Ecosystems, poverty alleviation and conditional transfers Module Ecosystems, poverty alleviation and conditional transfers Module Ecosystems, poverty alleviation and conditional transfers Module 2 Experiences Ina Porras and Nigel Asquith, 2018 A set of four modules for practitioners and trainers 1 2 3 4 Context Experiences Financing Implementation Examples of conditional transfers reviewed Job schemes in India and South Africa

China, Costa Rica and Mexico (national) Brazil, Bolivia and Nepal (local) Less poverty, Better ecosystems Better ecosystems, Less poverty Experiences Detailed case studies and engagement of ongoing CT/PES Bhutan/ Nepal/ Vietnam emerging PES Mexico PSA/ Scolel-Te Costa Rica PSA Uganda: Trees for global benefit WaterShared

(Bolivia, Ecuador, Colombia) Bangladesh Jatka conservation programme India Mahatma Gandhi Rural Employment Guaranteed Kenya: Blue carbon/mangroves Bolsa Floresta, Brazil PRC SLCP/ Eco-compensation The Philippines Greening the Nation Madagascar (emerging) PES South Africa: Environmental works programme Source: Prepared by Ina Porras, IIED Theory of change The programme provides guaranteed employment during the lean agricultural season. It primarily funds infrastructure

projects such as irrigation and water conservation structures that support agricultural activities. Therefore, through wages and productive infrastructure, MGNREGA directly tackles livelihood security issues for a major section of the population. It has thus grabbed high political attention especially at the sub-national level, ultimately influencing national policy and securing significant budget allocations for the scheme. MGNREGA features strongly in the countrys INDC. Main features 100 days of guaranteed wage employment; All rural households who are willing to work (833 million people live in rural areas) At least 1/3 must be women Almost half of approved works linked to environment Institutional set-up Ministry of Rural Development Central Employment Guarantee Council (CEGC) State Government Rural Employment Guarantee Scheme

(REGS) State Employment Guarantee Council (SEGC) District Panchayats District Programme coordinator (DPC) Gram Sabha (GS) District Panchayats Programme Officer (PG) Intermediate Panchayat (IP) Others Green Panchayat (GP) Source:

Reported impacts Indicator Value Central release funds US$5.9 billion Total expenditure US$7 billion Total wage expenditure US$4.9 billion Number of households getting jobs 48.2 million Average number of person/days per household in a year 49 Women participation rate 55 per cent Average wage

US$2.5/day Average cost per person US$3.4 /pp/day Source: Porras and Kaur (2018): Indias Mahatma Gandhi Guaranteed Employment programme. Main lessons Legal backing of the scheme has ensured political attention and adequate budgetary allocation since its inception. Strong participation of local institutions in the programme design, Direct payment to bank accounts of beneficiaries reduces leakages and supports financial inclusion for poorer sectors of the economy; Information technology and infrastructure play important role to improve efficiency and effectiveness; The investments provide climate resilient and livelihood-linked assets in addition to wage guarantee for the poor. More efforts need to go into output-based monitoring (rather than only jobsdone approach) and to securing long-term quality of these environmental investments. Selected references

Babu, VS and Rao, KH (2010) Impact of MGNREGS on Scheduled Castes and Scheduled Tribes: Studies conducted in 8 states. National Institute of Rural Development, Hyderabad. Banerjee, K and Saha, P (2010) The NREGA, the Maoists and the developmental woes of the Indian State. Economic and Political Weekly. 55. Bhakta, P, (2017) How the Aadhaar-based payment modes work. The Economic Times, Delhi. Dreze, J, (2015) The digging-holes myth, Opinion. The Indian Express. Ghosh, J, (2015) India's rural employment programme is dying a death of funding cuts, Employment. The Guardian, London. Government of India (2014) Report to the people: Mahatma Gandhi National Rural Employment Guarantee Act, 2005. Ministry of Rural Development, Department of Rural Development, New Delhi. Jaitley, A (2015) Budget 2015: MGNREGA gets more funds from Narendra Modi government. The Economic Times, New Delhi. Kaur, N, Steele P, Barnwal, A (2017) The Mahatma Gandhi Rural Employment Guarantee Act (MGREGA), India -Country study summary. In: Porras, I et al (eds), Conditional transfers, poverty and ecosystems: National Programmes Highlights series. International Institue of Environment and Development, London. Liu, Y and Barret, C (2013) Guaranteed Employment and the Poor, The Mahatma Gandhi National Rural Employment Guarantee Scheme, Project note 01. IFPRI, Washington D.C. MGNREGA Division (2017) Mahatma Gandhi National Rural Employment Guarantee Act 2005: Performance, initiatives and strategies (FY15-15 & FY16-17). Ministry of Rural Development, Government of India, Delhi. Padma, K (2015) MGNREGA and rural distress in India. International Journal of Humanities and Social Science Invention. 4, 67-76. Pani, N and Lyer, C (2011) Evaluation of the Impact of Processes in Mahatma Gandhi National Rural Employment Guarantee scheme in Karnataka Bangalore National Institute of Advanced Studies. Shah, M (2016) Should India do away with the MGNREGA? The Indian Journal of Labour Economics. 59, 125-153. Tiwari, R, Somashekhar, HI, Parama, VRR, Murthy, IK, Mohan Kumar, MS, Mohan Kumar, BK, Parate, H, Varma, M, Malaviya, S, Rao, AS, Sengupta, A, Kattumuri, R, Ravindranath, NH (2011) MGNREGA for environmental service enhancement and vulnerability reduction: rapid appraisal in Chitradurga district, Karnataka. Economic and Political Weekly.

46, 39-47. Type of programmes Working for Water, focuses on the removal of alien invasive species from waterways, combined with job creation Environmental Protection and Infrastructure Programmes, focus on job creation, skills development, and environmental conservation and sustainability through infrastructure-related projects. One of its projects is Working for the Coast, which hires and trains people from coastal communities to protect and conserve coastal environments and estuaries Working for Wetlands, promotes co-operative governance and partnerships that support the protection, rehabilitation and sustainable use of wetlands Working on Fire, promotes integrated fire management to help protect lives, livelihoods and ecosystem services. Detailed environmental targeting Receiving environment criteria Local poverty & unemployment Local household income Mean living level of income Direct dependence on ecosystems Protection status of the land Invasive alien species infestation (IASI) levels Wetlands/river health and condition

Landscape ecological infrastructure Climate change mitigation Climate change adaptation Ecosystem service targeting criteria Water flow demand Water quality Existing EPWP projects distribution Spatial biodiversity priorities Fire management & risk reduction Security of NRM investment Fire risk and vulnerability Water supply Erosion control Source: Marais and Mlilo (2018): Lessons and challenges Tackle high-level social problems in ways that contribute to environmental protection. Umbrella programme brings environmental and socio-economic objectives with a clear instrument (job creation). Challenges: - Bureaucratic, eg delays in payments, which can be especially harmful for the vulnerable participant groups. Local authorities can be inefficient and often ineffective. NGOs, private sector agencies and other commercial entities tend to respond better. - Long-term challenges, e.g. securing sustained control of invasive plants in cleared areas. It is unclear the obligations of the receiving landowners.

- Challenges unlocking significant investments from the water sector Selected references Department of Environmental Affairs (2016) Annual Performance Plan 2016/17, Pretoria. Department of Environmental Affairs, Working for Water Programme. https:// Government of South Africa (2011) South Africa Working for the Environment. Department of Environmental Affairs, Pretoria. Lieuw-Kie-Song, M (2009) 'The South African Expanded Public Works Programme (EPWP), 2004-2014' Presentation at the Conference on Employment Gaurantee Policies, New York, 22 June 2009. Marais, C and Wannenburgh AM (2008) Restoration of water resources (natural capital) through the clearing of invasive alien plants from riparian areas in South Africa Costs and water benefits. South African Journal of Botany 74 (3):526-537. National Treasury (2016) Estimates of National Expenditure. National Treasury, South Africa. Porras, I and Neves, B (2006) South African Working for Water project profile: Markets for Watershed Services - country profiles. IIED, London. Turpie, J, Marais, C and Blignaut, JN (2008) The working for water programme: evolution of a payments for ecosystem services mechanism that addresses both poverty and ecosystem service delivery in South Africa. Ecological Economics 65 (4):788-798. Stages of SLCP The programme was first piloted in 1999 in the three provinces of Sichuan, Shaanxi, and Guansu with 381,500 ha of sloping lands converted to forest lands (FEDRC and SFA, 2004 report). The pilot areas were expanded to more provinces in the following years. Stage I: Pilot Phase

(19992001) Stage II: Full implementation (2002-07) There were no new conversions and the payment rate was cut by half for the already converted lands. The payment rate in Phase II was 100 kg of grains/mu/year for 8 years for conversion of croplands to ecological forest lands in the Yellow River Basin, which was equivalent to US$260/ha/yr, plus tree seedlings. The rate was cut by half to be US$130/ha/yr (FEDRC and SFA, 2009 report). The other half of funds were invested in livelihood support activities for the households who converted their lands to non-farmland (Song et al., 2014) Stage III: Retreat phase (2008-14) The programme was expanded to up to 25 provinces gradually from 2002 forward. About 14.67 million ha of farmland had been converted to forestland (9 million ha) or grassland (5.67 million ha) during the period. It involved 32 million households and 124 million rural people (FEDRC and SFA, 2008 report). The payments were in grains during 2002-2004, and have been in cash since 2005. Stage IV: New round (2015-20) An additional 2.8 million ha of cropland will be converted to forestland or grassland during this period. The target areas will be i) poor areas; and ii) sloping crop lands with 15-25 degree of gradient in the water source areas or crop lands with more than

25 degree of gradient in non-water-source areas (FEDRC and SFA, 2016). Poverty alleviation was explicitly added to the Programmes objectives (Liu and Lan, 2015). Source: Jin et al, 2018: Chinas Eco compensation programme. Institutional setup Ministry of Finance Funding from central budget (US$69 billion between 2002-2012) National Development and Reform Commission (NDRC) State Forest Administration (SFA) Demand led: consolidation of household applications County Forestry Bureau Determines reforestation targets and allocates provincial

quotas 25 Provincial governments in 82% of PRC Councils Townships/ local governments Responsible for meeting targets, distributing payments, providing technical support and monitoring impact Voluntary applications to participate Households Direct ES beneficiaries Programme encourages the promotion of local deals with beneficiaries of ecosystem services 32 million households between 2002 and 2012

Source: Jin et al, 2018: Chinas Eco compensation programme. SLCP within the eco-compensation portfolio in Qinghai Province Total eco-compensation investments (Total 458 billion Yuan) 120 100 Billions of Yuan 80 60 40 20 0 2010 2011 Sloping Lands Conversion Programme 2012

2013 2014 Other eco-compensation programmes 2015 Programme (458 billion Yuan 2011-15) Percent Sloping Land Conversion Program 9% Ecological Forest Compensation 8% Natural Forest Protection Program 4% Protective Forests in the Three Norths 1% Wetland Eco-compensation 0% Subsidy and Reward Funds for Grassland Ecological Protection 21% Returning Grazing Land to Grassland

6% Public Transfer for Key Ecological Functional Zone 21% Ecological Environment Protection and Comprehensive Governance of Qinghai Lake Watershed 1% Ecological Rehabilitation in Sanjiangyuan Region 27% Comprehensive Governance of Ecological Rehabilitation of Qilian Mountain 1% Source: Jin et al, 2018: Chinas Eco compensation programme. Selected references

