforts for conservation and to implement

an effective management of Tapanti NP and its buffer zone on the

medium and long term

There is no

improvement or

development of

additional

services

benefiting to

Tapanti NP

General deterioration of biodiversity and

risk for rare and endangered species

Analysis of interactions between stakeholders

(determine supply, demand, WTP, etc)

6%

74%

18%

2%

AyA+Cartago Plant

ICE

Tourism Businesses

Park managers

Ecosystem Services

Beneficiaries

Water Supply Recreation

& Tourism

(not very attr. but still …

Maintenance

of biodiversity Drinking

Water

(25%)

Hydropower

generation

(25%)

Total AyA+Cartago Plant 208, 500

Total ICE (hydro-power) 2, 662, 500

Total AyA+Cartago Plant+ICE 2, 871, 000

Tourism Businesses Orosi 99, 000

Tourism businesses Orosi

surroundings

558, 100

Tourism Businesses MM 5, 100

Total tourism businesses 662, 200

Park Managers 57, 600

INbio -

Total Park managers+ INbio 57, 600

TOTAL 3, 590, 800 US$/y

Annual economic benefits Tapanti NP (US$/year)

Ecosystem

Services Beneficiaries

Economic

Benefits Potential

Payment

Potential Payment

Mechanism (based on interviews)

Water

Supply

AyA+Cartago Plant

via consumers of

drinking water

208,500 174,800 (1) Public Good Service Payment (Water Tax)

Mechanism in development (Law) since 2002.

National Mechanism

ICE via consumers

of hydroelectricity

2, 662,500 9,447,300

Recreati

on &

Tourism

Tourism businesses 662,200 85,500-101,000 (2) Donations with voluntary contractual

arrangement or system 1$ with tourists

Tourists 0 45,700-128,000 (3) User fees (development of new services

development of concession and involvement of

local people as either owners of the concession or

co-concessionaires

(2) Individual donations, adoption programme

and friend schemes.

Support of Friends of Tapanti association

Mainten

ance of

biodivers

ity

Industrial Comp.

(eg. Baxter)

0 30,000 (2) Donations with voluntary contractual

arrangement.

Inbio

(chemical comp.)

0* >1,000 (3) User Fees for research activities and share of

benefits for discoveries and commercialisation

TOTAL (Without ICE) 870,500 337,000-435,000

TOTAL 3,710,000 ≈ 9,833,200 -

Even without ICE, at least

337.000 (ca 10% of benefits),

which would be enough to

cover operational costs of

Tapanti NP (245 + 100.000 $)

(based on only 3 services …)

Environmental Systems Analysis

The Rewarding Upland Poor for Environmental Services – RUPES Project

RUPES

aims to enhance the livelihoods and

reduce the poverty of upland poor in

Asia while supporting environmental

conservation at the global and local

levels

Supported by IFAD

Coordinated by the World Agroforestry Centre (ICRAF)

Implemented with local, national and international partners

Beria Leimona

3.2 User fees & private deals

Eco-tourism - Entrance fees (to parks etc)

(> 1 billion US$)

- Wildlife protection programs

- etc

Mineral Water Companies

Perrier Vittel pays farmers (24,5 Million US$ for 7

years to protect the source of their mineral water

(reduce nutrient & pesticide runoff)

3.3 Eco-labelling & social pricing

-Wood (Forest Stewardship

Council (FSC)

-Fish (Marine Stewardship

Council (MSC)

- Fair Trade (coffee,

bananas)

3.4. Biodiversity & ES

as business case ....

Make biodiversity a business case (TEEB D3-report)

Business opportunities:

-(eco) tourism

-Resources (food, water, etc)

-Pharmaceutical products

-Biotechnology/bio-mimicry

(nature as “model”)

IWOKRAMA

800.000 US$ profit in 2008

model for improving

scotch tape and post-its

“Emerging Markets” (TEEB for Business, 2010)

2008

In US$/year

Certified Agricultural Products

(organic etc.) [“wild foods”]

40 billion (2,5% of

global food market)

210 billion

Certified forest products

(eg. FSC, PEFC)

5 billion 15 billion

Bio-carbon/forest offsets

(eg. CDM, VCS, REDD+

21 million (2006) 10 billion (50x)

Payments for water-related ES

(gov. & private) [+ air purif/fine dust]

5 billion 8 billion

Biodiv. Offsets [mitigation banking] 3,5 billion 110 billion (30x)

Bio-prospecting contracts [pharma] 30 million 100 million

Private land trusts/cons. easements

[“landschapsveilingen”]

8 billion

(in USA alone)

20 billion

Estimated 2020

Other: “Bionics”/pest control/etc. ??? ??????

(eco-tourism)

*) http://www.bsr.org/reports/BSR_2009_Global_Ecosystem_Services_Policy.pdf

2009 State of Global Ecosystem Services Policy Developments

(February 2010) - BSR –report *: “While the trends are still emerging,

it appears there will be a shift ....toward a systems-based approach to

environmental issues that includes consideration of ecosystem services”.

Participants

BC Hydro

BG Group Inc.

BP p.l.c.

