Continuum of policy instruments for biodiversity conservation and ecosystem service management. © Schröter-Schlaack and Ring 2011
Direct regulation, i.e. command-and-control instruments that directly steer the policy addressee’s behaviour by standards , best available technology requirements or spatial planning, including protected area designation.
Incentive-based approaches, such as environmental taxes, fees or levies that impose a price on environmentally harmful activities thereby internalising external effects of consumption or production patterns. For biodiversity conservation and the sustainable management of ecosystem services, internalising positive externalities is of equal importance (TEEB 2011). Such measures include payments for environmental services and ecological fiscal transfers (Ring 2011, ▶ Sect. 5.2).
Instruments to support self-regulation of markets by informing and educating people about the environmental impacts of their behaviour or provide motivation towards conservation and sustainable use of ES in consumption or investment decisions.
In practical politics, several instruments from these categories can often be found in combination. Some instruments may have been introduced on purpose to enhance the outcome of another instrument. Informational instruments, for example, are often introduced to provide relevant addressees with the knowledge necessary to enhance the outcome of regulatory or incentive-based instruments. In other cases, incentive-based instruments are introduced as compensation for the costs imposed by regulatory instruments, such as restricted land-use intensity in drinking water catchments or nature protection areas.
In economic literature on instrument choice and design a multitude of criteria has been suggested to analyse and assess policy instruments . In the following, these criteria are grouped into four main clusters:
Environmental effectiveness , i.e. whether the environmental goal was reached by the use of the instrument.
Cost-effectiveness, i.e. whether the environmental goal was reached at the lowest costs. Besides opportunity costs this also comprises implementation and transaction costs associated with the specific instrument.
Social and distributional impact, i.e. whether there are positive or negative social impacts associated with the use of the instrument and how the benefits and costs are distributed among actors and social groups.
Institutional arrangements, i.e. institutions necessary for the successful implementation and operation of the instrument.
In textbook economics, incentive-based approaches are deemed to be more flexible and cost-effective than command-and-control-type measures (Michaelis 1996; OECD 2007). A comprehensive literature review of policy instruments for biodiversity conservation and a sustainable provision of ecosystem services showed, however, that policy mixes are not only a matter of fact in real-world policy, but combining instruments can also be theoretically justified for efficiency reasons and a range of other motives (Ring and Schröter-Schlaack 2011a). Building on that work, ◉ Table 5.1 presents characteristics of the instruments reviewed (including regulatory instruments, offsets, habitat banking and tradable development rights, easements and tax reliefs, ecological fiscal transfers, payments for environmental services and forest certification) as well as main findings on the performance of the different approaches (Schröter-Schlaack and Ring 2011, p. 178 et seq.). For a detailed discussion of payments for environmental or ecosystem services (PES) and ecological fiscal transfers (EFT) see also ▶ Sect. 5.2.
‘Direct regulation’, e.g. protected area (PA) designation
Offsets, habitat banking and permit trading
Ecological fiscal transfers
Reducing emissions from deforestation and degradation (REDD and REDD +)
Payments for environmental services (PES)
Safeguard important areas for species and habitat conservation
Account for and mitigate inevitable impacts on biodiversity and ecosystems
Account for positive environmental externalities provided by land users
Compensating decentralised governments for opportunity and/or management costs as well as spillover benefits of protected areas (PA)
Multinational and multilevel policies and measures to reduce deforestation and forest degradation and associated carbon emissions in developing countries (REDD), while considering conservation and co-benefits (REDD +)
Incentivising land users for biodiversity conservation and ecosystem service provision, e.g. by compensating for associated opportunity and management costs
Promote biodiversity and environmentally friendly forest production in accordance with legal codes and certification requirements
Private and public actors
Private and public actors
Public and private actors
Mostly private actors/land users
Private actors (consumers)
Baseline and policy context
Protection provided by other primary instruments (e.g. emission/management standards) or existing PA network, very often no protection at all
Impact allowed by (management/emission/performance) standards
Taxpayers behaviour without the tax relief (business as usual might be biodiversity friendly anyhow)
PA coverage when instrument is introduced
Deforestation and degradation rates without REDD (i.e. business as usual defined, e.g. by historical or forecasted deforestation rates or national circumstances)
Land-use practice without incentives by PES schemes (business as usual could be either static, declining or improving)
