Rationale for research implementation
The Lao People's Democratic Republic, formerly known as the Land of a Million Elephants, is rich in natural resources, featuring unique and productive forest ecosystems that support diverse wildlife and protect vital soil and water resources In 2015, forest cover comprised 46.7% of the country's land area, earning Laos the title 'Château d'Eau de l'Asie' due to its extensive water resources, which contribute over 40% to the Mekong River’s flow Recognized for its remarkable biological diversity, Laos is home to many new species and approximately 1.6% of globally threatened species, according to the 2004 IUCN RED list The country also boasts abundant mineral resources, including gold and copper, despite its mountainous terrain covering 65% of its area, which is more conducive to hydropower development and livestock raising than agriculture.
The Lao government recognizes the vital importance of its natural resources and is committed to sustainable usage and extraction to conserve the country's natural capital To achieve this, the government has implemented a balance of regulatory and economic incentives, enacting key regulations such as the Environment Protection Law and the Forestry, Water, and Land Laws Additionally, pilot programs in sectors like water, forestry, fisheries, agriculture, and land have encouraged rural residents to engage in the effective protection and responsible use of these resources while enhancing their household incomes The private sector is also encouraged to play an active role in this national initiative.
1 Water Resources and Environment Agency, National Water Policy, Vientiane, Lao PDR, 2012
2 Ministry of Natural Resources and Environment, MONRE National Biodiversity Strategy and Action Plan for Lao PDR 2016-205, Vientiane, Lao PDR, 2015
The Lao people face significant challenges in recognizing the importance of natural resources in their daily lives, as rising international market demand and human greed, particularly in certain commercial sectors, contribute to the degradation of these resources Despite the alarming decline in natural resources, many government institutions, citizens, and businesses in Laos still operate under the misconception that environmental protection and ecosystem services are infinite and self-sustaining.
Globally, economic incentives are being utilized to encourage active participation in the management of natural and environmental resources Payments for Ecosystem Services (PES) are provided to farmers and landowners who commit to specific actions that enhance the management of their land or watersheds These payments occur when beneficiaries of ecosystem services compensate the service providers, based on the principle that those who protect or maintain these ecological services deserve financial recognition for their efforts Such initiatives aim to foster natural resource conservation through economic means.
PES, or Payment for Ecosystem Services, is a groundbreaking initiative that has been implemented in Asia since 2009, sparking significant interest in the development of PES programs across the region Numerous studies and pilot projects are currently underway in countries such as Indonesia, the Philippines, India, Nepal, Vietnam, and China to evaluate the necessary conditions for establishing effective PES systems This growing focus on PES highlights the urgent need to address the scarcity of ecosystem services in Asia.
Since 2010, the Government of the Lao PDR has demonstrated a strong commitment to implementing Payment for Ecosystem Services (PES) programs This interest has sparked extensive discussions among government officials, development partners, and NGOs through various workshops and meetings In 2018, a National Steering Committee and Working Group on PES were established to analyze and assess the current status of PES in Laos, aiming to develop relevant legislation that aligns with the country's specific needs and conditions.
3 Michael Esbach, Mike Hedemark, Payments for Ecosystem Services (PES): An Introduction and Case Study on Lao PDR, Center for Biodiversity and Conservation of the American Museum of
Natural History, Washington DC USA, 2012
4 Minister of Natural Resources and Environment Resolution, Vientiane, Laos PDR, 2018
Current research on Payment for Ecosystem Services (PES) in Laos is limited, with a focus primarily on forest conservation and wetland services There is a notable lack of comprehensive studies assessing the effectiveness of Ecosystem Services (ES) and PES concepts in the Lao PDR This policy research aims to address several key questions: the current status of ES and PES realization in Laos, the main factors influencing their success and failure, the local interpretation of these concepts, the reasons behind the general public's lack of awareness regarding their significance, and strategies to enhance understanding among relevant institutions and individuals Additionally, the research will explore whether the PES framework is suitable for the Lao context and identify potential barriers to its successful implementation, particularly concerning the private sector.
Forests play a vital role in the livelihoods of rural communities in Lao PDR and globally, providing essential resources and services for centuries Community forestry initiatives aim to enhance the relationship between people and forests, ensuring sustainable outcomes for both forest-dependent communities and the ecosystems themselves Despite these efforts, deforestation and forest degradation remain pressing issues in Lao PDR, exacerbated by weak land and forest management that struggles to control improper land use This has led to significant environmental degradation, loss of biodiversity, and adverse impacts on the livelihoods of vulnerable agricultural communities The last comprehensive land and forest survey was conducted in 2002, with imagery from 1999-2000, while rapid changes in land use have occurred since 2003-2004, primarily driven by increased investment in commercial agriculture.
The conversion of dense forests frequently takes place before establishing plantations, while extensive areas are cleared for hydroelectric power projects and mining operations Moreover, forest degradation is driven by shifting agriculture, logging activities, and various other influences.
Environmental Services (ES) refer to the benefits humans receive from both natural and developed environments Hydrological services, which include river flow regulation, flood control, and soil erosion prevention, are essential components of ES However, these services are increasingly threatened by various human activities worldwide To address these challenges, the concept of Payment for Ecosystem Services (PES) has emerged as a viable strategy to incentivize land users to adopt behaviors that enhance ES, thereby promoting sustainable land use practices.
Lao DPR is experiencing significant growth in hydropower development, with current generation capacity reaching 3,800 Megawatts and projections estimating an increase to 12,500 Megawatts by 2020, according to the Ministry of Energy and Mines Maintaining intact upstream catchments is crucial for these hydropower projects, as they offer vital watershed services, including reduced sedimentation, regulated water flow, improved water quality, and minimized flood damage and debris.
