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Payment for Environmental Services (PES)

The welfare of all human beings depends on the ecosystems of our planet and the many services they provide, such as drinking water, food, grain, climate regulation, prevention of soil erosion, air purification, natural pest control, and crop pollination. Human populations also require healthy ecosystems to meet their cultural, spiritual and recreational needs. However, during the twentieth century, human population transformed ecosystems extensively and rapidly, endangering the environmental services they provide to societies. One of the main reasons for this pressure on the environment has been the exponential population growth over the past 50 years: there was great need to meet the growing demands for natural resources in order to feed and support the new generations of human beings over a very short period of time.

Although many people have benefited from the intensive use of food, firewood, timber, grain and fresh water, the recent demand for these resources has caused very serious damaging phenomena and environmental degradation processes, which have affected environmental sustainability, putting the welfare of the world’s population at risk in the medium and long terms. In fact, the true costs associated with the uncontrolled exploitation of natural resources have already become evident.

Millennium Ecosystem Assessment (MA)
Valuation of Ecosystem Services
PES: A tool for the management and conservation of natural resources
PES systems in Latin America
PES projects in the Dominican Republic

Millennium Ecosystem Assessment (MA)

Early in the new century, and with the objective of finding out the true costs and benefits of the environmental services that ecosystems provide to humanity worldwide, a group of more than one hundred experts conducted an exhaustive study known as the Millennium Ecosystem Assessment (MA). This study entailed an international work program designed to provide decision makers and the public in general key scientific information about the consequences on human well-being of the changes in ecosystems, and the options for responding to these changes.

The MA summarized the existing information on ecosystem services, databases and scientific models, and incorporated knowledge held by the private sector, experts, local communities and indigenous people. The purpose of the appraisal was not to seek new basic knowledge, but to add value to the existing information by collecting, evaluating, summarizing, interpreting and communicating it in the most useful way.

The most significant result of the study – the so called Assessment Report on Millennium Ecosystems - explains the three major problems that our current management of ecosystems causes for the environment and, therefore, for the human communities which rely on these systems: 1) the environmental services that ecosystems provide to people are being severely degraded; 2) the changes that have occurred in the ecosystems result in often highly rapid, abrupt, and irreversible alterations which affect human welfare in the medium to long term (such as the collapse of fisheries due to overfishing); and 3) the degradation of the ecosystem services leading to growing inequalities and disparities between different social groups, which, at times, is the main cause of poverty, hunger and social conflict.

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Valuation of Ecosystem Services

Given this critical situation, it is essential that the world start to reverse the degradation of ecosystems while pricing ecosystem services in an integrated manner, factoring into the calculation not only the benefits but also the costs, including those which are generated by the loss of a specific service when exploiting another good or service without setting limits. For example, in the short term the benefits that are obtained from completely cutting down a forest are the production of timber and firewood, while in the medium and long term other services such as the generation and supply of fresh drinking water, pollination, and erosion control, among others, are lost.

As a key step in maintaining or restoring an ecosystem’s environmental services, the integration of management objectives in sectors such as forestry, agriculture, finance, tourism, trade, and health should be promoted. Simultaneously, the so-called perverse subsidies that harm ecosystems by promoting their irrational exploitation must be eliminated. At the same time, management and negotiation decisions need to incorporate the values of ecosystems and their services that aren’t reflected by the market. In this sense, the economic valuation of an ecosystem’s services is essential, and must reflect both commercial economic values as well as non-commercial ones, in relation to natural resources such as forests, brushwood and natural meadows, rivers and lakes, and seas.

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PES: A tool for the management and conservation of natural resources

Once the economic, social, cultural and spiritual values of an ecosystem have been established, it is essential to develop mechanisms of financial compensation for the multiple services that these ecosystems provide to human populations. This is where the concept of Payment for Environmental Services (PES) comes into the picture. It is a commercial tool that allows a more just and equitable redistribution of the costs and benefits that natural resources offer, and ensures that financial resources are transferred from the parties demanding the environmental service to the owners who care for or manage the ecosystems, such as forests, springs, wetlands, etc.

More specifically, service providers are compensated through the payment of a fee that allows them to finance the management and conservation of the natural resources that are located on their properties. By paying for these environmental services, the aim is to contribute to the preservation of ecosystems, by motivating their conservation as opposed to an inappropriate use which degrades their ecological integrity. Hence, the creation of schemes for payment of environmental services within the framework of sustainable management of a place, region or country, can reverse the degradation of resources at risk. Thus, the PES is designed to strengthen the preservation and recovery of natural ecosystems in affected areas.

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PES systems in Latin America

For over a decade, several developing countries such as Chile, Costa Rica and Ecuador, have implemented different systems of payment for the environmental services that are provided by tropical forests. Basically, four aspects have been approached: 1) mitigation of greenhouse gas emissions (carbon reduction, absorption, fixation and storage); 2) protection of water for urban, rural or hydroelectric use; 3) conservation of biodiversity for sustainable scientific and pharmaceutical use, research and genetic improvement, protection of ecosystems and life forms and, 4) protection of natural scenic beauty for touristic and scientific purposes.

