Can Payment for Ecosystem Services Be a Solution for Timber Companies and Local Communities?
Payment for Ecosystem Services, sometimes also known as Payment for Environmental Services (PES), refers to the practice where farmers or landowners receive remuneration or compensation in return for offering different ecological or environmental services depending on the type of the property they own.
Ecological services,on the other hand, do not have a precise definition, but are usually understood as the various ways in which society can benefit from nature.
Generally, PES is a voluntary transaction and therefore cooperation between landowners and communities is crucial for the success of any PES initiative.
PES gained popularity in the last couple of years, as several PES projects in the Nordic countries were successfully implemented.
However, the practice of paying farmers for environmental services is by no means a new idea; the US Conservation Reserve Programme (CRP), which is considered to be the world's largest payment scheme for environmental services, started functioning as early as 1985.
Under the CRP, landowners receive annual payments in return for adopting agricultural practices aimed at reducing water runoff and sedimentation.
The integration of environmental requirements from EU farmers and landowners in the Common Agricultural Policy (CAP) may also be counted as a form of PES.
This practice will be further enhanced by the new green measures recently proposed by the European Commission, namely, reserving 30% of direct CAP payments specifically for farmers and landowners who adopt practices for protecting the environment, such as landscape preservation.
Applying of PES to the forestry sector is also causing an increased amount of interest due to the numerous environmental benefits of forests such as carbon sequestration, water and air purification, etc.
Countries such as Mexico and Costa Rica are developing strategies to implement PES in the forestry sector, as a measure to reduce deforestation and protect the interests of indigenous communities dependent on forest ecosystems.
One of the most popular examples for a successful PES program in the forestry sector is the Finnish METSO programme.
In short, the programme operates on the basis of agreements between the state and owners of timberland, who submit tenders, which are assessed on the basis of their ability to deliver a given ecosystem service at a competitive price.
According to the Nordic Council, the programme will run until 2016, and Finland will have invested ?180 million by 2012.
It is evident that PES is applicable in the forestry sector as well as in agriculture.
Companies with timber investments can provide environmental services such as ecotourism and recreational activities on the timberland property.
Together with carbon sequestration, and the climate and biodiversity advantages forests bring, it seems fair that sustainable forest management, best practice of which requires more time and resources than monoculture tree farming, is financially rewarded.
In practice, however, the introducing of PES does not always come without difficulties.
Since PES is established more or less on a local basis, without hard and fast rules, it involves a large amount of goodwill, both on behalf of local communities who will benefit, and on the respective company.
Also, the mechanism of PES implementation and management needs to be well-defined, as in this case the seller is a private entity, whereas the buyer (local community, municipal authorities or a government) is by definition public.
This is also the case with PES in the forestry sector, where the company willing to make timber investments in a particular area will have to reach an agreement with the local community both on the payment amount, and, more importantly, on the particular type of environmental service or services; a forest area can generally provide a large variety of environmental services, and this can therefore further complicate PES negotiations.
Establishing of a PES system is a particular challenge in developing countries, due to ambiguous land ownership rights and weakness of local community structures which cannot adequately balance the strong commercial interests for harvesting timber.
A possible solution in this case, and especially where local communities face difficulties in raising money for compensating timber companies for providing sustainable forest management services that benefit the local community, might be increased efforts on a governmental level - providing the necessary financial stimulation, and strengthening it with a legal aspect, for instance, setting a limit on timber extraction.
Thus, companies willing to make timber investments will have financial as well as regulatory incentive to adopt practices minimizing environmental impact.
An additional benefit would be increasing social awareness about the importance of forest preservation, which might induce better cooperation between the timber company and the community, the basis for successful functioning of any PES.
Ecological services,on the other hand, do not have a precise definition, but are usually understood as the various ways in which society can benefit from nature.
Generally, PES is a voluntary transaction and therefore cooperation between landowners and communities is crucial for the success of any PES initiative.
PES gained popularity in the last couple of years, as several PES projects in the Nordic countries were successfully implemented.
However, the practice of paying farmers for environmental services is by no means a new idea; the US Conservation Reserve Programme (CRP), which is considered to be the world's largest payment scheme for environmental services, started functioning as early as 1985.
Under the CRP, landowners receive annual payments in return for adopting agricultural practices aimed at reducing water runoff and sedimentation.
The integration of environmental requirements from EU farmers and landowners in the Common Agricultural Policy (CAP) may also be counted as a form of PES.
This practice will be further enhanced by the new green measures recently proposed by the European Commission, namely, reserving 30% of direct CAP payments specifically for farmers and landowners who adopt practices for protecting the environment, such as landscape preservation.
Applying of PES to the forestry sector is also causing an increased amount of interest due to the numerous environmental benefits of forests such as carbon sequestration, water and air purification, etc.
Countries such as Mexico and Costa Rica are developing strategies to implement PES in the forestry sector, as a measure to reduce deforestation and protect the interests of indigenous communities dependent on forest ecosystems.
One of the most popular examples for a successful PES program in the forestry sector is the Finnish METSO programme.
In short, the programme operates on the basis of agreements between the state and owners of timberland, who submit tenders, which are assessed on the basis of their ability to deliver a given ecosystem service at a competitive price.
According to the Nordic Council, the programme will run until 2016, and Finland will have invested ?180 million by 2012.
It is evident that PES is applicable in the forestry sector as well as in agriculture.
Companies with timber investments can provide environmental services such as ecotourism and recreational activities on the timberland property.
Together with carbon sequestration, and the climate and biodiversity advantages forests bring, it seems fair that sustainable forest management, best practice of which requires more time and resources than monoculture tree farming, is financially rewarded.
In practice, however, the introducing of PES does not always come without difficulties.
Since PES is established more or less on a local basis, without hard and fast rules, it involves a large amount of goodwill, both on behalf of local communities who will benefit, and on the respective company.
Also, the mechanism of PES implementation and management needs to be well-defined, as in this case the seller is a private entity, whereas the buyer (local community, municipal authorities or a government) is by definition public.
This is also the case with PES in the forestry sector, where the company willing to make timber investments in a particular area will have to reach an agreement with the local community both on the payment amount, and, more importantly, on the particular type of environmental service or services; a forest area can generally provide a large variety of environmental services, and this can therefore further complicate PES negotiations.
Establishing of a PES system is a particular challenge in developing countries, due to ambiguous land ownership rights and weakness of local community structures which cannot adequately balance the strong commercial interests for harvesting timber.
A possible solution in this case, and especially where local communities face difficulties in raising money for compensating timber companies for providing sustainable forest management services that benefit the local community, might be increased efforts on a governmental level - providing the necessary financial stimulation, and strengthening it with a legal aspect, for instance, setting a limit on timber extraction.
Thus, companies willing to make timber investments will have financial as well as regulatory incentive to adopt practices minimizing environmental impact.
An additional benefit would be increasing social awareness about the importance of forest preservation, which might induce better cooperation between the timber company and the community, the basis for successful functioning of any PES.
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