Getting Started with Payments for Ecosystem Services

1. Getting Started with Payments for Ecosystem Services Getting Started with Payments for Ecosystem Services MODULE FOUR: Steps to Developing a Payment for Ecosystem Services Project October 2009 United States Forest Service

2. Steps to Developing a PES Project: Part 2 • Module 4.2: Steps to Developing a Payment for Ecosystem Services Project: Part 2 • Step 3: Structure PES Agreement • Agreement Basics • Key Issues for Sellers • How to Reduce Costs • Options for Payment Types • Contracts • Key Elements of an Agreement • Step 4: Implement PES Agreement • Key Actions • Monitoring and Evaluation • Value of Honest Brokers

3. Step 3: Structure PES Agreement Design management and business plans Reduce transactions costs Review options for payment types Select a contract type 3 3 3 3 3 3

4. Agreement Basics Who is responsible for each action? What ecosystem service results are expected? How results will be demonstrated? Who will be responsible for monitoring, evaluating, verifying, and certifying results? Who will receive what amount of money in what time frame? Which criteria will evaluate the fairness of the PES deal? 4 4 4 4

5. Key Issues for Sellers What costs may be incurred during implementation of the deal? What are the projected revenues for sellers? What, if any, intangible benefits will sellers realize What are potential risks to sellers and pathways for mitigating risks? 5 5 5 5

6. How to Reduce Costs Aggregate projects Build on existing programs “Bundle” environmental service payments Cost-sharing mechanisms Intermediary institutions provide special services and overall management services Reduce data costs Large-scale, area-wide projects Set up a Trust Fund 6 6 6

7. Options for Payment Types Direct financial payments Financial support for specific community goals In-kind payments Recognition of rights Pay-per-tree Forest establishment and protection Profitable and sustainable land management Providing services

8. Contracts Memorandum of Understanding or Memorandum of Agreement Legal contract Customary law agreements “Handshake” agreement Quid-pro-quo 8 8 8

9. Key Elements of an Agreement • Terms and types of payments • Timing of payments • Requirements to be met for payment • Managing risks • Signatories to the contract

10. Step 4: Implement PES Agreement • Finalize the PES management plan • Implement activities • Verify PES service delivery and benefits • Monitor and evaluate the deal 10 10 10 10 10 10

11. Key Actions • Hire personnel • Prepare accounting management and tracking systems • Open accounts to manage funds • Train participating community members on the activities allowed 11 11 11

12. Monitoring and Evaluation • Determination of who selects indicators and who is reporting to whom • Selection of indicators • Creation of a “Local Ecosystem Conceptual Process Model” • Selection of monitoring sites

13. Value of Honest Brokers • Assessing ecosystem service products and values to buyers • Establishing relationships and rapport with potential buyers • Enabling sellers get to know potential buyer(s) well, ensuring meetings reveal key details • Ensuring the final agreement is in sellers’ best interest • Risk management advice / services • Negotiating on behalf of the community • Proposal development

14. “Take your time. And don’t sign it if you don’t fully understand.” - Chief Oren Lyons, Onondaga Nation Council of Chiefs of the Six Nations of the Iroquois Confederacy 14 14 14

15. Thank You! Questions & Discussion www.katoombagroup.org Kate Hamilton: khamilton@ecosystemmarketplace.com Fiona Mulligan: fmulligan@forest-trends.org 15 15 15 15 15 15 15 15 15