National forestry regulation, certification process most often progressive and adaptive
High–increase in/conservation of biodiversity and ecosystem service provision; however, effectiveness may be at risk due to weak enforcement or may erode in the future due to changing environmental conditions (e.g. climate change)
Medium–although typically designed to allow for a ‘no net loss‘ goal, problems arise in assuring equivalence of mitigation measures and their long-term monitoring
Low–depending on tax burden relieved (existence of tax, actual enforcement of payments, and sufficient tax rate); non targeted approach
Medium to high–increase in quantity and quality of PAs likely (especially when beneficiary of transfers can influence quantity and quality of PAs)
Potentially medium to high–depending on actual design (additionality, avoidance of leakage, permanence and carbon accountability) of scheme once established
Low to high–depending on instrument design regarding baseline, and additionality, leakage, permanence and participation
Medium–impact dependent on rigorousness of standard and framing conditions, such as intensity of investment, difficulties in transport and licensing, land tenure and conflicts with competing land uses
Associated costs and proxies for cost-effectiveness
Medium–though PAs very often show a positive benefit-cost-relationship, local opportunity costs can be substantial
High–in particular the option to trade mitigation measures significantly reduces opportunity costs; however, some ecosystem/habitat types may be (too) costly to restore
Medium–low transaction costs as resting on existing administrative procedure; however, very often incentives provided are insufficient for required change in land-use practice
Medium to low–low transaction costs as it builds on existing mechanism (fiscal transfer schemes and PA designation)
Potentially medium to high–pilot schemes may have underestimated implementation and transaction costs of fully developed REDD architecture
Medium to high–no up-front public investment for buying land, auction-based programmes limit excessive rents; however potentially high transaction costs
Medium–administrative costs of certification scheme may be substantial (in particular in tropical forests)
Medium–ecosystem services protected by PAs may benefit (local) population; however, substantial opportunity costs and risk to revoke informal rights (e.g. access/abstraction) in area designation
Medium–increase in education/job and income opportunities for rural landowners marketing offsets; compensation of opportunity cost of land conservation (TDR)
Medium–compensation for opportunity costs of environmentally friendly land-use practices; however, only applicable to tax debtors (e.g. landowners)
Medium–depending on entry point of PAs in fiscal transfer systems; fiscal transfers as such address inequalities between jurisdictions
Potentially high–depending on the institutional infrastructure at international and national level to enable broad participation of and within developing countries
Medium–support of rural livelihoods, resource management and social coordination capacities; but enrolment numbers limited by insecure property rights and transaction costs , mixed effect on poverty alleviation
Low to medium–difficult to reach smaller operators except through subsidised schemes; communities are often benefited through workforce participation and engagement in co-benefits
Legal and institutional requirements
Medium to high–easily introducible for a few unique spots; increasingly difficult to implement if demand for land is highly competitive
High–strong public sector involvement necessary in standard setting and monitoring of mitigation measures, high up-front investment for trading architecture
Low–tax deductions are likely to be politically accepted; implementation builds on existing administrative structures
Medium–requires existing fiscal equalisation scheme; introduction of PA indicator often needs constitutional changes and new laws, requiring political majorities
Medium to high–countries need to be able to participate internationally/implement national and subnational-level programmes; this may require broad stakeholder participation, reform of national forest laws and creation of new institutions
Medium to high–definition and enforcement of property rights key for programme success, more effective programmes require high up-front costs for baseline setting, negotiations, fund- and awareness raising
Medium to high–effective forest legislation/laws on property rights; architecture to distribute benefits in case of community involvement
5.1.3 Assessing Instruments for Biodiversity Conservation and Ecosystem Service Management in Policy Mixes
In the following sections we develop a stepwise approach to assess instruments for biodiversity conservation and a sustainable management of ES in policy mixes . This will be based on existing frameworks for policy mix assessment in other policy sectors (Ring and Schröter-Schlaack 2011b) and the specific characteristics of biodiversity and ES. The framework’s three fundamental steps are built up by the criteria to evaluate the underlying problem, the policy instrument or the relevant policy mix (◉ Table 5.2). These broad assessment categories can be further subdivided into relevant issues to consider in steps 1 and 2, and into fine grain assessment criteria for the detailed evaluation and design of policy instruments in step 3.
