Global Ecosystem Services Partnership Proposal: A National Ecosystem Service Valuation System for Peru. Background.

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1 Global Ecosystem Services Partnership Proposal: A National Ecosystem Service Valuation System for Peru Background With approximately 29 million inhabitants, Peru is the fourth most populous country in South America, and among the most biologically diverse countries on Earth. 1 Peru's per capita income is currently bordering on $10, Poverty in Peru has decreased since 2004, when nearly half of the country s population was below the poverty line 3, but still remains high with 34.8% of its total population that is poor, including 11.2% that is extremely poor. 4 With a Gross Domestic Product expected to grow to 9.00% in 2010, Peru is one of the fastest growing economies in the Americas. 5 Furthermore, Peru has one of the lowest inflation rates in Latin America. This has paved the road for the Foreign Investment rate to get the highest level ever with more than $37 billion invested in Peru at an accumulated level by the end of Much of this investment is in the extractive industries, threatening the country s 84 distinct ecosystems, from staggering mountain peaks to the near-shores of the Pacific Ocean. The Peruvian Congress recognizes that loss of ecosystem service production and health threatens not only the many rural communities and indigenous cultures that depend upon them for such services as climate regulation of the Southern Amazon watershed and clean freshwater supply, but also the long-term health of the national economy. In 2010, Congress took bold action to protect their natural heritage from unsustainable development practices, and passed a law requiring ecosystem service valuation to be included in all environmental impact assessments by the year The Peruvian Ministry of the Environment, (MINAM), requested our assistance in developing a framework to ensure the law is implemented fairly and meets the goals for which it was created. Project Summary This project will build a fundamental bridge between environmental, social, and development researcher goals to understand, value and manage critical ecosystems and apply innovative green-infrastructure approaches to poverty alleviation through pioneering implementation of sustainable 21 st century national development policies in Peru. Political Economy is the overarching theme of this proposal, which looks at the application of valuing ecosystem services from both the local ( bottoms-up approach) and national scale. The legal framework is already set by the national government of Peru. The process to implement the requirement of valuing ecosystem service at the local level will be addressed through our skillshare workshops. 1 CIA World Factbook, accessed in International Monetary Fund. Retrieved January 1, García, A. En el 2015, la pobreza se reducirá a menos del 10%, El Comercio Perú, Instituto Nacional de Estadística e Informática, Nota de prensa, Quigley, J. Peru extends reserve requirements to bank units overseas. Message posted to MINAM Ley 27446, Article 25 and 26, accessed in Page 1 of 6

2 Earth Economics will build upon the ESPA work already completed in Peru. Which includes the research done to create a market and give economic value to environmental benefits (ecosystem services) from carbon storage and biodiversity, addressing how best to monitor these services, how payments would reach local communities and whether they would aid in poverty alleviation, and how it would change activities of local communities. In response to a newly passed law requiring ecosystem service valuation to be included in all environmental impact studies, we have been invited by the Peruvian government, Dirección General de Evaluación, Valoración y Financiamiento del Patrimonio Natural (DGEVFPN) at the Ministry of the Environment (MINAM), to aid in the creation of a rapid economic valuation methodology and process to be adopted nationwide. This framework will result in stronger networks of protected areas, rigorous benchmarks for environmental compensations to local communities and improved protection of indigenous lands. This methodology will take into account the multiple spatial and temporal scales across which ecosystems and the services that they provide operate and are impacted. In 2011 DGEVFPN plans to finish a preliminary study The Economics of Ecosystems and Biodiversity (TEEB) in the San Martín area and establish new case studies in the regions of Loreto y Madre de Dios. Such case studies will constitute the backbone of the collaborative partnership between the Global Ecosystem Services Partnership and DGEVFPN, and will provide both the experience and the opportunity to showcase to other South American nations the direct correlation between poverty alleviation, sustainable development and healthy ecosystems. Our goal is to build a framework that easily plugs into existing environmental impact assessment guidelines defined by the World Bank, so this systematic comprehensive approach to ecosystem service valuation can be measured, evaluated, and applied in any developing country against specific development metrics and national goals. Three Peruvian provinces, which are part of Amazonia, will be the focus of our project: San Martín, Loreto and Madre de Dios. The three provinces are home to more than 1.7 million people. 7 Based on the poverty levels provided in the 2007 census, Loreto and San Martín provinces have high poverty rates, 70% and 62.4% respectively, higher than the national average which is 34.8% as mentioned earlier. Everyone benefits from ecosystem services in various degrees, however, the poor are impacted by changes to ecosystem services more directly. 8 Peru has set up the legal foundation to apply ecosystem services. The way poverty alleviation can occur is when the poor are part of the process of ecosystem services management. Our tools and workshops are catered to be useful for policy makers and those who directly benefit from the Amazon forests in Peru. Our workshops and tools are designed in a way that they can be replicated and used in various districts in the three provinces. We will begin by formalizing a research team that 7 Instituto Nacional de Estadística e Informática, TEEB The Economics of Ecosystems and Biodiversity for National and International Policy Makers, Page 2 of 6

