Alice Ruhweza, Consultant UGANDA

1. Mainstreaming Payments/Incentives for Ecosystem Services in National and Regional Planning/Policy Dimensions Alice Ruhweza, Consultant UGANDA

2. Introduction Ecosystem services are those valuable, ongoing streams of benefits provided by thriving ecosystems – e.g • Watershed services – flow, quality, • mitigation of floods and droughts • Detoxification and decomposition of wastes • generation and renewal of soil and soil fertility • pollination of crops and natural vegetation • maintenance of biodiversity • stabilization of climate - moderation of temperature extremes and the force of winds and waves – • support of diverse human cultures - beauty and spiritual sustenance … etc etc * USDA Carbon & GHG Symposium, Baltimore

3. Intro - contd There is growing awareness of services and effects to society that result from loss of such services e.g landslides, floods, climate change, etc However, In developing countries business case is not yet fully developed; In developed countries where science and legal/Instn framewks are stronger, payment schemes have evolved. • E.g New York City - water purification services provided by the Catskills watershed. When the municipal system began to deteriorate in the 1990s, the City faced a choice between investing up to $8 billion in a state-of-the-art treatment system or about $1.5 billion to protect and restore the Catskills watershed. In this case, the choice to protect the watershed was made essentially because of the economic benefits provided by the watershed’s stream of ecosystem services. USDA Carbon & GHG Symposium, Baltimore

4. Why mainstream payments/incentives for ecosystem services? • Ecosystem degradation has continued. Water quality, soil productivity and habitat are impaired • Enable people to understand their actions in terms of their effects on ecosystem functions • Need to place value on ecosystem functions in a way that creates incentives for maintaining them e.g provide financial incentives for farmers to weigh cost/benefit of maintaining native vegetation vs. cash crops USDA Carbon & GHG Symposium, Baltimore

5. Why payments?-contd • Need to ensure beneficiaries pay for the env. services they receive. E.g land holders are compensated for services they provide - income can be used to finance on-ground works; reward good land mgt practices/ecosystem stewardship • Encourage monitoring of ecosystem services • Penalise adverse impacts on environment • traditional regulatory approaches have not worked • protected areas have limitations • Poverty reduction strategies/sustainability USDA Carbon & GHG Symposium, Baltimore

6. Focus –Forest Ecosystem services STATUS OF UGANDA’S FORESTS • 50% reduction in forest cover (FAO 1995) Causes of degradation:- • MARKET FAILURE – timber pdcts traded in local area – sometimes bartered. Lack of mkt information – values; poor access roads; underpricing of natural resources; no water tarrifs – this reduces incentive to conserve • POLICY FAILURE – Decentralisation without matching increase in human and financial resources • POVERTY - forest dependence, resource depletion **Despite all these, studies show there is great potential! USDA Carbon & GHG Symposium, Baltimore

7. Value of Uganda’s Forests (Plumptre et al – 2004) • Source of water for local communities- Value could be estimated by considering the cost of providing an alternative source e.g mkt costs for boreholes • Soil Fertility – source of fuel wood. Uncontrolled over exploitation results in decrease of wood stock – causing households to resort to crop residues. Loss of crop residues and nutrients to the agric. system will result into further degradation of the soil. Value of soil fertility can be estimated by looking at the cost of replacing nutrients in the farm with chemical fertilisers which are available on local markets USDA Carbon & GHG Symposium, Baltimore

8. Value – cont’d • Carbon storage – carbon sink at global level – help reduce GHG and regulate climate change. Estimates by various studies show the value of UG’s forested areas (forests, woodlands, grasslands) to carbon sequestration to be 56.4 billion UGX(app. 34M USD;ex 1670UGX/1USD) • Biodiversity Option Values- Promising returns expected from development of plant based pharmaceuticals. Several studies using number of endemic plant species per hectare and patent rights to estimate the potential value of undiscovered plant based drugs show a value of $0.1 to $3 per hectare. USDA Carbon & GHG Symposium, Baltimore

9. Value –cont’d • Tourism/eco-tourism – 6 national parks created from forest reserves; Bwindi and Mgahinga – mountain gorilla –half of the world’s population. 33% of revenues of Uganda Wildlife Authority from gate receipts– not including downstream benefits from tourisms such as travel, hotel, handicrafts • Timber Revenue – sale of forest products; concession fees; taxes levied on charcoal makers; rent for land in forest reserves; permits for transport and trade USDA Carbon & GHG Symposium, Baltimore

