How to Sell Nature Well?
How do you feel while you are freely breathing fresh air in a forest ? Good, for sure. However, how much would you be willing to pay to feel that ? I guess, it’s a question nobody asked you before. How people could give a monetary value to things they always had for free ? Neither religion nor morality were able to convince capitalist society of the benefits to conserve biodiversity or natural ecosystems. We should play the same game and put a price on Nature.
Payments for Ecosystem Services (PES) may be an innovative scheme to motivate society to conserve natural ecosystems. Payment for ecosystem services (PES) are a voluntary transaction, done by a service user to a service provider on conditional and agreed rules, for natural resource management generating offsite services. PES are generally considered for regulatory or cultural ecosystem services since the provisionary ecosystem services are already integrated in economic markets.
The main idea of the PES is to give a value to ecosystem services which are invisible or not valued yet and therefore, finance the conservation of an area for the common benefit.
1) What to value and sell ?
What do you put on the table to sell ? This is a difficult question, for example how to sell the climate regulation service ? How do you know this service is well achieved ? Moreover climate change is global, how to differentiate your personal impact on it ?
Since the climate is changing and people start to worry about it, companies selling carbon stocked in trees are flourishing. Tree volume gives a good estimation of the quantity of carbon taken out from the atmosphere. This proxy is simple and practical to assess.
However, referring only to the number of trees to sell carbon might be a devastating practice. For example, the company which sells carbon stocks may plant only one fast growing tree species on the land, reducing biodiversity and soil quality. This is a trade-off between competing ecosystem services. Moreover this same company may plant trees in a remote place, maybe on another continent and alter the indigenous living conditions. This spillage of the negative impact outside of the working area is called leakage.
2) Who are the buyers
Buyers are organizations who want to conserve an area or a resource. It can be a private corporation who needs to ensure the quality of a resource because its business uses it, water for instance. It can also be a private company who has to stick to a national or international law and voluntarily reduce its negative impact.
Two conceptualizations exist depending on the buyer willingness to participate in a PES scheme :
- The first one is the Coasean or user-financed conceptualization where the buyer is motivated to create PES scheme because its business highly depends on a natural resource, water or beautiful landscapes for instance. Vittel, a French company selling bottled water, created a PES with the farmers living on the watershed. Vittel financed a social and economic study of the 26 landowners living there and helped them to switch to eco-friendly farming practices. As you can see in this example, service users don’t necessarily pay with money, but they can pay with in-kind contribution. In the previous example, farmers got advice, training and new high-tech machinery.
- The second one is the Pigouvian conceptualization of PES. In the latter, PES agreements are regulated by government or international laws. It is based on the philosophy of taxing negative and subsidizing positive externalities. For example, the European Agri-environmental scheme subsidized good land managers who use biodiversity-friendly practices. In this case, the service user is not the government but the citizen of the country.
As mentioned in the PES definition, payment is conditional which means that the buyer doesn’t pay if the ecosystem service is not delivered. The delivery condition can be based on output metrics such as carbon sequestration, wildlife offspring… However if an output based payment is not possible, the payment condition can be based on input metrics such as area, number of planted trees…
3) Who are the sellers ?
Service providers are people or organizations who actively influence a regulatory ecosystem service by changing environmental conditions. They own a land and, through a sustainable management, can sell ecosystem services such as water or soil quality, biodiversity conservation and climate mitigation.
Biodiversity-friendly farmers conserve biodiversity for the public good, for this reason they receive a public financial incentive.
FairVentures Worldwide plants trees in Indonesia and sells carbon credits to companies willing to compensate their greenhouse gas emissions.
PES can be sold in 3 different ways :
- First, ecosystem services can be put into a big bag and sold as a package to one buyer (bundling). For example, shrimp farmers in the south of Vietnam are paid to conserve mangroves and reduce soil erosion, biodiversity loss and hurricane damages.
- Second, the services of one ecosystem can be divided into different parts and sold to different buyers (layering). “A” buys the biodiversity, “B” the climate mitigation and “C” the water quality regulation.
- Third, only one ecosystem service is sold to one buyer who benefits for free from the other ecosystem services (free ride). This one is the worst one as some services are not consider in the contract. There is a loss of value and so a loss of conservation opportunities.
4) Other actors
Many other actors are involved in the valuation of ecosystem services and its integration in the global economy.
- Academics and researchers start by identifying ecosystem services and metrics to ensure its saleability. Mapping is particularly useful to identify sensible areas where to focus conservation effort and create more efficient PES.
- Insurance organization insures the sellers in case of environmental hazards. In the case of carbon credit sellers, it is necessary to insure the tree plantation in case of storm or pest attack. Insurances are also necessary because of the market volatility, the price of the carbon credit highly fluctuates.
- Certification providers are actors able to provide a sustainability label. For example Naturland certifies farmers who produce food organically. This certification is also a way to motivate land owners to manage their land sustainably as the certification increases their income.
- Intermediary organizations are necessary to negotiate contracts between sellers and buyers, for example to define key metrics for service delivery and payment conditions. Intermediaries reduce the transaction cost of PES implementation by creating a market and infrastructure where buyers and sellers can meet. Intermediaries check the market prices and ensure the PES fairness. When the agreement is signed, intermediaries are in charge of monitoring, reporting and improving the scheme.
PES is a novel method to conserve the landscape. As every new tool, it has weaknesses. The most commons are the lack of scalability, the lack of targeting when choosing geographical area and participating land owners, and the lack of environment monitoring for payment conditionality.
The gap between theory and practice is still huge and need to be addressed by future researches. New metrics and monitoring methods need to be created to ensure payment conditionality, new market has to be designed to raise funds for conservation purposes, new knowledge has to be created about the link between land owners social background and PES success.
Only interdisciplinary research and the involvement of a diversity of actors can ensure the success of the PES scheme. Bringing experts with different background is a fertile land to grow new ideas and tools in land conservation.