3 includes Peruvian and Partnership experts to work on the following specific objectives: 1. Review the existing studies of economic values for supporting, provisioning, regulating and cultural ecosystem services in Peru and worldwide; 2. Identify existing gaps in ecosystem services valuation (ESV) studies and communicate those gaps to MINAM to disseminate to regional universities; 3. Conduct workshop with local stakeholders to prioritize gaps. 4. Fund two Peruvian graduate students to conduct primary studies on the highest priority study gaps as identified by the team; 5. Produce and publish a comprehensive study demonstrating the clear connections between ecosystem health, development policies and the direct contributions of ecosystem services to community welfare and economic vitality in Amazonia, specifically in Peru; 6. Develop a reference database of economic values based on Peruvian studies of ecological as well as economic conditions; 7. Map the ecosystem service provisioning, beneficiaries and impairments temporally across the landscape to show the most relevant sources of ecosystem services and their users (those who depends on them and at what level) as a way to inform and prioritize conservation and land use planning decisions; 8. Provide web-based tools for Peruvian government staff to do ecosystem valuation reports at very low cost; 9. Integrate the economic valuation approach into the existing Peruvian policy of environmental impact assessment; 10. Design a training system for public officers at regional agencies; 11. Evaluate program annually. To achieve these objectives, we will convene one stakeholder workshop and three work sessions in Peru to jointly develop, apply, and disseminate the valuation methodology. The three work sessions will be 5 days long and will allow experts to review important material, evaluate progress and set the basis for valuing Peru s ecosystem services. The one-day workshop is planned to reach out to the public and businesses. Milestones and success criteria include wider Partnership peer review feedback, participation levels in the work sessions and workshop, production of reference value matrix for use in the rapid valuation, writing of a professional report in Spanish and English, availability of an online ESV tool and user guide in Spanish and in English as well as the establishment of a training system in the use of the rapid valuation method and mapping. Management Plans and Structure Page 3 of 6

4 Long-term sustainability: The goal of the initial creation of the database for the Peruvian government is to create consistency and be tenable by both public and private entities who are required to conduct ecosystem service valuations in their environmental impact assessments (EIA), now a requirement for all EIAs. Earth Economics currently holds one of the most comprehensive databases for ecosystem service valuations, building from the Ecosystem Service Database (ESD) tool, originally a National Science Foundation funded project. The ultimate goal is to provide a standard database, which will be housed under MINAM. Partnerships with local universities in Lima would help provide updates to the database. A clear protocol will be developed with the Peruvian partners to designate the upkeep of the tool. Once the tool is developed, the project can be sustained beyond the ESPA by private companies, such as transnational mining corporations, who would use and provide the financial support needed to administer and update the tool. Research Methodology Earth Economics Economics original Ecosystem Service Database (ESD) was jointly developed with the Gund Institute of Ecological Economics at the University of Vermont. Funded by the National Science Foundation, it did not reach its full potential within the grant period. Earth Economics adopted the ESD in 2007 and started building a new prototype in Innovations to the database include the intent to have it hosted online, create downloadable calculation tables, and allow for the saving of scenarios by each logged-in user. We intend to transform the original ESD into a tool that has practical versatility and functionality and we believe it is time to make this powerful tool generally available for sound, holistic infrastructure planning. The database itself will draw on selected studies that are pertinent to Peru. By entering GIS data concerning the land cover types of a selected area, the user will be able to create tables that detail, not only the ecosystem services provided by an area, but also the annual value of that service to the community. Users will be able to log in and save their GIS data and tables for later recall or editing. Human health and well-being will be highlighted in the project by Earth Economics. There are clear linkages to sustainable development and cultural ecosystem services. The comprehensive report will look at valued ecosystems. Particularly in the province of Madre de Dios, poverty is currently driving illegal mining, impacting the natural systems that provide critical ecosystem services in Peru s Amazon rainforests. As this negatively impacts ecosystem services, it furthers poverty by damaging ecosystem services which are fundamental to the local and regional economy and health of the community. The relationship between ecosystem services, especially cultural, and mental health will be addressed as well as the impacts to physical health. With the support of the Peruvian Ministry of Environment (MINAM), Earth Economics will plan for backing by the Peruvian Ministry of Health (MINSA). Both physical and mental health are closely linked to ecosystem services which is why valuing ecosystem services is crucial, not only to environmental policies but health as well. Why ESPA? It is vital for this project to receive ESPA funding because the law, which requires all environmental impact statements to include ecosystem service valuations, has only recently passed and this is a timely opportunity for Peru to implement the process of valuing ecosystem services both properly and cost effectively at the national level. ESPA s support would provide the initial funding for this project, as to date, no part of this project has yet been funded. Earth Page 4 of 6

