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Katoomba Dialogue III: Payments for Ecosystem Services in Africa

Ricardo Bayon (Moderator)

In September 2005, The Ecosystem Marketplace held the third in its series of Katoomba Dialogues. Hosted by the Katoomba Group in Uganda, the session focused on pro-poor payments for ecosystem services in Africa.

In September 2005, The Ecosystem Marketplace held the third in its series of Katoomba Dialogues. Hosted by the Katoomba Group in Uganda, the session focused on pro-poor payments for ecosystem services in Africa. Ricardo Bayon: We've called this a "Socratic dialogue" but many of you will recognize this process by another name–a talk show. Essentially we've asked the panelists not to prepare any presentations to avoid what I call power point narcosis. I will simply ask panelists questions while trying to be as rude as I possible, and I can be very rude, trust me. So rather than introducing everybody, I will ask everybody to introduce themselves. John, if you could? John O. Niles: Hello, my name is John O. Niles from the Climate Community and Biodiversity Alliance (CCBA). Sheila Mwanundu: Hello, my name is Sheila Mwanundu, I am the senior technical advisor on environment and I work for the International Fund for Agricultural Development. Our headquarters are based in Rome, thank you. Alan Rogers: Hi, I'm Alan Rogers and I've been working in East Africa largely on biodiversity for the last 40 odd years. I am now based in Nairobi. Mark Botha: Hi, I'm Mark Botha, I am director for conservation for the largest membership based NGO in South Africa. We are based in Cape Town. My interest is in leveraging resources from the development economy to support the biodiversity economy. Bwango Apuuli: Hello, my name is Bwango Apuuli, I'm the acting director general for lands and environment in Uganda's Ministry of Lands and Environment. I am also the national focal point for the United Nations Framework Convention of Climate Change and I have recently concluded a study on the potential benefits of carbon markets for Uganda. Mr. Bayon: Thank you, I think we'll start with you Mr. Acting Director General. We've heard a lot of good talk about payment for ecosystem services and it all sounds like something very, very interesting, but is it really relevant to a place like Uganda? Mr. Apuuli: Payments for ecosystem services are certainly relevant to Uganda, but let me hasten to clarify that my focus will be mostly on carbon. I am not very familiar with biodiversity and water payment [schemes] for ecosystem services…[In general, I think they are feasible but there are challenges]. Now turning to carbon, which is my best subject: clearly, carbon payment for forest services is already applicable here in Uganda. Our colleagues from ECOTRUST who are in this room are already dealing with farmers in one part of this country, the western part of Uganda called Bushenye. They have already worked with a group of farmers who are planting trees… They are being paid up to eight dollars a ton of carbon and each of these farmers is contributing approximately one to three hectares. [I]f we use the conservative estimate of about 15 tons of carbon from one hectare of eucalyptus over 20 years rotation, …someone who contributes three hectares will make about 360 dollars per year. This is about one dollar a day and, remember, if we can increase somebody's income by an extra dollar a day, then we can bring this person out of poverty, over the poverty gap so to speak. In this country about 28 percent of our population lives below one dollar a day… Mr. Bayon: If I could just interrupt you there to start being rude: there are very few things happening in Uganda why is that? Mr. Apuuli: In terms of the carbon trade, I would say awareness is still the problem. There are many policy makers and community members who are not aware of these opportunities. There is also a need for capacity building for these groups of people to start engaging in these schemes. Mr. Bayon: Thank you very much. I'll turn it over to Mark now. Can you expand to give us some experiences from South Africa? Mr. Botha: Thanks very much Ricardo, South Africa finds itself in a slightly different position to Uganda. I think most likely due to our well-developed tenure systems and possibly greater opportunities to put regulatory mechanisms to promote PES into place. Obviously South Africa is not a well-forested country, so we need to leave that one aside for the time being. I think the key challenge that we're facing is linking payments for biodiversity conservation with payments for ecosystem services in watersheds, for which there is a lot of appetite for at the moment… In South Africa we have quite a well-developed regulatory framework and many institutions to make this sort of thing work but we still haven't seen much movement. Part of the reason, I think, is that we might be trying to be too sophisticated and we might need to be a little bit more robust and simplistic in our thinking and try to keep things as small and as ring-fenced as possible. I think it's basically for Africa and certainly for South Africa, too. The more sophisticated we make it, the more steps we build into the process, the more likely