Upland areas that serve as hydropower catchments are increasingly being farmed by long-term residents, leading to unsustainable agricultural practices due to rising populations and demand for commodities Traditional farming methods, once sustainable and low-intensity, are giving way to practices like shifting cultivation for non-traditional crops such as maize, aimed at international animal feed markets This shift results in decreased land productivity, insecure livelihoods, and diminished availability of non-timber forest products (NTFPs), ultimately compromising the watershed services essential for hydropower projects To address these challenges, it is crucial to implement sustainable management mechanisms for catchments that balance the needs of local communities with the requirements of hydropower projects, with Payment for Ecosystem Services (PES) schemes being a proposed solution.
Objectives of the thesis
Implement assessment of Payment for Ecological Service (PES) Scheme Nam Kading Protected Area (PKPA), Bolikhamxay Province and make recommendations for completing PES management system in Lao PDR
1 Systematize the theoretical basis of PES, structure, principles of design, and operation of PES
2 Review experiences on PES of countries around the world
3 Review the implementation of PES in Laos PDR
4 Assess the operation of the PES scheme at NKPA and withdraw implications
5 Estimate the willingness to participate in the PES scheme by local communities in Laos
6 Proposing solutions to improve the effectiveness of PES in NKPA and completing PES policies in Laos
Subject and scope of thesis
This project focuses on empirical research in NKPA, Boulikhamxay Province, while reviewing global experiences and literature on Payment for Ecosystem Services (PES) It also examines the current state of PES in Lao PDR Insights gained from the empirical study at NKPA are utilized to inform the design and implementation of PES in Laos.
Evaluation of the implementation of PES policy in Nam Kading Nature Reserve, Boulikhamxay Province between 2017 and 2020
The main contents analyzed in the study include:
• Statistics of PES area in NKPA
• Impact of PES policy on economic, social, and environmental aspects in the study area
• Analyzing strengths, weaknesses, opportunities, and challenges in PES in Nam Kading NR
• Assessing the achieved results and pointing out some limitations and causes in implementing the PES policy in NKPA
• Proposing appropriate policies to complete the PES policy in Boulikhamxay province in general and in NKPA in particular.
Specific research methods
This study utilizes secondary data regarding forest cover and annual statistics from Nam Kading National Reserve, along with information from the Boulikhamxay Province Department of Agriculture and Rural Development Furthermore, it incorporates yearly Payment for Ecosystem Services (PES) data derived from the forest status map of Nam Kading NR.
Collaborate with the Nam Kading NR Management Board to clearly identify the PES payment area, while also reviewing the funding sources collected and disbursed for FES over the past three years Additionally, assess the inspection and supervision of the PES policy implementation within the protected area, as managed by the Board.
The study utilizes semi-structured interviews and open-ended surveys to conduct a participatory rural assessment (PRA) aimed at evaluating the promotion of Payment for Ecosystem Services (PES) policies It involves direct interviews with 20 individuals engaged in PES-related tasks, including members from the MPA management board, DONRE leaders, and NKPA management board Additionally, the research encompasses service users from three power plant and three water plant service units, as well as local service providers in the villages of Nam Kading National Reserve.
A field survey was conducted in Khamkuna and Nacheng villages, engaging 150 local households through group meetings to evaluate the advantages and disadvantages of Payment for Ecosystem Services (PES) The study identified key limitations affecting the establishment of PES funds and utilized a SWOT analysis to assess the internal and external environmental factors influencing PES This comprehensive approach aimed to develop effective strategies for enhancing PES implementation in the communities.
Methods of analysis and data processing
The descriptive statistical method employs tables, charts, and graphs to effectively summarize the socio-economic conditions of NKPA and its surrounding provinces, alongside the actual revenue and expenditure data from the pilot PES scheme in NKPA By comparing data from various sources, inaccuracies are identified and eliminated, ensuring a more accurate representation of the financial landscape.
The method of aggregating and comparing data involves analyzing the number of impoverished households, Payment for Ecosystem Services (PES) revenues, and expenditures over the past three years This analysis aims to identify changes in forest quality and the average annual income of households, thereby assessing the economic, social, and environmental impacts since the implementation of PES policy in the study area.
This thesis employs the binary Contingent Valuation Model (CVM) to assess local residents' willingness to engage in Payment for Ecosystem Services (PES) programs It establishes and estimates regression models to evaluate participation levels, utilizing SPSS software for data processing and analysis.
Structure of the thesis
In addition to the introduction and conclusion, the thesis is structured into chapters as follows:
• Chapter 1: The basis of Payment for ES
• Chapter 2: Payment for PES in countries around the world and Lao PDR
• Chapter 3: Location, Scope, and Methodology
• Chapter 4: Research results of the assessment of PES scheme at NKPA, Bolikhamxay province
• Chapter 5: Recommendations to complete PES mechanism in Lao PDR
THE BASIS OF PAYMENT FOR ES
Scientific basis of PES
1.1.1 Concepts related to ES and PES
Ecosystems are communities of living organisms interacting with their nonliving environment, forming a complex system Earth hosts a variety of ecosystems, including agroecosystems, forest ecosystems, grassland ecosystems, and aquatic ecosystems When functioning properly, these ecosystems deliver essential resources such as agricultural products, timber, and marine life, including fish and crabs.
