Payment for environmental service

by Elwyn Grainger-Jones, Director of IFAD’s Environment and Climate Division

Paying the protectors 
At IFAD we are convinced that poor rural smallholder farmers should be recognized and compensated for the environmental services they provide when they practice environmentally sound land-use management and forestry which benefit all of us.

This type of compensation, known as Payment for Environmental Services (PES), creates incentives for sustainable production by paying for carbon sequestration, avoiding deforestation, and protecting biodiversity. It’s all part of the solution to climate change. Schemes for carbon trading need to involve compensation for rural carbon sequestration.

Climate change will affect us all, but it poses a particular risk to development and poverty reduction, and to the achievement of the Millennium Development Goals.

Natural water filters
One example of PES at work is the Green Water Credit model, piloted in Kenya and now expanding to other countries such as Algeria and China. This model is about farmers upstream being paid for soil and water conservation by water users downstream who benefit from cleaner water.

Soil and water conservation is a matter of survival in most developing countries where the majority are smallholder farmers. In fact, 80% of the food consumed in Asia and Sub-Saharan Africa is produced by small farmers. Although many private investors are not attracted to natural resources management, it is a fundamental part of sustainable development.

In the Andean Highlands of Peru, our project with the Global Environment Facility (GEF) will work towards protecting and sustainably farming this fragile ecosystem. At the same time, downstream beneficiaries will pay upstream agricultural communities for the resulting biodiversity and water services that they maintain.

Similarly, communities in Ethiopia have re-greened the Tigray, a massive watershed which was hopelessly degraded a few years back. It is now a rejuvenated landscape supporting 4.4 million people who depend on smallholder agriculture. Investors are also trickling back to support people’s livelihoods.

Not just cash
In Jordan, another GEF funded project for IFAD will see private tour operators being asked to pay local communities for nature conservation and the maintenance of corridors between different reserves.

Recent work in Africa tested innovative techniques for promoting PES through negotiated environmental service contracts with poor communities based on the principles of 'willingness to provide services' and 'willingness to pay'. This work was funded by an IFAD grant to the World Agroforestry Centre (ICRAF) – Pro-poor Rewards for Environmental Services in Africa (PRESA) – which is linked to IFAD investment projects in Guinea, Kenya, Uganda and the United Republic of Tanzania.

Similar work with ICRAF is ongoing in Asia, where the Programme for Developing Mechanisms to Reward the Upland Poor of Asia for the Environment Services They Provide (RUPES) is active in 12 sites in China, Indonesia, the Lao People's Democratic Republic, Nepal, the Philippines and Viet Nam.

In Indonesia alone, over 6,000 farmers in 18 communities received permits to grow coffee while protecting the forests. Providing communities with clear land tenure rights gave them the incentive to maintain or restore environmental services, such as replanting and managing forest areas.

One community negotiated with a private dam operator to reduce silt in the river by applying soil protection techniques on their plots in return for a micro-hydroelectric machine for energy supply.

The activities also benefit lowland communities by protecting the watersheds, and shoring  up carbon sinks. These activities offer further evidence that PES transfers do not necessarily need to be financial, but can be provided in the form of secure land rights.

Our efforts at IFAD will be more effective if we recognize poor rural people as effective custodians of the natural resource base, and ensure they have access to the technology and financing they need to cope with climate change and be part of the solution.

By listening  to smallholder farmers in developing countries when planning adaptation and mitigation projects, we can reduce the amount of carbon in our atmosphere while accelerating progress towards a world without poverty.