In more recent years, a growing national awareness of the importance of water for sustainable development in the Dominican Republic has become apparent. In 2007, for example, the National Agricultural and Forestry Research Council (CONIAF) of the Dominican Republic held a symposium where several projects were presented and discussed on the estimated payments for environmental services in the eastern region of The Hispaniola. One of the studies, presented by the Dominican Institute of Agricultural and Forestry Research (IDIAF) analyzed in detail the costs and benefits of carbon sequestration as an essential ecosystem service to mitigate the threat of global warming. The report revealed that the Juncalito area has a potential for carbon sequestration of 120,875 tons per year (9,500 tons/ha/year), for an average total price of $28.5 million Dominican pesos, whereas the Solimán area has the potential to capture 33,440 tons of carbon per year (1,665 tons/ha/year), with an estimated value of approximately $5.3 million. In view of this potential, there is rising awareness around the regulations for implementing of the Payment for Environmental Services plan, and follow up committees are being formed in each of the regions. The idea is to produce a document that enables the creation of an easy verification methodology, which ensures that producers implement the appropriate practices to conserve natural resources, that users are duly charged for the services they receive and, subsequently, that producers receive their payment from the users.

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PES projects in the Dominican Republic

At present, the Dominican Republic has started to see some interesting results from the development of a PES system, especially in watersheds where efforts have been focused on the valuation of water resources. With the support of the German Cooperation Agency, GTZ and other governmental entities, Corporación Dominicana de Electricidad (CDE) has been able to launch and develop several pilot projects in the river basins of Yaque del Norte, Altas de Sabana Yegua, and Loma Quita Espuela.

The pilot PES water project in Cuenca Alta del Yaque del Norte is perhaps the best example of the promising implementation of the National Payment and Compensation for Environmental Services (PES) Program, developed by the Secretariat of State for Environment and Natural Resources (SEMARENA). In this context, Corporación Dominicana de Electricidad (CDE) is providing funds to carry out measures to protect the natural resources of the basin. The project makes use of economic incentives that encourage the preservation of natural resources. The communities that are involved and live in the upper part of the basin near the Jimenoa, Tavera, López Angostura and Monción dams, will receive monetary compensation for the environmental services offered by the forests on their farms, in order to care for the quality and quantity of water which benefits users in the lower basin. More specifically, the owners of these woodlands will be paid to keep the services provided by the forest, to plant saplings and to refrain from cutting mature trees in order to plant or use the land for agriculture or livestock. This way, the smooth operation of hydroelectric dams and the water sources for human consumption in the region can be ensured.

Another project of great interest in the country priced the environmental services of the Cuenca del Río San Rafael, about 30 kilometers south of Barahona, in the eastern part of the Sierra de Bahoruco. This project, implemented by the Dominican Environmental Consortium (CAD for its acronym in Spanish), focused on the Majagualito and Majagual river basins, which come together to form the San Rafael River, an area of great local importance, as it produces all the drinking water in San Rafael, which is home to about 1,500 inhabitants. The methodology employed to price the PES included, among others: a) the establishment of a committee for the protection of aquifers in San Rafael; b) a land use plan developed in a participatory manner; c) an assessment of the current use and ownership structure of the land; d) the compilation of the basin’s direct and indirect values; e) the level of awareness among consumers in relation to water services in the basin; and f) the development of a plan to install PES mechanisms in the area.

In mid 2009, Fundación Global Democracia y Desarrollo (FUNGLODE) and its sister organization in the United States, Global Foundation for Democracy and Development (GFDD), in collaboration with the Department of Sustainable Development of the Organization of American States (DSD/OAS), discussed the scope of the payment system for environmental services in the Dominican Republic, for its implementation and consolidation. These organizations recognized that the mechanism of PES is an effective way of preserving nature and reducing poverty, at a time when the world suffers the effects of climate change. They further concluded that the implementation of such mechanism requires a coherent and sustained institutional support that ensures the state’s and its representatives’ commitment to its compliance, and, at the same time, the involvement of civil society, organized in a highly articulated way, under a legal framework that ensures its implementation.

As a result of the work carried out in 2009, in early November 2010, GFDD and FUNGLODE, together with the Department of Sustainable Development of the Organization of American States (DSD/OAS) carried out workshops in Santo Domingo on the "Design and Implementation of Payment Schemes for Environmental Services (PES): Training for Government Officials." The workshop met its objectives of providing scholars and officials from the Dominican Republic and Latin America the knowledge and skills on PES and useful tools for decision making for the conservation of natural resources.

The projects show that the country is taking steps forward in the implementation of PES mechanisms, and fragile and endangered ecosystems, as well as human populations that depend on the multiple roles that these resources offer, have already derived benefits.

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