In PES you pay only for the service you receive

Posted on 05 April 2013  | 
Julio Tresierra is a coordinator of a global programme for the payment for watershed services (EPWS) which is headquartered in the Netherlands. He is a Canadian citizen born in Peru who travels frequently in Europe, Latin America, Asia and Africa, supervising and promoting new programmes in the field of payments for ecosystem services (PES).

How do you see the PES schemes in the Danube Basin, in Bulgaria and Romania, which WWF is developing?

PES is a relatively new mechanism. It has grown systematically in the last 20 years and exploded in the last 10 years. Watershed services – one of four types of PES, is the most common, while carbon sequestration is the largest in volume of transactions. The other two environmental services are biodiversity and cultural/aesthetic values. The Danube region is a prime target to start exploring the possibilities of applying PES mechanisms. In Bulgaria WWF is already developing four pilot schemes which are testing the viability of this finance mechanism. The Danube is a massive water body and 19 countries are part of its watershed. Any changes in the quantity or quality of the Danube will have a very serious impact on the land mass which is adjacent to the river. It is a river that very much defines the life of many countries and people. It provides water for domestic consumption for many important European capitals. So, if - for example - the levels of pollution and contamination grow out of control, the impacts are going to be felt immediately. Or, if for some reason a mismanagement of upstream water bodies affects the quantity of water, a significant segment of the population is going to be affected downstream. Or if you want to use the river just as a motorway to promote commerce and make it more amenable for transportation of commodities using bigger ships, then the biodiversity of the watershed is going to be affected as well. From an economic, environmental, political and social perspective, the Danube has an important role to play in the overall integration of livelihood, conservation and development.

Why are watershed PES schemes most popular?

Because water stress is becoming a serious issue all over the world. The sources of fresh water are very limited. The problem of water has to do with the quantity, quality and distribution of opportunities to get access to this water. Payment for watershed services is one way of re-establishing the equity of access to water not only within countries but also between them.

How are you going to get people to pay for services which, to them, have no value because they are currently free?

There are two positions. Firstly, the amount of water that has been taken for granted and used freely is diminishing. All of a sudden the corporate users of water - bottling, cement or energy companies –realize: “Hey, this water is really decreasing and is going to impact my business”. There is an awareness of the scarcity of water which is becoming a serious concern for the large corporate users of water.

Secondly, an integrated view is developing. People are connecting the scarcity of water downstream to upstream changes. In many watersheds where we developed our EPWS Programme upstream areas are populated by poor farming communities. The actions they exert upon the land have a direct impact on the quantity and quality of water. Like it or not you have to deal with water managers upstream because those are the stewards who are going to undertake the required steps to restore the ecosystem capacity to provide the water services downstream. So the free water use is a thing of the past because of growing water scarcity on the one hand, and on the other because of the obvious connection between upstream and downstream habitats providing the foundations for agreements such as PWS.

How do you price an ecosystem service?

Valuation of ecosystem services is quite a problematic issue because people are trying to put a price tag on a service that is not entirely “marketable” by definition. There are all kinds of philosophical, ideological and scientific issues around the “marketing” of nature. There are some who are highly critical of mechanisms by which nature is “for sale”, whereby nature is transformed into a market commodity. It is argued that there is the risk of misusing what nature provides by transforming it into a commodity like a car, a shirt or a table. However, we must consider that in programmes such as EPWS you provide an environmental service in such a way that you restore nature’s capacity to provide such services. There is a tangible result which is a water service different than its source: nature. In addition to this there is an intangible improvement of the system itself that in the long run is going to permit the continuation of the provision of these services. A hydroelectric dam which produces “X” MW of energy needs a constant volume of water. But if something is happening upstream – deforestation, changes in the rain cycle – which is going to affect the volume of water, the hydroelectric business is going to suffer. If the volume of water is restored, the hydroelectric business is going to improve. Part of such benefit is the payment that must go upstream to pay for the restoration of the ecosystem. So the notion of improving the profitability of the downstream user and the cost of changing the land upstream are two of the main components of evaluating the ecosystem service.

So this is not a gimmick to make the business pay?

No, in PES there is the contingency principle – you pay only for the service you receive. This type of contractual association between buyers and sellers is managed by very strict regulations monitored by independent bodies.

Why is PES getting more popular?

People are becoming more environmentally aware, in general. There is much bigger concern whether because of global warming or the increased fury of nature – tornados, hurricanes, through all those manifestations people are perceiving that there is a human action which is modifying the natural cycles. This is generating an increased consciousness and awareness about the need to maintain and restore an ecosystem balance. We have to use innovative mechanisms available to us to restore balances. What used to work in the past is not working nowadays.

Can you give examples of successful PES schemes around the world?

The two most well-known cases in the developed world are the Vittel (Nestlé Waters) in north-eastern France - paying farmers to adopt more environmentally friendly practices, and the case of the Catskill Watershed Corporation where New York City Municipal Government pays for water services. In Mexico, Costa Rica and Colombia there are schemes run by the governments. In Peru a scheme was started by us (The WWF - CARE Consortium) and it is now continued by the government. In China the PES approach is also being explored.

Do you believe that in the end the market will save the world?

No, we have to save the world in spite of the market, which has to be more responsible towards human needs and respect the environment. Under the global crisis people are interested in keeping their jobs. Energy production and food security are also priorities. These urgent demands place environmental regulations as secondary matters. We have to understand however to what extent environmental decay is a significant component of the economic crisis. Profits are made out of nature and people, and not the other way around. If you destroy nature, you are going to end up with empty bags.

When PES cannot help?

It is not the answer to every single environmental problem. There are many options that are much more effective. PES works under very special conditions that must be established in advance. PES cannot resolve all the problems once and for all. It is one approach among many.
It cannot resolve the managerial problems connected with the misuse of natural resources, nor the governmental and legislative limitations that prevent the manipulation of the environment to produce contracts among water users. PES cannot deal with environmental damages created by natural disasters.

How do you see the future of PES?

I think it has very significant future given its growth in the last ten years. But PES is a finance tool and must be applied in the context of sustainable development, economic growth, poverty alleviation, and food security among other structural processes. A strong political will is required to modify existing schemes because PES is challenging a lot of laws in the market.

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