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2.4 Overview of PES Initiatives in East and Southern Africa Alice Ruhweza, The Katoomba Group While there is growing interest in PES in Eastern and Southern Africa (Box 5), there are several obstacles to their development in the region: providers/sellers are not aware of monetary value of their service; beneficiaries/buyers are not aware of the need to compensate the providers; while there is a fairly conducive statutory policy environment for PES due to decentralization and reform of environment, water, forestry & land policies, there isn’t specific provision for PES; there are some support institutions in place like NGOs with PES experience and networks to share knowledge and provide support using local expertise, but overall there is still limited institutional capacity in project design & implementation (Box 6).

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E.g. the East and South Africa Regional Katoomba Group, www.katoombagroup.org/~katoomba/regions/africa/index.php Payments for Environmental Services from Agricultural Landscapes- PESAL Capacity-building workshop, FAO- CARE Tanzania Dar es Salaam 4-6 February 2008 Final Report

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Box 6. Current obstacles to PES development in East Africa Standards and guidelines for design and operation eg. how to collect funds from multiple users and channel • to providers.

Market Information- linking sellers& buyers • Assessing and capturing ES value – Price does not always capture value of other services • Defining rights – who will receive payments?

• Ensuing effectiveness –in enhancing environmental benefits • Securing efficiency –compared to other NR management (and/or poverty alleviation) approaches • In-building equity –in the distribution of benefits • Little or no involvement of private sector and yet they are the largest users • Limited institutional capacity •

2.5 Equitable Payments for Watershed Services (EPWS) in Tanzania: A CARE-WWF Programmeoverview & lessons sharing Lopa Dosteus, CARE Tanzania Equitable Payments for Watershed Services programme, a joint CARE and WWF programme active in Kenya and Tanzania (also with sites in Latin America and Southeast Asia) aims to create pro-poor and business-attractive PES schemes.

In the Tanzanian site, the work focuses on the catchment of the Ruvu river- the source of 90% of the water used by domestic and industrial users in Dar es Salaam, and where rapid expansion of farming to the steep slopes of the catchment has increased the silt load in the river and raised water treatment costs, especially in the last 5 years. Following feasibility studies (livelihoods and hydrology baseline assessments, policy and legal framework review and cost benefit analysis to show buyers how much more expensive it would be to arrange alternative water supply), the project identified justifiable “business criteria” and secured support from one of the main water users (Coca Cola), served by the city’s water utility DAWASCO.

The latter however, has not yet agreed to contribute to this initiative as they are already paying extraction fees to the basin water office. A change in policy would be required to earmark more of these funds for investment upstream. CARE hopes their ongoing investment watershed management can inform policy and lead to an increase in investment.

With the support from Coca Cola, work on the ground is starting in March 2008 in the Kibungo subcatchment, where farmers are adopting terracing and agroforestry, building previous UNDP work. Next step is to replicate the scheme in East Usamabara (Sigi river supplying Tanga city) Payments for Environmental Services from Agricultural Landscapes- PESAL Capacity-building workshop, FAO- CARE Tanzania Dar es Salaam 4-6 February 2008 Final Report

3. Ongoing PES projects in East and Southern Africa (afternoon session, day 1) The session offered an overview of on-going PES activities in the world for the main markets (carbon, water and biodiversity), focusing on East Africa and highlighting obstacles faced and successful approaches.

3.1 Opening Remarks: Watershed protection and river basin integrated management: an opportunity for implementing PES projects in Eastern Africa Mr. Evarist Nashanda, Forestry and Beekeeping Division, Tanzanian Ministry of Natural Resources The presentation highlighted the role of catchment forests in water provision, carbon storage and biodiversity conservation and the need to take these ecosystem services into account in policy decisions and budget allocations. Local communities in charge of managing and protecting these forests need to receive compensation for their efforts (Box 7). The Joint Forest Management initiative, ongoing since 1998, has proven to be successful in allowing limited and sustainable management and use of these forests, for the benefit of their host communities. However, funding to continue implementing the programme is not secure in the long run. A possible source of continuous funding would be from the water and energy sectors that benefit from the watershed functions of these forests.