A three-step framework for assessing and designing policy mixes for biodiversity conservation and ecosystem service management. (Soure: Schröter-Schlaack and Ring 2011, p. 184)
Issues to consider
Identifying challenges and context
Characteristics of biodiversity and ecosystem services
Potential trade-offs between biodiversity and ecosystem services
Irreversibility of biodiversity loss
Tipping points and threshold effects
Lacking property rights for biodiversity and many ecosystem services
Defining ecosystem service in question
Objectives regarding biodiversity conservation and ecosystem service management
Range of ecosystem services utilisation
Trade-offs between different ecosystem services
Drivers of biodiversity loss and ecosystem degradation
Direct and indirect drivers from various sources/better “sectors” than sources?
Negative impact of drivers amplified by sectorial policies
Actors and governance levels
Public and private actors
Local to global level actors
Alteration of decision-making processes and inputs across scales—and thus necessary policies
Cultural and constitutional settings
Local knowledge and traditional practices
Relative appropriateness of monetary valuation and market-based conservation in cultural context
Constitutional options and constraints
Identifying gaps and choosing instruments for analysis
Evaluating the functional role of instruments in the policy mix
Policies in place versus new instruments under consideration
Policy mix across sectors and governmental levels (national/federal versus regional/local)
Experience with policy instruments
Persistence of existing instruments
Context-specific strengths and weaknesses of instruments
Dealing with uncertainty and ignorance
Lacking property rights
Spatial targeting of instrument
Type of ecosystem service
Inherently complementary interaction
Inherently negative interaction
Policy evaluation and design
Impact evaluation for existing (ex post) and scenario analysis for new instruments (ex ante)
E.g. trend in numbers of endangered species and others
Cost-effectiveness and further efficiency-criteria
E.g. increase in transaction costs in relation to higher conservation effectiveness of measures and others
Distributive impacts and legitimacy
E.g. beneficiaries and benefactors of a certain conservation measure and others
Institutional options and constraints
E.g. constitutional fit and administrative practicability and others
188.8.131.52 Step 1: Identifying Challenges and Context
When it comes to analysing policy mixes, the focus is not on maximising effectiveness or efficiency of individual policy measures but on the complementarity of the instruments involved, their interplay and the ability of the policy mix to address all drivers of the underlying problem (Ring and Schröter-Schlaack 2011b). The appropriate mix of instruments and actors will hence depend upon the nature of the environmental problem, the target groups and wider contextual factors (Gunningham et al. 1998).
Against this backdrop, the first step of the proposed framework consists in gaining a thorough understanding of the policy object, i.e. biodiversity conservation and ES management. Although we believe the questions listed in the ▶ Box to be neither comprehensive nor exclusive, they may cover the most relevant questions to be answered in a preparatory screening phase of the policy mix analysis.
Within this first step, it is necessary to identify relevant actors–both private and public–in the affected political and economic sectors on the relevant governance levels. Moreover, constitutional and legal requirements as well as the cultural perceptions of biodiversity and ecosystem services may open up options or impose constraints on the implementation of potential policy instruments (Brondízio et al. 2010).
Challenges and Context for Policy Instruments for Biodiversity Conservation and Ecosystem Service Management
What are the important characteristics of biodiversity and ecosystems that will influence appropriateness, applicability and success of certain instruments and their combinations?
What are the policy objectives regarding biodiversity conservation and ecosystem service management?
What are the drivers of biodiversity loss and ecosystem degradation and how might these be adequately addressed?
184.108.40.206 Step 2: Identifying Gaps and Choosing Policy Instruments for Analysis
During the second step of the proposed framework gaps in the implemented policy mix have to be identified and potential instrument alternatives or complements have to be chosen, as further assessed in step 3. In this respect, it is necessary to first identify the policies already in place, as most aspects of biodiversity are already covered or at least influenced by existing policies. These policies will not always originate from environmental policies only, but might stem from different sectorial policies, e.g. agri- and silviculture, energy, transport or trade policy as well. Taking stock of existing policies may point to shortcomings, unaccounted trade-offs and blind spots of the currently applied instruments (▶ Box).