Barton, D, K, Benavides and M, Miranda (2012) Analysing spatial PES priorities in the Osa Peninsula using the property cadastre. In: PESILA-REDD: Payments for Ecosystem Services in Latin America in the context of REDD integrating methods for evaluating the enabling conditions and cost-effectiveness of PES (2011-2014). Armenia, Colombia. Barton, David N, Primmer, E, Ring, I, Adamowicz, V, Robalindo, J, Blumentrath, S and Rusch, G (2011) Empirical analysis of policymixes in biodiversity conservation spatially explicit policyscape approaches. In: 9th International Conference of the European Society for Ecological Economics, Istanbul, 14-17 June 2011. Belt and Road Portal, May 2017. The Belt and Road Ecological and Environmental Cooperation Plan. Belt and Road Portal: /zchj/qwfb /13392.htm . Braimoh, AK and Huang HQ (eds) (2014). Vulnerability of land systems in Asia. John Wiley & Sons, Ltd, Chichester. Duan, W, Lang, Z, Wen, Y (2015) The Effects of the Sloping Land Conversion Program on poverty alleviation in the Wuling Mountainous Area of China. Small-scale Forestry 14 (3):331350. FEDRC and SFA (various) A Report for Monitoring and Assessment of the Socio-economic Impacts of China's Key Forestry Programs. Beijing: China Forestry Publishing House. Individual reports in Chinese for years 2004, 2008, 2009, 2014, and 2016. He, J (2014) Governing forest restoration. Local case studies of sloping land conversion program in Southwest China . Forest Policy and Economics 46:30-38. Huang (2016) Big Floods in 1998. Jin, L and Wenjuan, Z (2010) Conference Paper 1: Eco-Compensation in the Environmental Policy Tool Kit. In: Zhang Q et al. (eds.) Payments for Ecological Services and Eco-Compensation: Practices and Innovations in the Peoples Republic of China. Asian Development Bank, Manila. Li, H, Yao, S, Yin, R, Liu, G (2015) Assessing the decadal impact of China's sloping land conversion program on household income under enrollment and earning differentiation. Forest Policy and Economics 61:95-103. Liu, Z and Jin, L (2015) The Sloping Land Conversion Program in China: Effect on the Livelihood Diversification of Rural Households. World Development 70:147-161. NDRC (2016) Developing Gross Ecosystem Product Accounting for Eco-Compensation (Interim Report). In: ADB TA-9040 (PRC). Project Group. National Development Reform Comission, Kunming.

SFA (2014) SFAs Task Force on Assessment of Socio-economic Impacts of Key Forestry Programmes: ten-year's Review on Assessment of the Socio-economic Impacts of National Key Forestry Programmes. Forestry Economics 1:10-21. Song, X, Peng, C, Zhou, G, Jiang, H and Wang, W (2014) Chinese Grain for Green Program led to highly increased soil organic carbon levels: a meta-analysis. Scientific reports 4:4460. UNEP (2016) Green is gold: the strategy and actions of China's Ecological Civilization. UNDP, Geneva. Wang, C and Maclaren, V (2012) Evaluation of economic and social impacts of the sloping land conversion program. A case study in Dunhua County, China. Forest Policy and Economics 14 (1):50-57. Wang, C, Pang, W and Hong, J (2017) Impact of a regional payment for ecosystem service program on the livelihoods of different rural households. Journal of Cleaner Production 164:1058-1067. Xu, Z, Bennett, M, Tao, R, Xu, J (2004) Chinas Sloping Land Conversion Program four years on: current situation, pending issues. Special Issue: Forestry in China Policy, Consumption and Production in Forestrys Newest Superpower. The International Forestry Review 6 (3-4):317-326. Yin, R, Liu, C, Zhao, Yao, S and Liu, H (2014) The implementation and impacts of China's largest payment for ecosystem services program as revealed by longitudinal household data. Land Use Policy 40:45-55. Yin, R, Zhao, M and Yao, S (2013) Designing and implementing payments for ecosystem services programs: what lessons can be learned from China's experience of restoring degraded cropland? Forest Policy and Economics 35:66-72. Zhang, Q, Bennett, M. T., Kannan, K and Jin, L (2009) 'Payments for ecological services and eco-compensation: Practices and innovations in the Peoples Republic of China'. Paper presented at the International Conference on Payments for Ecological Services, Mandaluyong City, 67 September 2009. PES Policy context Source: Porras et al (2013). Learning from 20 years of Payments for Ecosystem Services in Costa Rica. Tools and systems for implementation Prohibition Economy Institutions and tools

Ecosystem services as inputs to production or for final users Rewards Regulation: Prohibition of deforest reduces opportunity cost of forest/s, but places protection costs on the landholder. Reward: Cash payment to landowner. Annual conditional payments per hectare for forest protection and reforestation helps compensate for cost of protection. Rules on rent capture: PES Law creates rules and the system to extract rents from users (water users) and polluters (through fuel tax), and international sources. Ecosystems Fund: Independently managed, it collects revenues from multiple sources and provides financial sustainability National programme

manager: legally appointed, manages and monitors systems Local facilitators: officially registered, they provide technical and logistic support to landowners (e.g. management plans, paperwork) and first stop for monitoring. Source: Prepared by Ina Porras, IIED PES in Costa Rica Module 2 Payments (government) International Wholesale intermediary FONAFIFO Local facilitators Landholders (ecosystem service providers) Ecosystem services

Demand Intermediation Supply National Assigns government budget Purchases ES credits Loans, grants, etc Purchases ES rights from landholders Sells ES rights to users Administers the programme Monitors Provide information Technical support First-level monitoring Charge commission (12-18% of PES contract) Private landholders Receive cash US$/ha/year Contracts 5, 10, 16 years Source: Porras et al (2013). Learning from CR experience Programme is continually experimenting with different financing strategies

Sources of finance for PES in Costa Rica (USD million) CAF-forest Ecomarkets subsidy (1) Gov budget WB loan KfW grant Previous forest subsidy 1995 1.36 provides policy 1996 1.47 background. 1997 1.63 They are integrated with 1998 2.16 1.15 PES from 2005 onwards 1999 1.45 2.20 2000 1.30 1.99 2001 1.23 2.31 0.65 2002

1.20 2.95 2.84 Direct negotiation with 2003 0.96 1.34 2.84 1.65 HEP provides basis for 2004 1.06 1.48 3.46 0.79 water tax revamp (25% 2005 0.21 1.56 3.54 1.04 earmarked for PES). Large 2006 6.21 3.12 0.94 utility (CNFL) continues 2007 7.73 0.83 providing extra funding for 2008

8.29 0.64 works in their watersheds. 2009 9.34 4.21 0.30 2010 17.74 6.36 0.00 2011 16.85 9.67 0.26 2012 19.93 4.94 2013 19.99 11.18 2014 20.44 Government funding are the 2015 26.27 main source of funds. 2016 24.74 OTC sales (certificates) show 2017 28.85

the potential for internal markets but revenues Total 14.02 221.36 52.80 6.45 collected still low. 5% 74% 18% 2% HydroCNFL 0.07 0.08 0.15 0.15 0.20 0.24 0.26 0.23 0.29 0.15 0.60 0.11 0.16 0.14 0.32 0.03 0.02

3.19 1% Beverage company FI&F 0.02 0.02 0.00 0.02 0.02 0.07 0.0% Hydrovarious deals 0.01 0.01 0.02 0.00 0.02 0.02 0.06 0.03 0.05 0.02 0.02 0.26

0.1% Total Total (adjusted, (unadjuste OTC ES 2017 d by certificates prices) inflation) 1.4 8.3 1.5 7.5 1.6 7.3 3.3 13.5 3.6 13.4 3.3 10.9 4.3 12.7 7.1 19.4 7.0 17.4 7.0 15.5 6.6 12.9

10.6 18.4 8.9 14.2 0.06 9.2 13.0 0.16 14.2 18.6 0.08 24.3 29.9 0.01 27.4 32.1 0.00 25.0 28.0 0.24 31.3 33.4 0.21 20.6 21.0 0.20 26.6 26.8 0.29 24.8 25.2 0.004

28.9 28.9 1.25 298.1 428.2 0.4% 100% Source: Porras and Chacn-Cascante (2018) Where now? (Soft) earmarking funds from fuel and water tariffs that internalise the environmental cost Funds target specific areas (e.g. critical areas for water production/protection) Struggle to get resources back from main budget pot. Uncertain space in Kyoto and voluntary markets FONAFIFO has a portfolio of investment ready for specific or over-thecounter carbon sales but most sales are still within the country Internally supporting strengthening of land tenure and timber markets Creation of a Biodiversity Conservation Fund Longer-term (or guaranteed renewal) protection contracts Looking for strategic investors Selected references Arriagada, RA, Ferraro, P, Silis, E, Pattanayak, S and Cordero, S (2010) Do payments for environmental services reduce deforestation? A farm level evaluation from Costa Rica. Land Economics 88 (2):382399. Barton, DN, Benavides, K, Chacn-Cascante, A, Le Coq, JF, Quiros, MM, Porras, I, Primmer, E and Ring, I (2017) Payments for Ecosystem Services as a Policy Mix: Demonstrating the institutional analysis and development framework on conservation policy instruments. Environmental Policy and Governance 27 (5):404-421. Chacn-Cascante, A, Ibrahim, M, De Clerk, F, Vignola, R and Robalino, J (2012) Costa Rica: National level assessment of the role of economic instruments in the conservation policymix. CATIE / NINA. Lansing, DM (2017) Understanding Smallholder Participation in Payments for Ecosystem Services: the Case of Costa Rica. Human Ecology

45 (1):77-87. Porras, I, Alterio, H, Vardon, M, Pagiola, S and Bastad, K (2016) Showing the worth: NCA and the design of payments for ecosystem services.The World Bank, Washington D.C. Porras, I, Barton, DN, Miranda, M and Chacn-Cascante, A (2013) Learning from 20 years of Payments for Ecosystem Services in Costa Rica. International Institute for Environment and Development, London. Porras, I, Miranda, M, Barton, DN and Chacn-Cascante, A (2012) De Rio a Rio+: Lecciones de 20 aos de experiencia en servicios ambientales en Costa Rica. International Institute for Environment and Development, London. Robalino, J, Pfaff, A and Villalobos, L (2011) Assessing the impact of institutional design of payments for environmental services: the Costa Rican experience. Ecosystem services from Agriculture and Agroforestry: Measurement and Payments, Rapidel, B et al. (ed.). Earthscan Press. Robalino, J, Pffaf, A, Snchez-Azofeifa, A, Alpzar, F, Len, C and Rodrguez. CM (2008) Deforestation impacts of environmental services payments. Costa Ricas PSA Program 2000-2005. In: Environment for Development Discussion Paper Series, Washington D.C. Snchez-Azofeifa, A, Pfaff, A, Robalino, J and Boomhower, J (2007) Costa Ricas Payment for Environmental Services Program: intention, implementation, and impact. Conservation Biology 21 (5):1165-1173. WAVES (2016) Costa Rica: WAVES Country Report 2016. The World Bank, Washington D.C. World Bank, CIAT, and CATIE (2015) Climate-Smart agriculture in Costa Rica. CSA Country Profiles for Latin America Series. The World Bank Group, Washington D.C. Institutional set up Financing Intermediation Government Federal Rights Law (water users), Federal budget Local matching funds: Municipalities, water users, companies,

