CC BY
12
UDC 330.15
Sazcha Marcelo Olivera Villarroel, Doctor of Economics, professor of Department of Economy, Autonomus Metropolitan University e-mail: satzcha@msn.com
Ricardo Hernández Murillo, Doctor of Economics, World Bank e-mail: rhernandez1@worldBank.org
PAYMENT FOR ENVIRONMENTAL SERVICES: THE FOREST RESOURCES MANAGEMENT
Environmental services from the perspective of the State have as public policy objective the conservation of natural environments as well as the coverage of vegetation that provide environmental services to society. While from the perspective of the forest owner the decisions about forest use, whether through forest extraction activities or change of land use for agricultural or urban activities, depends on the opportunity costs, the conditions of production and access to economic resources. From this perspective, the study will analyze the current institutional framework that regulates environmental services and the system of payment for environmental services giving a contrastive emphasis on the management of forest resources by forest owners and managers. The program for the Payment of Environmental Services is not a determining factor in the owner community's decision to preserve the forest and to continue providing environmental services. So the creation of the conditions for the active forest preservation through the reconstruction of community institutionalism would allow generating the basis for guaranteeing the community reproduction.
Keywords: environmental services, society, management, forest, agricultural activities, economic resources, system of payment.
Introduction
One of the most important causes of the loss of forest areas and the drying of wetlands around the world is driven by the growth of farming regions and the change in land use for agriculture and livestock purposes (FAO-CONAFOR, 2005). This change involves the loss of services generated by these ecosystems along with their social, environmental and economic influence; the current biodiversity in those systems and their contribution to the climate change process by reducing the amount of carbon sinks already present (Hernández, 2008; Farley and Constanza, 2010;UNEP, 2011).
The recognition of the contributions made by these ecosystems such as drinking water in urban and rural areas, agriculture, and fishing, has evidenced the need for enforcing laws that allow us to maintain the previously stated services. In addition, these laws would provide the owners and administrators (of woods, wetlands, pastures, etcetera) with economic opportunities so they would avoid changing the land use for activities that pay for their efforts in the short term and that would grant them access to commodities such as clothing and food.
The most important instruments generated by the public policy to recognize the importance of the environment and its services are the creation of Natural Protected Areas, a compensation for the Payment for Ecosystem Services, and the establishment of Ecological Flow Regimes in stream banks and aquatic ecosystems.
The purpose of this study is to analyze the current institutional framework that regulates the payment for ecosystem services in contrast to the management of forest resources done by private owners and administrators.
This paper will conceptualize the understanding of environmental services from the economic point of view; then it will analyze the contrast and the workings of the payment for ecosystem services and the community forest management, this will be exemplified in a particular case study.
Environmental Services and Economic Thought
The importance of the functions of forests, wetlands (Mangrove forests provide services at a local level as a place where several commercial species reproduce; worldwide this carbon fixation rate is three times higher compared to that of other types of forests (UNEP, 2011)), and natural surroundings in providing the essential ecosystem services for society only highlights the discrepancy between the rationality of social interests and the individual behavior of the agents in that social order. In other words, the evidence of the continuous loss of forest cover, the desiccation of wetlands, and the land-use change that the country registered (CONABIO, 2009) show that the sum of all individual behaviors seeking their economic benefit do not move towards common good. That is to say, an individual gets an individual benefit from a conduct that may impact negatively the common ownership if attached (Hernández, 2008).
The owner of the resources (forest or wetland) or whoever has the right to enjoy a harmful usufruct (including the change of forest soil) internalizes an economic benefit even if this decision has negative consequences for the social context. However, the decision of preserving forests in the short term will not make profits for the owner who decides to sacrifice the benefits he would be obtained.
As long as there is no legal and institutional framework responsible for recognizing the ecosystem services provided by the natural surroundings and that warns of the costs of the negative consequences; the owner's incentives will not match the social objectives. In its current configuration, the legal and institutional framework enables the benefits realization at the expense of common good.
The economic incentives offered by the flaws in the institutional laws and the unfair exchange conditions are so powerful that the owner or the people with no right over the natural resources continue illegally woodcutting and changing soil use in spite of having sanctions and the fact that these actions jeopardize the quality of life for this and future generations.
It is worth mentioning that in order to understand the Payment for Ecosystem Services (PES), we should avoid certain prejudices such as:
- To compare PES to a strict conversation, when it can be compared to different extractive activities.