Ecological services (ES) encompass the economic benefits derived from the ecological functions of ecosystems, impacting all living species, not solely humans Increasingly, society is acknowledging the vital importance of maintaining the health of ES, as well as its social, cultural, and economic implications.
Ecological services (ES) encompass the economic benefits derived from the functions of ecosystems, impacting all living species, not just humans Society is increasingly acknowledging the essential health, social, cultural, and economic needs associated with the well-being of ecological services.
Figure 1.1 The eight Broad Habitats assessed and examples of the ES-derived from each
Source: British Department for Environmental Food and Rural Affairs, 2010
Human activities often lead to the misuse of natural resources, negatively impacting ecosystems' ability to provide essential services Sectors like agriculture, forestry, fishing, and tourism can strain these ecosystems, resulting in adverse effects on air quality, water purification, flood management, and climate stability According to the 2005 Millennium Ecosystem Assessment, although food production has increased, most ecosystem services have deteriorated significantly.
The rise in agricultural productivity has led to a decline in essential ecosystem services (ES), particularly those related to biodiversity and the quality of air, soil, and water, primarily due to the loss of semi-natural habitats Although there have been improvements in specific ES over the past decade to two decades, many still operate well below their potential With a growing global population and increasing climate change impacts, the pressures on ES are expected to persist A critical challenge is to boost food production while reducing agriculture's negative effects on other ES through sustainable intensification.
Land management can often be optimized to provide multiple ecosystem services (ES) simultaneously However, since nature operates as a complex, interconnected system, enhancing one type of service may impact others, either positively or negatively For example, river restoration can yield 'win-win' outcomes by benefiting amenities, biodiversity, and fisheries Conversely, introducing non-native tree species for carbon sequestration may lead to trade-offs between services.
1.1.2 Market-based mechanisms for enhancing ES
Over the past 60 years, the decline in habitat size and health, coupled with the deterioration of ecosystem services (ES), highlights a historical failure to recognize the true value of nature While some ES, like food and lumber, hold monetary value, others, such as climate regulation and flood control, are essential for our well-being but lack a price tag This has led to a decision-making imbalance, prioritizing short-term financial gains and resulting in the overexploitation of natural resources However, recent advancements in our understanding of ES and how individuals value these services enable us to consider a broader range of ecosystem benefits in our decision-making processes.
As our understanding of ecosystem services (ES) improves, developing market-based systems that incorporate these values into decision-making through incentives and price signals becomes essential These systems can include trading mechanisms, such as biodiversity offsets, where benefits in one region compensate for harm in another, and certification processes that reflect ES value in product pricing, like eco-labeled products Consequently, Payment for Ecosystem Services (PES) emerges as a viable market-based approach for conserving the benefits provided by ecosystems.
What is Payment for ES (PES)
Payment for Ecosystem Services (PES) involves a voluntary agreement where a buyer acquires a specific ecosystem service or land use from at least one provider, contingent upon the provider ensuring the delivery of that service This arrangement emphasizes the importance of conditionality, ensuring that the ecosystem service is effectively secured before any transaction occurs.
This thesis, drawing on this definition, identifies seven fundamental principles t hat should ideally underpin any PES scheme:
PES agreements are entered into freely by stakeholders
Payments paid by ES recipients are referred to as beneficiary payments (individuals, communities and businesses, or governments acting on behalf of various parties)
Direct payments are those made directly to ecosystem service providers (in practice, often via an intermediary or broker)
Additionality in Payment for Ecosystem Services (PES) refers to the compensation received for actions that exceed the normal duties of land or resource managers While the specific definition of additionality can differ based on individual circumstances, it is essential that the actions rewarded go beyond mere compliance with regulations.
Payments through the PES program are dependent on the successful provision of ecosystem service benefits The pricing often relies on the agreement between the contracting parties regarding management practices that are expected to yield these benefits.
Permanence requires that management initiatives funded by beneficiaries be irreversible, hence ensuring sustained service supply
Avoiding leakage entails establishing PES plans to prevent leakage, which occurs when securing an ecosystem service in one site results in the loss or deterioration of ES in another.
Concept of PES Schemes?
PES systems lack a clear definition, leading to some ambiguity (Wunder 2007), yet they are generally agreed to comprise five key components: (1) voluntary payments, (2) for a clearly defined ecosystem service (ES).
(3) at least one buyer, (4) at least one provider, and (5) the buyer paying only as long as the provider offers the service (Wunder 2005)
Pagiola et al (2005) introduced a key criterion stating that customers of an ecosystem service (ES) must also be its users This approach suggests that the financial responsibility for acquiring an ES should fall on the end users rather than governments or donor organizations By doing so, it enhances the likelihood of reinforcing and securing the essential conditionality factor associated with the service.
Diverse efforts of varying dimensions have been touted as PES programs under this paradigm of 'definition by characteristic.' According to Arriagada and Perrings
(2009), four primary ES have been commercialized for use in PES schemes:
Many Payment for Ecosystem Services (PES) systems are small in scale, both geographically and financially (Arriagada and Perrings 2009) These systems typically emphasize compensating indigenous communities for their role in safeguarding valuable ecosystem services In contrast, larger PES initiatives are frequently spearheaded by government entities at the provincial, state, or national level.
PES programs vary in their design and efficacy in promoting efficient, long-term
ES conservation However, analyzing a PES scheme's effectiveness and added value is challenging for two reasons (Arriagada and Perrings 2009)
The absence of a PES system leads to a significant lack of control, making it impossible to accurately assess the status of the target environment or resource Prior to implementing the PES method, the existing condition of the environment serves merely as a proxy for evaluation.