things are to sort of come undone a bit. We might also have a lot more unintended consequences that we haven't thought through and we need to develop quite carefully the kinds of criteria by which we would design good projects to make sure that we don't have unintended consequences. Mr. Bayon: What are some of those unintended consequences? Mr. Botha: The last thing I would want to see is people planting up South African grasslands with eucalyptus for carbon because we'd be losing some of the most diverse grassland on the planet. We'd also be having unintended consequences in terms of water reduction and important things like that. Even though it sounds quite strange it has been proposed in many places and is being done. There are tens of thousands of hectares of Australian wattles being proposed for the Eastern Cape, there are also 70 thousand hectares of eucalyptus being proposed for the coastal areas… These things all make me incredibly nervous. Mr. Bayon: And how can we get around that? How can we go beyond that? Mr. Botha: The obvious answer is education, sort of making people alive to the fact that South Africa is going to not going to be a big player, I think, in the carbon market and to roll the focus more heavily on trying to promote water and biodiversity benefits in the same sort of projects. Mr. Bayon: There have been high expectations raised in terms of carbon. Is carbon something we should all be expecting to make us rich? Mr. Botha: No, it's interesting that in Michael's slide carbon was trading at 22 dollars a ton but the farmers in Uganda are getting it for 8 dollars a ton here so someone else is making the 14 dollars a ton and it is not the poor farmers in Uganda. I think that a lot of the poorer people that we are trying to benefit, ultimately, are going to be in exactly that same trap, they are not going to be able to capture the bulk of the revenue. I don't even think a Uganda-based brokerage will be able to capture that sort of revenue. Instead of having to use payments for ecosystem services in place of a range of other conservation mechanisms, we just need to add them to our arsenal and figure out where and when to use them. Mr. Bayon: Okay, thanks. I'll turn it over to John Niles. We've talked a lot about the carbon market with these last two speakers. I wonder if you could tell us a little bit more about… the problems and issues in this market… for a place like Uganda? Mr. Niles: Well, just a clarification, too, I think on the last slide it was 8 dollars per ton of carbon and the price is about 27 dollars per ton of CO2, so it's actually about the same. I think Michael and a few other people made the point clear that we've received some examples from both Uganda and South Africa that there is real money changing hands to plant trees and hopefully there will be money at some point to protect trees. …Unfortunately, greenhouse gasses are in the atmosphere for about 200 years, so … these very early payments for people to put trees into the ground are just the very beginning of something that's going to be with the society for a very long time and the question is, are we going to do a form of carbon colonialism, which some critics have called it, where you basically kick indigenous people off the ground and you have no respect for biodiversity and water and you plant the fastest growing carbon stocks imaginable, or, as the second speaker said, are you going to use carbon as a tool to improve local livelihoods and to improve biodiversity? That's why I think why we are here this week is to figure out how to do the latter. Mr. Bayon: But if I'm a buyer, what I'm looking for is the cheapest carbon out there. If you tell me I'm paying 5 dollars a ton for eucalyptus plantations and paying 25 a ton for some nice native species, I'm sorry, I am gonna pay the 5. Mr. Niles: Well, I would disagree a little bit. Let's look at who the buyers are in the carbon market. Does anyone want to guess which continent is paying for carbon right now? It's not the United States because we're not acknowledging the problem. It's Europe and Europe actually has the morals. Mr. Bayon: Not many, but a few. Mr. Niles: A few yeah, but none of us are guilt free here, right? They are not necessarily looking for the cheapest carbon. Some people are, you're right, Ricardo, but there are a lot of very intelligent companies out there that realize they want to get good quality carbon that has co-benefits and here is why: When you go and promote the fact that you've taken your country or your company carbon neutral, you don't want some NGO in Kampala saying you kicked my people off their land and you just planted eucalyptus trees. Big companies are afraid of this. They've invested billions of dollars in their brand, so they actually want credible carbon investments and some of them even want investments that are going to help poor people, you just have to look harder for those types of buyers… Mr. Bayon: Let me ask you another question. There's a lot of concern amongst people that all carbon markets are going to do is raise prices for anything that uses energy, which is just about everything. What impact will that have on poor people who are already struggling with paying for food and fuel? Mr. Niles: Well, I mean carbon is the backbone of the biomass in our trees and it's also the backbone of all the hydrocarbons. They're called hydrocarbons for a reason. If we don't want to see what four degree Celsius warming looks like in 200 years, we are going to have to phase out fossil fuels and we are probably going to have to phase out trampling the Amazon at the rate of 30 to 40 million acres per year. These are not sustainable. Is that gonna raise prices? Definitely. Is that gonna be a regressive impact on poor people? Definitely. Mr. Bayon: Maybe I can turn to Alan. With your line of experience in Africa, how do you think these issues might be handled? Maybe you can move us beyond the carbon market to talk about some of the other ecosystem services. Mr. Rogers: Yes, I want to broaden the debate a little bit and talk about my organization, the Global Environment Facility… I think it's a pity we weren't here doing this ten years ago when the major donors, the multilaterals, the world was greatly interested in environment. Attention's now moved towards poverty alleviation and sustainable development and I think the title of the discussion here is how we see these payments for ecological services providing support to the poverty agenda… We can't just talk about the environment in an esoteric way, it has to link…into social development. Water, I think, is the way into dealing with ecological services in the context of Eastern Africa, and, I presume, in an awful lot of the Southern African context as well. Where are we going to be getting our water? Mr. Bayon: Let me put to you a theoretical situation. Yesterday we were in a very nice place on the edge of the Nile. Now Uganda says, 'Okay, we're helping produce all the water in the Nile, we're sending it downstream, look Egypt, tomorrow we're going to start setting fees for that to help us protect the forests. What does Egypt say?" Mr. Rogers: Egypt has been having a long battle with colonial East Africa over this since 1898… And Egypt can't refuse the water and send it back up the Nile. But there is a dialogue with the Nile basin initiative and with the countries of the region talking about this, looking at the Nile as a source of agriculture through the whole irrigation of the alluvial process, through sharing water, through shared environmental processes. I think that as a matter of awareness, one needs more specific examples of where things are happening and where the opportunities exist. Mr. Bayon: There was a real issue behind my question about Egypt and the Nile and that's the issue of the buyers. Are the buyers really there and really willing to pay for these services or are they just going to say, "look, we haven't been paying for this before, why start now?" Who's going to make them pay? Mr. Rogers: I think the buyers are there for biodiversity and we've seen that. I think an awful lot of the water buying and selling is within the country, I think an awful lot of the water flows are not international. We do get the big river processes and I think it's in sorting out cost and benefit-sharing processes where you are going to see a greater level of support, not necessarily a payment for so much water flowing down stream. Mr. Bayon: Thanks, Alan. Let me turn to what is perhaps one of the most important issues in this debate and that's the issue of how this will truly affect issues of equity. We are talking about a pro-poor system for payment of ecosystem services. Is this truly pro-poor or will the poor end up losing out, as is often the case in market systems? Ms. Mwanundu: Let me start by first mentioning two well-known facts or findings. First is the link between poverty and environmental degradation. These two are mutually reinforcing. Second is that a large portion of the population in the rural areas where the poor are worst-off tend to survive on natural resources for their livelihood. Given this perspective I think that accessing markets will have a real role to play in promoting incomes and food security among the rural poor. The question has been that most people tend to see PES just focusing on the conservation side but I think there is a lot of room for PES to actually incorporate social objectives. I could try and give some examples here. One of the examples would be if there were to be effective targeting of those needy groups that tend to be marginalized and of course, focusing on the role of women and the disadvantages they face. Secondly would be to try to reduce transaction costs, this would greatly help the poor communities, and third, would be to try and identify suitable entry points to link the PES into the national strategic frameworks that deal with poverty, such as the poverty reduction strategies in some countries or to link things to national objectives that try to address the Millenium Development goals for poverty reduction. Okay, you have rightly asked who are the winners, who are the losers. This is a tricky question because there are various levels of winners and losers. To be able to determine this you really need to have a good understanding of the costs and benefits of ecosystems in a particular area, how do the communities make use of these services, what would be the changes of value of these benefits