Payment for Ecosystem Services in Asia and the Pacific

A new approach to environmental conservation can help governments protect ecosystems and build stronger economies. ADB.org speaks with Conservation International's Vice-President for Global Policy Carlos Manuel Rodriguez, who pioneered the development of payment for ecosystem services (PES) in Costa Rica.

What are the challenges to achieving the twin goals of reducing poverty and preserving the environment?

The biggest challenge we have in the developing world is that many of our countries are doing well in terms of economic growth, but if we move toward a more sustainable way of doing business, that growth may be dramatically impacted. Yet, if we do not bring sustainability in the decision-making process, the economy will eventually collapse because the way we produce and consume are totally irrational and unsustainable. Ecosystems replenish at rates slower than the pace of development.

In addition, in most of our countries the administration changes every 4 to 5 years, which is a sign of them having strong democratic institutions. However, this limited timeframe makes it difficult for a government to come up with a sustainability proposal that can implement structural reforms.

We need to understand that, this is first of all a political challenge. Our proposals should be politically viable and supported by information about environmental costs that can be easily understood, particularly by senior policy makers.

What are payments for ecosystem services (PES) schemes and how do they differ from previous approaches to environmental conservation?

PES is an innovative tool by which nations and societies have been able to give an economic value to nature so that protecting it becomes an economic option for many people, particularly poor farmers in indigenous and rural communities.

Nature provides many goods and services to many beneficiaries, but they do not pay for them or recognize their financial value. With clear land tenure or property right systems in place, we can establish a mechanism whereby, for example, the beneficiaries of the water generated in the water shed and of climate change mitigation initiatives pay for those services to the local communities that own or manage natural ecosystems.

Previous approaches to environmental conservation were government-funded and as such depended on the national budget. This left the system exposed to budgetary problems. The PES does not compete for the taxpayers’ money. In this sense, it is a politically viable system.

What are the challenges faced by the international community in the implementation of such schemes?

Many think that PES is like a silver bullet that has the power to solve all problems. But we need to put things in the right perspective: PES is just an instrument for nature conservation.

We are not going to achieve our targets of sustainability with the same institutional framework that created the problems we have today. Countries must go through a transformation process that includes changes in their development policies and incentive framework.

How can the experience of applying PES schemes in other parts of the world be transferred to Asian countries?

PES has become an alternative to protecting nature through strict regulation, which punishes people without understanding that often they destroy nature because they make very simple economic decisions. If we understand how and why these economic choices are made, we can then come up with innovative ideas on how people can benefit from protecting nature.
With a PES mechanism in place, people looking after ecosystems receive more resources because other people at a local or global level are willing to pay for the environmental services they provide. People in Paris, London, or Rome are willing to pay people in Cambodia or Viet Nam to keep their forests standing, not because they love nature, but because they are concerned about climate change.

What types of instruments can be developed in the future to tackle environmental problems?

In Costa Rica, we have been discussing about how to change the tax system. Normally, governments tax positive things like income, property, and financial transactions. However, things that are bad for our economy, health or the environment, such as pollution, are not taxed. I believe that those companies that pollute the water or contribute to climate change should assume upon themselves the environmental costs they are responsible for. This approach will also allow governments to lower traditional taxes, like income tax. This is a major structural reform.

Mr. Rodriguez was keynote speaker on sustainable development governance and PES at ADB's Sustainable Asia Leadership Program, a forum for development practitioners held in Manila on 10–14 September 2012.