10. Implications for Policy • People living near forests are forest dependent therefore policies that exclude them from using the forest run the risk of contributing to poverty • Conversely policies that integrate people into mgt and use of forests have potential to contribute to livelihoods (user rights and adequate protection and monitoring of the resource required) • Reducing access to forests may lead to poverty therefore alternative welfare measures are needed USDA Carbon & GHG Symposium, Baltimore

11. Policy – cont’d • Capacity in terms of finance and expertise to become involved in broader devpt activites is limited – Government must play a big role as principal direct buyer and catalyst for private sector direct payment schemes • New financial mechanisms need to be identified and implemented – eg finances from carbon offset schemes others should be investigated eg GEF/WB Carbon fund USDA Carbon & GHG Symposium, Baltimore

12. Enabling environment for mainstreaming PES in Uganda • Laws and Policies exist National Environment Act National Forest Policy National Forest Sector Business Plan etc Integrated Natural Resource Management Poverty Reduction Strategy Papers/Poverty Eradication Action Plan -PEAP outlines national programmes for poverty reduction as the foundation for lending (PRSC) by WB and IMF USDA Carbon & GHG Symposium, Baltimore

13. Enabling environment • DECENTRALISATION – direct involvement of local governance in PRSP reviews to adjust priorities in line with budget constraints – occurs at national, sectoral, district level – allows the unique opprtunity to integrate interventions like PES in sector plans, district plans, SDPs, SEAPs, PEAPs, & DEAPs; National Medium Term Expenditure Framework, budget framwework papers, sector investment plans • Regional level - Cross border biodiversity – shared ecosystems; USDA Carbon & GHG Symposium, Baltimore

14. Incentive mechanisms currently underway • Land tenure - Long term land leases for tree planting on govt land/Permits to grow trees in forest reserves • Eco Label Markets (FSC)/Certification – still trying to work on this…(organic certification has done well!!) • Favorable tax regulations for overseas and local developers – limited success • Trust Funds – Rwenzori Watershed Business Plan being developed to look at levying a conservation tax on downstream water users in return for catchment management • Carbon Funds – ECOTRUST Pilot Initiative has been relatively successfull USDA Carbon & GHG Symposium, Baltimore

15. Case Study – Value added from ECOTRUST Carbon offsets trading scheme • Marginal lands turned into productive areas for tree growing and income generation • Farmers learnt to establish and manage tree nurseries. Some have taken up tree nursery establishment and management as a business • Initiating a culture of farming as a business – farmer doing cost benefit analysis of putting plots under tree growing vs. getting carbon funds • Collective decision making - sale agreements signed by the both spouses USDA Carbon & GHG Symposium, Baltimore

16. ECOTRUST – value added • Change of attitude – farmers focus on biodiversity conservation with an incentive • Generation of new ideas - traditional bee hives to site in the trees - generating multiple benefits. • Access to basic needs - paying school fees for the children out of carbon funds • Encouraging planning ahead of time - plant trees for 15 years - initiates forward planning • Multiple benefits out of trees planted for carbon e.g. fruit trees, medicinal trees etc USDA Carbon & GHG Symposium, Baltimore

17. Challenges Assessing and capturing value – Price does not always capture value of other watershed services -Defining rights – who will receive payments? -Effectiveness –in enhancing environ. benefits -Efficiency –compared to other approaches -Equity –in the distribution of benefits -Relevance –to protected areas -Lack of Information/Regional differences in ES which may require application of different tax/subsidy at every site - exchange rates? USDA Carbon & GHG Symposium, Baltimore

18. Recommendations • Raise awareness – develop clear valuation tools in order to educate the public about many ways they depend on ES – informed trade offs • Define property rights – certificates of ownership- set caps or limits on activities. • Market survey – make case for bettter market prices for timber and other ENR products USDA Carbon & GHG Symposium, Baltimore

19. Recommendations • Joint forest management – controlled access/revenue sharing • Mobilise and organize buyers for ES- Connect global and national action; ForestTrends/Katoomba Group East Africa Meeting-September • Encourage private sector invstmt – payments must be structured to relate to conservation benefits USDA Carbon & GHG Symposium, Baltimore

20. Policy Actions – cont’d • Further develop fiscal instruments – environmental taxes, differential land use tax, taxes • Charges – permits and licenses – bioprospecting (e.g pharmaceutical values – access benefit sharing) hunting permits, research permits, ecotourism • Liability systems-penalties for damage/performance bonds USDA Carbon & GHG Symposium, Baltimore