It is often challenging to clearly define and measure ecosystem services (ES), leading to payments that rely on indirect indicators of service providers' actions or environmental conditions Consequently, the impact of payment for ecosystem services (PES) plans remains uncertain, as we cannot observe the outcomes that would have occurred without such initiatives, and quantifying these effects is inherently difficult.
Types of ES and PES Schemes
The chart below provides an overview of the primary ES
Type of service Description Examples
Material or energy outputs from ecosystems
Freshwater supply Food production Raw material production Medicinal resources provision
Benefits obtained from the regulation of ecosystem processes
Local climate and air quality regulation
Erosion prevention and maintenance of soil fertility Carbon sequestration and storage Moderation of extreme events Waste-water treatment
Provided to support habitats and ecosystem functioning
Providing habitats for species Maintenance of genetic diversity
Related to recreation and human inspiration
Recreation and mental and physical health provision
Spiritual experience and sense of place provision
Tourism, Aesthetic appreciation and inspiration for culture, art, and design
Source: The ecosystem and Economic Foundation, TEEB 2010
Provisioning Services are the material or energy outputs of ecosystems They include, among other things, food, water, and other resources, as listed below:
Ecosystems play a crucial role in food production, primarily through regulated agroecosystems, while also providing valuable resources from marine, freshwater, and forest environments Despite their significance, foods sourced from forests are often overlooked and undervalued.
• Raw materials: Ecosystems supply many building and fuel resources, including timber, biofuels, and plant oils obtained directly from wild and farmed plant species
Ecosystems and biodiversity are vital sources of medicinal resources, as numerous plants serve as traditional remedies and raw materials for the pharmaceutical industry Each ecosystem holds the potential to contribute valuable medical resources, highlighting the importance of preserving biodiversity for future healthcare solutions.
• Freshwater: Ecosystems play an essential part in the global hydrological cycle by regulating water flow and purification The amount of water available locally is influenced by vegetation and woods
Regulating Services are the services provided by ecosystems in their capacity as regulators Some instances of handling services are as follows:
Trees play a crucial role in enhancing local climate and air quality by providing shade and influencing rainfall and water availability both locally and regionally Additionally, trees and plants contribute to cleaner air by removing environmental pollutants, making them vital for a healthier ecosystem.
Carbon sequestration and storage are crucial for regulating global temperatures, as ecosystems absorb and store greenhouse gases Trees and plants capture carbon dioxide during their growth, effectively acting as carbon sinks within forest ecosystems Additionally, biodiversity enhances the resilience of these ecosystems, enabling them to better adapt to the impacts of climate change.
Extreme weather events such as floods, hurricanes, tsunamis, avalanches, and landslides pose significant natural hazards However, ecosystems and living species play a crucial role in moderating these disasters by acting as natural buffers For example, wetlands effectively absorb floodwaters, while trees stabilize hillsides, reducing landslide risks Additionally, coral reefs and mangroves provide essential protection for coastal areas against storm damage, highlighting the importance of preserving these natural systems to mitigate the impacts of extreme events.
Wetland ecosystems play a crucial role in wastewater treatment by filtering human and animal waste, acting as a natural buffer between the environment and the ecosystem Microorganisms in the soil biologically break down most garbage, effectively eradicating pathogenic bacteria and reducing nutrient and pollutant levels.
Soil erosion significantly contributes to land degradation and desertification, making erosion prevention essential for maintaining soil fertility Vegetation cover plays a crucial role in regulating soil erosion, ensuring that the soil remains fertile for plant growth and agricultural productivity Healthy ecosystems supply the necessary nutrients for robust plant development, highlighting the importance of preserving soil health.
Pollination is vital for the growth of fruits, vegetables, and seeds, with insects, birds, and bats playing a crucial role in this process The contribution of animal pollination to our ecosystem is significant, as it supports biodiversity and food production.
87 of the 115 main worldwide food crops are pollinated by animals, including significant crops such as cocoa and coffee (Klein et al., 2007)
Biological control is essential for maintaining ecosystem balance, as it helps regulate pests and vector-borne diseases impacting plants, animals, and humans This natural management occurs through predatory and parasitic interactions involving various species, including birds, bats, flies, wasps, frogs, and fungi.
Supporting Services are ES, which provides to support habitats and ecosystem functioning
A habitat is essential for the survival of plants and animals, offering crucial resources like food, water, and shelter Each ecosystem comprises diverse habitats that support various species, particularly migratory animals such as birds, fish, mammals, and insects, which depend on multiple environments during their migrations.
Maintaining genetic diversity is crucial for the health of animal populations, as it encompasses the variety of genes within and between these groups This diversity is essential for distinguishing different breeds or races, providing the basis for regionally adapted cultivars and a vital gene pool for future agricultural and animal advancements Certain ecosystems, known as biodiversity hotspots, host an exceptionally high number of species, contributing to greater genetic variation and resilience within those habitats.
Cultural Services are ES which provides recreation and human inspiration
Engaging in physical activities like walking and sports in green spaces promotes both mental and physical health, offering individuals a chance to relax and rejuvenate The significance of these natural environments in enhancing well-being is increasingly acknowledged, despite the challenges in measuring their impact.
Tourism plays a vital role in the economy, with ecosystems and biodiversity serving as key elements that contribute to its success In 2008, global tourism revenues reached an impressive US$ 944 billion, highlighting its economic significance Furthermore, cultural and ecotourism provide valuable opportunities for visitors to learn about the importance of biological diversity.
