Assessing the livelihood impacts of payments for environmental services: implications for avoided deforestation

Introduction S the 2007 Conference of the Parties to the United Nations Framework Convention on Climate Change in Bali, there has been heightened international interest in policy approaches and incentives for REDD. Broadly, such schemes involve the provision of funds to developing countries to reduce emissions from deforestation and degradation, below those that occurred during a certain reference period. Such policies have generated much support, but also raised concerns about the potential of curtailed access to forest resources negatively impacting on the rights and livelihoods of indigenous and rural people (Griffiths, 2007). Promoting the participation of indigenous and local communities in a REDD mechanism, for instance through payments for forest conservation, reforestation and afforestation, is one option that has been discussed to address such concerns. Although livelihoods have never been the primary focus of PES schemes, recent research has highlighted that PES schemes raise a number of risks and opportunities for the livelihoods of both participants and non-participants (e.g. Grieg-Gran et al, 2005; Pagiola et al, 2005; Porras et al, 2008; Wunder, 2008). However, evidence is limited given the relatively recent implementation of most PES schemes. A comparative case study approach has been used here to examine eight case studies of PES schemes in Africa, Asia and Latin America, to contribute to filling this knowledge gap. The research addresses the following questions: What have been the livelihood impacts of existing PES schemes? What are the implications for the design of REDD activities? PES & livelihoods: what do we know? A PES system has been defined as a voluntary transaction, where a well-defined environmental service(s) is bought by a minimum of one buyer from a minimum of one seller, if and only if the seller secures the provision of the service (Wunder, 2005). Although this research draws on this definition as a way of conceptualising PES, we recognise that these criteria rarely apply in practice (Vatn, 2008); most PES schemes range across the spectrum from market-based to regulatory approaches. The definition also underplays the role of intermediary organisations, which in the cases considered here, have helped to establish markets for environmental services and facilitate subsequent market transactions. Although PES schemes were not developed as a means of improving livelihoods, there has been increasing interest in their impacts on participants and non-participants, particularly with respect to poverty (Grieg-Gran et al, 2005; Pagiola et al, 2005; Porras et al, 2008). Whilst the empirical evidence is limited (Engel et al, 2008), it shows that: • The poor have been able to participate in PES schemes even when they are not directly targeted (Wunder et al, 2008), but high transaction costs are a significant threat to participation (Grieg-Gran et al, 2005; Pagiola et al, 2008). The participation of the poor usually depends on the nature and location of the environmental service, which cannot be fully controlled for in the design of PES schemes, since the primary objective is to secure the provision of an environmental service. Also, their participation in PES schemes is often limited by insecure land tenure, small Initiatives to reduce emissions from deforestation and forest degradation (REDD) are under development in several countries with tropical forests. Concerns have been expressed, however, that these activities could have negative impacts on rural livelihoods by restricting access to forest resources. This research analysed the potential livelihood impacts of incentive payments for REDD by examining the impacts on livelihoods of existing payments for environmental services schemes. Eight case studies of payments for environmental services (PES) schemes in Africa, Asia and Latin America were prepared, based on a livelihoods framework. The research finds that the PES schemes reviewed have: normally enabled participation by poorer households, although land tenure remains a critical constraint to their participation; provided financial capital to households, but contributed a relatively minor share of total household income; stimulated investment in community infrastructure and services (physical capital), when payments were made at the community level; improved human capital, although the long term impact is uncertain; improved social capital when the schemes worked with existing community institutions; and have not monitored their impacts on the environmental services they sought to protect appropriately. Key issues for attention in REDD design include: broadening REDD to forests under non-private tenure which may improve livelihood outcomes, but brings its own design challenges; the need to work with communities to increase the flow of benefits to them, to reduce transaction costs and to improve community infrastructure; assessing the opportunity costs and transaction costs is crucial, and matching benefits need to be provided to communities, in an appropriate timeframe. Crawford School of Economics and Government