Based on such assessment, policy-makers may have two options or pathways to enhance the overall performance of the policy mix (◉ Fig. 5.2): on the one hand, they could aim at improving the existing mix of instruments by explicitly considering the effects of instrument interaction in fine grain design of single components of the mix (ex post analysis). On the other hand, policy-makers may opt for introducing a new instrument into the existing mix in order to account for yet unconsidered aspects of the problem (ex ante analysis). This may include, e.g. actors, activities or sectors so far not explicitly addressed or the acknowledgement of recently evolved ecological knowledge.
Second, the different strengths and weaknesses of instruments are of different importance for different conservation and management goals. ‘Direct regulation’ will have to play a crucial role in safeguarding a minimum level of biodiversity to avoid crossing critical thresholds of ecosystem functioning . Incentive-based instruments merit particular consideration for managing marketable ES, and sustainably using ES within safe margins that do not endanger ecosystem functioning. Motivational , educational and informational instruments are always an important component of the policy mix as they raise awareness for biodiversity conservation and the consequences of continued loss of biodiversity and ecosystem service degradation, enhance acceptance of policies, and increase participation in voluntary conservation and management measures. In contrast to other fields of environmental regulation (e.g. in controlling air pollution, see OECD 2007) overlap of instruments in biodiversity conservation and ecosystem service management constitutes an insurance against knowledge gaps, policy and implementation failures and should thus not be treated as generally inefficient (Gunningham and Young 1997). The spatial heterogeneity of biodiversity conservation and ecosystem service provision potential often requires a mix of instruments to be applied. Incentive-based instruments may be linked to regulation or planning (eligible areas for PES may be linked to, e.g. protected areas), or provide spatial bonuses in areas targeted for special conservation efforts. The performance of ‘direct regulation’ can in turn be supported by incentive-based instruments when actors are incentivised to provide conservation and management action beyond regulatory minimum requirements .
Lastly, if instruments are applied simultaneously they will not only work towards the desired policy goal, e.g. biodiversity conservation, but they may also interact and thereby influence the performance of the policy mix. Thus, it is necessary to reconsider the classifications of instrument interactions available, identify the functional role of each approach within a policy mix and choose complementary instruments to the policies already in place (Schröter-Schlaack and Ring 2011).
Assessing Existing Policies Against the Challenges for Biodiversity Conservation and Ecosystem Service Management
Do the policies in place adequately address the irreversibility of biodiversity loss as well as thresholds of ecosystem resilience that–once crossed–will result in a failure of the ecosystem to deliver its services?
Do the instruments in place address the trade‐offs between biodiversity conservation and ecosystem service provision on the one hand and between different ecosystem services on the other?
Are the drivers of biodiversity loss and ecosystem degradation identified and addressed by existing policies?
Are all relevant actors addressed by policy instruments or who is missing?
What is the scope of new instruments judged on available experience of policy‐makers and policy‐addressees and the overall attitude of the society regarding biodiversity conservation, ecosystem service management and public regulation?
220.127.116.11 Step 3: Policy Evaluation and Design
The third step of the proposed framework turns the focus to the evaluation and design of single instruments so that the additional value of the relevant instrument to the existing policies is maximised. To develop policy recommendations we refer to the policy instrument evaluation criteria mentioned above: conservation effectiveness ; cost-effectiveness; social impact, fairness and policy legitimacy; and institutional aspects. When dealing with policy mixes, the ultimate goal for instrument design is no longer to develop first-best or second-best single policy solutions , but to optimise design regarding the functional role of the instrument in the policy mix.
Real-world policies and environmental policy in particular are characterised by the existence of policy mixes. This holds especially true for policy responses to the ongoing biodiversity loss and the associated degradation of ecosystems’ ability to provide ES. Despite this observation, most of the literature on instrument choice has focused on the analysis of individual instruments rather than policy mixes. Building on the existing literature on policy mixes and a number of reviews on selected individual policy instruments , this chapter has developed a stepwise framework for assessing instruments in policy mixes for biodiversity conservation and ecosystem service provision (Ring and Schröter-Schlaack 2011a, ◉ Fig. 5.2).
