Can the poor participate in Payments for Environmental ... · Pagiola, World Bank, 2007 15...

Can the poor participate in Payments for Environmental Services?Empirical evidence from Latin America

Stefano PagiolaEnvironment DepartmentWorld Bank1818 H Str NWWashington DC [email protected]

The opinions expressed in this presentation are the author’s own and do not necessarily represent those of the World Bank Group.

The materials in this presentation may be freely reproduced with appropriatecredit to the author and the World Bank.

Stefano PagiolaEnvironment DepartmentWorld Bank

Poverty and Environment Partnership (PEP) - 11th meetingEnvironmental Improvements for Poverty Reduction and Sustainable Growth: The Challenges of Implementation Copenhagen 18th-20th June 2007

2Pagiola, World Bank, 2007

Payment

Conservation with payment

for service

The logic of Payments for Environmental Services (PES)

Benefits to land users

Costs to downstream populations

Deforestation and use for

pasture

Conservation

PES payments are payments to land useParticipation is voluntary


Poverty and PES

1. PES is not intended as a poverty reduction mechanism

2. Hope that it will help the poorSpatial correlation between poor areas and areas that provide environmental servicesPayments to poor land users provide them with additional income

3. But maybe it won’tCan the poor participate?

4. Fears that it may do some harmExacerbate tenure problemsImpact on non-participants


Factors that affect household participation in PES programs

Eligible to participate

Yes

PES programcharacteristics

Householdcharacteristics

Degree oftargeting

Locationof plots

In target part of the watershed?

Yes

In target watershed?

Source: Pagiola et al., 2005




Householdcharacteristics

PES practice profitable?(with payment)

Fits in farming system?

Yes

Yes

Eligible to participate

Paymentoffered Opportunity

cost of landTransactioncosts imposedon participants

Characteristicsof PES practice

Current landuse practices

Size of holding

Householdstrategy

Want to participate

Yes





HouseholdcharacteristicsYes

Want to participate

Security oftenure

Time horizon ofPES practices

Assets, savings, other income,remittances

Investmentrequirements of

PES practices

ExperienceEducation

Technicaldifficulty of

PES practices

Land title, othercollateral

Able to participate

Yes

YesAccess to TA?

No

Yes

Able to undertakePES practices?

YesAccess to credit?

No

Yes

Able to invest?

Has secure tenure?



Can the poor participate in PES?Key questions

1. Are the poor potentially eligible to participate?a. Are potential service suppliers poor?

b. How many of the poor are potential service suppliers?

2. Are eligible poor households able to participate?


Guatemala:Watersheds with hydroelectric power plants

Source: Pagiola, Zhang, and Colom, 2007


Guatemala:Watersheds with irrigation



Guatemala:Watersheds with significant domestic water use



Guatemala:Watersheds with significant potential for PES



Guatemala:Poverty rate by watershed

Source: Pagiola, Zhang, and Colom, 2007, based on Nelson and Chomitz, 2002


Guatemala:Poverty rate in water supply areas


High poverty rate in water supply area

Low poverty rate in water supply area


Guatemala:Poverty rate in water supply areas


0

5

10

15

20

25

300-

10

10-2

0

20-3

0

30-4

0

40-5

0

50-6

0

60-7

0

70-8

0

80-9

0

90-1

00

Poverty rate (%)

Num

ber o

f wat

ersh

eds

Average poverty rate 44% (sd 21%)


Relationship between poverty rate and importance of water supply areas


0

20

40

60

80

100

0 5 10 15 20Importance for HEP generation (kW/ha)

Pov

erty

rate

(%)

0

20

40

60

80

100

0 1 2 3 4 5 6 7Importance for domestic water supply (hhs/ha)

Pov

erty

rate

(%)

0

20

40

60

80

100

0.00 0.20 0.40 0.60 0.80Importance for irrigation (irrig ha/ha)

Pov

erty

rate

(%)

