Elsevier

Ecological Economics

Volume 69, Issue 11, 15 September 2010, Pages 2093-2107
Ecological Economics

Targeting and implementing payments for ecosystem services: Opportunities for bundling biodiversity conservation with carbon and water services in Madagascar

https://doi.org/10.1016/j.ecolecon.2009.01.002Get rights and content

Abstract

Payments for Ecosystem Services (PES) are generating a lot of attention among conservationists because they have the potential to create new funding opportunities for biodiversity protection and other ecosystem services that contribute to human well-being. A number of recent publications have suggested ways to target and implement PES projects in order to maximize their cost-effectiveness and efficiency, and the Heredia Declaration (this issue) sets forth a list of agreed-upon principles concerning the use of PES schemes. One of those principles concerns the “bundling” of joint products of intact ecosystems in PES schemes in order to maximize the benefits to society. There have been several recent studies focusing on the degree of overlap between biodiversity and other ecosystem services and therefore the opportunities and constraints to bundling these services. Building on this idea, the bulk of this paper focuses on developing a method for selecting sites for PES where the main interest is to bundle biodiversity with other ecosystem services. We focus our analysis on Madagascar, a country with globally important biodiversity that is also beginning to explore the utility of PES as a conservation mechanism. Specifically, we assess the opportunities for bundling biodiversity conservation with carbon and water services at the national scale and identify where using PES to protect these areas of multiple benefits would be most cost-effective and efficient. This analysis identifies almost 30,000 km2 — out of 134,301 km2 — of natural habitat that could potentially meet biodiversity conservation goals and protect additional ecosystem services through a PES scheme. One of the places identified by our methodology corresponds to an ongoing conservation project that has already begun using payments from carbon emission reductions to protect standing forests and restore important biodiversity corridors — the Ankeniheny-Mantadia-Zahamena Biodiversity Conservation and Restoration Project. This project site was selected for its high biodiversity and carbon values, lending credibility to our spatial targeting methodology and providing a case study to draw insights on how multiple-benefit PES schemes can be implemented in biodiversity “hotspots”. In the discussion section of this paper we draw on experiences from this project to consider how many of the principles outlined in the Heredia Declaration affect implementation of PES schemes in Madagascar, providing lessons for similar countries experimenting with PES for biodiversity conservation.

Introduction

Payments for ecosystem services1 (PES) are generating a lot of interest among conservationists and land use managers because they are considered a promising new approach to protect biodiversity and ecosystem goods and services, such as climate regulation, water filtration, and nutrient retention, which contribute to human well-being (Pagiola et al., 2002, Wunder, 2005). PES are defined by five criteria: (1) they are a voluntary transaction; (2) they involve a well-defined environmental service; (3) the service is “bought” by at least one buyer; (4) the service is “provided” by at least one provider; and (5) the transaction is conditional on provision of that service (Wunder, 2005, Wunder, 2006, Wunder, 2007). Specific PES tools include direct public payments, direct private payments, tax incentives, cap and trade markets, voluntary markets, and certification programs (Scherr et al., 2005, Ecosystem Marketplace website, 2007). To date, most PES projects have focused on one or more of the following services: biodiversity, carbon, water, or landscape beauty (Landell-Mills and Porras, 2002, Wunder, 2005). While there are still only a limited number of PES projects in the developing world, the number is growing rapidly, and they range from national programs (e.g., China, Costa Rica), which tend to be government driven, to local PES projects, which are smaller and tend to be financed by the private sector (e.g., Ecuador, Brazil, etc.). The extent to which these projects meet all five of the defining criteria varies considerably, as does the number and type of services being sold, the payment mechanisms being used, and the number of buyers and sellers involved in the transaction (Landell-Mills and Porras, 2002, Landell-Mills, 2002, Wunder, 2005).

In theory, the PES approach can offer several advantages for meeting biodiversity conservation goals over other conservation interventions. First, PES use direct incentives to reach biodiversity targets. This type of direct approach is considered more cost-effective than traditional and indirect conservation policy tools, such as protected areas or integrated conservation and development projects, because it is not as complex to implement and is targeted specifically at project outcomes (Ferraro, 2001a, Ferraro and Simpson, 2001, Ferraro and Kiss, 2002, Pagiola et al., 2005). This means that policymakers should get more biodiversity conservation outcomes per dollar spent. Second, in a time where biodiversity conservation financing is scarce, PES can attract new funding sources (Jenkins et al., 2004, Scherr et al., 2005). The potential inclusion of avoided deforestation in post-Kyoto negotiations represents one of the most tangible opportunities to secure large amounts of financing for the protection of ecosystem services, including biodiversity (Chomitz et al., 2007). Recent proceedings from the thirteenth session of the Conference of the Parties (COP-13) on climate change to explore instruments to “reduce emissions from deforestation and degradation” (REDD) suggest that this may soon become a reality (UNFCCC, 2007). The key for those interested in biodiversity conservation is to ensure that carbon-based PES projects are targeted in areas that also benefit biodiversity protection. Third, PES projects can provide mutual benefits to local people. While PES are not designed to be a poverty alleviation strategy, they can result in more sustainable livelihoods through the provision of cash or in-kind benefits to participants, especially when targeted specifically at rural or indigenous populations (Pagiola and Platais, 2002, Rosa et al., 2003, Pagiola et al., 2005). These direct incentives to local people can be critical in areas where traditional biodiversity conservation strategies have failed and where unsustainable livelihood activities, such as slash and burn agriculture, are one of the major threats to biodiversity (Wunder et al., 2005).

