Protected Area Financing via Ecosystem Services Markets

ECOSYSTEM SERVICES AND PROTECTED AREA FINANCING Presentation by Ed Sanders TIES Ecotourism & Sustainable Tourism Conference October 2008, Vancouver B.C.

Successful Ecotourism Depends On Preserving Natural Areas.

Growing populations and incomes putting pressure on ecosystems worldwide.

Budgetary constraints squeezing funding for national/state/provincial parks.

Extractive uses being emphasized for other “multiple-use public” lands.

Private protected areas threatened by development pressures and demand for food, fuel, and timber.

What Are “Ecosystem Services” And Why Are They Important?

Natural ecosystems contribute directly to human survival and welfare.

For example, forests and other natural areas combat global warming by sequestering carbon; wetlands clean water and reduce flooding.

Only recently have these so-called “ecosystem services” been explicitly identified and quantified.

They are largely free but extremely valuable (Costanza et. al. estimated $33 trillion or twice global GNP at the time).

The Millennium Ecosystem Assessment Categories

Provisioning = food, fuel and fresh water.

Regulating = climate and flood regulation, water purification.

Supporting = nutrient cycling, soil formation, pollination.

Cultural = aesthetic, spiritual and recreational benefits (including ecotourism) Preserving = protecting against uncertainty through bio-diversity

Why Ecosystem Services Are Under-supplied

Most ecosystem services (regulating, supporting, cultural and preserving) are “public goods”. { Non-excludable (I can’t keep you from using) { Non-rivalry (my use doesn’t reduce your use) Land owners have incentives to produce food, fiber or energy for sale, but not to provide ecosystem services for which there is no revenue.

Options for Preserving Natural Areas

Public ownership and management (national, state and local parks) Philanthropy (land trusts, conservation easements, predator kill compensation programs) Public payments for ecosystem services (CRP, debt for nature swaps) Creation of market mechanisms (carbon cap and trade, wetlands mitigation banks)

Current Initiatives to Create Market Mechanisms

Carbon credits and offsets (cap and trade, CDM, voluntary markets) Wetlands mitigation banks Water quality trading Local habitat preservation (e.g., URI/EAM Bobolink project)

A Few Examples

The huge carbon sequestration market (over $2 trillion by 2020) The famous New York Catskill Watershed protection program ($1.5 billion versus 6-8 billion for new water treatment plants) Costa Rica’s payment system for ecosystems services

Challenges For Forest And Land Use Change Projects

Measurement (difficult to estimate the ecological production functions) Additionality (would the action happen anyway without the program?)

Leakage (will an offsetting action occur somewhere else?)

Permanence (how long will the benefit last?)

Transaction costs (will the transaction costs be greater than the potential income?)

Potential To Generate Income from Ecosystem Services. „

„

Current payment levels are generally too small to provide strong incentives { $10 - 30 per acre for carbon credits { $500 – 100,000+ per acre for wetland mitigation banks (but expensive to implement) Likely to increase significantly in future as scarcity become more severe {

Opportunity to bundle multiple ecosystem services

Public Versus Private Protected Areas „

Government owned land should be managed to provide ecosystem services when ever that maximizes public welfare. {

„

Implies that public needs to understand and advocate for such uses.

Private land owners usually will manage their lands to provide ecosystem services only when it is in their economic interest to do so. {

Implies critical importance of developing markets for ecosystem services.

The Bottom Line

Payments for ecosystem services will be important for ecotourism projects attempting to acquire, manage and protect large properties The markets for ecosystem services are rapidly evolving and will become increasingly robust over the next few years But still well-understood only by environmental and economic specialists Ecotourism community (and general public) need to become advocates for promoting ecosystem services market development