Peruvian Ecosystem Services Law In Limbo On Eve Of Earth Day Katoomba Meeting In Lima

Elisa Arca

Peruvians have spent the last six years developing a comprehensive legal framework for the sticky issue of payments for ecosystem services (PES). The current bill is one of the most advanced pieces of legislation of its type, but it’s been stuck in committee for five years, and will remain so as the 20th Katoomba Meeting kicks off next week in Lima on Earth Day.

NOTE: This article was adapted into English from Ecosystem Marketplace’s Spanish language sister site, Valorando Naturaleza. Click here to view the original in Spanish.


18 April 2014 | It’s not easy for any country to protect its natural areas from exploitation, but Peru is making a solid attempt to preserve its forests, which store massive amounts of carbon and provide habitat to thousands of rare and endangered species – delivering in the process benefits that accrue to the world at large and not only to Peru.

The country’s legislators have drafted one of the most comprehensive pieces of legislation for governing Payments for Ecosystem Services (PES), but the Ley de Mecanismos de Retribucií³n por Servicios Ecosistémicos has been perpetually on the brink of passing since it was introduced in 2008. It emerged around the same time as the Brazilian state of Acre’s System of Incentives for Environmental Services (Sistema de Incentivo a Serviços Ambientais, or “SISA”), and like that ground-breaking initiative, the Peruvian law would create a legal framework for conservation efforts that harness private capital.

In December, a key congressional commission gave the bill a thumbs-up; in February, the Ministry of Environment (Ministerio del Ambiente, or “MINAM”) launched a consultation initiative with indigenous people; and last week, the bill was slated to be formally debated for the first time before the entire National Congress.

That debate, however, never took place, and now the bill is back on ice – a development that will feature prominently at the 20th Katoomba Meeting, which runs from April 22 through 25 in Lima.

The Laws of Limbo

In Peru’s unicameral system, a bill must first emerge from a commission before being introduced to the congress at large. The PES Bill passed that hurdle in December, when it was approved by the Committee of the Environment and Ecology. It was supposed to have its long-awaited debut before Congress on April 10, but then it got pushed back to April 15, when it was again left in the lurch. Now it isn’t clear if the bill will head back to the Environment Commission or again be presented to the entire Congress.

Those close to the process are speculating as to why the bill didn’t progress. It’s possible legislators outside of the Environment Committee disagreed with the bill. It’s also possible the last congressional meeting was simply packed with other proposals and they didn’t have time to discuss the PES bill.

How it Works

The bill provides a legal framework to support a diverse range of ecosystem services – including greenhouse gas emissions reductions, biodiversity conservation and the preservation of natural beauty. Investments in watershed services (IWS), an already popular water management method in the country, have also been incorporated into the proposal.

There are two parties involved in the PES process that the bill lays out. The first are land stewards – farmers, indigenous peoples, landowners and individuals involved in ecotourism, who act as the receivers of ecosystem services. The other group – mostly civil society, businesses and municipalities – are the payers. They compensate the land stewards to practice sustainable land-use. These sustainable practices ensure businesses and cities will have the ecosystem services, like clean water and air, that they need to survive and thrive.

The government will be responsible for identifying the payers and also for administering the compensation process.

Monitoring for compliance and effectiveness will vary by program. For REDD (reducing emissions from deforestation and forest degradation), which is already well-developed internationally, the law incorporates existing certification procedures and standards.

Congressman Nestor Valqui Matos was one of the leading legislators on this bill, guiding it through the Commission. He tells Ecosystem Marketplace that some key details still need to be ironed out, and he singled out the law’s lack of provisions on preexisting conditions. This, he says, introduces an element of uncertainty that could come back to haunt them if not dealt with now.   Conditions like determining the legal rights to the area where the project will take place and who stands to benefit should be decided on at the start.

Jose Luis Capella agrees. He is Director of the Forestry Program in the Peruvian Society of Environmental Law (SPDA), and says all of these issues should be worked out in the design phase.

The Changing Role of Government

Peru’s Payments for Ecosystem Services (PES) programs are still voluntary agreements between parties, which means the government’s role is limited. It boils down to ecosystem services management and providing regulatory certainty for contracts.

“It’s a voluntary agreement between private parties with a private contract but the state often owns the natural resources at the center of the contract,” says Capella.

Therefore, PES programs require state involvement as well as participation from the private sector in order to operate – but that degree of involvement is still a matter of debate.   Institutions have argued in certain locations – near remote communities, for instance – more government intervention is needed in order to provide transparency and keep information flowing to the locals. Otherwise, locals may feel their rights are being violated by outside organizations.