to the livelihoods of the communities, and what would be the role of these benefits as safety nets for the communities in case of hardship. Once you have a clear understanding of that then you can figure out who the winners and the losers are but I am going to try to focus on the rural areas. If you look at the rural areas I think the benefits are likely to be derived from having a better ecosystem whereby there is an increase in cropland, increase in rangeland services, increase in forests, the losers would tend to be the marginalized groups who are disadvantaged in many ways because of entrenched constraints of exclusions that we find in the communities, but then we've noted that we don't have to have any losers at all, what we need to come up with are win/win situations whereby all communities can benefit from this and that's why the issue of coming up with effective compensation mechanisms whereby communities are actively involved in the planning of this strategy so that their needs can be identified and also if we can promote the negotiation platforms whereby communities can be able to have equal voice and power to negotiate their benefits. So I think those are some of the key issues that need to be addressed. Mr. Bayon: Very interesting. I wonder if you could elaborate on that because, in part, people are poor because they don't have power. That includes negotiating power and in many business transactions, any business deal, negotiating power is central. So, how do we ensure that the people we want to serve, the communities with the poorest of the poor, obtain that negotiating power somehow? Do you have any ideas? Ms. Mwanundu: First, to be able to do that, I think what one needs to do is have a good understanding based on a poverty and livelihood strategy of that particular community. We need to know what the quantities are in terms of how the poorer communities can negotiate and be able to get their demands addressed. Here is where you see the CBOs , that's the community-based organizations and key donors playing a key role. Because then they will be able to support those processes that will strengthen social capital at the community level and would at the same time strengthen the platforms which would enable these communities to be able to bargain with the buyers in order to gain the right compensations that address their needs in that specific local context. Mr. Bayon: I wonder if I could turn back to you, Mr. Acting Director General? We've talked about a lot of different types of intermediaries: CBOs, NGOs, we've even talked about the private sector but I haven't heard that much about the role and the importance of government in this whole process. I wonder if you could address that and maybe some of the other panelists as well? Mr. Apuuli: The role of government is basically regulatory. Government's role is to provide framework conducive to business… For example, if we looked at carbon; the government would be responsible for certification and providing the environment that would give confidence to the investor. In terms of the other services: water, and biodiversity, government is to set policy and regulation and allow the private sector to do the implementation. That applies across the three, it is important for carbon that the private sector recognizes that it will be the one to drive this trade. The government has its role, to provide a regulatory basis and a supportive framework. Mr. Bayon: Thanks. Mark, you have something to say? Mr. Botha: Could I suggest two additional roles for government, which, I think, are very crucial and completely under-appreciated. My colleague had mentioned that government must be there to support the private investors, but if we are interested in pro-poor payments for ecosystem services, then I think government should be there to support the community, to back-stop their needs in this…We are feeling our way here and some of the things that are being proposed are incredibly risky. I think government needs to create a bit of a safe space for NGOs or authorities to go ahead and pilot some of these things without severe threat of retribution. When we are talking about communities, I think everyone recognizes that communities are not as homogenous and cohesive as we would like to think they are. There are going to be very few times where we can think of direct payments into communities that aren't going to be skewing local power structures or power bases. So, in terms of direct payments to people on the ground, I think we might need to think a bit more broadly about ways to benefit the poor that aren't going to be necessarily skewing local economies. Ms. Mwanundu: You rightly say communities are not homogenous and of course we see that there are different uses to land, or communities have different access to land and different needs. When developing compensation packages, experience has shown that one should not just focus on financial payments. There are also other forms of payments, which are not financial, from which communities can benefit. So what may be necessary is to come up with a menu of options that can be made available to communities. Then communities can choose those options that they feel are of benefit to them based on