- To relate PES to the income obtained by a production cycle, when it could be possible to take the Net Present Value (NPV) according to the terms in the PES contracts VS the expected net income in the same period with a looting use.
- To compare the PES income to selling products that would not be obtained by means of an alternative use without deducting supply expenses, the workforce, and financing risk of both options.
- To relate PES to "doing nothing" since in a country with high deforestation rates the agreements of the program clearly involve an active forest conservation (Chapela and Lara, 2007).
Environmental services as public assets
From the economic perspective, the conservation of the services provided by a natural surrounding is a public asset due to the positive externalities. These allow the society to keep its current quality of life and to maintain the environment productive conditions. Environmental services generate public assets from private actions that work in different regions and scales depending on the service we refer to (Heal, 2000). The classic definition of public assets where they are defined as assets whose natures determine their non-rival character and for which it is impossible to establish a selective exclusion of their benefits, turns out to be inadequate to deal with environmental services and assets (Kelsey et al, 2008). As a consequence, this definition makes us think which economic instruments are likely to design the administrative structure that brings together public assets and market rules while at the same time it will establish organizational limitations.
Rivalry is described as the degree to which the use of goods by an individual reduces the availability to others. Goods such as music being listened in a public square, highways or information are not rival goods as long as they do not reach a saturation point where every additional user's benefit decreases both the quality and consumption for him and even for the group as a whole.
Rivalry unlike saturation demand of a limited good and the economic shortage threat lead the user to guarantee his rights of future access, and as a result, to the demand for property rights over the stocks or environmental services (Chomitz et al, 2006).
Excludability is a key element to recognize externality. In order to confirm the rights over movable property and real estate, alienation is the capacity par excellence, partly because excludability is taken for granted and it distinguishes public from private. Nevertheless, there seems to be a problem when the information asymmetry and the capacities of alienation (or power) is such that it is not possible to guarantee the excludability because of the lack of physical resources to demarcate and protect the limits of a good or a service (even with a title deed), and the absence of institutional resources to enforce property rights (In Mexico's countryside, the assumed uncertainty in the possession of the land is not caused by the absence of a recognized legal document but by the inability to guarantee the excludability, establish limits, and mobilize the institutional resources needed to enforce their rights.).
The problem with excludability has been particularly ascribed to the characteristics of the good or service we are dealing with, if we compare this problem to the physical challenge of excludability due to demarcation and surveillance "To try to solve the distinction between public and private goods". In practice, even though if this classification criterion was accepted, it would be difficult to find public or isolated goods. In the best-case scenario, private and public goods are related in such form that optimal functioning of a market of private goods is in itself a public good (Olivera, 2007).
History and geography teach us that any good or service, no matter how intangible it is, can be subject to private appropriation, a person may be able to exercise all possible property rights including alienation and inheritance. Unless there are appropriate rules and organizations to guarantee them; any good or service, tangible or personal property, will be difficult to control. The reason is that the organizations responsible for respecting property rights and carrying these laws out are insufficient.
There is a restriction to Environmental Services (ES) in the markets and this is the cost of excluding external agents from the benefit flows. Some critics of the payment of ES claim that in order to demand payment from the users, producers of ES should provide evidence of the relation between their activities and the provision of ES. Jurists, on the other hand, mention that in order to talk about the payment for ES, it is necessary that the law recognize them without taking into consideration the certainties obtained as a result of scientific knowledge, no matter how rich it was (Andaluz-West-reicher, 2005).
Jurists argue that formal recognition must precede the contractual agreement. In accordance with this be-
lief based on legal technique; transactions cannot be made on anything that is not considered subject to trade. This means that there must be at least the willingness to acknowledge the existence of a service coming from the natural surroundings so we can talk about PES.
The problem of not recognizing a good like a subject to rights and exchange (it was recognized as an externality, intangible, and public good) can now be solved by the explicit recognition of the property rights of one of the parties, penalized by the State and the society. This phenomenon can be the result of a simple concurrence of wills, an expression of trust, self-interest and even certain trust in formal or informal institutions, which guarantee these transactions. The fact that these transactions are regularly registered and that they work well has a bigger social consequence.
