Creating Markets for Ecosystem Services Economic Commission for Europe Seminar on the Role of Ecosystems as Water Suppli

1. Creating Markets for Ecosystem Services Economic Commission for Europe Seminar on the Role of Ecosystems as Water Suppliers Geneva, 13-14 December, 2004 Gonzalo Castro Head, Biodiversity Team Global Environment Facility

2. GEF Biodiversity Portfolio Summary(FY91-FY03) Number of Projects: 336 GEF Funding: US$1.54 Billion Co-funding: US$3.24 Billion Number of Countries: 140

3. Lessons Learned(Independent OPS-2) • STRENGTHS: • Excellent Ecosystem Representation • Wide Coverage • Innovative Financing (Trust Funds, PES, etc) • Impact on Capacity Building • Strong Stakeholder Participation • Addresses Cross-Cutting Issues • Includes Science and Technology Issues

4. Lessons Learned(Independent OPS-2) • WEAKNESSES: • Fails to Address Root Causes • Weak Sectoral Linkages (mainstreaming) • Weak Sustainability • Weak Private Sector Participation • Poor Capacity to Measure Results

5. Change in Paradigms From: How to make project sustainable? To: How to sustain conservation? From: Project success To: Changing behavior of societies and economies From: Short-term projects To: Long-term programs

6. GEF-3 Strategic PrioritiesUS$3.1 Billion (ca. US$800 Million for BD) • Catalyzing Sustainability of Protected Areas (US$400M) • Mainstreaming Biodiversity in Production Landscapes and Sectors (US$250M) • Capacity Building for the Implementation of the Cartagena Protocol on Biosafety (US$80M) • Generation and Dissemination of Best Practices for Addressing Current and Emerging Biodiversity Issues (US$70M)

7. MAINSTREAMING BIODIVERSITY OBJECTIVE To integrate biodiversity conservation in agriculture, forestry, fisheries, tourism and other production systems and sectors to secure national and global environmental benefits

8. Water services Supply of services: Upstream land uses affect the Quantity, Quality, and Timing of water flows • Demand for services: • Possible downstream beneficiaries: • Domestic water use • Irrigated agriculture • HEP • Fisheries • Recreation • Downstream ecosystems

9. Deforestation and use for pasture Conservation with payment for service Payment Costs to downstream populations The logic of payments for environmental services Conservation Benefits to land users Important! This logic is repeated every year Need annual payments

10. Example 1Silvo-Pastoral Systems (Central America, Colombia)

11. Expansion of livestock production is a major cause of habitat loss in Latin America Deforestation in Nicaragua, 1983-2000

12. Much of this expansion is in lands unsuited to it, quickly degraded Quindío, Colombia Esparza, Costa Rica

13. Silvopastoral systems Combine trees with livestock production • Use of trees in pastures • Cut-and-carry systems • Live fencing

14. Often insufficient to justify adoption Ignored by land users Benefits of silvopastoral systems • On-site benefits: • Promote soil fertility • Provide shade • Provide fodder • Provide additional products (timber, fruit, etc) • Biodiversity benefits: • Host larger number and wider variety of species • Help connect remaining natural habitats • Carbon benefits: • Sequester more carbon in soil and biomass • Water benefits: • Higher infiltration • Improved water filtration

15. Profitability of silvopastoral practices from land users’ perspective Note: 20ha farm in Nicaragua

16. Biodiversity index +0.1 for multiple species (>5); +0.1 for multiple shade species; +0.1 for multi strata; +0.1 for connectivity; +0.2 with understory; +0.3 with species enrichment; +0.1 if riparian; +0.1 with species enrichment

17. Finca Putumayo (Quindío, Colombia)

18. Finca Putumayo:Land use plan

19. Finca Putumayo: Payments under RISEMP

20. Impact of PES on profitability of silvopastoral practices Note: 20ha farm in Nicaragua

21. Primary ForestsTotal US$102/ha/year(Constantino and Kishor, 1993) Example 2Ecomarkets (Costa Rica)

22. Creation of Ecomarkets • Costa Rica Forestry Law • Pays landowners $40/ha/year • Same hectare Market Creation Over 500,000 ha under system!

23. Example 3Biodiversity-Friendly Shade Coffee (El Salvador)

24. Coffee grown under shade: The forest is structurally complex and provides some degree of habitat richness Coffee grown in the sun: The forest is gone and the value of this plantation for biodiversity is very marginal

25. Certified Coffee • Better taste • Less volatile prices • Ecosystem Conservation • Water Conservation

26. Water services: Key characteristics Water flows downhill

27. Río Ocoa Río Nizao High value = Substantial potential payments 98MW 52MW Hydropower Production San José de Ocoa Low value = Minimal potential payments 64MW Potable water Irrigation 6 m3/sec Dominican Republic Caribbean Water services vary substantially

28. N Río Caroní watershed SAN PTO. FELIX ORDAZ RIO ORINOCO CARIBBEAN MACAGUA CARUACHI TOCOMA CIUDAD BOLIVAR Caracas GURI Maracaibo VENEZUELA TAYUCAY Canaima NP AURAIMA RIO PARAGUA COLOMBIA RIO CARONI ARIPICHI EUTOBARIMA BRASIL DAM Venezuela: Canaima NP Project Pto. Ordaz

29. N INSTALLED CAPACITY 3000 MW GURI I 6600 MW GURI II TOCOMA 360 MW MACAGUA I 2376 MW MACAGUA II GURI CARUACHI MACAGUA III 164 MW CARUACHI 2160 MW TOCOMA 2160 MW RIO ORINOCO GURI II MACAGUA EL. 270 300 250 EL. 215 200 TOCOMA CARUACHI EL. 128 150 ELEVATION (masl) MACAGUA I -II Y III EL. 91 100 EL. 54,5 50 RIO ORINOCO 0 90 80 70 110 100 60 50 40 30 20 10 0 DISTANCE (Km) Venezuela: Canaima NP Project

30. Can we actually get people to pay? Costa Rica: Payments by water users