their own specific needs. Mr. Bayon: Before I let you go, can we answer this question? It's interesting in Uganda that carbon, an international market, is moving fastest. Biodiversity and water markets tend to be more localized and they are moving much more slowly. Are there truly buyers in Africa or do we start off by looking at the international buyers? Maybe you can address that as you make your comment, Alan. Mr. Rogers: That's not an easy question is it? …I think there are a lot of payments for ecological services in the water and biodiversity sectors. We don't sometimes recognize it as being a PES. I mean the whole flow of tourism and how that's working and the many little initiatives just to try and get some of those benefits back to people are linked to PES. I think we need to document and write much more from the Ugandan and East African and African perspective to be able to understand that. But I wanted to come back and not take issue but support part of what my colleague from government was saying there. I used to be a government officer. I resigned as an uncivil servant in 1976 from the Tanzanian Civil Service. You stressed, I think, the regulatory role of government. I think for my colleagues coming from Forest Trends and outside East Africa, government is awfully important in how things happen in the African situation. We don't have a strong private sector. The NGO group is growing but government still has an enormously important role facilitating and supporting as well as regulating. So I think you're going to see government having a role in moving the whole process forward as well as having that regulatory capacity. I agree with you, Mark, that government is not there only to protect the private sector but as a role in protecting the public and supporting the public and ensuring the flow of services into the public as well. I think one of our problems, and it's come out here in the discussion here this morning, is the government works in boxes, the box called forest, the box called water, the box called land and we're talking now about services…which sometimes overlap on the same piece of land and I think in a lot of Africa we can think of bundling up these benefits as to how to go forward. It's finding a mechanism for government to unlock the barriers between the sectors and I note, Sir, that your department now within the ministry of water, forest, land and environment has much greater ability I think to build these linkages between components much more than we have in the past. So I think the role of government is absolutely essential and it must be more than regulating, it must be facilitating and supporting. Mr. Bayon: Is government a buyer? Mr. Rogers: Yes. Mr. Bayon: Well that was uncharacteristically short, Alan Mr. Botha: I would like to just propose another buyer. I mean, South Africa is responsible for the bulk of the carbon footprint of Africa and in fact the biggest single point source for emission of CO2 on the planet is on the eastern high veld of South Africa. I think there's a lot of moral persuasion that should come from the rest of Africa, too. There are large private companies–most of which were 100 percent owned by government until very recently—that need to be investing in carbon projects in the rest of Africa. Mr. Apuuli: Yes, government is a buyer, but at the moment it is mostly the governments from the developed worlds that are buyers of carbon credits for example. But another interesting point is, I think, ecotourism. If we are looking at ecotourism as part of this payment for ecosystem services then we are thinking about individuals, really, as buyers in this case. Mr. Bayon: Yes, we have lots of tourists roaming around the Serengeti and around all these other places looking at the wildebeests and the elephants and the giraffes. My question is this; is that truly a payment for the ecosystem service if the payment doesn't ever reach the providers of those ecosystem services. Mr. Rogers: You mean the elephant? Mr. Bayon: In a way of speaking. Does anyone want to take that? Mr. Botha: I would disagree strongly that it's a payment for ecosystem services. The payment isn't going there to prolong the service, it's not a payment for that service. Unless we can figure out ways to either increase the direct sort of treasury charge to the environment department or to ensure that the environment departments are able to ring-fence certain large quantities of money to ensure the maintenance of the ecological infrastructure. I think we are using fancy words to describe things, which aren't real. Mr. Rogers: I think the payments go a really long and tortuous route. The person who is paying 20 dollars to enter Serengeti is to some extent paying for that ecological service. Now, where the payment goes from there you've probably got a very flawed pipeline, you've got a flawed system of how that payment actually reaches the intended beneficiaries. So I think again one of our jobs is helping to direct that flow, the benefit stream into where it's needed to continue that flow of ecosystem services. So it's not changing the system radically, it's making the system better from what it is at the moment. Mr. Bayon: Before we turn it over to questions from the floor, if