But Capella says the focus right now shouldn’t be on government monitoring but on simply creating more programs.

Protection for Indigenous People

Matos says prior consultation is only proposed where the project has the potential to directly impact collective rights of indigenous peoples.

“It’s important that all actors involved in a PES project benefit,” says Capella. “This law will help achieve that by keeping everyone properly informed and creating opportunities for those closest to the forest.”

The bill also faces implementation challenges on a regional level, because regional governments must be able to involve a consortium of individuals including forest users and indigenous groups but also NGOs and federal government agencies like the Ministry of Environment and Agriculture and Irrigation. Companies involved in water management, as well, will often need to be involved in developing a program.

Implications of a PES Law

Examples of PES and IWS in Peru are plentiful. One such example is the program implemented in the Rumiyacu-Mishquiyacu micro-watersheds, located among the jungles of Peru’s San Martin region. The area was degraded and the plan was to compensate using non-monetary benefits like tools to support sustainable production and technical advice. In return, participants in the project agreed to switch from their old ways of managing the land, which resulted in harmful environmental impacts, to a sustainable land management style that enhanced the ecosystem services.

People affected by the harmful land activities-mostly those living in the city of Moyobamba in Moyobamba province, agreed to finance the sustainable activities. This voluntary payment was made through their monthly water bill.

And there will continue to be movement in this space on different levels as the legislation works its way through Congress. The The Watershed Services Incubator, a collaborative initiative between environmental non-profit Forest Trends (publisher of Ecosystem Marketplace) and MINAM, among other institutions, is one active project. The incubator acts as a capacity-building platform for developing water projects based on PES.

Ultimately, Peru’s proposal aims to coordinate all of these activities by providing a simplified framework for PES to increase the mechanism’s use. It’s based on a simple idea that isn’t particularly innovative: those who help maintain and improve ecosystem services establish an agreement with those who are voluntarily willing to compensate for those services.

Elisa Arca is a journalist living in Lima, Peru. She writes for and can be reached at [email protected].
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About this Series

This is the ninth in an ongoing series of articles developed in support of this year’s two Katoomba Meetings, both of which are taking place in Latin America. The first meeting took place on March 19 and 20 in Brazil, under the banner “Scaling Up Sustainable Commodity Supply Chains”.

The second meeting will take place in Lima, Peru, over four days –  beginning on Earth Day, April 22 through the 25th – and its working motto is “Climate, Forests, Water, and People: A Vision for Alignment in Tropical America”.

Part One: Latin American Katoomba Meetings Aim To Turbocharge Climate Talks, provides an overview of the two Katoomba Meetings.

Part Two: Amazon States In Brazil Push For Benefit-Sharing On National REDD+ Strategy, takes a look at how Brazil’s Amazon states are gearing up for REDD.

Part Three: Your Donut Is Killing Our Forests, Here’s How To Make It Stop, examines the role of consumers in driving change in the palm oil sector – a lesson that may be applied to soy across the Amazon.

Part Four: How To Unlock Agricultural Finance To Save Forests And Reduce Greenhouse Gas Emissions On Farms, explores financing possibilities for sustainable forest-conserving production.

Part Five Commodity Roundtables: Katoomba 19 Sheds Light On Role Of Consumer examines the somewhat limited success of roundtables on growing sustainable crop production, factoring in the consumer’s role in mobilizing change.

Part Six REDD Bonds For Brazil-And The World examines ways of borrowing against pay-for-performance mechanisms to promote climate-safe agriculture in the here and now.

Part Seven Brazil Sees Promise, But Need For New Funding Source For REDD examines efforts to cultivate domestic demand for environmental finance.

Part Eight Biodiversity Boom Bolsters Peruvian Forests (And REDD) examines the interplay between healthy forests, biodiversity, and carbon finance.

Part Nine Peruvian Ecosystem Services Law In Limbo On Eve Of Earth Day Katoomba Meeting In Lima examines a comprehensive piece of legislation awaiting debate before the Peruvian National Congress.

Part Ten Katoomba Live Stream: A 20/20 Vision for A Unified Climate Solution offers a late-stage guide to the Katoomba Meeting in Peru and how to access it.

Part Eleven Uniting People And Ecosystem Resilience For Food Security In Latin America examines a survey of more than 100 Latin American landscapes management initiatives.