Throughout history, the interconnectedness of language, knowledge, and the natural environment has profoundly influenced our art, culture, and science The beauty of biodiversity, diverse ecosystems, and stunning natural landscapes has served as a significant source of inspiration, shaping creative expression and cultural appreciation across various domains.
Natural features like woods, caverns, and mountains hold sacred or religious significance across various cultures Spiritual experiences are deeply intertwined with these natural elements, reflecting a common theme in the world's major religions Furthermore, traditional knowledge and practices play a vital role in cultivating a sense of identity and connection to these sacred places.
Components of the PES schemes
This section will discuss the critical components of PES schemes: geographic scope, parties engaged, quantification of benefits, drivers, and payment modalities
PES systems can be implemented at a variety of spatial sizes, including the following:
The Reducing Emissions from Deforestation and Degradation (REDD+) program exemplifies international efforts to combat climate change by incentivizing poorer nations to reduce emissions linked to deforestation and degradation, with financial support from wealthier countries.
The Environmental Stewardship program is a government-funded initiative that allocates approximately £400 million annually to farmers and land managers, promoting environmentally friendly farming practices in exchange for public support.
Downstream water consumers play a crucial role in promoting responsible land management practices in upstream areas, which benefits the entire watershed Often funded privately, these initiatives see water utilities compensating upland property managers to implement specific measures that enhance or stabilize water quality.
• Local / neighborhood: an arrangement in which locals support a warden or environmental group to manage local green space for biodiversity, landscape, and recreational value
Achieving consensus on a Payment for Ecosystem Services (PES) scheme requires the active involvement of all relevant stakeholders throughout the planning, negotiation, and implementation phases Stakeholders can be categorized into distinct groups, as outlined by Porras et al (2008) and Smith, de Groot, and Bergkamp (2006).
Donors provide the funds for the provision of ES, and most commonly are:
- Government – supporting municipal and national governments;
- Private sector – voluntary and mandatory contributions for ES;
- Private people – household and usage fees for ecosystem materials and energy;
- Charitable foundations – gifts from their assets
Beneficiaries are commercial or public entities that require ES services Beneficiaries and donors frequently cross paths
The following are typical suppliers of ES, in order of prevalence:
- Private landowners – individuals with clear and undisputed property rights;
- Communal landholders – farmers or individuals who live on or derive their livelihood from communal property;
- Private reserves – whether an individual or a group, private entities registered as reserves and committed to ecosystem conservation are the third most common supplier of ES;
- Governments or non-governmental organizations
Informal occupants of public lands, such as farmers or those who live on repeatedly declared protected zones, may have long-standing land rights
Intermediaries, such as governmental entities, international agencies, and non-governmental organizations, act as essential connectors among donors, beneficiaries, and ecosystem service providers They facilitate the development, management, and functioning of Payment for Ecosystem Services (PES) systems, fulfilling multiple roles to enhance collaboration and effectiveness.
Scientific guidance to project developers, notably in identifying anticipated ES;
- Creating payment methods, conducting feasibility studies, developing management plans, and implementing monitoring systems;
- Facilitation of discussions amongst all parties;
- Capacity development in land management;
- Contract management, resource allocation, and payment;
- Acting as a middleman in the purchase and sale of goods and services
Analyzing the output of Payments for Ecosystem Services (PES) projects can be challenging, as ecosystem quantity, quality, and supply flow fluctuate over time due to land management practices Therefore, the most effective way to assess changes in ecosystem services is by monitoring fundamental alterations in land use Payments will be awarded for landscape management changes that positively impact the ecosystem's quantity, quality, and supply flow in a significant yet indirect manner Potential improvements in landscape management include various strategies aimed at enhancing ecosystem health and functionality.
• Existing ecosystem conservation and preservation; or
• Rehabilitation of damaged ecosystems for protection
PES systems are driven by incentives that promote effective upstream land management, which can be categorized as demand-driven, supply-driven, or solution-driven These factors play a crucial role in generating initial interest in a PES system.
Ecosystem degradation is a demand-driven driver of PES When ecosystem consumers are willing to pay, landowners are motivated to alter their land management practices in exchange for remuneration
Supply-driven forces arise when threats to nearby or protected areas or to primary resource usage become unsustainable Subsequent ecosystem users can invest funds to support necessary adjustments in the management of initially used resources, benefiting both the original consumers and the vulnerable ecosystems involved.
A solution-driven market driver is an external entity that is looking for instances in which a PES scheme would be optimal and viable
Payments for Ecosystem Services (ES) can include cash, technical or financial support, tenure rights, or profit shares from ecosystem preservation, forming the foundation of PES transactions To motivate suppliers to engage in these transactions, it is essential to transfer payments from later users to initial ES providers, especially when direct benefits are lacking Additionally, varying fees may be needed to attract distant users, while non-monetary incentives, such as reinforced land tenure, could be crucial for encouraging participation from users who might otherwise be unable to exclude non-participants from the benefits of the PES system.
The development of an efficient ecosystem services (ES) payment plan is influenced by several key factors, including the project's scale, benefit assessment methods, stakeholder involvement, driving forces, and payment structures As payment schemes become more complex and involve additional parties, they necessitate more sophisticated monitoring, enforcement procedures, and higher transaction costs In contrast, simpler schemes are more accessible to individuals unfamiliar with capital markets, typically incur lower costs, and require less time for setup and administration Therefore, these considerations are crucial for formulating an effective Payment for Ecosystem Services (PES) strategy.