As in any other policy field, there will be no ‘blueprint’ for optimally designing a policy mix for biodiversity conservation and ecosystem service management as each country is different and relies on biodiversity and ES to a different extent (TEEB 2010a). Moreover, ecosystems may be in different stages of degradation and thus in different proximity to tipping points of critical ecosystem service provision. Finally, each country deals with a different set of policies already in place. Nevertheless, two recommendations on mainstreaming biodiversity conservation and ecosystem service management may apply in almost all cases, irrespective of the specific setting (TEEB 2011):
The policy mix should not be limited to ‘environmental’ or ‘conservation’ policies but should also encompass other sectorial policies, such as agriculture, energy or transport.
A policy mix can be developed using a stepwise approach that starts with the more easily available opportunities.
5.2 Selected Financial Mechanisms: Payments for Ecosystem Services and Ecological Fiscal Transfers
Helmholtz-Zentrum für Umweltforschung GmbH – UFZ, Dept. Ökonomie, Permoserstraße 15, 04318 Leipzig, Germany
The loss of biodiversity and ES is often due to market failures concerning public goods . On the one hand, the destruction and deterioration of habitats as well as pollution (e.g. nitrogen and phosphorus inputs in water bodies) lead to negative impact and represent so-called negative external effects, which are not internalised or not sufficiently internalised. Economic production and consumption, which negatively influences the environment, is still too cheap. This also holds for the intensive production of many provisioning services of ecosystems such as agricultural use at the expense of their regulating services . The social costs of this behaviour are not reflected in the prices of the corresponding goods and services .
On the other hand, services of land users and public actors for biodiversity conservation and the conservation of ecosystems and their services are often linked to positive externalities, representing social benefits. Because of the inadequate internalisation of such positive external effects these social benefits do not often pay off for the suppliers of such services under the current social framework and market conditions. They are not paid adequately for the costs of their implemented measures. Therefore, these socially desirable services are not sufficiently provided, both regarding measures for the conservation of endangered species and the conservation of regulation functions of ecosystems (Ring 2011).
▶ Section 5.1 on policy mixes already introduced potential instruments to solve such problems, including regulatory approaches (law and order), planning law, economic instruments such as taxes, charges or payments for environmental services , as well as informational, motivational and educational instruments. Why economic instruments also make sense in nature conservation and the conservation of ES, has impressively been presented by the results of the global TEEB-study (The Economics of Ecosystems and Biodiversity) (Ring et al. 2010b; TEEB 2010b, 2011).
In Germany, the memorandum ‘Economics for Nature Conservation’ focused in the same direction (Hampicke and Wätzold 2009). How can economic activities be harmonised with nature conservation goals through greater use of economic instruments? Here, clear incentives, goals, market creation and making use of win-win effects (synergy) play an important role. In this section, two economic instruments are presented in more detail: payments for ecosystem services (PES) and ecological fiscal transfers (EFT) .
5.2.1 Payments for Ecosystem Services
For quite some time now, payments for environmental or ecosystem services (PES) have become widely known at a global scale (Wunder 2005; Wunder et al. 2008; Gundimeda and Wätzold 2010; Porras et al. 2011; Ten Brink et al. 2011). The goal of this instrument is the development of economic incentives for the protection of biodiversity and the provision of ES. In general, opportunity and management costs are compensated (◉ Fig. 5.3). Scientists have discussed this instrument in special issues of scientific journals (e.g. Ecological Economics 2008 (65), 2010 (69)) in a broad manner.
Background of introducing payments for ecosystem services: the conversion of forest to pasture leads both to a higher private benefit to the land owner and social costs due to the loss of ecosystem services. The land owner can be offered a payment to conserve the forest, which has to equal at least his gain in private benefit by a conversion to pasture. (Adapted from Engel et al. 2008)
Examples for the implementation of PES exist worldwide on a local, regional or national level. In Europe due to the EU common agricultural policy since 1992 agri-environment schemes are mandatory for the EU member states in the framework of plans for rural development (ec.europa.eu/agriculture/envir/measures/index_de.htm; Hartmann et al. 2006; ▶ Box case study 1). Land users can conclude contracts to implement measures offered in the corresponding agri-environment schemes and get payments for ES (due to simplification reasons we also include biodiversity thereunder). Such agri-environment schemes are directed especially to payments for opportunity costs for the implementation of specific measures in the agricultural sector. As the success and results of such schemes remain mixed at best, for some years result-oriented schemes have been increasingly tested that directly reward the relevant ecological services (Freese et al. 2011, ▶ Box case study 2).