Chevron Corporation

DuPont

Eni S.p.A.

Exxon Mobil Corporation

Freeport-McMoRan Copper & Gold Inc.

Rio Tinto plc

Royal Dutch Shell

“The Environmental Markets Initiative

helps companies integrate ecosystem

services into corporate decision making,

risk assessment, and supply chain

management processes”.

BSR: The Business of a Better World (> 250 companies)

3.4) Ecosystem services as a Business Opportunity ...

Ecosystem Services Partnership

ESP www.es-partnership.org

https://www.youtube.com/watch?v=IyL272Q1N0s

Why companies should invest in Natural Capital

www.pitchfornature.com

Environmental Systems Analysis

Biodiversity in Business

http://www.greenbiz.com/blog/2014/03/14/why-puma-dow-see-value-ecosystem-

services

“Forty-seven companies from around the world now mention

natural capital and ecosystem services in publicly available

materials, based on findings in a new BSR working paper”

(2014)*.

“Puma and parent company Kering ... have developed an

Environmental Profit and Loss Account (EP&L) with environmental

impact for greenhouse gas emission, water use, land use, air pollution

and waste generated through the operations and supply chain. The

EP&L is now being applied across all Kering brands” (14 March 2014)

* Beyond Puma, Coke, Dow: Why more firms value ecosystem services, By Corinna Kester and Sissel Waage

Published March 14, 2014

Natural Capital Declaration (RIO+20, 2012) -> NC Coalition

Environmental Systems Analysis

JOB-add: “Ecosystem Services Officer: environmental markets”

http://www.bioecon-network.org/pages/announce-03.html

Flora & Fauna International

London, UK

(Start-salary: 30.000 Pnd)

Start:

asap

(4) Voluntary Private non-market Mechanisms

Environmental Systems Analysis

Donations, Lotteries, Adoption & Friend-schemes, etc

WWF-Int., TNC-USA, RSPB -UK* , etc… *) > 1 million members

Membership fees, donations, legacies

Lotteries (e.g. Canada, The Netherlands, France, UK)

Part of the profits go to conservation activities

(eg. Scotland lottery (“Millenium Forest”) raised 25 million Euro to restore

10.000 hectare of woodland habitat)

Volunteer work Donate time instead of money (eg Earthwatch)

Environmental Systems Analysis

Landscape Auctions

10 jaar lease-contract …

- 100 m hedgerow

- a bench or historic tree

- free view

- etc

Landschapsveilingen (TripleE)

“For Sale”

26.000 € for a small lake

140.000 € various landscape elements

in Ooijpolder

Environmental Systems Analysis

Make users and beneficiaries pay for (maintenance and

restoration of) ecosystems and their services

Ecosystem Services help to attract (new) money …(*

*) Conclusion Special Issue PNAS (2008)

- What ecosystem service is being financed?

- Who is supplying the service?

- Who is paying for it?

- What instruments are being used?

- How much is paid?

- What is the current point of development of the mechanism?

- What is the legal context?

- What is the support needed and of which stakeholders?

- What are the equity concerns?

- Who are the winners/losers of the mechanism development?

- What are the strengths of the mechanism?

- What are the weaknesses of the mechanism?

Key questions for implementing financing mechanisms

Assessment of

service

Characteristics

of the services

Stakeholder

identification &

engagement

Integrated

monetary

valuation

Market

development

(seller/buyer)

Stakeholder

negotiation &

pricing

Check for sui-

table PES/RES

(intermediary)

Monitoring &

evaluation of

PES/RES

Design of

service market

Design of

payment

Assessment of

payment

Legislative &

institut. Support

(property rights)

Implementation

of PES/RES

transaction costs

Quantification of

the services

Guidelines for setting-up PES (RES) mechanisms

Step 1 Step 2 Step 3 Step 4

Sinisa (2007), Based upon: (Powell and White, 2001; Powell et al, 2002;

Perrot-Maître and Davis, 2001; Blignaut and King, 2006; Smith et al 2006)

National landscape ‘Groene Woud’ (PPP-example)

opvang

fijnstof

wonen

Natuur

Recreatie

Lokale

Producten

Waterretentie

How combine / optimise

Landscape services ?

Streekrekening(en) (Rabo-bank, ASN, etc)

5% of market-interest rate

-> Streekfonds (eg. at 2%

this is 0,1% of savings)

“Streekfonds”

> 200.000/year

2) Policy Measures (TEEB D1 & D2) - Adjust taxing and subsidy-system (reward sustainability/punish unsustainab.)

- Adjust SEEA, Greening GDP (or better replace by other welfare-measures)

- From CDM to Green Development Mechanism (reward prot. of biod.)

3) Awareness raising / TEEB for consumers (D4)

- Fair prices, eg. eco-labeling (e.g Fair Trade, FSC, MSC)

-> Fair society (private and corporate social responsibility)

1) New Economics (TEEB D3)

- Internalize “externalities”

positive ( ‘free services’)

& negative (biodiv. loss)

- Stop discounting interests of

future generations

Ecosystem Services Partnership

ESP www.es-partnership.org

www.es-partnership.org