Box 7: Watershed Protection and River Basin Integrated Management

- an opportunity for Implementing PES It is therefore recommended that the Government of Tanzania do the following Inclusion, or redirection, of a “forest conservation” component in the water user fees.

Inclusion, or redirection, of a “forest conservation” premium in the price of electricity.

Diversion of part of tourist revenues obtained from climbers of Forest Mountains to conservation.

Engage in carbon trading especially through REDD ( Reduced Emission by avoiding Deforestation and Degradation” “Local people wondering what is really happening, in light of the degradation of catchment forests”

3.2 Pro-Poor Rewards for Environmental Services in Africa (PRESA) Thomas Yatich, World Agroforestry Center- ICRAF (Kenya) Building on the work from RUPES (Rewarding the upland poor for environmental services), PRESA is supporting the development of workable environmental service agreements between upland smallholders and the beneficiaries of their land management decisions, in seven areas in Kenya, Tanzania, Uganda and Guinea (Box 8).

The project aims at catalyzing policy support and private-sector participation in environmental service agreements and disseminate the use of assessment tools, negotiation methodologies, prototype

mechanisms and monitoring tools. Site level activities include:

• Develop and adapt assessment methods and approaches from RUPES

• Appraise causal links between PES, incentives, resource use, institutions and environmental services.

• Develop a technology advisory tool for targeting appropriate conservation activities in the target landscapes.

• Develop and test prototype reward mechanisms and contribute to the development of institutional arrangements.

• Establish, implement and facilitate operational reward mechanisms (with partners).

• Monitor, evaluate and assess impacts.

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Payments for Environmental Services from Agricultural Landscapes- PESAL Capacity-building workshop, FAO- CARE Tanzania Dar es Salaam 4-6 February 2008 Final Report

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3.3 The Opportunities and Challenges of Implementing PES in the Water Sector: A Kenyan Buyer’s Perspective Philip Msafiri, Nairobi City Water and Sewerage Company-NCWSC The presentation started with a discussion of the main problems that the Nairobi city water company (NCWC) faces in treating water: given the high siltation rates in the rivers from where the, water treatment costs are very high (Box 9).

Box 9: Costs of water treatment for the Nairobi city water company (NCWC)

• Secondary dams require de-silting after every rainy season; main dam impounds around 4 million m3 though the capacity is 15.9 million m3 due to siltation

• Desludging expenses are about Kshs. 9m (about 140,000 USD) annually in the Sasumua catchment. In addition, the loss of the dam’s storage capacity due to sedimentation further worsens water quality leading to high treatment costs.

• Kshs.14m (about 200,000USD) per month in water chemical treatment alone.

Thus, the company is seeing PES as an opportunity to invest in improved land management, as a more sustainable and low costs approach to reducing their operation costs. They have created an Payments for Environmental Services from Agricultural Landscapes- PESAL Capacity-building workshop, FAO- CARE Tanzania Dar es Salaam 4-6 February 2008 Final Report environmental department to take this idea forward. The idea is to pool contributions from other users as well (including larger farmers in Thika, Thika water company, KENGEN, Yatta furrow) to fund an integrated management plan for the watershed (providers include farmers, forestry department, Kenya Wildlife Service).

Main obstacles the NCWSC faces in PES development can be summarized as follows:

• the company is making regular contributions to environmental bodies, but it is unclear whether these funds are being invested in watershed management;

there is no established policy framework for setting up institutions to oversee implementation of • PES (environmental legislation only mentions voluntary schemes but insists on negotiated and mandatory compliance);

there is little legal or legislative provision to enter into payment arrangements (insecurity of • investment);

there is poor understanding of PES at the governance level;

• within the water utility itself, the governing body does not include any representative from the • watershed governing bodies.