In the following sections we first provide a general overview of the instrument PES. The introduction of such payments does not per se guarantee goal achievement (e.g. Klejn et al. 2003). Therefore, criteria are necessary to evaluate the schemes. Subsequently, we present some of the important criteria.
18.104.22.168 Case Study 1: KULAP, Brandenburg and Berlin
The goal of the agri-environment scheme of Berlin and Brandenburg is the ‘Förderung umweltgerechter landwirtschaftlicher Produktionsverfahren und die Erhaltung der Kulturlandschaft’ (KULAP 2012) (promotion of environmentally sound agricultural production and the conservation of the cultural landscape). Agri-environment schemes of the German federal states are part of the European Agricultural Fund for Rural Development (EAFRD). The scheme comprises amongst others measures to protect the environment as well as to conserve natural resources (more information under: www.mil.brandenburg.de/cms/detail.php/bb1.c.213972.de). With a view to the concept of ecosystem services the scheme addresses the environmentally friendly provision of provisioning services as well as the protection of regulating services . EU, national state and federal states finance the scheme. In general farmers are providers.
22.214.171.124 Case Study 2: Northeim Project, Lower Saxony
In the Northeim project (www.zlu.agrar.uni-goettingen.de/index.php?option=com_content&view=article&id=47&Itemid=56&lang=de) a tender in form of an auction for a result-oriented remuneration was tested (Bertke 2005; Klimek et al. 2008). The pilot project was initiated by the University of Göttingen, Germany, in cooperation with the responsible public authorities. The goal of the pilot project was the conservation of agro-biodiversity in grassland. Therefore, farmers received a payment for the provision of a defined number of species in the study region.
126.96.36.199 Definitions and Design Options
In literature the term PES in general means a market-based instrument and follows the definition of Wunder (2005, p. 3) ‘(a) a voluntary transaction where (b) a well-defined environmental service (or a land use likely to secure that service) (c) is being ‘bought’ by a (minimum one) service buyer (d) from a (minimum one) service provider (e) if and only if the service provider secures service provision (conditionality)’.
The first precondition, thus is, that the participation in a scheme with PES is voluntary. Further important preconditions to clarify the following questions resulting out of the definition, are:
What is paid for?
The goal of the instrument is in general the provision of a defined ecosystem service, e.g. clean water. Therefore, one has to determine, how to measure the service and thus the goal achievement. There are services, which are directly measurable, e.g. carbon sequestration , but also services one can determine only by using a proxy, e.g. impacts on biodiversity (Gundimeda and Wätzold 2010). Herewith the question is also narrowly linked if a payment should be action- or result-oriented. If the payment follows the implementation of a measure (action-oriented), it can happen that the expected and desired result, e.g. more species or a defined, better water quality is not achieved. A generous definition (FAO 2007) concerning the service to be performed guaranties payments for ES, as soon as the provided performance by the management increases the performance provided without payment. Also, the possibility exists to bundle the provision of several ES in one payment.
In general the one, who attains a benefit of the provided ecosystem service(s) pays. There are two different forms: (1) Private user-financed programmes: in these programmes private interests and benefits are represented, e.g. if a water company offers land users payments for a better water quality and availability in its water catchment, usually a company or non governmental organisation pays. (2) Government-financed programmes: such programmes represent public interests. The governmental site as ‘buyer’ normally does not benefit by the programme but the ‘society’ as a whole benefits, e.g. concerning carbon dioxide or biodiversity. The government finances the programme (and pays) .
How is it paid?
In industrialised countries the mode of payment is usually money, but in principle allowance in kind is possible. The amount of the payment mostly equals the opportunity costs of the provider, which occur due to the provision of the ecosystem service. Additionally, administrative costs can be considered. The payment can be calculated once and be fixed in the contract or be variable. One payment or continuous permanent payments are possible. There are also different design options concerning the time frame such as monthly, yearly, ex ante or ex post payments. The duration of the contract has to be determined (short-, middle- or long-term). Last but not least a spatial differentiation can be done.
