Do Rewards for Environmental Services (RES) projects actually benefit the poor? What does it take to secure participation? How do you deal with uncertainty regarding the future of carbon markets?

It is issues such as these that Caitlin Patterson and Dr Henry Neufeldt have been investigating through a survey and a series of follow-up interviews examining RES projects worldwide. The aim is to devise lessons that can be learnt and shared among project developers.

The basis of an RES scheme is that farmers or landowners are offered incentives (cash or in-kind) to manage their land in a way that protects or enhances environmental services, such as carbon sequestration or watershed protection. These incentives are provided by those looking to benefit from these environmental services. For example, a hydropower company in the Way Besai Watershed in Indonesia has given incentive payments to coffee farmers for constructing terraces and planting trees. These measures reduce erosion and therefore sedimentation into the dam which the company relies on. For more on this project, see http://www.worldagroforestrycentre.org/newsroom/highlights/powerful-reward-erosion-control

“There is not a lot of information available about the actual experiences of RES projects,” says Patterson. “Project developers are interested to learn what others have done, especially when it comes to logistics and overcoming challenges”.

Patterson analyzed survey results from 55 RES projects, many of which were located in Africa, but there were also projects from Latin America, Asia, North America, Europe and Australia. The projects generally focused on carbon, water, or biodiversity protection, but the majority were carbon-based. Funding usually came from one of three sources: corporations as part of regulations or corporate social responsibility activities; voluntary or regulatory carbon markets; or national governments and non-government organizations. Follow-up interviews were also conducted to further explore some of the specific projects and issues more intensively.

Common to nearly all RES projects are three types of rewards: payments, services, or in-kind contributions such as seedlings or fertilizers. “Surprisingly we found 11 projects with no financial rewards at all,” outlines Patterson.

“It seems that provision of payments works well to recruit participants but more sustainable revenue is provided by the provision of non-financial benefits such as capacity building and improved access to markets”.

“We also saw examples where benefits are given to a group, like a farmer cooperative, and in some cases the group then chose to invest these benefits in a community improvement project”.

Perhaps more important than the provision of payments, it seems that trust is crucial when it comes to securing participation. Many of the locations chosen for RES projects are already the subject of research or have a particular environmental issue that needs to be addressed. People living in these areas are often considered to be more likely to participate, especially if the environmental issue has had a negative impact on their livelihoods.

“Several respondents highlighted the need for extensive community participation and how important it was to clearly communicate the goals and objectives of the project,” explains Patterson. “Some recruited community champions to help explain and advocate for projects, others partnered with NGOs working in the area”.

“One strategy for trust-building is to be flexible and to let the participants pick and choose from a menu of measures they can implement on their land”.

It was found that nearly half of the projects surveyed experienced similar challenges in trying to ensure sustainable funding and a lack of understanding about the idea of RES.

“A lot of investors are reluctant to provide the necessary start-up funds and it is often hard to predict what project costs will be. This may explain why so many RES projects we surveyed remain in pilot and planning phases”.

For projects involving tree planting for carbon storage, uncertainty over the future of regulatory carbon markets is proving to be a barrier to further financing. Currently, there is a ‘wait and see’ attitude being employed by investors regarding the future of carbon regulation. Many are only engaging in the carbon markets at small scales, which is challenging for projects attempting to sell credits.

As far as the potential for the RES projects surveyed to alleviate poverty, they would mostly be considered ‘weakly pro poor’ (according to the categories for RES projects developed by van Noordwijk et al 2007). On the whole, the projects are not significantly improving income distribution at the community level.

Contributing to the projects’ ‘weakly pro-poor’ status is the finding that project developers strongly prefer to contract with those landowners who have secure land tenure. Of the projects surveyed, one third involved direct contracts with landowners. Project developers tend to steer away from operating in areas where people have weak tenure rights; this avoids disputes over reward distribution.

Patterson has undertaken her research through an internship program hosted by the World Agroforestry Centre and International Institute of Sustainable Development, funded by the Canadian International Development Agency. It is documented in two papers, to be submitted for publication in July 2011.