The persistence of these transactions and their social sanction has become a great legal phenomenon. The contracting parties and the society as a big group believes that is being performed a fair act. From the ethical point of view, remuneration is given in the sense that it should be fair or proportionate. The legal consequence is the confirmation that remuneration is justifiable with which the necessary jurisprudence to contribute to casuistry is developed, so in this way we are building the legal framework of PES (Andaluz-We-streicher, 2005).
While environmental goods and services were defined as stocks of infinite flows present in a territory likely to be extended and whose exploitation did not require rationalization, assignment of property rights, cost internalization and valuation, it was possible to consider them to be public goods. However, as pressure over these resources was growing, as well as the subsequent perception of a real or potential shortage and as the nature of production cycle and biological reproduction (in geological cases like: oil and fossil aquifers) were known, people became aware of the fact that the constant availability in a permanent way and the inevitable emergency of the rivalry in their use would be present.
However, the user can still perceive the environmental services like public, non-excludable, and non-rival. Therefore, the excludability or restriction of consumption to future users or beneficiaries depends not only on the physical characteristic of goods, but also on the quality of the institutions.
Excludability of ES, in some cases, can be carried out through physical barriers (this gets complicated when dealing with services such as: "fresh air" or the beauty of a landscape), the efficiency of the excluda-bility will depend on the assignment of property rights and the institutional arrangements for their defense. For these goods and environmental services to be appropriate in a private way, institutions are being built to lay down rules and to guarantee mechanisms that allow making effective the selective excludability or commercialization rights. It is a must to identify that
there is indeed something in nature and that the role of goods and environmental services makes us consider them, partially, as public goods.
Case Study: Capulalpam de Mendez
Capulalpam de Mendez is a municipality located in the state of Oaxaca that has been a part of the PES program, with a population of approximate 1300 inhabitants and an irregular surface of 3,850 hectares. It is a community that has been promoted as "magic town" due to the condition of its forests, which give this place its picturesque aspect, so common in Oaxaca's northern mountain range. Forests goods and services are conceived as non-excludable within and managed by the community in a process to ask for the recognition of the national society to the positive externalities of the local landscape.
Capulalpam de Mendez has a forest that was almost unused until the fifties. In 1956, it was first given recognition to its value when the lands for wood exploitation were granted concession by the federal government. In spite of that, this community was able to get some benefits of the eminent domain and established timber rights on behalf of the licensee and which was managed by the federal government, in benefit of the affected communities by the forest exploitation. Since then, the forests have financed the government investment in public services for the communities of this area of the Oaxaca mountain range.
In 1981, the decision to renew the forest concession was revoked and the forest became community usage. By doing this, it provided the community with a series of management options that the community had to consider.
In the case of this community, it is limited to collective action problems, which we analyzed in the previous sections of this paper, since a good resource management requires an efficient collective action, common goals, and an understanding of their surroundings (forest), regulatory system, and internal surveillance. All of these actions should be based on economic and socio-cultural decisions that restrict and allow decision-making in changing legal frameworks. This community has the support of organizations like the Regional Board of Natural Resources (Consejo Regional de Recursos Naturales) and the Zapoteca Chinanteca Union (Unión Zapoteca Chinanteca) that provides technical forestry services to 4 forest communities in the area.
Capulalpam de Mendez bases its social organization in a cargo system, understood as a non-paid job of cultural roots that corresponds to the indigenous social structure of this region of the Oaxaca's northern mountain range. To sum up, it is a zapoteca indigenous community where the Communal Goods Commisary (Comisariado de Bienes Comunales) is a lawful effective authority. They know that work is a community service; therefore, the person in charge will need a second job to have an income.
Cargo system is based on customs in which the
"cargo" (position) lasts between a year and a year and a half. There are two types of cargo: citizens imposed by the citizens' assembly; their responsibilities include: to serve the urban area and the municipal services; and the community cargos imposed by the comuneros assembly (according to the National Institute of Statistics and Geography, comuneros in Mexico are individuals who belong to a rural community and have property rights over lands and can enjoy common goods. They are granted this comunero status for being members of the farmer population) they serve the community as a group.
Cargos are somehow important in the social and economic life of the community; the positions can go from security guardianship to presidential positions in community institutions like forestry and mining industry, both the citizens and community assemblies take into account the economic and family situation of individuals before assigning them a job.
