Wilson Lab Journal Club: Paying for Environmental Services from Agricultural lands

Andrea Fullagar

I was recently involved in exploring a range of possible actions for reducing biodiversity loss in Australia to include in a submission to the Biodiversity 100 campaign. One of the actions that we discussed (but which was not included in the final set published in the Guardian) was to secure a proportion of native remnant vegetation on all agricultural properties, as well as provide financial rewards to farmers who implemented management actions that were directly linked to conservation.

Agricultural land comprises 473 million hectares or nearly 62 percent of the Australian continent, so there is a clear need to engage with private landholders in order to achieve conservation outcomes across large parts of the country. As the potential to secure more protected areas diminishes, the need to implement sustainable management practices on private land becomes more pressing. Providing economic incentives to landholders in response to a direct management action would place environmental services on the market, while contributing to biodiversity conservation. Financial incentives may come in the form of subsidies or through a market-based system where payments may be administered on a competitive basis.

Payment for Environmental Services (PES) is an alternative to subsidies that pay directly for the environmental outcome or service secured. Also known as stewardship payments, payments for environmental services are administered for producing ecological or environmental services above a minimum acceptable standard and are usually in the form of ongoing, annual payments. Payments can reflect the opportunity cost of lost production as well as the cost of implementing on-ground management actions.

Bohlen et al. 2009 provide a recent example of how a PES program was implemented to conserve environmental services on agricultural lands. The Florida Ranchlands Environmental Services Project (FRESP) was designed as a cost-effective strategy to maintain water storage and reduce phosphorus loading  in the northern Florida Everglades, by paying ranchers for providing these environmental services. FRESP represented an opportunity to secure valued environmental and biodiversity assets on the south- central Florida cattle ranches, while providing greater financial security to ranchers who may otherwise be pressured to convert their lands to more intensive agriculture, or sell their properties to make way for urban development.

One of the key issues which came out of the discussion of this paper was how to best value or quantify ecosystem services. This is a particularly challenging question, but is necessary if we are to set a benchmark for the environmental service produced as part of a PES program. For example, how much carbon must be sequestered to warrant a payment? One tool which could assist with the valuation of ecosystem services is InVEST; which maps the delivery, distribution, and economic value of ecosystem services to demonstrate the future costs and benefits of a specific action. For example, if landholders were granted payments to protect remnant vegetation on their property, inVEST could be employed to calculate the value of native remnant vegetation in dollar terms according to the service it provides such as its carbon sequestration potential.

Could a PES program similar to that in the northern Everglades example be implemented in Australia? There are already a number of initiatives in place which provide funding to conservation-minded landholders in a cost-effective manner. Nature Assist (QLD) and Bush Tender (VIC) are State Government run programs which aim to provide funding to landholders who agree to set aside part or all of their land as nature refuges. Funding is provided to those landholders who can set aside the most environmentally significant areas and provide cost effective management, and is based on a competitive tender system.

PES programs differ to existing programs in Australia because they tie payments to the level of service provided. For example, imagine a farmer who owns land of high conservation value and is interested in fencing remnant vegetation from livestock. He signs a conservation management action Tender and  receives funding from the Nature Assist program for fencing. After one year, his land is assessed to ensure that he has complied with the Tender. If the farmer has made considerable progress and the action can be directly linked to conservation, then under a PES scheme he will receive an additional payment that reflects the contribution he is making towards protecting native vegetation. PES provides an additional incentive for farmers to implement management actions cost effectively.

There is potential for PES to play a role in providing incentives to key stakeholders to conserve ecosystem services in Australia. However, there are multiple challenges to its implementation that must be addressed first:  including securing a source of funding, and developing an appropriate framework for quantifying ecosystem services.

Literature cited

Bohlen PJ, Lynch S, Shabman L, Clark M, Shukla S and Swain H. 2009. Paying for environmental services from agricultural lands: an example from the northern Everglades. Front Ecol Environ 7(1): 46-55. doi:10.1890/080107