conservation NGOs Trust Fund (FFM) Priority criteria Reaching providers of ES Contracts (5 years) Activities and eligible areas e.g. Avoided deforestation, conservation, afforestation, agroforestry M&E Approval of cash payments Source: Ina Porras (IIED) Selected references Aemi, P, Neves, B and Jost, S (2013) Forest Conservation in Mexico: Ten years of Payments for Ecosystem Services, Case studies on Remuneration of Positive Externalities (RPE)/ Payments for Environmental Services (PES). Food and Agriculture Organisation, Rome. Alatorre-Troncoso, A, Aronson, G, Radeloff, V, Ramirez-Reyes, C, Shapiro, E, Sims, K and YaezPagans, P (2014) Mexicos national payments for ecosystem services programme: in the wrong

place at the right time: Gap analysis and assessment of conservation success. Imperial College, London. Alix-Garcia, J.M., Sims, KRE and Yaez-Pagansa, P (2013) Only one tree from each seed? environmental effectiveness and poverty alleviation in programs of Payments for Ecosystem Services. RFF Academic Seminar Resources for the Future, Washington DC. Alix-Garcia, J.M., Aronson, G, Radeloff, V, Ramirez-Reyes, C, Shapiro, E, Sims, K and YaezPagans, P (2014) Environmental and socioeconomic impacts of Mexico's Payments for Ecosystem Services Program, Grantee Final Report. International Initiative for Impact Evaluation (3ie), New Delhi. Corbera, E, Gonzles, C and Brown, K (2009) Institutional dimensions of Payments for Ecosystem Services: An analysis of Mexico's carbon forestry programme. Ecological Economics 68, 743-761. Muoz-Pia, C, Guevara, A, Torres, JM and Braa Varela, J (2008) Paying for the hydrological services of Mexico's forests: analysis, negotiations and results. Ecological Economics 65, 725-736. Salafsky, N (2011) Integrating development with conservation: A means to a conservation end, or a mean end to conservation? Biological Conservation 144, 973-978. Hilsa fish: Anadromous fish (marine/freshwater) Bangladesh accounts for about 60% of total hilsa catch in the Bay of Bengal 12% of total fish catch in Bangladesh 60% of marine capture fisheries 1% of GDP Employs up to 2.5 mill people along the supply chain (processing, marketing, transporting)

Programme addresses stagnation of hilsa fisheries from overfishing Provides compensation for lost earnings during temporary fishing bans In-kind payments (rice) Policy portfolio - Bangladesh Hilsa sanctuaries Jatka conservation week: todays jatka, tomorrows hilsa TV, Radio, Print, boat rallies, meetings, workshops Jatka: Nov May Brood: 5 days before and after the full moon in the month of Ashvin (October) 40kg rice/hh/month AIGAs (e.g. sewing machines) Some cash Source: Ina Porras (IIED) Ministry of Fisheries and Livestock Ministry of Disaster Management and Relief

Department of Fisheries Institutions: how does the Jatka PES in Bangladesh work? Department of Disaster Management District Commissioner Upazila Chief Officer Upazila Relief and Rehabilitation Officer Upazila Food Controller Chairman of Union Parishad Local Food Storage Fishers Source: Ina Porras (IIED) The hilsa fish value chain Prices determined by auctions Prices fixed by buyers

Stage 1 Stage 3 Stage 2 Primary market: extraction Retail market (national and export) Secondary market: trading wholesale Fishing family Bepari Aratdars Value proposition: Freshly caught hilsa fish, few storage facilities, prices fixed by buyer Value proposition: Manages loans from aratdars and ensures hilsa fish goes to aratdar in Landing Center

Value proposition: Wholesale hilsa fish throughout the year, sold through auctions Inputs. River ecosystem inputs, affected by fishing ban several times/year Financial inputs Loans from Dadondar, Mohajon or Araddar (lends money and usually keep the catch), to a lesser scale from associations, NGOSs, or banks (minor role as fishermen do not have access) ; In-kind PES as food compensation during ban. Technical inputs (usually located at Landing Center): Boat, fitting (nets, engine, oil, ice), labour (family, hired) Repairs and maintenance Safety inputs: Radio, communications, weather information, protection from navy/police; Insurance (not currently available) Local retailers Value proposition: Sale directly to restaurants and/ or final consumers Inputs Landing center facilities (access to or lack of - to physical location, water,

electricity, storage, quick transport Financial inputs most aratdars have their own funding, with occasional loans at 12-17%. Technical inputs include ice, storage, space at landing center; Transport providers: Truck, rickshaws, boats bringing buyers, pier providers Exporter/ paikar Value proposition: Specialised retailer for high quality product abroad Inputs High quality , first grade hilsa fish, all year round especially for festivals. Manages direct contacts with suppliers like beparis and aratdars and need top quality packaging and transport to ensure freshness and quality.for final customers. Source: Porras et al 2017 Selected references

Ahmed, AU, Quisumbing, AR, Nasreen, M, Hoddinott, JF and Bryan, E (2009) Comparing food and cash transfers to the ultra poor in Bangladesh. Research Monograph 163. International Food Policy Research Institute, Washington, DC. DoF (2012) National Fisheries Week 2012. Department of Fisheries, Government of Bangladesh, Dhaka. Engel, S (2015) The Devil in the Detail: A practical guide on designing payments for environmental services. International Review of Environmental and Resource Economics 9 (1-2):131-177. Haldar, GC and Ali, L (2014) The cost of compensation: Transaction and administration costs of hilsa fish management in Bangladesh. IIED Working Paper. International Institute for Environment and Development, London. Islam, Md M, Mohammed, E and Ali, L (2016) Economic incentives for sustainable hilsa fishing in Bangladesh: An analysis of the legal and institutional framework. Marine Policy 68:8-22. Islam, SB and Habib, Md M (2013) Suppy chain management in fishing industry: a case study. International Journal of Supply Chain Management 2 (2):40-50. Matin, I (2000) Targeted development programmes for the extreme poor : experiences from BRAC experiments. Bangladesh Rural Advancement Committee, Bangladesh.

Matin, I and Hulme, D (2003) Programs for the poorest: Learning from the IGVGD Program in Bangladesh. World Development 31 (3):647-665. Mohammed, E (2015) Balancing carrots and sticks for fisheries management: Lessons from Bangladesh. In: 52nd Australian Marine Science Association (AMSA) Annual Conference. Geelong, 5-9 July 2015. Mome, M, Personal communication, Bangladesh. September 2014. Porras, I, Mohammed, E, Ali, L, Ali, Md S and Hossain, Md B (2017) Power, profits and payments for ecosystem services in Hilsa fisheries in Bangladesh: A value chain analysis. Marine Policy 84:60-68. Porras, I, Mohammed, E, Ali, L, Ali, Md S and Hossain, Md B (2017) Leave no one behind: Power and profits in hilsa fishery in Bangladesh: a value chain analysis. International Institute for Environment and Development, London. Rahman, MA (2012) Hilsa fishery management in Bangladesh. In: Status of Fishery and Potential for Aquaculture Regional Workshop, Dhaka, 6-17 September 2012. Uraguchi, ZB (2011) Social protection for redistributive justice: socio-economic and political drivers of vulnerability to food insecurity in

Bangladesh and Ethiopia. In: International Conference on Social Protection for Social Justice, Brighton, 13-15 April 2011. Wunder, S (2015) Revisiting the concept of payments for environmental services. Ecological Economics 117:234-243. Payment types Cash Social development BF Familia Short-term economic benefit paid to women in household BF Social Investments in community infrastructure 44% 26% Empowerment

BF Associaao Supporting local associations for community empowerment 4% Sustainable income BF Renda Helps kickstart sustainable businesses 26% Percent allocations are negotiated with the communities, and can change through time Source: Porras and Asquith (2018) BF theory of change Based on four points: Intermediate results that should be achieved by the providers in terms of changes in practices. Direct results anticipated from rewards foreseen in the scheme. Complementary actions to be realised by the leader of the scheme or partners.

Complementary actions outside the governability of the scheme. FAS (2017) provides clear details on the specific components of this theory of change. Clear gender agenda Includes objectives, resources, indicators and monitoring. The programme has defined clear strategies for action, which include: Control of cash resources by women. Incentive for participation of women in participative planning workshops, leadership meetings and other processes of participatory management. Incentivising leadership of women in projects that generate income and enterprise. Educational actions on the rights of women. Support for the creation and strengthening of clubs and associations of women. PES design as a business proposition See next page Source: See Module 2 Bolsa Floresta Most important investments for the communities, as perceived by communities Others; 2.60% Communications; 9.19% Water supply; 25.57%

Electricity and power; 12.59% Community infrastructure; 12.69% Boats; 17.88% Schools, internet; 19.48% Annual deforestation rate (km2) Annual deforestation rate in priority areas benefited by FAS (km2) 25 20 15 10 5 0 Key lessons Based on the FAS experience implementing the BFP, there are five essential elements to build an environment of trust for PES schemes:

- Effective spaces for dialogue - Valuing positive leadership - Aligning expectations - Shared agenda with short-term impacts (to show effectiveness), and - Presence, proximity, availability and connections. Selected references Agustsson, K, Garibjana, A, Rojas, E and Vatn, A (2014) An assessment of the Forest Allowance Programme in the Juma Sustainable Development Reserve in Brazil. International Forestry Review 16, 87-102. Brner, J, Wunder, S, Reimer, F, Bakkegaard, RK, Viana, V, Tezza, J, Pinto, T, Lima, L and Marostica, S (2013) Promoting forest stewardship in the Bolsa Floresta Programme: local livelihood strategies and preliminary impacts. CIFOR, Rio de Janeiro. FAS (2016) Relatrio de Atividades 2016. FAS (2017) Designing innovative schemes for payments for environmental services. InterAmerican Development Bank, Washington DC. Tersitsch, C (2017) The impact of public policies on deforestation in the Brazilian Amazon. Universitts-und Landesbibliothek, Bonn. Viana, V (2008) Bolsa Floresta (Forest Conservation Allowance): an innovative mechanism to promote health in traditional communities in the Amazon. Estudos Avanados 22. Viana, V, Tezza, J, Salviati, V, Ribenboim, G, Megid, T and Santos, C (2013) Programa Bolsa Floresta no estado do Amazonas. In: Pagiola, S, Carrascosa von Glehn, H and Taffarello, D. (eds). Experincias de Pagamentos por Servios Ambientais no Brasil. Secretaria de Meio Ambiente, So Paulo. Watershared: Reciprocal Agreements for Watershed Conservation Water Rewards: Selection criteria is

a simple mix of hydrological rules of thumb, conservation priorities and downstream requirements, with light-touch monitoring. Wa te Conflict: Solutions reached by negotiation; Rewards are social recognitions of mutually beneficial deals; Development projects r Institutions and tools: Water utilities Municipal governments NGO (Natura) Source: See Module 2 Watershared, BOLIVIA Checklist for targeting Watershed is in or close to an important conservation area (such as a protected area, or an important bird area, etc). A hydrological service is being provided. Watersheds should be small and simple.