Capulalpam is a multi-active community; it works as a complex production unit with a diversified strategy in the use of their carefully thought out resources to increase family income of the members and the resources of their community. Amongst the mentioned strategies, we can find immigrant consignments, forestry and mining work, carpentry, goldsmithing, and in a subsidiary way tourist activities, farming and stockbreeding activities. Since the community administers the utilities generated by such activities, the latter can be transferred to communal enterprises and are considered to fulfill certain communal services such as: religious activities, maintenance of infrastructure facilities, scholarships, and educational trips.
The community and the municipal territory are identical, and the number of domiciles without rights is so reduced that in practice they operate with an almost perfect complementarity that equals a shared government where the city council works as a counterpoise to that of the commissary of communal goods and vice versa. In this community it is possible to observe that enterprises finally have dual purposes by providing jobs and producing economic rents of common use by exploiting natural resources of common property.
The PSA-CABSA, Environmental Services Program for the Capture of Carbon, Biodiversity and Agro-forestry Systems is a governmental program created in 2004 as a strategy to promote mechanisms for the payment of environmental services in Mexico (Programa de Servicios Ambientales por Captura de Carbono, Bi-odiversidad y Sistemas Agroforestales), is the biggest step towards the recognition of the community's territory and the re-appropriation of the forest.
The contract signed with CONAFOR (National Forestry Commission or Comisión Nacional Forestal) was created in 2001, one of its functions is to develop and encourage production activities, and preservation and restoration of forests leads us to a recognition of rights that reinforce the role of the community as land-
lord not only of the forest, but also of the environmental services that it produces. This contract forces and at the same time recognizes the work being done to preserve their environment.
The Payment for Environmental Services is a rent perceived by natural capital controlled by the assembly. The decision to preserve the forest by guaranteeing the flow of Environmental Services (ES) is part of the community decisions on the management of their natural patrimony and their productive diversification.
If the preservation commitments required by the PES are at odds with the exploitation interests of the Community Forest Enterprise (Empresa Forestal Comunitaria) or the requirements in farming, livestock lands or of other uses; the cost-benefit analysis will be of greater importance in the owner's decision, since the decision would correspond to a potentially more productive asset and not to the rent of an estate highly valued for its option value and its contribution to risk reduction and economic and politic vulnerability.
Even in this case it is difficult to claim that PES is in itself and instrument capable of inducing a change in the owner's (community) behavior in favor of the preservation of the forest. In other words, the PES should at least offer a competitive amount compared to the profitability of the forestry exploitation, if what we want is a preservation instrument that modifies the current tendencies in the degradation and deforestation processes.
Results
The analysis of the Capulalpam case suggests that the income reported by the PES program may not be the determining factor in their decision to preserve the forest, because in the documented case it represents a lower proportion compared to the incomes from endeavors carried out as a community and certainly does not compete positively with the alternative soil uses.
In Capulalpam, the forest: its preservation and health, is mentioned as a responsibility in the citizen perception of the type of town (understood as the territorial area with a clear assignment of the proportions devoted to the urban, agriculture and livestock, mineral extraction, and forest exploitation) in which they want to live and leave to their offspring. This collective perception of what is desirable turns into the decision to act as a collective individual who does what it takes to lead the general development process in a way that includes the forest preservation (see Table 1).
In this case study we were able to identify the isolated elements of an integral program of PES. The institutional arrangements of the community allow it to administer the services within and look for recognition of its benefits outside by means of the PES. However, the voluntary incorporation to the program is accomplished with the subsidy of its other successful activities to the community, in other words the incomes for other productive activities and the desire to keep the opportunity service of its forests are decisive to the preservation, nor are the conditions that the program offers itself.
Table 1. Main economic interrelations between institutions, production and payment of environmental services. 2006. Value added (2006) in Mexican pesos
Source Concept Incomes Operating cost, investment, devaluation Operation excess Community transferences Investment fund
Forestry Enterprise $2,766,696 $2,291,651 $475,045 $101,181 $373,864
Mining Enterprise $2,398,439 $1,952,466 $445,993 $244,463 $201,530
Forest rights $344,232 $0 $344,232
PES $50,000 $0 $50,000
Municipal income $1,708,992 $1,708,992 $0
Total $7,268,359 $5,953,109 $921,038 $739,876 $575,394
Sources: Hernández, 2008
Discussion
In this community (Capulalpam) the CONA-FOR'S program for the Payment of Environmental Services is not a determining factor in the owner community's decision to preserve the forest and to continue providing environmental services. The existence of the program and the participation of the community in the announcement did not modify the social or productive conducts since the community strategy of making traditionalist exploitation, improve the forest and keep it for future generations was a decision made before the PES program.