you could summarize the one thing that you think is the top priority in Africa and in Uganda. Mr. Niles: I would say the government of Uganda, Tanzania, and South Africa should mobilize their resources for the next negotiations at COP 11 where major decisions about lots of money will be made. Mr. Bayon: Is COP a policeman? What's COP 11? Mr. Niles: The next round of negotiations for the UN Climate Change Convention. Mr. Bayon: Too much jargon. Sheila, same question. Ms. Mwanundu: What I would say is that the next step is to ensure that the compensation schemes or mechanisms to transmit payments are actually defined to start with from the local context, taking into consideration the environmental and the institutional context and this should be based on participatory social processes. Mr. Rogers: Maybe–maybe we can move forward if we get greater awareness and capacity and understanding. We've all said yes, there are payments for ecosystem services taking place in East Africa. We're not 100 for sure of what they are, who is originating the payments, where they go. So I think a much greater investment into documenting best practice and sharing that is going to help move the process along in a very great way. Mr. Botha: I would take a subtly different approach from Alan. I think success breeds success and I'm almost embarrassed to come from South Africa where we have much more capacity, many more resources to put these things into place but we still don't have a very clear, obviously politically supportive payment system working and sort of sustainable. You've got to get these things in place in the next couple of years. Mr. Apuuli: My comment would be that we need to move forward. We need to move these payments for ecosystem services and the way to do it is to give the capacity both to the private and the public, to raise the awareness of the policy makers as well as the intended beneficiaries and to take it all up a gear, so to speak. Mr. Bayon: How do we do that? Mr. Apuuli: Intensify awareness raising as a first step. And then build partnerships to build their capacities. Have durable projects, as my colleague here says, success begets success, we need success stories that we can build upon. Mr. Bayon: I would just add that you can also learn quite a bit from failure so let's not forget that. Any questions from the floor? We'll probably have time for maybe two or three. Question from the Floor: Who sets the price for these payments and how? Mr. Bayon: In terms of who sets the price, let's take the carbon example. You have to remember where this all started from. The government has set a cap so they've set a limit on emissions for some industries so the ability of these industries to go below that level and how much they're willing to pay to meet these regulatory commitments is one starting point for the price. There are many others but I do think supply and demand based in this context plays a very big role. I don't know, John, if you want to add anything there. Remember that sequestration isn't the only supplier of carbon credits, in fact, it is one tiny supplier of carbon credit. The bigger suppliers of carbon credits are people doing efficiency programs in Europe, US, and elsewhere and sort of reducing the amount of energy they need to do the things they do every day. Mr. Bayon: Another question over here? Question from the Floor: We need more market intelligence. How is this market working? What is out there? Where do we get this information and how can we get this information to the poor? Mr. Bayon: I paid him to ask the first question about information because the product that I manage, The Ecosystem Marketplace, is designed to help generate and distribute this information. Mr. Bayon: We have one question back there way in the back. Question from the Floor: Thank you very much. I come from Uganda. The issue of who pays for the ecosystem services must be addressed very seriously, particularly for Uganda. At the moment there are so many critical issues that are competing for government payments. We have the issue of AIDS, health services, education, and infrastructure. So that when you now bring in another aspect and say that governments should pay for that ecosystem services, I find that very difficult. I must say that I am operating at the policy level, but about some of these things we are really quite ignorant, so a lot of awareness needs to be raised both at the policy level and at the community level. Mr. Apuuli: For the moment these are market-based systems when in comes to the established markets like the Kyoto market so it is supply and demand but on the voluntary market there is negotiation. In the eight dollars we are talking about for the Bushenye farmers we were told that this was a negotiation between Tetra Pak of the UK and the farmers. In terms of awareness, I agree that we need to raise awareness. Mr. Bayon: Well, thank you very much. We'll cut it short there. Just to say that I've been taping all this so you're all going to be held to what you said. Ricardo Bayon is the Managing Director of the Ecosystem Marketplace. He may be reached at rbayon@ecosystemmarketplace.com. First posted: January 27th, 2006

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