Who gets paid?
Addressees of schemes with PES are mainly private actors/land users, who are named (ecosystem service/service) provider or deliverer. Besides the direct negotiation of the scheme and contracts between buyer and service provider, intermediaries between the parties are also possible, e.g. a certification office or research institute.
When is it paid?
It is important to exactly define in the scheme, when the payment is to be made, that means only under the condition that the performance is actually provided as contracted (= conditionality).
It becomes apparent that each definition plays an important role in the design for PES and has to be determined carefully. Due to the different design options different types of programmes/schemes are possible. Overviews can be found, e.g. by Wunder et al. (2008), Nill (2011) or Porras et al. (2011). In which case what kind of design should be chosen, depends especially on the fitting of short-, medium- or long-term time horizon as well as the spatial (local, regional or national) level for buyer, provider and ecosystem service provision. Many factors influence the success of PES schemes. In the following different factors are introduced, which can be used to evaluate the scheme.
188.8.131.52 Ecological Effectiveness
One important criterion to evaluate the success of a PES scheme is its ecological effectiveness . In what way does the scheme contribute to an improvement/increase of the ecosystem service or the halt/stop of deterioration (e.g. stop of biodiversity loss)? The degree of goal achievement is not always easy to determine. It depends especially on the measurability of the ecosystem service (see above: what is paid for?) and the handling of uncertainty. The ecological effectiveness can be low to high depending on the design of the scheme, whereas the following factors play a crucial role:
Monitoring : In order to evaluate the goal achievement a monitoring of the ecosystem service(s) is necessary. Different methods are available, e.g. measurements in laboratories, on-the-spot inspections, indicators, etc. It has to be clear which kind of monitoring can and should be implemented, its frequency, who is responsible for the monitoring and who pays for it. Also, rules have to be defined beforehand in the case that the monitoring reveals that the service provider violates the contract. One can think of no payment at all, only a part of the payment or as the case may be a fine or other sanctions.
Additional benefit , that means the determination of the baseline/reference situation and scenarios in conjunction with an additional ecological benefit through the scheme (additionality; ◉ Fig. 5.4): It has to be guaranteed that in fact an additional unit of ecosystem service due to the payment arises, which would not exist without the scheme. In order to determine this additional benefit , the reference situation and its expected development without an incentive payment has to be determined. One has to make sure that not beforehand of an expected scheme implementation the reference situation is damaged on purpose, e.g. by an expanded afforestation, in order to gain a higher additional benefit after the start of an ‘increase-in-forest’ scheme.
Three different scenarios for PES systems: a static, b deteriorating and c improving the service-delivery baseline of the reference scenario. Dash-dot lines show the service delivery with payment systems, solid lines without. The additional unit is the increase in service delivery through the payment system compared to the reference scenario (baseline). (Adapted from Wunder 2005, 2007)
Leakage or spillover: It can happen that the introduction of a scheme with PES only leads to a spatial shift of the land use which negatively affects the environment. Therefore, altogether no ‘plus’ of the desired ecosystem service is provided, because while at one place the ecosystem service increases due to a payment at a different place it decreases due to the new derogation of the land-use shift.
Permanence: A scheme should come along with a long-term conservation of or increase in ES, especially desirable if the payments run out. This depends crucially on the duration of the negative externality, which the payments should internalise (Wunder et al. 2008) .
184.108.40.206 Costs and Cost Efficiency
One important requirement for the design of schemes is that they should be cost-efficient. For this purpose goals (e.g. good water quality, high level of biodiversity) should be achieved with a minimal budget, or the other way round the available budget should be spent in a way, that the goal achievement is maximised (Wätzold and Schwerdtner 2005). The cost efficiency of schemes is influenced by different factors:
Insufficient knowledge of the costs of the service provider: If a buyer has no or insufficient information about the real opportunity costs of service providers, the payments can be too high and the cost efficiency of the scheme decreases. This problem can be solved, e.g. by the implementation of auctions in which the service providers make an offer for the provision of a service and reveal their costs (▶ Box Example 2; Ferraro 2008). Such differentiated payments can help to better spend the available budget for the scheme, that means, e.g. more contracts can be closed. However, transaction costs (administration and negotiation costs) increase with auctions, leading to conflicts or so-called trade-offs between additional costs of instrument choice and design and the cost savings within the payments (Wätzold et al. 2010). Possible trade-offs should be considered by the design of schemes.