Of course, PES will not be an appropriate tool in all places where biodiversity conservation is warranted, but it is increasingly becoming a preferred policy mechanism given the advantages cited above. While payments can be made exclusively for the provision of biodiversity, another approach that is gaining momentum is to “bundle” biodiversity with one or more additional ecosystem services. Bundling can be advantageous for those interested in biodiversity conservation because biodiversity is often harder than many other services to monetize and thus more difficult to get local and global beneficiaries to pay for directly (Chomitz et al., 1999, Heal, 2002, Robertson and Wunder, 2005). Bundling of services can also be beneficial from the seller's point of view because it can reduce transaction costs and raise price premiums (Landell-Mills and Porras, 2002). However, there are also caveats to trying to bundle multiple services in a conservation program. First of all, our knowledge on many ecosystem functions and services is still rudimentary and obtaining accurate spatial data for these services is even more difficult (Carpenter et al., 2006, Kremen and Ostfeld, 2005). This limits our ability to adequately plan for these services. Second, several recent studies have highlighted the inherent tradeoffs between multiple services (Chan et al., 2006, Egoh et al., 2007, Nelson et al., 2008). The degree of congruence between biodiversity and services such as carbon and water is still relatively unknown (Egoh et al., 2007). Nelson et al. (2008) suggest that we may have to settle for lower levels of services if we are interested in conservation actions that target multiple benefits simultaneously.

With these caveats in mind, conservation practitioners are rapidly building their portfolios of projects that deliver biodiversity plus other ecosystem service benefits. However, to date, there has been no systematic strategy for incorporating ecosystem services into biodiversity conservation projects (Egoh et al., 2007), let alone a method for identifying areas that might make sense for using a market-mechanism such as PES to conserve biodiversity. Therefore, the main purpose of this article is to develop a targeting method that can be used to identify where PES might be an effective and efficient approach to protect ecosystem services that occur in priority areas for biodiversity conservation. We apply our methodology to Madagascar — a country known for its globally important biodiversity and one that is also beginning to explore the use of PES for biodiversity conservation. For this analysis we use spatial data to map where areas important for biodiversity conservation overlap with carbon and water services. We focus exclusively on remaining forests and wetlands in this article because this is currently the main strategy used by international and national conservation organizations to target biodiversity priority areas. Within these forests and wetlands we consider what the level of threat (e.g., probability of deforestation) and opportunity costs are in the areas where biodiversity, carbon, and water services can be bundled to target where PES projects could protect multiple services in a cost-effective and efficient manner.

In the next section, we provide some background on biodiversity conservation and PES in Madagascar. In addition, we introduce one of the first PES projects in the country that has been targeted at biodiversity protection and carbon services — the Ankeniheny-Mantadia-Zahamena Biodiversity Conservation and Restoration Project (referred to as the Mantadia Project in the remainder of the paper). We draw on this project later in the paper to help validate our spatial targeting methodology and to discuss many of the implementation challenges highlighted in the Heredia Declaration (this issue). In Section 3 we discuss the methods and data sources used for our analysis. In Section 4 we present the results from the national-level targeting of potential PES sites; this includes identification of the area corresponding to the Mantadia Project. We discuss the implications of this targeting methodology for Madagascar in Section 5 and provide a brief overview of some of the implementation challenges associated with using PES as a biodiversity conservation strategy in Madagascar. In Section 6 we conclude with a discussion of the opportunities and challenges of using this type of targeting methodology to identify areas to use PES to conserve biodiversity and additional ecosystem services in priority countries for biodiversity conservation.

Section snippets

Background

Madagascar is an ideal test case for our spatial targeting methodology of PES schemes aimed at biodiversity conservation because of its global importance as a “biodiversity hotspot” (Myers et al., 2000, Mittermeier et al., 2004). In addition to biodiversity value, ecosystems within the country also provide a number of documented goods and services to local, national, and global beneficiaries (Kramer et al., 1997, Kremen et al., 2000, Carret and Loyer, 2003, Minten and Moser, 2003, Bodin et al.,

Targeting PES for biodiversity conservation

Currently, we know very little about where higher concentrations of ecosystem services such as carbon or water regulation occur in most countries, what the opportunities are for bundling these services with biodiversity conservation projects, or where PES might be a cost-effective and efficient conservation approach. In this exploratory analysis we focus on the provision of biodiversity, carbon, and water services in existing forests and wetlands in Madagascar. There are, of course, a number of

National targeting

To produce a national map of PES targets we first restricted our analysis to remaining forests and wetlands by clipping vegetation classified by Kew Gardens (2002) as forest or wetlands from other land cover classes; this gave us a total area of 134,301 km211

Implications for targeting PES in Madagascar

Sixty percent of the areas identified for PES in this analysis overlap with existing or proposed protected areas. This is not too surprising given the high biodiversity values and amount of forest cover found in these areas. Given the limited funding for protected areas management (Carret and Loyer, 2003), the fact that protected area status does not ensure against all deforestation (Ingram and Dawson, 2005), the opportunity costs borne by local people around protected areas (Ferraro, 2001b),

Conclusions

In this paper we have laid out a method that those interested in biodiversity conservation can use to target PES projects in areas that protect biodiversity and provide important additional ecosystem services, such as carbon and water. The main objectives of this method are to identify potential sties that are beneficial from a biodiversity conservation perspective and that are cost-effective and efficient from an economic perspective to be considered for PES. As our analysis highlights, PES

Acknowledgments

This research was funded in part through the support of The Gordon and Betty Moore Foundation to the Center for Applied Biodiversity Science at Conservation International. The authors are grateful to staff at Conservation International – USA and Conservation International – Madagascar, participants of the March 2007 workshop in Costa Rica on Payments for Ecosystem Services: from local to global, hosted by the University of Vermont's Gund Institute of Ecological Economics and funded by the Blue

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