Theory of change: The smaller the watershed, the more likely that upstream actions can be directly linked to hydrological benefits downstream, and land managers and water users can be more clearly identified. Furthermore, the smaller the watershed, the more likely that actions upstream actually do affect downstream users. Selected references Asquith, N (2016) Watershared: Adaptation, mitigation, watershed protection and economic development in Latin America, Inside Stories on climate compatible development. Climate & Development Knowledge Network (CDKN). Asquith, N and Vargas, MT (2007) Fair deals for watershed services in Bolivia, Natural Resource Issues International Institute for Environment and Development, London Asquith, N, Vargas, MT and Wunder, S (2008) Selling two environmental services: In-kind payments for bird habitat and watershed protection in Los Negros. Bolivia Ecological Economics 65, 675-684. Asquith, NM. (2011) Reciprocal Agreements for Water: An Environmental Management Revolution in the Santa Cruz Valleys. Harvard Review of Latin America 3: 58-60. Asquith, NM (2013) Investing in Latin Americas Water Factories: Incentives and Institutions for Climate Compatible Development. Harvard Review of Latin America 1: 21-4. Botazzi, P, Jones, JPG and Crespo, D (in review) Payment for ecosystem self-service: exploring farmers motivation to participate in a conservation incentive scheme in the Bolivian Andes Ecological Economics. Le Tellier, V, Carrasco, A and Asquith, N (2009) Attempts to determine the effects of forest cover on stream flow by direct hydrological measurements in Los Negros, Bolivia. Forest Ecology and Management 258, 1881-1888. McKenzie, RB and Dwight, RL (2017) Microeconomics for MBAs: The economic way of thinking for managers. Cambridge University Press, Cambridge. Smallholder carbon offset chain

Source: See Module 2 Carbon offsets Links to wider agenda: SDGs SDG 17: Means of implementation through a certified ethical carbon market in partnership with local partners, including governments SDG1: Reduce poverty through (1) Short-term improvement in food security and cash payments from PES and (2) long-term investment in resilience to climate change CO2 SDG 7: Sustainable energy SDG 13: Reduce climate change threat through offsetting unavoidable carbon SDG 2: Food security emissions through promotion of

agroforestry systems through timber from managed forests Project developer Communities get paid to reduce carbon emissions Communities SDG 15: Protect local ecosystems and biodiversity by using native species and Private sector buys carbon offsets SDG 8: Growth and employment through creation of multiple jobs along carbon value chain, especially for youth and women (monitoring, technical support, nurseries, etc) CO2

CSR Private sector promoting conservation and enhancement of existing habitats Source: Porras 2015 Carbon offsets: energy and agriculture Source: IIED/HIVOS Carbon and agriculture Ability to demonstrate impact: monitoring Voluntary carbon offset buyers Farmers Project developers Independent standards Standardisation of carbon as over-thecounter commodity. Establish criteria to provide credibility. Who are they?

Heterogeneous. Seek added value to agriculture. Carbon-generating activities must combine with existing farming activities. Commitment: long-term to access project Absorb risk of price volatility. Carbon as single activity or part of portfolio. Must comply with requirements. Manager and seller. Link to M&E Useful feedback on the quality of their activities but may divert from other activities. Helps understand when they may be at risk of default and why. Legitimacy to access Trust that is reflected

international markets in market share. but need to keep transaction costs down. Buyers Offsets as compliance or CSR. Heterogeneous and not grouped. Individuals or companies. Respond to shareholder and public pressure. Trust re. legitimacy of transaction is reflected in prices and repeat purchases. PES in the Hindu Kush Himalayas No one-size fits all, national programme (except China). But there are emerging local deals: - Markhor (Siberian ibex) hunting in Pakistan, where 80 per cent of the total hunting revenues go back to local communities - incentive to communities for increased carbon stock through REDD+ pilots in Nepal - sharing of hydropower revenue with local government in Nepal, where 10 per cent of the hydropower revenue is ploughed back into local government

- municipal support to local communities living in the upstream water source at Palampur city of the Himanchal state in India - compensation scheme for ecological restoration in China, where the government of China provides cash eco-compensation to local communities based on per unit of land for wetland restoration. The structure of watershed incentives in the Himalayas Source: Patterson et al. (2017) Basic steps of an IED process: the Himalayas experience Source: Patterson et al., (2017) Selected references Bhatta, L, Khadgi, A, Rai, R, Tamang, B, Timalsina, K and Wahid, S (2017) Designing community-based payment scheme for ecosystem services: a case from Koshi Hills. Environment, Development and Sustainability, Nepal. Bhatta, L and Kotru, R (2012) Paper 10: Learning perspectives and analytical framework for framing PES in Nepal. In: Acharya, K et al. (eds). Leveraging and landscapes; conservation beyond boundaries. Nepal Foresters Association, Kathmandu. Bhatta, L, Oort, BHv, Rucevska, I and Baral, H (2014) Payment for ecosystem services: possible instrument for managing ecosystem services in Nepal. International Journal of Biodiversity Science, Ecosystem Services & Management 10, 289-299

ICIMOD (2010) Climate change impact and vulnerability in the Eastern Himalayas synthesis report. International Centre for Integrated Mountain Development, Kathmandu. Jodha, NS (2005) Adaptation strategies against growing environmental and social vulnerabilities in mountain areas. Himalayan Journal of Science 3, 33-42. Karki, M, Sharma, S, Mahat TJ, Tuladhar, A and Aksha, S (2012) Sustainable mountain development in the Hindu Kush Himalaya: From Rio 1992 to Rio 2012 and beyond. ICIMOD, Katmandu. Liu, Z and Lan, J (2015) The Sloping Land Conversion Program in China: Effect on the Livelihood Diversification of Rural Households. World Development 70, 147-161. MEA (2005) Ecosystems and human well-being: wetlands and water. Synthesis. World Resource Institute, Washington DC. Patterson, T, Bhatta, L.D., Alfthan, B, Agrawal, NK, Basnet, D, Sharma, E and van Oort, B (2017) Incentives for Ecosystem Services (IES) in the Himalayas: a cookbook for emerging IES practitioners in the region. ICIMOD, CICERO, GRED, Arendal. Porras, I, Barton, DN, Miranda, M and Chacn-Cascante, A (2013) Learning from 20 years of Payments for Ecosystem Services in Costa Rica.

International Institute for Environment and Development, London. Sandhu, H and Sandhu, S (2015) Poverty, development, and Himalayan ecosystems. Ambio 44, 297-307. Singh, S (2010) Chapter 11: Payments for ecosystem services (PES) in India from the bottom-up. CEECED Handbook: Ecological Economics from the Bottom-Up. CEECEC, pp. 226-234. WMD (2015) Integrating PES & REDD+ in Bhutan Project, PES Field Documentation Report. Department of Forests and Park Services, Thimphu. WMD (2016) Draft approaches to payment for environmental services (PES), including REDD+, and its relevance for Bhutan. Department of Forests and Park Services, Thimphu. Zhang, Q, Bennett, MT, Kannan, K and Jin, L (2009) Payments for ecological services and eco-compensation: Practices and innovations in the Peoples Republic of China. In: Proceedings from the International Conference on Payments for Ecological Services, Mandaluyong City, 6-7 September 2009. This work represents the reflections of a wide range of practitioners, researchers and policy makers involved in the daily implementation of conditional transfers and payments for ecosystem services programmes. We would like to thank the ESPA programme for providing the funding to conduct this review, as well as the space to access the very latest scientific advances on ecosystems and poverty alleviation in developing

countries. We would like to especially thank Paul Steele, Bhaskar Vira, Esteve Corbera, Virgilio Viana, Mahesh Poudyal, Kate Schreckenberg and Julia Jones for their insightful comments and feedback along various stages of this work. We would also like to specially thank Zaiza Khan and Cinzia Cimmino for their support in editing this document. All errors and omission remain the responsibility of the authors. Ina Porras and Nigel Asquith, 2018 For more information and materials visit: Notes by slide 2 This guidance focuses on the use of conditional transfers (CTs) such as PES in the context of ecosystems and poverty alleviation. CTs are a type of economic incentive that often works alongside regulatory instruments such as standards and prohibitions. Incentive-based policies provide inducements monetary and otherwise to encourage good behaviour (ie investments in watershed protection) or discourage bad practices (ie pollution or forest degradation). In this module we discuss some of the main elements of designing CTs for ecosystems and poverty alleviation. Modules 2 and 3 bring in-depth lessons from practical experiences. How to use this handbook: The handbook is organised into four modules, accompanied by downloadable PowerPoint presentations and links to other downloadable materials. We start with the observation that PES is not a stand-alone concept that was recently developed within the conservation movement. Rather, PES is a form of conditional transfer (CT) with a strong environmental component (Ma et al., 2017; Rodrguez et al., 2011) that in practice often operates alongside other policy instruments (Barton et al., 2017b). We therefore base many of our lessons on the extensive global experiences in conditional transfers for social protection, and in particular the large- scale public works programmes that have already had important environmental impacts (Devereux, 2009; Kakwani et al., 2005; Koohi-Kamali, 2010; McCord, 2013; Uraguchi, 2011). We build on previous publications and guides (see Table 2) with new research findings, such as those from ESPA researchers, and add practical knowledge of practitioners and researchers on key enabling conditions for success, brought together at several recent international workshops in Cambridge, UK (Sept 2016), Kunming-PRC (November 2016) and Chongqing, PRC (December 2017). 3 Designed carefully, conditional incentives can contribute to the wellbeing of people, especially poor and vulnerable groups. We look at two types of schemes to evaluate how CT and PES programmes have managed to reach scale, and to assess if lessons from CTs for social protection can help design programmes for the maintenance of ecosystem services:

Direct environmental interventions using social conditional transfers, such as the South African Environmental Public Works Programme. Although focused on social outcomes, such as jobs and poverty alleviation, some programmes have had large-scale environmental impacts. Programmes that seek to change behaviour towards positive environmental actions, using different conditional incentive packages that include mixes of cash and in-kind rewards. Some of these are top-down national programmes, such as the China Sloping Lands Conversion within the Eco Compensation Programme, or bottom-up initiatives such as water deals in South America and carbon offsets for mangrove protection in Kenya. We look at how these programmes manage to achieve scales, either by `scaling up by designing and implementing national programmes, such as India, China and Costa Rica, or `scaling out by replicating small-scale programmes for watershed protection in South America and Nepal or community deals in voluntary carbon markets 4 SEE MODULE 2 FOR DETAILS. We looked at a wide variety of programmes that: Managed to go beyond project to programme Managed to achieve scale Are promising examples of incentives towards stewardship for good ecosystem management. We also looked at two types of conditional transfers: 1) Conditional transfers supporting direct interventions through job schemes (e.g. gully control) which ARE NOT PES, but provide good examples of how to engage with landless, poor/vulnerable people. These programmes also have environmental works in their portfolio and can benefit from experiences from PES elsewhere. And 2) Conditional transfers supporting positive changes in behaviour, more in line with PES idea. Some are national programmes (scaled up) or replication of local-based initiatives (scale out). 5 9 India. Example of Terracing in Hilly areas India. The worlds largest works-based social protection scheme, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has covered all of India since 2006 and aims at enhancing livelihood security in rural areas by providing at least 100 days of guaranteed wage employment in a financial year to every household whose adult members volunteer to do unskilled manual work (Kaur et al., 2017). It also provides improved productive assets and livelihood resources in rural areas, proactively ensuring social inclusion and strengthening Panchayat Raj (local government) institutions. The types of projects included are public works linked to natural resource management (mostly watershed-related projects), improving conditions of assets for vulnerable sections of society, and building common and rural infrastructure. MGNREGA provides a key example for payments for ecosystem services (PES) to learn about successful combinations of social and environmental objectives to achieve political support, resources and scale. At the same time, PES experiences elsewhere can provide MGNREGA with ideas on how to improve long-term environmental impacts on the ground. Source: The key characteristics of this programme are:

employment for all rural households (one member per household) who are willing to work (100 days/year) free registration, with a job guaranteed within 15 days of application fixed minimum wage, with weekly payments at least a third of employees must be women. Implementing this programme in a country with over 833 million people living in rural areas requires a massive effort. The Ministry of Rural Development (MoRD) is responsible for ensuring the adequate and timely delivery of resources and funds to the states and for reviewing, monitoring and evaluating the use of these resources. It has also developed a management information system that provides real-time information on the implementation on of MGNREGA at each level. The programme has been implemented in stages since its introduction in 2006. It was introduced initially in 200 districts, extended to 130 more districts in 20072008 and now covers all rural districts (Government of India, 2014). Actual implementation is carried out by local governments. According to MGNREGA Division (2017) some of the main limitations have been linked to unrealistic and ineffective planning at the local levels. Impact studies also tend to be local, with little information on impact assessment at national level. Some of the main local results are described below. 12 16 South Africa. Inclusive green growth in South Africa has been primarily pushed forward by the environmental authorities through a series of joint environmental and social protection job schemes. The social protection programme seeks to alleviate poverty through provision of temporary work and skills development through learnerships, which are deployed to projects to improve their local environments. Projects include, for example, clearing of alien vegetation, rehabilitation of wetlands, support of fire protection associations, waste management programmes, coastal management and eco-tourism. Starting with a water focus, it now mobilises about US$285 per year and is managed under the Expanded Public Works Programme (EPWP). Targeting: The focus of the EPs is to optimise employment opportunities, broadbased black economic empowerment and poverty reduction. When prioritising investments, the challenge is finding a balance between areas that have high biodiversity conservation value and those that have high levels of poverty (Department of Environmental Affairs, 2016b). Environmental targeting: DEA recognises the importance of developing optimisation strategies for each of their programmes, for example through the development of spatial frameworks that will evaluate future investments through the Land User Incentive (LUI) programme, enabled by local contractors (see Table 1). Social targeting: projects must comply with a minimum social criteria: individuals already employed by the land user for more than 100 days of the year are not permitted to become project participants 90 per cent of temporary job days must be reserved for local people 55 per cent of temporary job days must be reserved for women, 55 per cent for youth between the ages of 16 and 35 years and 2 per cent for people with disabilities training person days must be equal to 10 per cent of total person days 50 per cent of small, medium and micro enterprises used must have at least a 70 per cent equity stake owned by historically disadvantaged individuals. 17

China: Lessons The Peoples Republic of China (PRC) has been experimenting for many years now on eco-compensations programmes, as ways to redress missing market signals for ecosystem services (Zhang et al., 2009). This section provides a quick insight into one of its larger programmes: the Sloping Land Conversion Programme. The Sloping Land Conversion Program (SLCP, also known as Grain for Green) is the largest ecological restoration project in PRC and PES initiative in the developing world, with a total current investment of more than US$69 billion (Liu and Lan, 2015). It was launched together with the Natural Forest Protection Program (NFPP) as a response to the widespread flood in the PRC in 1998 and has undergone several development stages. It is a key component of the Eco-Compensation Programme, which is a compendium of environmental policies and instruments, including environmental fiscal reform. The programme uses a series of conditional transfers alongside wider policies promoting off-farm income to encourage ecological restoration and contribute towards PRCs vision of EcoCivilization. Many useful lessons can be drawn from the SLCP experience, all pointing to the crucial, inextricable link between the institutions, incentives and ultimate success of a programme. Decentralisation under the SLCP focused disproportionately on distributing responsibilities rather than on fostering a local sense of ownership, causing the programme to expand too fast in its phase I and first half of phase II (19992005) at the cost of its budget, its democratic character and effective targeting. Recognising the trade-offs inherent between scale and targeting, the critical importance of the latter should not be understated, as revealed by the SLCPs unintended, negative impacts on the environment (water shortages and decreased biodiversity) and local livelihoods (lower incomes, higher inequality and disempowering of nonparticipants). Therefore, implementation, including compensation, should be sensitive to local heterogeneity and be guided by a management strategy that is flexible, inclusive and responsive to feedback (Yin et al., 2014a). Beyond implementation, scaling up a programme of such magnitude requires a strong focus on the initial phases of planning, demonstration and piloting, as well as on strong safeguards that will maintain the programmes incentive structures long after its implementation and thus guarantee its long-term success (Yin et al., 2014b; Chen et al., 2015). Fortunately, some of the lessons learned from the previous phases of the programme have been used to re-shape the programme. For example, in its latest phase IV, the programme is targeting only those who are poor, willing to convert, and whose crop lands are in a steep slope (25 o in one case, and 1525 o in another). Adaptive management is vital for the programmes success, yet absence of independent monitoring and evaluation might undermine its adaptive capacity in the long run. 18 The Sloping Land Conversion Program (SLCP, also known as Grain for Green) is the largest ecological restoration project in PRC and PES initiative in the developing world, with a total current investment of more than US$69 billion (Liu and Lan, 2015). It was launched together with the Natural Forest Protection Program (NFPP) as a response to the widespread flood in the PRC in 1998, and has undergo four important development stages (see Figure 3). It is a key component of the Eco-Compensation Programme, which is a compendium of environmental policies and instruments, including environmental fiscal reform. The programme uses a series of conditional transfers alongside wider policies promoting off-farm income to encourage ecological restoration and contribute towards PRCs vision of EcoCivilization. 20 FROM NDRC (2016) PRESENTATION DURING KUNMING CONFERENCE The innovative character of the SLCP lies not only in its scale targeting 25 provinces that cover about 82% of PRCs total land area but also in its institutional design. Its hybrid

form of governance combines a top-down approach with decentralization at the provincial and local government levels and voluntary participation at the household level. In practice, it works by compensating farmers for the provision and improvement of ecosystem services that they facilitate by retiring part of their land from cultivation and restoring it to either forest or grassland. In that way, it is an eco-compensation project that is distinctively different from the countrys traditional command-and-control instruments of environmental governance (Jin and Wenjuan, 2010). The program is planned by the National Development and Reform Commission (NDRC) based on bottom-up applications of households who want to join the programme, and it is implemented by the State Forestry Administration (SFA), with its finances managed by the Ministry of Finance. After deciding on country- and provincial-level reforestation tasks, the SFA distributes the retirement quotas to provincial governments who then allocate them to the counties, townships and, finally, to the participating households. By signing liability agreements, the local governments are held responsible for meeting the targets set by the SFA. Accordingly, their responsibilities include allocating the quotas, targeting the enrolled areas, determining the participants, distributing payments, providing technical support and monitoring the programs achievements see Figure 5. 21 Source: PORRAS, I. 2008. Payments for Environmental Services in Costa Rica. Ecosystem services and human well-being: Interrogating the evidence. NERC-ESRC Transdisciplinary Seminar Series Edinburgh, June 09th 2008. The basis of PSA: 1) Financial sustainability by providing the revenues from fuel tax, even if the pledged amount has changed throughout the years. Also, by allowing the managing institutions to capture payments from direct users (make international sales, deals with local users, etc) 2) Creation of the legal framework that recognises the principle 3) Institutional framework to administer the programme, allows for the financial and technical groups to work together. The managing institution, FONAFIFO, is a public organisation managed as a private one, which gives enough flexibility to work. 4) Political support from the highest to the lowest levels the Programme has survived several changes in administration and political parties 5) Participation of civil society has been key at all stages, and provides important feedback to the programme 6) Transparency and credibility from monitoring, administration, forest regents, audits, GIS, etc. 22 PES emerged in 1995 from the convergence of various factors that led to the 1995 Forestry Law reform (Porras et al., 2012). It was perceived as a necessary incentive to carry out the increased level of restrictions to legal forest extraction. Emerging soon after the Rio and Kyoto conferences, the country had high expectations about the development of instruments for carbon reduction and biodiversity. The concept of 'payment for ecosystem service', as opposed to 'forestry subsidies', provided the Ministry of Finance with a loophole to bypass the heavy restrictions imposed by the structural adjustment reform in the country. At the same time, it provided a window of opportunity for small conservation groups to benefit from forest incentives.

PES has now been implemented for more than 20 years. During this time, it has experimented with various instruments for raising and delivering finance for conservation. Currently, most of its budget comes from public sources, which demonstrates long-term political support. The participation of the civil society has been instrumental in this programme, raising awareness of its importance and helping to secure funding when it has been threatened. 25 PORRAS, I., BARTON, D. N., ;, MIRANDA, M. & CHACN-CASCANTE, A. 2013. Learning from 20 years of Payments for Ecosystem Services in Costa Rica. London: International Institute for Environment and Development. The National Forestry Fund (FONAFIFO) is the primary intermediary charged with administrating the PES programme. It signs legal contracts agreeing land use with forest owners, and monitors their compliance through local forestry technical facilitators (regentes forestales). In exchange for the payments, the landowners transfer the rights to the ecosystem services to FONAFIFO, where they make up the wider portfolio of approved ecosystem services (ES) credits. FONAFIFO then sells some of these credits to its buyers. The figure presents the overall structure of the programme, which is discussed in in the following sections. 26 *Note: (1) Certificado de abono forestal (CAF) pre-dates PES, and was a subsidy for reforestation. It overlapped with PES between 1998-2005, and phased out since 2006. Note (2). Totals not adjusted by inflation. Source of data: FONAFIFO statistics. Prepared by Porras and Chacn-Cascante. Source: PES Handbook Porras & Asquith (2018) Sustainable financing Financial resources come mostly from domestic sources through a combination of instruments: Fuel tax: Initially as a percentage of collection and now a fixed annual amount, it is linked to carbon emissions (average US$11.6m per year). Water tax: Early one-to-one watershed agreements with hydroelectric companies gave way in 2006 to an allocation from water fees (25 per cent of collected revenue goes to PES, and 25 per cent to public parks and conservation areas). Average revenues from this source reached US$3.6m between 2007 and the first half of 2010. Loans from the World Bank to kick-start the programme, combined with some smaller grants, notably from the German Development Bank (KFW) and the Global Environmental Facility (GEF). Agreements with private and semi-private companies interested in promoting forest protection for water protection, biodiversity conservation or landscape beauty in their areas (for example, the tourism sector, conservation groups). To date, most of the funding for PES comes from the government, either through central budget allocation or as loan repayments to the World Bank (through Ecomarkets). Agreements with individual companies (CNFL, Florida Ice & Farm, and several hydroelectric companies) provide small amounts of financial resources (less than 2 per cent of all payments made since the beginning of the programme) but have been instrumental in creating demand and support for the water tax adjustment (which succeeded in unlocking significant new revenues). Over-the-counter sales of ES certificates (CSA) remain small but internally promising as a way of raising resources to invest at local level. One of the reasons why they have not taken off is their relative high transaction costs in relation to money raised, compared to the other sources, especially earmarking.