Necessity of weighing up (trade-offs) between different cost categories: a higher participation of potential service providers in the design phase of PES schemes leads in general to higher costs for the buyer beforehand but also to a high acceptance by the later service-providers (e.g. Perrot-Maître 2006).
An insufficient link between ecological and economic knowledge: It has been shown that the integration of economic and ecological knowledge in combined models (Wätzold et al. 2006) is a promising approach to design payments in a way that they are ecologically effective and cost-efficient. For example a software-based decision support software can be helpful (e.g. Mewes et al. 2012), which not only can evaluate existing schemes but also can make suggestions for new, cost-efficient schemes with the help of optimisation algorithms.
220.127.116.11 Further Criteria
Further criteria are social and distributive effects as well as legal and institutional requirements:
Social and distributive impacts: Besides the criterion of cost efficiency the question of fairness of the payment systems plays an important role (e.g. concerning acceptance). One should bear in mind critically who can participate in the scheme/participates, if there are obstacles for potential participants and how to deal with them. This also holds for the participation by the design of the schemes. Questions of distribution are especially meaningful, if PES are implemented in structurally weak rural areas or so-called developing countries. If the institutional and legal preconditions can be designed appropriately, payments can support the rural population and contribute to poverty reduction in so called developing countries (Gundimeda and Wätzold 2010).
Legal and institutional requirements: For payment systems to function, property rights must be defined and be enforceable, which is often difficult mainly in so-called developing countries. In Germany and Europe it is more important, how far the tenure of agricultural areas results in that schemes or individual measures are not implemented.
5.2.2 Ecological Fiscal Transfers
18.104.22.168 Greening Intergovernmental Fiscal Relations in Germany
By way of fiscal transfers, intergovernmental fiscal relations distribute and allocate public revenues between and across different governmental levels. In the German federal system, the vertical dimension of intergovernmental fiscal relations distributes and allocates public revenues between the national and the state level (the German Länder) as well as between each state and the local level (district-independent cities, districts, municipalities). In addition, fiscal relations fulfil a crucial and constitutionally anchored redistributive function in Germany because an important goal is to reduce fiscal inequalities between the various jurisdictions. In their horizontal dimension, fiscal relations lead to fiscal equalisation between financially strong and financially weak states and local municipalities by redistributing public revenues from the former to the latter. For the calculation of fiscal transfers, the usual procedure is to contrast the fiscal need of a jurisdiction with its fiscal capacity, based on its own revenues. As the number of inhabitants is commonly used as an abstract indicator for fiscal needs reflecting the provision of various public goods and services, it is above all populous jurisdictions that mostly benefit from fiscal transfers today. This makes sense, of course, insofar as numerous public services are provided for the inhabitants of these jurisdictions.
Another purpose of such schemes is to compensate jurisdictions for expenditures incurred in the provision of public goods and services with positive effects on inhabitants in jurisdictions beyond their boundaries. Traditionally, district-independent and large cities provide various educational, health-related and cultural services for adjacent areas and their inhabitants, e.g. universities and secondary schools, hospitals, theatres and operas. The benefits of these services, reaching beyond city borders (so-called spillover benefits), come along with costs that the city itself has to cover. In order to compensate for such spatial externalities relating to costs and benefits and to account for services brought to other areas, many German Länder apply weighting factors for urban compared to rural dwellers in the calculation of the relevant fiscal needs, thereby artificially increasing urban populations.
However, rural and remote as well as suburban areas likewise provide a variety of services for cities. They provide food and drinking water (provisioning services) , regulate the climate through their forests, provide areas for flood retention (regulating services) and serve as recreational space for the urban population (cultural services). Besides providing many ES, rural and remote areas also fulfil important ecological public functions, which benefit the entire population (Ring 2004). For this reason the inclusion of ecological indicators into intergovernmental fiscal relations has been demanded for some time in Germany. A prominent advocate was the German Advisory Council on the Environment (SRU) in its 1996 report (SRU 1996). According to studies by Ring (2001