3.4 Potentials for PES in the Carbon Markets in East Africa: Experiences in Carbon Offset Projects in Uganda Byamukama Biryahwaho, Nature Harness Initiatives-NAHI While there is enabling policy and institutional framework, the Carbon offset projects in Uganda are so far at early stages, with only a few that are already fully operational. Tree planting for sale in the voluntary carbon market trhough the Environmental Conservation Trust of Uganda (ECOTRUST), Plan Vivo and UWA-FACE Foundation projects. the problem is that most projects face a long design process due to many obstacles to overcome and lack of start-up funds.

There is room for further development also in combination with Sustainable Land Management and

poverty alleviation:

Promotion of on-farm tree planting: soil and water conservation, fodder, protection of water catchments;

Rehabilitation of formerly encroached areas;

Promotion fruit trees growing for improved nutrition;

Use of unproductive land for tree growing;

Integration of tree planting with other enterprises (e.g. beekeeping, small livestock).

But there are many gaps that need to be addressed:

Scanty information about land based carbon offsets – potential sellers now aware of opportunities and/or wary of risks (eg. fear of loss of rights over land);

Limited technical skills among local promoters (eg. how to pay and how much? cash or accounts with village banks?) and associated high costs of hiring international experts (eg. verifiers and intermediaries to make the bridge into the international market- the current development of the DNAs should improve this but it’s still early...);

Limited market for land management based carbon offsets- energy projects favoured by investors;

Scattered and uncoordinated projects – there is need for bundling of projects;

Limited land holdings and land distribution.

FACE foundation project: http://www.stichtingface.nl/disppage.php?op=30401&rp=L13|L21&lang=uk Ecotrust/ Plan Vivo: http://www.planvivo.org/fx.planvivo/scheme/ugandagovernance.aspx and http://www.ecotrust.or.ug/ Payments for Environmental Services from Agricultural Landscapes- PESAL Capacity-building workshop, FAO- CARE Tanzania Dar es Salaam 4-6 February 2008 Final Report

3.5 The Nairobi Framework and Potential Carbon Market for East Africa Todd Ngara, UNEP Risøe Center Several organisations (UNDP, UNEP, WB, AfDB and the UNFCCC) are working together to enable to enable developing countries to increase their CDM activities, under the Nairobi Framework Initative.

Africa-specific problems in increasing participation in CDM:

• Limited access to finance by potential developers;

• Financial intermediaries’ lack of knowledge on CDM;

• Lack of trained CDM local consultants;

• Unfavourable investment climate;

• Limited budgets for Designated National Authorities (DNA) operations;

• More potential in small-scale projects – difficult to attract financing – lack of entities capable of bunding projects.

Among other capacity building activities, NBI has:

supported operationalization of DNA in a number of countries;

funded preparation of pipeline of PINS/PDD’ s prepared by national consultants;

led targetted capacity building workshops for policy makers, national consultants, DNAs, potential developers, bankers and financial intermediaries and for specific sectors (e.g. fuelswitching workshops, etc).

The goals of this capacity building investment are:

• reducing the number of days DNA reviewing/approve a CDM project;

• increasing the number of local consultants capable of preparing good PIN/PDD;

• improving the understanding of local financial institutions of CDM, possible willingness to provide underlying project financing;

• supporting the Validation/Verification processes.

3.6 Reducing Emissions from Deforestation and Degradation (REDD): Policy Scenarios and Carbon Markets Jenny Farmer, Uganda Carbon Bureau Forest-related mitigation activities can considerably reduce emissions from sources and increase CO2 removals by sinks at low costs, and can be designed to create synergies with adaptation and sustainable development.About 65% of the total mitigation potential (up to 100US$/tCO2-eq) is located in the tropics and about 50% of the total could be achieved by reducing emissions from deforestation.

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