30 Mexicos PES programme is the combination of two previously separate programmes: the Payments for Hydrological Environmental Services Programme (PSAH) and the Program of Payments for Carbon, Biodiversity and Agroforestry Services (PSA-CABSA). These programmes were merged in 2006, at the same time that it introduced poverty alleviation as a programme objective (Alix-Garcia et al., 2014; Muoz-Pia et al., 2008). It currently offers two types of cash compensation: payments for watershed services and payments for biodiversity conservation (Aemi et al., 2013). Implementing this programme is not an easy task. The country has nearly 125 million people, with an expanding urban network (almost 80 per cent now live in cities); a growing economy constantly exposed to global crisis and with highly unequal distribution of wealth in the country -especially in rural areas, and for indigenous groups. Almost 80 per cent of the country managed as ejidos (communal lands with emphasis on social benefits), a property regime that underpins the PES programme. Urban expansion and demand for resources drives deforestation and put significant pressure on water: to supply for cities, agriculture and industry, and dealing with waste and pollution. Both water and deforestation are considered national security issues by the government. The programme targets private forest owners as well as ejidos. A contractual relationship is formed between the forest owner and the governments Forestry Department (CONAFOR), the latter assuming the role of the buyer of the environmental service. Landowners may enrol a portion of their property in which they must maintain existing forest cover and undertake sustainable management practices. Participants can make changes to land cover in the rest of their property. Verification of forest cover is made through satellite imagery or site visits. In the case of non-compliance, where CONAFOR verifies deforestation within the enrolled area due to conversion to agriculture or pasture, the participants are removed from the programme. Payments are also reduced for deforestation under natural causes such as fire or pests. This long-term programme provides several lessons. It has clear sources of financing based on a legal mandate, and clear operational rules that promote accountability. The programme has been adapting along the way, improving its focus environmental impacts at least in terms of targeting areas of high deforestation risk. The programme works in both private and communal lands (ejidos). In communal lands, contracts are signed with the ejido board which decides how to distribute the money internally. A participation bias in favour of those already engaging in good practices versus those more likely to deforest (eg cattle ranchers) has been suggested, implying limitations to the programmes additionality. The introduction of social benefits was a requirement to make the programme politically acceptable, even if it led to trade-offs. However, evidence of such trade-offs in the programme has been contradictory: some show that it is possible to effectively combine social and environmental objectives (Alix-Garcia et al., 2013), while others claim that it is counterproductive (Alatorre-Troncoso, 2014; Salafsky, 2011). 32 Bangladesh. The programme combines environmental and social objectives, using a mix of regulation (ban) and a payment for ecosystem services (PES) as compensation. PES rewards good ecosystem management agreements (such as improving soil conservation, or refraining from doing damaging activities like overfishing) expected to result in ecosystem benefits, like cleaner water, reduced carbon emissions (Engel, 2016; Wunder, 2015) or in this case an improvement in provisioning services, ie bigger juvenile hilsa fish ( Islam et al., 2016). The primary goal of this scheme is the conservation of hilsa and associated biodiversity, but as it is funded through a national Vulnerable Group Feeding (VGF) programme, which

aims to reduce food insecurity (Ahmed et al., 2009; Uraguchi, 2011), it is intended also to improve the socioeconomic condition of affected fishers living inside and around the sanctuary areas (DoF, 2012; Haldar and Ali, 2014). This programme provides useful lessons on the challenges of using conditional transfers in open-access resources. Fishery policies are particularly vulnerable to failure. Their open access characteristics make compliance difficult. Trade is often informal and non-regulated, with multiple pressure points across the supply chain that can render a PES incentive invalid. Attention to the social component of the policies is particularly important artisanal fisheries, as the main actors affected by regulation tend to be poor and vulnerable. While economic incentive mechanisms of this kind have been hailed as the most cost-effective and efficient way to manage natural resources and alleviate poverty, their efficiency depends on how much the incentives cost to implement. The lengthy administration chain from the national government to fishers have low reported transaction costs but it is long and time consuming. Other less reported costs include potential bribery, for example local union leaders withholding some of the rice for their own costs even if these are covered by the programme. There have been concerns regarding equity and political interference in the distribution of compensation, elite capture and high levels of inclusion and exclusion error (Haldar and Ali, 2014; Matin, 2000; Matin and Hulme, 2003; Rahman et al., 2012). Impact on the ecosystem is difficult to measure, especially because of the open access nature of the resource, and the absence of counterfactual. However, this programme represents a step forward linking social and environmental authorities. There is a perceived increased number of mature hilsa fish, hatchings and juveniles with important benefits on supply chains. Additional work -including the potential rethinking of the PES format and providing the right type of incentives, can help improve the programmes impact on poverty alleviation, for example addressing the problems of financial exclusion by providing suitable financial products to fishers. Importantly, the programme should also consider wider watershed management approaches and mitigate non-fishing related stresses such as upstream damming, river diversion, siltation, pollution that affect the health of the fish stock (Mohammed, 2015). 33 Hilsa Fish (Tenulosa ilisha) is an important source of income and cultural identity in Bangladesh. It represents 11 per cent of the total catch in the country, and provides jobs to over 2.5 million people (Islam et al., 2016). Once a cheap fish affordable even for the poor, hilsa catches declined gradually over 30 years to reach a low point of only 0.19 million tonnes in 19911992, then stagnated until 20012002. This prompted the government of Bangladesh to declare five hilsa sanctuaries in 2003 and seasonally ban the fishing of hilsa at important stages in its life cycle. This ban is designed to allow mature fish to reproduce and juvenile hilsa (jatka) to grow, thus achieving better sizes (and prices). It also allows juvenile fish to mature and reproduce to replenish the overall stock. To compensate for lost earnings during the closure, and to incentivise compliance with the new regulations, the government started providing affected fishing communities with rice and alternative income-generating activities. 34 The Hilsa Conservation Programme (HCP) in Bangladesh has grabbed much political attention because the programme is regarded as part of poverty reduction strategy and sustainable development. Another reason is the fish hilsa itself it is very popular fish. The media have played a big part in that, with programme-related news regularly published in the country. The programme has a strong approach to awareness rising as part of the incentives, reaching people through television, radio, boat rallies and local workshops (see

Figure 7). Recent economic studies are generating new information on the economic importance of hilsa fish in Bangladesh and its links to poverty alleviation (Porras et al., 2017a, Porras et al., 2017b). The studies show that hilsa fish is a high-value activity with a guaranteed market for its supply, with prices significantly higher than other types of fish. 35 The process of finalising the list of food incentive recipients, allocating and distributing the food (rice) is lengthy and complex. It requires 13 separate steps and involves every tier of Bangladeshs administrative hierarchy, from meetings at the union parishad (local council) to approval from the Director General of the Department of Fisheries, with several layers in between and back again to how rice is distributed to the fishers. The transaction costs however are very low: taken together administration and transaction costs account for 918 Bangladeshi taka (equivalent to USD 11.89) for each metric tonne of rice distributed, or 3 per cent of the total cost. Local councils present a list of jatka fishers (an ID system is being introduced) to higher levels of administration. Such a lengthy system, without a clear cut targeting leads to problems like favouritism and elite capture. From 2013 a new system where local primary teachers prepare a list of the hilsa fishers in their community, and more recently the introduction of an ID card. 36 Source: PORRAS, I., MOHAMMED, E. Y., ALI, L., ALI, M. S. & HOSSAIN, M. B. 2017a. Leave no one behind: Power and profits in hilsa fishery in Bangladesh: a value chain analysis. London: International Institute for Environment and Development. PORRAS, I., MOHAMMED, E. Y., ALI, L., ALI, M. S. & HOSSAIN, M. B. 2017b. Power, profits and payments for ecosystem services in Hilsa fisheries in Bangladesh: A value chain analysis. Marine Policy, 84, 60-68. The hilsa fish value chain Figure 1 presents a simplified value chain for the hilsa fish in Bangladesh. It presents four main stages: the fishing families and their input suppliers, landing centers, wholesalers and retailers reaching final consumers (including the export sector). The figure also identifies their position in relation to primary, secondary and retail markets, as well as some of the main inputs needed for their value proposition. It is important to highlight that the focus of this study is on the fishing families. Appendixes 1, 2, and 3 present the detailed business canvas for fishermen, wholesalers (aratdars) and exporters as high-end retailers. Figure 1. A stylised value chain (Note: Terminology: Dadondar/mohajon: money lender; aratdar: wholesaler; bepari (facilitator/intermediary between fishermen and aratdar); paikar: exporter. Source: prepared following consultations and fieldwork. 39 Brazil. Type of transfers: The structure of BFP began with three components considered basic for quality of income (Figure 2): community infrastructure; cash rewards; and

community empowerment. After 2008, following a series of workshops and consultations, the programme was reorganised, with additional components aimed at promoting sustainable income, supporting grassroots organisations and social investments (education, transportation, health and communication). These additional components are funded by the project, not as (government) public services. The relative weight of the incentive package was rearranged, with more emphasis on cash reward, in response to the community feedback. The consultation process also determined the stronger focus on women as main recipients of the cash, and proposed equal level of investments across different communities. Adapting incentives in response to changing context: Most participants associated the benefits of BFP to the cash component. However, this perception decreased from 2011 (64 per cent) to 2015 (41.7 per cent). In contrast, perceptions about the benefits of other components increased from 2011 (32.5 per cent) to 2015 (47.8 per cent). This perception corroborates with the hypothesis set in the beginning of the programme, that cash benefits were important in the first years, while the benefits of income generation and social investments were not clearly perceived. As time passes and investment matures and yield results, the cash component has become relatively less important. Cash payments are perceived very positively by beneficiaries and provide equitable distribution of benefits among families. Non-cash benefits present a challenge to secure equitable benefit-sharing among families, across and within different areas. The use of equity indicators to monitor implementation equity needs to receive greater attention in the implementation of the BFP. Drivers of inequity in non-cash benefits need to be analysed and solutions need to be developed to promote greater equity. This includes a better understanding of the political divides, governance challenges and different interest groups across and within different areas. 40 BFP is one of the oldest and largest programmes aimed at promoting environmental conservation and poverty alleviation in the world (Brner et al., 2013; Viana, 2008). It began with a few communities in two protected areas and now involves an area of 10.9 million hectares, 583 communities and 16 protected areas. Created in 2007, and initially administered by the State Secretary of Environment, with the support of Idesam, a non-governmental organisation (NGO) from the Amazon, BFP has been implemented by the Sustainable Amazonas Foundation (FAS) since 2008. FAS, an NGO, was created through a partnership of Bradesco Bank and the Amazonas State government. The strategy behind having the programme implemented by FAS was to increase efficiency, efficacy and equity in delivering benefits to communities, as well as to create resilience in the light of possible changes in government partisan politics. 42 The design of the BFP follows a business approach, based around the business canvas model see Figure . Some of the main components are presented in the next section, but for more information see FAS (2017). Laws and regulations. This programme is part of the state public policy, instituted by the Government of Amazonas in 2007. The main laws underpinning the programme are Law 3135 on Climate Change, Environmental Conservation and Sustainable Development of Amazonas, and Supplementary Law 53 concerning the State System for Protected Areas (SEUC). The laws determine environmental legislation at the State level, and paved the way for forest-based environmental services linked to social justice and equality. Targeting and prioritisation. The prioritisation of areas in the Bolsa Floresta Program have the following reference attributes: identification of relevant areas, focusing on Sustainable Use Protected Area (PA) as well as the presence of potential providers, i.e. forest guardians and riverine communities, for