Principles for developing PES schemes
A successful Payment for Ecosystem Services (PES) plan must create advantages for both buyers and sellers For buyers, PES can be more cost-effective than alternative methods of obtaining services, such as when a water company finds it cheaper to compensate landowners for improved watershed management rather than investing in additional water treatment Sellers benefit from PES as long as the payments they receive offset the value of any returns they forgo by implementing the agreed interventions For instance, a farmer might agree to construct ponds for better water storage if the compensation covers both the construction costs and any potential loss in agricultural production.
Consider a shift in farm management that focuses on providing a more comprehensive variety of ecosystem service advantages, such as wetland restoration on existing cropland:
• The minimum PES payment would generally be expected to cover at least any (private) return forgone by the farmer as a result of reduced agricultural production;
The theoretical maximum payment reflects the total value of additional ecosystem service benefits received by the buyer, which may encompass flood risk mitigation, freshwater supply, wildlife habitat, and other relevant services based on the specific purchases made.
• In actuality, the amount of PES payments would reflect supply and demand for certain ES and would be a mutually agreed upon intermediate value between the minimum and maximum levels
Figure 1.4 illustrates how various land management practices significantly impact the availability of ecosystem services, providing essential benefits to individuals, communities, and businesses.
Figure 1.4 Land managed primarily for agricultural production vs land managed to provide multiple ES under a PES scheme
Policies to promote PES
Well-formulated policies within a country's legislative framework are essential for the successful establishment and implementation of Payment for Ecosystem Services (PES) systems Conversely, poorly designed regulations can create significant burdens and may obstruct the efficiency and effectiveness of PES programs.
Governments and PES project developers influential among policymakers must acknowledge the importance of establishing or modifying legal frameworks to promote future PES initiatives They should also understand the potential impact and content of new or revised laws that can effectively support PES, as well as identify the appropriate legal instruments for this purpose.
The table below summarizes the necessity and significance of legal frameworks for various PES systems
Table 1.2 The significance of legal framework to PES schemes
Type of PES scheme Need for legal frameworks The significance of legal frameworks
Private PES scheme Medium to low
Encourage the use of a layered approach Scale up from the neighborhood to the regional/national level PES trading scheme High
Construct a trading strategy Regulate the trading system's complexity
'Control' the market Public PES scheme High
Promote the growth of PES Establish legal certainty Ascertain sound governance
A country's constitution can potentially include provisions supporting Public Employment Services (PES) However, it is essential to recognize that a constitution serves as a foundational framework that defines the structure, character, and governance of a state It outlines the extent and manner of exercising sovereign power, establishes fundamental legal principles that are immutable, and ensures the protection of certain rights for its citizens.
The constitution serves as the supreme legal framework, aiming to create a comprehensive national order rather than to regulate specific environmental policies Many countries impose strict legal and political barriers that make constitutional amendments challenging, if not unfeasible Consequently, while integrating specific Payment for Ecosystem Services (PES) provisions into a nation's constitution is theoretically possible, it is limited by existing legal principles and practical considerations.
Although the constitution does not explicitly require the recognition or regulation of Payment for Ecosystem Services (PES), it can serve as a crucial tool for fostering its growth Including legislative language that affirms the right to a clean and healthy environment, as well as recognizing the value of nature and its ecosystem services, is essential for creating a supportive political environment and a solid legal framework for PES For instance, Colombia's Constitution includes three key elements that can enhance the development of PES initiatives.
• Environmental protection is a constitutional requirement and a joint obligation of the state and its citizens;
• Every citizen has a fundamental right to a healthy environment;
• Public participation is a procedural requirement
These three principles encourage future collaboration between the state and citizens to protect the environment and conserve natural resources, which is critical for designing and executing PES programs
When a government enacts broad enabling laws, it is crucial that these laws are supported by comprehensive legislative provisions within the environmental framework Ecuador serves as a notable example, having adopted a new constitution in September 2008 that ambitiously recognizes the rights of the environment, termed ecosystem rights This constitution uniquely acknowledges nature's inherent right to exist, persist, conserve, and renew its essential cycles, structures, functions, and evolutionary processes, yet it lacks the necessary accompanying legislation to enforce these principles effectively.
Humans need to benefit from natural resources while the state must regulate their production and use However, the realization of these goals in legal practice is currently uncertain due to the lack of applicable legislation This absence of clear guidelines may hinder the growth of Payment for Ecosystem Services (PES), leading to confusion and legal ambiguity for practitioners.
A constitution holds higher authority than standard statutory law, allowing courts to invalidate conflicting statutes Therefore, it is crucial to ensure that no regulations hinder the establishment of Payment for Ecosystem Services (PES) systems Failing to do so could lead to legal uncertainties that undermine the credibility of PES schemes, making them more susceptible to disputes.
In Bolivia, PES developers encountered significant challenges due to the previous Constitution's view of natural resources as mere economic commodities, which favored extraction over conservation This perspective led to a misinterpretation of the 'socioeconomic function demand for land,' associating rural land care with deforestation activities Consequently, participants in PES systems expressed concerns about potential third-party claims on their forested areas, creating legal uncertainties that fostered mistrust and misunderstanding Addressing these issues is crucial before launching PES initiatives.
While legal recognition of Payment for Ecosystem Services (PES) may not be essential, the constitution should not hinder the creation of PES programs These programs hold significant potential for enhancing appreciation of nature and ecosystem services, fostering an environment conducive to the growth of PES initiatives.
Many countries have the option to implement a specific PES (Payment for Ecosystem Services) act, which would formalize PES as a policy tool, encourage its application, and outline the details of its execution Despite its potential, the adoption of this approach remains limited, with only a handful of nations, such as Costa Rica and Argentina, having enacted dedicated PES legislation.