0

20

40

60

80

100

0 5 10 15 20Importance for coffee production (quintals/ha)

Pov

erty

rate

(%)


Guatemala:Poverty density by watershed



Guatemala:Poverty density in water supply areas


Many poor inwater supply

area

Few poor inwater supply

area


01020304050607080

0-1 1-2 2-3 3-4 4-5 >5

Poverty density (poor/ha)

Num

ber o

f wat

ersh

eds



Average poverty density 0.95/ha (sd 1.1)




Total number of poor: 1.7 million

Share of country’s poor*: 27%(* excluding Petén)


PES and poverty

Potential for local impact variesSome areas with significant PES potential have high poverty rates, but not all

Potential for national impact is significant but limited

Max 27% of country’s poor may be able to participate


Can eligible poor households participate in a PES program?

Regional Integrated Silvopastoral Management ProjectMatiguás-Río Blanco, Nicaragua

Piloting use of PES to promote silvopastoral practices in degraded pastures, to improve biodiversity and carbon sequestration


A tough test:Most participants are poor...

Income level of program participants, Matiguás-Río Blanco, Nicaragua

0

5

10

15

20

25

30

35

40

< 0 0 - 2,950 2,950 -5,650

5,650 -9,000

9,000 -12,000

12,000 -15,000

15,000 -18,000

18,000 -21,000

21,000 -24,000

24,000 -27,000

27,000 -30,000

30,000 -33,000

> 50,000

Reported annual household income / per person (C$)

Num

ber o

f hou

seho

lds

Non-poorExtremely

poor Poor

Source: Pagiola, Rios, and Arcenas, 2007

Participating households:• 20% poor • 46% extremely poor(national poverty line)


A tough test:… and participation requires expensive investments

Establishment costs of selected silvopastoral practicesMatiguás-Río Blanco, Nicaragua

Source: Gobbi, 2005

0 100 200 300 400 500 600 700 800 900

Improved pasturewithout trees

Improved pasture withlow tree density

Improved pasture withhigh tree density

Fodder bank withwoody species

Fodder bank withleguminous species

(C$/ha)

Land use only

+ live fence


-480 -400 -320 -240 -160 -80 0 80 160

Annual crops

Degraded pasture

Natural pasture without trees

Improved pasture without trees

Semi-permanent crops

Natural pasture with low tree density

Fodder banks

Improved pasture with low tree density

Natural pasture with high tree density

Diversified fruit crops

Monoculture timber plantation

Improved pasture with high tree density

Scrub habitats (tacotales)

Secondary and riparian forest

Net land use change (ha)

Extremely poor households

Poor households

Non-poor households

Were the poor able to participate? Yes!Land use change in Matiguás-Río Blanco, Nicaragua



Were the poor able to participate? Yes!


0 10 20 30 40

Extremely poor

Poor

Non-poor

Change in land use (% of farm)

0 10 20 30 40

Extremely poor

Poor

Non-poor

Change in environmental services/ha (%)


Can the poor participate in PES?Important: PES are not poverty reduction programs

Trying to make them be poverty reduction programs can undermine themBut can try to maximize positive impacts/minimize adverse impacts

A small but significant portion of the poor are potential participants in PESWhen the poor are eligible to participate, their ability to participate may be greater than assumed

Transaction costs a bigger obstacle than household characteristics

Appropriate PES design can helpAppropriate contract designLow transaction costsSupport to participants


Guidelines for Pro-poor PESPES is not a poverty reduction mechanism

Poverty cannot be used as a criterion for participationA pro-poor PES program is one that maximizes its potential positive impact and minimizes its potential negative impact.

Keep transaction costs lowDevise specific mechanisms to counter high transaction costs.

Ensure that the social context is well understoodAvoid implementing PES programs in areas of insecure land tenureProvide targeted assistance to overcome problems that impede the participation of poorer householdsSeek external funding for additional costs of pro-poor programs

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