environmental services in the area; Identification of critical areas by looking at risk of reduction in provision, taking into account existing provision of ecosystem services, level of coverage by command and control structures, external pressure on the PAs with impacts on ecosystem conservation and occurrence of unsustainable activities in the territory. Identification of potential areas by understanding needs of potential providers, including social vulnerability and access to public services; level of social organisation, willingness to conserve; Priority areas for PES schemes also taking into account cost versus conservation impact (resident populations versus area of the PAs). These attributes are rated numerically (e.g. 3=high, 2=medium, 1=low; Yes=1, No=0) and added to identify the areas with higher potential. FAS (2017) provides in-depth details on implementing these targeting strategies. Type of transfers: The structure of BFP begun with three components considered basic for quality of income (Figure 12): community infrastructure, cash reward, and community empowerment. After 2008, following a series of workshops and consultations, the program was re-organised, with additional components aimed at promoting sustainable income, supporting grassroots organisations and social investments (education, transportation, health, and communication). These additional components are funded by the project, not as (government) public services. The relative weight of the of the incentive package was re-arranged, with more emphasis on cash reward, in response to the community feedback. The consultation process also determined the stronger focus on women as main recipients of the cash and proposed equal level of investments across different communities. Figure 12. Payment modalities in Bolsa Floresta. FAS management strategies. Several factors appear also help improve programme effectiveness: The development and use of cost indicators (e.g. % overall implementation costs; number of days before purchasing air tickets controlled per individual staff) presented and discussed at length on quarterly FAS staff and board meetings lead to creation of an institutional culture of cost reduction. The use of indicators of key outcomes (e.g. gender - % of women participation, % projects fully implemented), presented and discussed at monthly (up to 2013) or quarterly (2014 onwards) internal management meetings at FAS helped identify problems and develop solutions for improved efficacy. Partnerships with other organisations (e.g. state and municipal governments, NGOs, grassroots organisations) helped reducing costs of field journeys, demand of staff and improved outcomes. When possible, bulk purchase equipment and goods by FAS administration, which increases the bargaining power with suppliers and helps reduce costs. ICT systems for inclusion. The Family (cash) component is paid through a Bradesco Bank debit card, directly to the account of individual families. This benefit is paid every month and accumulates in the beneficiarys account until collected when the family goes to town or to a remote Bradesco express ATM machine. All families visit the city at least two or three times per year, when they visit relatives, for education, medical purposes etc. The link to bank account reduces paperwork and the chances of mismanagement of resources, while promoting financial inclusion by encouraging the creation of bank accounts for the families in these remote locations. Programmes theory of change, based on four points: 1) Intermediate results that should be achieved by the providers in terms of changes in practices, 2) direct results anticipated from rewards foreseen in the scheme; 3) complementary actions to be realized by the leader of the scheme or partners; and 4) complementary actions outside the governability of the scheme. FAS (2017) provides clear details on the specific components of this theory of change. Clear gender equity agenda, that includes objectives, resources, indicators and monitoring. The programme has defined clear strategies for action, which include: 1) control of cash resources by women; 2) incentive for participation of women in participative planning workshops, leadership meetings and other processes of participatory management; 3) incentivize leadership of women in projects that generate income and enterprise; 4) educational actions on the rights of women; and 5) support for the creation and strengthening of clubs and associations of women; Ensuring transparency and feedback. Transparency is a key element of the implementation strategy of FAS. The governance of the BFP includes a leadership meeting, which includes 40 to 70 presidents and other leaders of grass root organizations that represent the over 40 thousand beneficiaries of different areas.

These are umbrella organizations (associaao me), which are formally established and represent small community level associations, mostly informal. These meetings take place twice a year, usually in Manaus (in 2012 took place in Rio de Janeiro, at Rio+20 meeting) and last five days. These leadership meetings provide a unique space for open evaluation and discussion of the BFP, with a focus on challenges and solutions. These meetings also provide a unique space for the leaders to engage in direct debate with high ranking governmental officials, thus empowering them to claim their rights. Finally, the leadership meetings provide an opportunity for sharing lessons and for developing new leaders. Since 2016, the leadership meetings are also receiving 10 to 20% of youth participants. Once a year the results of the BFP are discussed in seminars held at local universities (UFAM, UEA) or at FAS. These public seminars provide a space for multi-stakeholder interaction, especially with academia and NGOs, focusing on sharing knowledge and reduce partisan criticism of the BFP. Complete financial statements of FAS and the BFP are published in full in the web and registered in a public notary. This disclosure is preceded by an annual independent audit by PwC, which is reviewed and approved by the Fiscal Board and the Board of Administration of FAS. A detailed activities report (+100 pages) is published yearly and also posted in the web for open access. 44 Participants perceptions: Cash is the preferred form of incentive. According to household surveys in RDS Juma, Uatum and Rio Negro, most families (78 per cent) preferred an increase in the family (cash) component. Between 2011 and 2015, there was a significant increase (from 5 per cent to 15 per cent) of respondents who would have preferred to increase the income-generation component, and non-significant increases in options for the social and association components (Agustsson et al., 2014). The social component of BFP included investment in the construction and reconstruction of 67 schools, installation of 160 radio communication stations, 91 river ambulances, water supply, energy generation, boats and internet access, among others. The importance of these investments in social infrastructure, according to a 2015, poll indicated that the most relevant investments were drinking water supplies, schools, boats, energy and communication (see Figure 3). 45 Impacts on the environment: Perceptions of participants of the BFP indicate that there has been a change in their behaviour. Most (90 per cent) beneficiaries perceive that the BFP has contributed to environmental conservation, 80 per cent associate these results to reduction of deforestation and 76 per cent with reduction of forest fires. In 2015, most (79.8 per cent) participants considered that the programme had helped reduce deforestation. Measuring the impact of the BFP on deforestation rates is complex. First, there are no appropriate control areas. Attempts to use federal protected areas as controls (Tersitsch , 2017) have a limitation, given that there are different governance and institutions in charge. Second, it is not appropriate to compare BFP and non-BFP protected areas, given the fact that some areas face very different deforestation pressures. Nevertheless, the data suggests that deforestation in the BFP areas has reduced over the years. Relative to an average five years before the beginning of the programme (20032007), deforestation was reduced by 28 per cent in the first five-year period (20082012) and another 37 per cent in the following period (20132015), totalling 54 per cent compared to the baseline (Figure 4). Forest fires have also reduced in BFP areas. There were 775 fires in 2016, down from 1,473 in 2015 in all BFP areas. In terms of improvements in livelihoods, most participants considered that their lives had improved since the beginning of the programme. This assessment improved from 2011 (54 per cent) to 2015 (78 per cent). Negative changes decreased from 9.6 per cent to 3.2 per cent in the same period.

There were several other positive impacts of the BFP and the associated FAS programmes. In the RDS Rio Negro, for example, the incidence of diarrhoea in children from 0 to 6 years of age reduced from 41.5 per cent to 13.6 per cent in 2013 and 2016 respectively a 67 per cent reduction. 46 The BFP needs to focus on several challenges, including ensuring the equity of non-cash components and the detailed monitoring of the social, environmental and economic impacts of the programme. In addition, the programme needs to secure long-term funding, beyond current sources. New opportunities may emerge within the framework of the Paris Agreement and the Amazonas legislation on ecosystem services. The programme has a strong gender component, with clear monitoring of indicators to measure progress that show how control of cash, active support to engage in economic activities, and empowerment through dialogue all contribute to the reduction of inequality associated with gender. An important lesson of the BFP is that using a simple message as a reference for the scheme (`standing forest) acts as a common denominator and improves the coherence of the programme. This helps to amalgamate resources from the scheme investors into a single budget with a common objective. This in turn helps to avoid duplication of efforts, double counting, and reduces the risk of negative spillovers. The programme was peer-reviewed in 2012-13, but requires continuous independent evaluations which can be expensive, and for which collaborations with academic and research institutions are key. Based on the FAS experience implementing the BFP, there are five essential elements to build an environment of trust for PES schemes: Effective spaces for dialogue Valuing positive leadership Aligning expectations Shared agenda with short-term impacts (to show effectiveness), and Presence, proximity, availability and connections. The lessons learned from the BFP could be used more widely to help the design and improvement of similar programmes in other areas. These lessons learned are also useful to implement other programmes for community-based sustainable development goals (SDGs), including adaptation to climate change in Amazonia and other similar regions. FAS recently launched a toolkit (FAS, 2017) on implementing PES in the Amazon: 48 BOLIVIA: The principles of a Watershared agreement (following the RED/AMBER/GREEN format: Red: Conflict resolution by negotiation, not prohibitions or regulation; Amber: Financially sustainable system with long-term downstream contributions, supported by NGO/donor contributions; Green: Positive rewards that act as social recognitions of the mutual benefits of upstream protection. The activities and target areas follow simple, clear guidelines to understand hydrological linkages. The Water Fund works like this: The development NGO, the Municipal Government and the Water Cooperative each invest in--and play a decision-making role in--the Water Fund.

The three-institution board decides annually how money will be spent: in annual payments, in-kind support, land purchases, or whatever else. These compensation payments are paid to upstream landowners, who in turn sign contracts to guarantee land use, and (supposedly) provision of the water service.Photographs: 49 Land tenure arrangements are highly informal in much of the Andes. Few landowners have government-approved titles, but rather rely on signed purchase contracts, some of which are generations old, as proof of possession. In general, PES schemes, especially government schemes such as those in Costa Rica and Ecuador, do not accept these informal `titles. Many landowners (often the poorest) therefore cannot enter the schemes (Botazzi et al., forthcoming, 2018). In contrast, reciprocal watershed agreements do not require formal land titles but instead rely on locally accepted definitions of who owns and controls, or grants access to, watershed forests. In Bolivia, tenure is confirmed, and agreements are signed based on simple assurances from neighbours and the village chief that a piece of land belongs to an individual. Watershared ownership decisions are thus based on local consensus, and although such tenure does not necessarily have de jure recognition, the de facto definition of boundaries used by participants in the Watershared scheme is often stronger. Selection of upstream areas use the following checklist (Asquith and Vargas, 2007): Watershed is in or close to an important conservation area (such as a protected area, or an important bird area, etc). This criterion ensures that selected sites are globally important for conservation. A hydrological service is being provided. This is often complex to prove, as most hydrological relationships are site-specific. It is therefore difficult, a priori, to state that protecting forest in any given area will actually provide the desired hydrological service, unless complete hydrological studies have been completed (Le Tellier et al., 2009). However, there are two important exceptions: cloud forests, where it is almost always true that deforestation will reduce dry season flows, and forests, where cattle range freely and where keeping cattle out will improve water quality. Municipal governments can be sure that, in these cases, upstream conservation interventions will help protect watershed services, without a need for detailed and costly hydrological assessments. Watersheds should be small and simple. Hydrology is complex, and the larger and more complex the hydrological system, the more difficult it is to successfully identify the level of service provided, and to identify and negotiate with the real suppliers and beneficiaries. The smaller the watershed, the more likely that upstream actions can be directly linked to hydrological benefits downstream, and land managers and water users can be more clearly identified. Furthermore, the smaller the watershed, the more likely that actions upstream actually do affect downstream users. The cost effectiveness of Watershared increases if there are only a few, motivated stakeholders involved. Two criteria can thus maximise the economic efficiency of Watershared: Some but few downstream water users: Schemes where there are a few major downstream stakeholders, such as a drink bottling company or a hydroelectric plant, are more likely to succeed than if project managers must negotiate with hundreds of independent farmers. On the contrary, if there are no water users, there will likely be no long-term interest in upstream conservation. Local perception of forest water links: Success is more likely where local stakeholders already perceive and understand the connection between forest management and the maintenance of healthy freshwater ecosystems, so costly public education programmes are not needed. Clear, demand-led rewards: Downstream water users provide upstream landowners with alternative development tools, such as beehives, fruit tree seedlings and irrigation tubes. The content of the compensation packages is defined by beneficiaries based on their needs, but usually comprise alternative livelihood options that can diversify income