Brazil has established its own Payment for Ecosystem Services (PES) legislation, highlighted by the Substitutivo Act, which aims to institutionalize PES nationally Additionally, the states of Amazonas and Espirito Santo have enacted regional laws to support PES frameworks In Peru, where PES programs are just beginning to develop, a proposal is underway to create the first legislation to define, regulate, and promote ecosystem service compensation, although its adoption is still pending.
Creating a distinct PES or ES law may have a variety of benefits and drawbacks:
A targeted statute can highlight the institutionalization of Payments for Ecosystem Services (PES) as a vital policy tool for ensuring future ecosystem service supply This engagement is essential for increasing public awareness and fostering acceptance of this newly implemented policy instrument.
Regulating Payment for Ecosystem Services (PES) through dedicated legislation establishes a comprehensive legal framework that enhances the organization and clarity of PES-related rules This consolidation into a single legal document significantly boosts public awareness of PES, clarifies the scope and nature of PES instruments, and streamlines their implementation.
Developing a distinct Payment for Ecosystem Services (PES) law poses practical challenges, particularly the risk of fragmenting the existing environmental legal framework If not carefully aligned with current environmental regulations, new PES legislation could become just another ineffective law, complicating the legal landscape and hindering compliance To prevent the creation of a 'parallel' legal system, it is essential to craft unique PES legislation that integrates seamlessly with the country's existing legal and institutional structures, especially those governing various ecosystems and their services However, achieving this integration may require a thorough evaluation of existing legal instruments to identify and resolve potential conflicts, necessitating amendments or modifications where necessary.
The table below highlights the potential advantages and disadvantages of each PES or environmental rule
Table 1.3 Potential advantages and disadvantages of a specific PES law
PES is brought up in general
PES was promoted as a credible policy instrument
Developed a comprehensive codification Environmental legislation is becoming increasingly fragmented
The scope of PES instruments has been defined The legal structure became more complicated
Legal certainty was established Contradictory legal frameworks were formed Sustaining implementation Implementation was complicated
Property Rights
To build and operate PES systems successfully, special attention must be paid to property rights policies
Property rights define the interactions between individuals or groups concerning specific assets, whether tangible or intangible, such as land and its natural resources that offer ecosystem services This term encompasses both ownership and various rights derived from specific claims or demands related to these assets.
Property ownership encompasses various forms and has historically been defined as the right to possess, utilize, and enjoy a specific asset, including land and its natural resources, while also having the authority to exclude others According to the FAO (2002), several rights are associated with ownership.
• Access and use rights, which provide the right to use the natural resources of the land;
• Control rights, which grant the authority to determine how land and natural resources should be used; and
• Transfer rights entitle the owner to sell, transmit, or mortgage the land, to inherit it, and to reallocate access, use, and control rights
Ownership rights can be interconnected or exist independently and be transferable Certain rights, such as the right to utilize land, can be categorized into specialized uses, including natural resource and ecosystem service categories.
Transferring property rights can occur in various ways, primarily through the complete transfer of ownership from one individual to another via sale or inheritance, necessitating that the seller or decedent possesses full property rights However, complications arise when only a portion of the ownership bundle is transferred, such as through easements, servitudes, licenses, permits, or concessions.
Depending on the country's legislation, property rights are categorised as follows:
• Public – that is, state-owned;
• Private - that is, possessed by an individual, whether natural or legal;
• Communal – that is, shared by all community members; alternatively
• Unreserved – that is, not assigned to anybody
Property rights are frequently included in the constitutions of states State legislation goes into further depth about their distinct conditions and characteristics (e.g., the civil code)
Property ownership is not exclusive to a single individual, as multiple parties can hold various ownership and usage rights related to the same property, which can be transferred separately.
1.8.2 The importance of Property Rights to PES
Property rights are critical in the development of PES programs
A PES (Payment for Ecosystem Services) contract involves a downstream user agreeing to pay for essential ecosystem services like water purification This arrangement raises the question of who has the authority to sell these specific services, highlighting the necessity of defining property rights, including ownership and usage rights, related to the ecosystem service.
Many PES contracts may not require discussions about ecosystem services (ES) because ES is often linked to land use and management Consequently, a PES contract may include particular land management practices In such cases, the buyer assumes the risk that these management strategies will yield the desired services and compensates directly for the land management rather than for the services themselves.
When a PES contract focuses on land management services instead of ecosystem functions, property rights become crucial Effective management practices, whether actions or omissions, must be implemented on the specified land Therefore, it is essential for the seller to have the appropriate property rights to fulfill the contract's requirements.
Property rights play a crucial role in identifying ownership of ecosystem services (ES) and the associated land and natural resources Only individuals or entities with the appropriate property rights can engage in and enter into a Payment for Ecosystem Services (PES) contract.
Additionally, disagreements over benefit distribution may emerge between PES contract participants and non-parties When property rights are ambiguous, such disagreements cannot be resolved, jeopardizing the scheme's viability
The long-term sustainability of PES programs is crucial, as areas developed under these schemes may attract natural resource exploitation Establishing clear property rights, particularly the right to exclude others from one’s property, can effectively deter criminal activities and protect these valuable resources.
To ensure the long-term sustainability of ecosystem services (ES) beyond the duration of Payment for Ecosystem Services (PES) contracts, one effective strategy is to prohibit land-use changes after these contracts expire Implementing servitude as a legal mechanism could facilitate the enforcement of such restrictions, thereby safeguarding the continued provision of ecosystem services.