5 Economics has also submitted a proposal for 150K to the Wallace Global Fund based in Washington, DC. Roles Principal-Investigator David K. Batker, Chief Economist and Executive Director Earth Economics 1121 Tacoma Avenue South, Tacoma, WA USA Telephone: (01) dbatker@eartheconomics.org Web: Co-Investigator Percy Summers, Coordinador de Servicios Ecosistémicos Conservation International Av. Dos de Mayo 741 Miraflores Lima 18, Peru Telephone: (51-1) p.summers@conservation.org Web: Comment [MK1]: Confirming Maya Kocian, Research Analyst Earth Economics 1121 Tacoma Avenue South, Tacoma, WA USA Phone: (01) mkocian@eartheconomics.org Project Partner Isabel Castañeda Hurtado, Especialista en Valoración Económica Dirección de Evaluación, Valoración y Financiamiento del Patrimonio Natural Ministerio del Ambiente - MINAM Av. Javier Prado Oeste 1440, San Isidro Lima, Perú Telephone: (51-1) anexo icastaneda@minam.gob.pe Web: Fernando León Morales Dirección de Evaluación, Valoración y Financiamiento del Patrimonio Natural Ministerio del Ambiente - MINAM Av. Javier Prado Oeste 1440, San Isidro Lima, Perú Telephone: (51-1) anexo fleon@minam.gob.pe Web: Page 5 of 6

6 About Earth Economics Mission: Earth Economics is devoted to applying new economic tools and principles to meet the challenges of the 21st century: achieving just and equitable communities, healthy ecosystems, and sustainable economies. Earth Economics, formerly known as the Asia Pacific Environmental Exchange (APEX), was founded in 1998 as a project of the Tides Center in San Francisco, California. For six years under the Tides Center, working at both the local and international level, we conducted grant-funded projects to apply the rapidly growing academic field of ecological economics to real-world problems. In the spring of 2006 our capacity was such that we incorporated as an independent 501(c)3. We have established our home office in Tacoma, Washington and, in 2011, will be opening a small satellite office in Portland, Oregon to serve as the implementation arm of the new Sustainable Solutions Institute at Portland State University. We have six full-time staff and regularly contract with leading ecologists, economists, systems modelers and hydrologists and other experts in our local to our project areas. We also offer practicums and internships for graduate and undergraduate students and, at any one time, have between 4-6 students working at Earth Economics. Earth Economics is the only organization that applies the science of valuing ecosystem goods and services to human economies and natural ecosystems. Our goal: creating healthy economies, communities, and ecosystems from which all people benefit. As natural systems represent the foundation of ecological and economic prosperity, Earth Economics helps quantify and visualize these fundamental values as a way to promote conservation and sustainable management of resources. Rather than confining ecosystem service analysis to conservation only, we bring it to the center of overall economic planning, which enables moving investments into conservation and restoration. Due to the nature of our work, we do not serve an exclusive geographic area. Our international work includes several projects in the Americas. We produced the first ecosystem service valuation on indigenous lands in the Yasuní region of Ecuador. This valuation informed the creation of a United Nations funding mechanism for ecosystem services and resulted in a national decision to leave 20% of the nation s oil reserves underground for the sake of forest conservation and the protection of indigenous land. We have also done extensive work in Costa Rica. Currently, we have ongoing project work in the Intag region of Ecuador where we are seeking local revenue alternatives to copper mining, and we are participating with our partners, the Gund Institute of Ecological Economics at University of Vermont and Conservation International, in a freshwater conservation project in Mexico. We recently have been invited by the Peruvian Government to help implement a national ecosystem service valuation (ESV) system to meet the requirements of the newly passed law requiring ESV to be included in all Environmental Impact Studies (EIS) for new civic and private development projects. Page 6 of 6