The environmental community has been rightly wary of markets. But payments for environmental services can play a role in protecting nature, so long as governments guide, govern and regulate such markets.
Water, clean air and insect-pollinated food crops are all examples of nature’s endowments to humankind, and provide the material for our well-being.
In our globalized economy, all our actions and decisions have implications for both people and nature, whether near or far. Buy flowers in Asda, and the farmer in Kenya who grew them will receive a fraction of what you paid. Buy rice, and chances are some wetland in Arkansas has been farmed to provide the cheap grain markets demand. Your child’s new timber-frame bed may have come from some illegally logged forest, via China. Water in your tap doesn’t just materialize from the clouds. While some people loudly protest about the commodification of nature, not everybody sees how closely our own consumer needs are guiding those markets we despair about.
There seems to be a two-faced argument in our relationship with nature. Putting a price on nature is seen as some grotesque exercise to justify the private sector in their plundering. Yet we do that almost every day. Most of us still reach for the cheaper pint of milk in the supermarket, not thinking beyond the bottle to the farm where the cow was milked, to the soy-crops grown in Brazil on destroyed forests and grasslands to feed the cow, or to the stock-market in New York that is driving agro-investments.
Moving to alternatives that aim to value nature over profits has many benefits. Using less intensive agricultural techniques, for example, will help maintain soils and reduce the need for expensive fertilizers. But the benefits go beyond the farmer and the land they till. Well-managed land is often more biodiverse, and creates a beautiful landscape that we all enjoy. Avoiding deforestation can significantly aid the fight against global warming while we search for cleaner technologies.
The world is responding
Throughout the world we find examples of initiatives that reward landowners for good land stewardship. Direct payments to landowners in Costa Rica – including indigenous communities, farmers and small businesses – reward them financially for maintaining environmental services that benefit other people, who then pay for that gain. For many years, Plan Vivo has helped communities develop plans to protect and manage natural resources – such as forests – which are biodiverse, help support people’s livelihoods, and capture carbon. The organisation has shown how money from carbon sales can both mitigate the effects of climate change and create better livelihoods for people living in Mexico, for example. Meanwhile, Bolsa Floresta in Brazil has shown how money from international markets can be used effectively to reward forest communities that avoid deforestation.
Many species face extinction because their habitat is being destroyed at an unprecedented rate. In Western Uganda a similar approach is being tested to promote habitat conservation for chimpanzees and other wildlife, compensating farmers living in private and communal lands to keep forests standing.
And it can also promote ‘greener’ farming. In Europe and the UK, regulation on agricultural private lands is often complemented with subsidies for better practices, for example the Environmental Stewardship scheme that rewards farmers who maintain hedgerows and buffer strips, or practise organic agriculture. In Kenya, negotiations underway for a scheme to reward highland farmers who manage water in ways that limit flash flooding, and providing a steadier flow of water downstream.
Who pays for all this?
Local municipalities, water utilities and hydroelectric projects are increasingly willing to pay for ecosystem services as this reduces the overall costs they need to pay for water treatments. They realise treatments would be much more expensive if, for example, the forests were cut down and the silt content in the water was higher. Examples of this can be found in Latin America in Los Negros, Bolivia, in Quito, Ecuador and in Jesús de Otoro, Honduras. Organisations and people seeking to reduce their carbon footprint through voluntary, ethical transactions and international conservation organisations, such as WWF, that are interested in protecting habitat to maintain biodiversity are also willing to pay.
Governments must lead the way
There are calls for the private sector to step in and hike up the value of a ‘green investment’. Although this is happening to a certain degree, in our post-credit crunch, penny-pinching current economy, the odds of this being an ethically-guided approach are slim if left unregulated, as it becomes difficult to distinguish reputable sources from hazardous investments and scams.
The environmental community has been rightly wary of markets. For ‘Payments for Environmental Services’ schemes to succeed, we need stricter regulation to discourage unsustainable land practices and ensure that no corners are cut. Markets can play a role, rewarding efforts with better prices. But ultimately, governments can, and must, play a key role in guiding these processes.
This can be done. In Costa Rica, the government allocates a percentage of fuel and water taxes to pay for environmental services, and promotes private sector participation through Carbon-Neutral initiatives. For example, Thrifty Rent a Car compensates emissions from their car rental by paying 40 families to protect their forests in the national voluntary, certified carbon market.
Rather than shy away and pass the blame, governments must set the basis for governing, and not surrendering, to these market forces.
Ina Porras is a researcher in Sustainable Markets and Environmental Economics for the International Institute for Environment and Development, where this blog was originally published under a Creative Commons license.