It is critical to keep in mind that well defined property rights enable parties to join into PES contracts and ensure the long-term viability of PES schemes
1.8.3 Challenges of PES Schemes Related to Property Rights
Clear property rights are essential for the successful creation and implementation of Payment for Ecosystem Services (PES) systems Additionally, there are various challenges that individuals face when considering PES, which will be explored in the following section.
Conflicts between statutory and customary law
Statutory law, encompassing a country's written or codified regulations, operates at various governmental levels, from national to local In contrast, customary law consists of established norms and customs that may only apply to specific local groups and are often transmitted orally across generations While statutory law is formally enacted by governing authorities, customary law evolves over time within communities, highlighting the distinct ways property rights can be recognized under each legal framework.
Statutory law can formalize customary property rights through legal land titles or usage rights, as seen in Bolivia's irrigation law, which acknowledges specific daily use rights In Brazil, the formalization of these rights depends on the status and location of indigenous and local communities, where land remains state property, but indigenous peoples possess unique usage rights to land and natural resources In cases where Payment for Ecosystem Services (PES) systems allow participation without ownership titles, individuals with usage rights can engage without complications.
Conflicts can arise in countries where customary standards lack legal recognition but are still practiced, leading to discrepancies between customary and statutory property rights This divergence can create significant ownership issues.
Overview of studies on PES
1.9.1 Studies on PES in the world
PES is a trending topic in environmental resource management The literature on PES has been growing almost exponentially, and practical applications of PES schemes are mushrooming worldwide
However, this thesis would only focus on the primary and most relevant international outcomes, for instance, the idea named on the Millennium Ecosystem Assessment and the TBBa
The Millennium Ecosystem Assessment (MEA), initiated in 2001 and released in 2005 with over $14 million in funding, evaluates human impacts on the environment, highlighting the concept of Ecosystem Services (ES) — the benefits humans gain from ecosystems The MEA warns that human activities are depleting Earth's Natural Capital, jeopardizing the ability of ecosystems to support future generations It predicts an acceleration in ES deterioration in the coming decades, hindering progress toward the Millennium Development Goals Nonetheless, the assessment indicates that with appropriate interventions, it is possible to reverse some ES degradation within the next 50 years However, significant policy and practice changes are necessary, which are unlikely to happen if nature continues to be perceived as unchanging and eternal.
Latin America has a rich history of experimenting with Environmental Services (ES), while Asia and Africa lag in developing markets for these services Recent case studies from Southeast Asia, such as the RUPES program, highlight this gap However, there is a lack of empirical research on Payment for Ecosystem Services (PES) in centralized government and rural settings The integration of PES into local political economies often intensifies existing social inequalities and wealth disparities, which can undermine the long-term benefits of PES programs for rural households and threaten local livelihoods and conservation efforts.
1.9.2 Studies on PES in Lao PDR
The Lao People's Democratic Republic, formerly known as the Land of a Million Elephants, is rich in natural resources, with 46.7% of its land covered by ecologically significant forests that protect soil, watersheds, and biodiversity Home to Asia's highest potential for water utilization, Laos contributes nearly 40% of the Mekong River's flow and boasts one of Southeast Asia's most diverse ecosystems, with ongoing discoveries of new species The country is also home to about 1.6% of the world's vulnerable species, as noted in the 2004 IUCN Red List Additionally, Laos is abundant in high-quality mineral resources like gold and copper, making it more favorable for hydropower development and livestock raising than for traditional agriculture.
The Lao government prioritizes the sustainable use of its natural resources to conserve the country's natural capital It has implemented a balance of regulatory and economic incentives, enacting significant regulations like the Environment Protection Law and legislation on Forestry, Water, and Land in the late 19th and early 20th centuries Pilot programs in key sectors such as water, forestry, fisheries, agriculture, and land have engaged rural communities in the effective protection and responsible use of resources while enhancing their household incomes Moreover, the corporate sector is encouraged to actively contribute to this national goal.
The Lao community faces significant challenges in protecting its natural resources due to increasing global market demand, human greed in various industries, and a lack of awareness about the importance of these resources in daily life As a result, natural resources in Laos are rapidly depleting and deteriorating Many government institutions, citizens, and businesses still mistakenly perceive environmental protection as an automatic and infinite process.
Global initiatives are increasingly focusing on economic incentives to encourage active participation in the management of natural and environmental resources Payments for Ecosystem Services (PES) are financial rewards given to farmers or landowners who commit to specific actions that enhance the management of their land or watersheds for ecosystem benefits In this system, those who benefit from ecosystem services provide direct or indirect payments to the service providers, based on the principle that individuals who protect or maintain these ecological services deserve compensation Such initiatives effectively promote the conservation of natural resources through economic mechanisms.
Since 2010, the Government of the Lao PDR has demonstrated a significant interest in implementing Payment for Ecosystem Services (PES) programs This interest has sparked extensive discussions among government officials, development partners, and NGOs through various PES workshops, working groups, and meetings To facilitate these efforts, a National Steering Committee and Working Group on PES have been established.
2018, with the clear objectives to analyze, assess the PES status in Laos, and appropriately formulate relevant legislation on the PES according to the country's real needs and conditions
Recent studies on Payment for Ecosystem Services (PES) have been limited, particularly regarding forest conservation and wetland services Some research has focused on identifying suitable PES schemes in Lao PDR However, there is currently a lack of reports and theses assessing the effectiveness of ecosystem services (ES) and the implementation of the PES concept in Lao PDR.