The acceptance of the payment for environmental services and the decision-making process of the community owner can only be understood by distinguishing the importance of community institution both formal and informal in its economic and social organization and that grants it restrictions to the economic decision-making process that goes beyond the perception of an immediate economic benefit.
In a context where the loss rate of forest cover is higher than 600,00 hectares per year (Esteva, 2004), the existence of non-fragmented and in a good preservation state forests seems to be associated to an indigenous in-stitutionalism and/or solid community (Esteva, 2004), characterized by:
a. Community status that offer the legal framework for the functioning of efficient management institutions (low transaction costs in a credibility framework of the institutions responsible for enforcing the rules) that coordinate effectively the collective action for the good management of common resources;
b. The existence of access rules which control the access to common resources and that establish performance mechanisms and efficient sanctions.
c. The use of planning tools like the community territory legislation and techniques for the good management of common goods.
The existence of well-preserved forest areas may be attributed to one of the following conditions or a combination of them:
a. Well-preserved forests are mainly located in inaccessible areas where forest exploitation is not profitable, which would be consistent with the minute trip
component in the proposal of deforestation risk index of the INE;
b. Community property of forests, particularly those communities where there are strong community institutions, there possess a very low discount or negative rate, in spite of being poor communities where there is a high rate of discount compared to their natural resources and which grants a high value to the preservation of the biological resource for future generations, and
c. The community territory ordering reveals the opportunity costs and even if there is absence of an incentive like compensation for environmental services, historically it has been granted high value to the future option that forest resources preservation means.
The extension of PES may occur if the schemes manage to demonstrate the growing effects in terms of forest preservation in contrast to the predefined deforestation lines (Wunder, 2007), and considering organization aspects of the communities in the management of forest areas.
On the other hand, if the purpose of the policy behind the PES is truly to accomplish lasting affection in relation to the baseline which represent the high deforestation rates in Mexico, the intervention would have to focus not only to give a compensation to forests owners, but also it would examine policies and encouragement programs in general to adjust them to this objective. Nowadays, the huge offer of sectorial programs emerged as isolated responses to pressure groups including divergent incentives when they do not contradict with each other.
The creation of the conditions for the active forest preservation through the reconstruction of community institutionalism and the strengthening of encouragement policies for the promotion of economic activities, including the good forest management to obtain timber and non-timber yielding and other income alternatives that would allow generating the basis for guaranteeing the community reproduction. Only by doing this, the life conditions will improve (which are not guaranteed by the assistance programs in a short term) and the reduction of forest pressure.
Besides preserving ecosystems, forest conservation allows us to protect the quality and water supply in the
fluvial systems and wetlands in general. Therefore, recognizing that the lack of trees in a system generates an absence of water supply in the long term, all this depends of an integral management of the resources according to their physical characteristics and the societies in that living area.
Conclusions
As non-developed areas and natural habitats reduce, the previously guaranteed environmental services (in a freeway) are being threatened. These rising shortages make them dangerously marketable to the environmental services.
The creation of limitation rules of uses (like the ecological flows and the PES in its multiple versions) is seen as a strategy to preserve them and looks for explicit recognition of the associate costs to preserving the ecosystems provided by environmental services. It also looks for incentive mechanisms that solve the interest divergence between the producers and the users.
The existence of several contractual arrangement
examples in both developed and developing countries to protect water sources, biological diversity, landscapes, carbon sinks or natural barriers which protect us from natural disasters, evidences the idea that a strong economic assessment is not always necessary to calculate the consumer surplus or a opportunity cost study which allows us to calculate the producer surplus.
Some PES schemes and stipulation of environmental regulations can be based on the perception or presumption of bonds between the actions and the production of services, and not on strong evidence. Considering that the appropriate valuation of the services to be commercialized, by definition, is any price that in which buyer and seller agree the appropriate price, just like it happens in the market for the majority of interchanged products.
Acknowledgment
We have to express out appreciation to Maria Eugenia Olvera Varillas (UAM Cuajimalpa, Mexico City) who helped prepare the manuscript.
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