Forests Sourcebook - HCV Resource Network

payments for reforestation can encourage land users to cut
down standing trees so as to qualify.
have a field presence, but sometimes it may be necessary to
establish new organizations to undertake this task.
Creating the institutional framework
Scale of project. A critical initial question concerns the
scale of the PES mechanism. There are, in principle, three
broad scales at which PES could be implemented: (1)
nationwide, (2) at the scale of a river basin, and (3) locally,
usually at the scale of a microwatershed. In practice,
although there are some high-profile national systems (in
Costa Rica and Mexico), almost all existing mechanisms are
at the local scale. There are no river basin–scale programs.
Nationwide systems may appear attractive because they can
cover large areas quickly and can have relatively low costs
because of economies of scale. Experience has shown that
such systems tend to be very inefficient, however. They are
easily distorted by political considerations and exhibit low
transaction costs mainly because they sidestep the difficult
questions. Local initiatives are more likely to be efficient
because they tend to be closely tailored to local needs and
conditions. However, they often are constrained by limited
local capacity. The El Salvador Environmental Services
Project is exploring an intermediate approach, in which
local mechanisms are being developed under a nationwide
umbrella.
Legal framework. PES programs are often thought to
require a specific legal framework. They only do so if they
are to be based on public financing, in which case a legal
framework is desirable so that the payment program is not
wholly at the mercy of annual budgetary decisions. Relying
on public financing is, however, generally an undesirable
approach to PES. PES programs that are based on payments
from service users do not require any specific law, other
than general contract law. There may be a need for legal
reform to remove obstacles, however. For example, public
utilities may be restricted in their ability to charge
consumers for the costs of conservation, or in their ability to
use available funding in PES mechanisms.
Functions to be accomplished. Systems of payments for
environmental services require a supporting institutional
infrastructure. This can take many forms, but several common
functions must be accomplished (see figure 2.4).
Organizationally, the most complex task to be undertaken is
paying service providers because agents must be sent into the
field, with all the logistical issues that entails. This task can
often be subcontracted to NGOs or other agencies that already
Ensuring the poor benefit
PES programs are not poverty-reduction instruments, but
given the often high spatial correlation between areas that
provide environmental services and areas of high poverty,
PES programs may contribute to poverty reduction, at least
locally. Guidelines are available on how to design PES programs
to maximize their positive impact on the poor and
minimize any potential negative impacts. For example, in
some countries, even within a community, benefits may be
captured by local elites at the expense of the poor. To
address this issue, capacity needs to be built to empower the
poor and vulnerable groups in the community.
Because some participants may be indigenous groups, it
may be necessary to prepare an Indigenous Peoples Plan
(IPP) or an Indigenous Peoples Planning Framework
(IPFP). However, because PES programs are largely voluntary,
these safeguards are triggered mainly in cases with collective
decision making on land use and the use of PES revenues
(see chapter 12, Applying OP 4.10 on Indigenous
Peoples, in section II of this sourcebook).
Other operational considerations
Project type. PES projects can generally take two forms:
■
■
Projects entirely dedicated to PES, which typically work
on a nationwide basis (as in Costa Rica and Mexico).
PES components within a broader project. Such PES
components could be part of a variety of projects. Obvious
examples include watershed management and sustainable
land management projects (as in the Kenya
KAPSLM (Kenya Agricultural Productivity and Sustainable
Land Management), but there is also significant
potential to undertake PES as part of institutional reform
projects or water infrastructure projects (the Brazil
Espirito Santo Project is partially blended with a domestic
water supply project in the town of Vitoria).
Avoiding perverse incentives. PES projects do not
support any clearing or degradation of forests or other
natural habitats. On the contrary, they are intended to
promote the conservation and restoration of forests and
other natural habitats. PES projects, therefore, are usually
fully compatible with both the World Bank’s Natural
Habitats OP/BP 4.04 and the Forests OP/BP 4.36.
NOTE 2.3: INNOVATIVE MARKETING ARRANGEMENTS: PAYMENTS FOR ENVIRONMENTAL SERVICES 89