sources, have a multiplier effect, and reduce farmers susceptibility to climate change. Given local capital and transport constraints, there is also a huge added value of compensation packages being `delivered to the farm gate by project implementers. 52 Any growing tree can fix and reduce carbon emissions. But it takes a series of extra steps to make this action into a commodity that can be traded in carbon markets. Figure 1 shows how a typical Plan Vivo carbon offset project operates. A project developer works with smallholders, communities and supporting agencies to develop a project idea note (PIN). This is submitted to Plan Vivo where it is initially checked against the eligibility criteria set out by the Plan Vivo Standard. Amongst other key aspects, the Plan Vivo Standard has a particular focus on whether the project secures land tenure or carbon rights for participating communities and uses native or naturalised species in its project activities. If it fulfils the eligibility criteria, the carbon accounting methodology goes into the Project Design stage. After submission, the carbon accounting methodology is evaluated through a peer-review process and assessed by Plan Vivos technical committee. Successful projects go through validation and project registration. Through the submission of annual reports, projects can demonstrate compliance with their project design and monitoring targets, which will lead to the issuing of valid carbon certificates. The project developer is then able to sell these certificates in voluntary carbon markets. Regular third-party evaluation takes place to ensure the validity and permanence of carbon sequestration rates and that the proper dispersal of funds to communities in an equitable benefit sharing that is fair and transparent. 53 Figure 3. Smallholder carbon offsetting and the SDGs Source: Porras, I., 2015. The Plan proposal towards the Sustainable Development Goals. Plan Vivo Foundation, Edinburgh. The Sustainable Development Goals (SDGs) are a new, universal set of targets and indicators. UN member states are expected to incorporate them into their agendas and political policies over the next 15 years. They include a commitment to end poverty and hunger, improve health and education, make cities more sustainable, combat climate change and protect oceans and forests. The investment required will run into trillions of US dollars. This will mean forming partnerships across the whole spectrum of society: government, the private sector, international and local NGOs, and communities. The mutually beneficial, ethical partnerships promoted by Plan Vivo are well placed to support the implementation of at least seven of the SDGs (Porras 2015b), as shown in Figure 3 and outlined below. SDG1: End poverty. Partnerships can cut through many of the roots of poverty in several ways. Direct cash transfers estimated in proportion to the amount of carbon absorbed in the plot provide short-term poverty alleviation. Projects build human and natural capital within communities, helping eliminate long-term poverty. And Plan Vivo operates in many places ignored by others. For instance, it works in remote locations/farms and in areas divided by conflict. In these situations, the projects provide much-needed technical support in the design of the individual farm-management plans. The farmers own the trees planted and are able to use and/or sell the timber in both the medium and long term depending on the species used. Some projects help communities establish small-scale timber workshops, and local people are learning how to produce furniture or crafts. SDG2: Achieve food security. During the initial stages of a project, farmers and project developers hold regular meetings. Their objective is to design a management plan that will ensure the long-term survival of tree species without compromising family food security. Plan Vivo promotes a mixed portfolio of activities to spread risk. For example, different

types of tree species are appropriate for timber, fruit, fodder and shade for intercropping, considering what works best with the agricultural crops the farmers have available. Activities like beekeeping produce honey for household consumption or sales income while encouraging natural pollination. F igure 3. Smallholder carbon offsetting and the SDGs Source: Porras (2015a). SDG7: Affordable and sustainable energy. A significant amount of timber is generated by removing branches to encourage tree growth and through the thinning process when younger trees are removed to provide space for others to mature. Many projects, like Scolel T in Mexico, also promote the adoption of efficient cookstoves. These are excluded from the carbon account but financed through the support of committed offset buyers either as donations or through agreements to increase the price per offset. SDG8: Growth and employment. The introduction of carbon markets has created a major new supply chain. At the local level, this includes project developers who carefully orchestrate the participation of smallholders and remote farmers. They provide cash payments and technical support, and sell carbon offsets to international buyers. Community monitoring creates jobs for forest technicians, many of them women, as well as young people eager to learn new technological skills. Demand for tree cultivation also promotes seed collection and the creation of local nurseries. All Plan Vivo projects are independently verified, and most of the voluntary carbon offset marketing is carried out through a growing network of retailers in the USA and Europe. SDG13: Urgent action to combat climate change. Reforestation, protection and management of forests help diminish the threat of climate change. Collaborations with the research and academic sectors, such as the ESPA project with IIED and Edinburgh University, have a role to play here. For instance, they help develop rigorous and streamlined scientific methodologies employed to measure the environmental footprint of these activities in cost-effective ways. Once verified and validated, these reduced emissions become a tradable commodity sold in voluntary carbon markets. Companies and governments are then more confident in purchasing these offsets and can use them to meet emissions reduction targets. SDG15: Protect biodiversity and ecosystems. The sustainable principles underpinning each management plan seek to balance food and timber cultivation while broadening the area of impact to other ecosystem services. Better farm management contributes to improved water retention and reduces sedimentation. Planting new trees, especially native species, helps rehabilitate degraded landscapes. The Yaeda Valley REDD+ project in Northern Tanzania is an example of a project working with hunter-gatherer communities to reduce pressure on existing forests while improving livelihoods. Projects like the Nakau Programme in the Pacific Islands put forward a habitat protection unit that promotes rainforest and mangrove protection to reduce indigenous community vulnerability to climate risks. This link to biodiversity conservation is also a key proposition for community forest management in Indonesia. It is currently piloted by Flora & Fauna International and shows great potential for being scaled up across the rest of the country. SDG17: Partnerships for implementation. The increasing number of projects promoting reforestation, organic agriculture and cleaner energy technologies requires multiple partners along the value chain. These include farmers, technical and capacity-building specialists, project managers, office administrators, carbon experts (modelling specialists, auditors and certifying agents), offset resellers, and importantly, offset buyers. Project developers are increasingly becoming leading figures in the design of national public initiatives, such as Ecotrust in Uganda and Fundacin Ambio in Mexico. 54 Implementation. Carbon and smallholder agriculture value chains. This example shows how carbon offsets can be brought alongside initiaties that support BIOGAS for smallholder agriculture. Payments for Ecosystem Services in smallholder agriculture: lessons from the Hivos-IIED Learning Trajectory.

This synthesis report presents highlights from six projects which are part of the joint Hivos-IIED PES Learning Trajectory Programme in five countries Guatemala, Indonesia, Kenya, Nicaragua and Peru that are exploring the use of carbon projects in smallholder farming. Through this research IIED and Hivos explore the feasibility of payments for ecosystem services (PES) as incentives to promote a shift to sustainable smallholder agriculture. Results from this research are published in the Payments for Ecosystem Services in Smallholder Agriculture series. We focus on practical learning from existing smallholder and community PES projects linked to energy and agroforestry activities. Working with local partners and project practitioners, we analyse the opportunities, challenges, strategies and potential no-go areas in a pre-selected group of smallholder projects and analyse them within the global context of wider learning on what works and what does not in PES. Based directly on lessons drawn from our partner studies, we adapt the LINK methodology tools developed by the International Center for Tropical Agriculture (CIAT), to understand if and how PES and carbon approaches can help smallholders successfully enter and benefit from existing markets. 55 Figure 2. Monitoring along the value chain Monitoring and evaluation (M&E) becomes the tool by which projects prove the existence of the carbon offset and its co-benefits. International certification bodies such as the Plan Vivo Foundation or the Gold Standard act as independent agents that ensure transparency and credibility of these transactions. Monitoring is important along the chain for several reasons (see also Figure 2): For farmers, it checks compliance of agreed activities, and provides useful feedback to them on the quality of their activities for example, how well their trees are growing or if any remedial actions are necessary if operational issues arise. For project managers, it helps align incentives to performance and triggers payments.For transferring technology, capacity and feedback related to the activities promoted from project developers to farmers, creating a wider community of practice and sharing lessons and strategies with other smallholder and community projects. For validating assumptions for model development. For supporting transparency and credibility for buyers to foster sales. Community monitoring plays an important role in REDD+ projects in monitoring carbon stocks (Larrazbal et al., 2012). For example, communities can provide a large workforce to facilitate collection of large amounts of data at large scales; they can bring their local skills and knowledge to complement expertise (Berkes et al., 2000), and they can provide ecological data where there are gaps in academic studies (Doswald et al., 2010). The cost of hiring local labour is, for the most part, relatively cheap (see Box 2). There are, however, some risks. For example, training is required to ensure that protocols and procedures approved by IPCC are met (see glossary). Supervision is required (especially in early stages) and procedures to ensure the reliability of data collected must be adhered to. Larrazbal et al. (2012) also point out that local people might be tempted to exaggerate the carbon stock increases if this is linked to payments received. 57 There are many similar schemes to the payment for ecosystem services (PES) scheme in the Hindu Kush Himalayas (HKH) region, that aim at channelling financial and nonfinancial benefits (for example, as development projects) to the communities providing various ecosystem services, through an established institutional mechanism (Bhatta and Kotru, 2012; Bhatta et al., 2014; Patterson et al., 2017) (see Figure 1). Some of them include: Markhor (Siberian ibex) hunting in Pakistan, where 80 per cent of the total hunting revenues go back to local communities incentive to communities for increased carbon stock through REDD+ pilots in Nepal

sharing of hydropower revenue with local government in Nepal, where 10 per cent of the hydropower revenue is ploughed back into local government municipal support to local communities living in the upstream water source at Palampur city of the Himanchal state in India compensation scheme for ecological restoration in China, where the government of China provides cash eco-compensation to local communities based on per unit of land for wetland restoration. These schemes operate alongside a wider range of political and policy instruments used by governments. The experiences from these schemes show that they are opening new sources of conservation finance, helping to improve ecosystem at large, and providing experiences for empowering negotiations at local level. This document summarises the key components and learning from the process, as well as the enabling policy options to support PES or PES-like schemes. Lessons Research and experiences from the HKH region showed a promising potential for incentive-based mechanisms to encourage and acknowledge mountain communities for their efforts in conserving the ecosystem to maintain and/or improve it. However, several essential elements are necessary to make such schemes successful. These include clarity and transparency on conditionality, land tenure rights, contracting provisions supported by legislative instruments and equitable benefit sharing mechanisms and monitoring. Studies also suggest that if PES schemes are embedded within environmental impact assessment (EIA) plans for development projects, they would be more effective in ensuring long term sustainability of the project and benefits to the communities. Existing experience strongly suggest focusing on a wider range of incentives rather than cash-only as means to improve quality and/or quantity of ecosystem services in the HKH region. Properly designed, these types of incentives have the potential to improve ecosystem management while increasing transparency and accountability. A 'one size fits all' approach may not be desirable, as the design of these PES schemes need to respond to local context, culture and environmental priorities. Rather, an overarching framework with common principles might be helpful to streamline such schemes at the national or transboundary levels. 59 Patterson et al., (2017) discussed various PES-like schemes ranging from national to locally initiated schemes in the Himalayas. Conducive policies, intermediaries, ownership by local municipalities, facilitation and mediation, and ensuring benefits to communities are crucial for successful PES or PES-like schemes in the region. The HKH has special characteristics such as limited land tenure, high dependency on natural resources and ecosystem services (Jodha, 2005) which requires contextualisation of such PES schemes based on local needs and priorities and may mean a one-fit model may not work effectively in the region. The recently published handbook for incentives for ecosystem services (IES) distils lessons on basic components for designing and implementing PES in the region (see Figure 2). Some of these aspects are discussed below.

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