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Research Report

Payments for forest environmental services in Vietnam: From policy to practice

Pham Thu Thuy
Karen Bennett
Vu Tan Phuong
Jake Brunner
Le Ngoc Dung
Nguyen Dinh Tien
Copyright Date: Jan. 1, 2013
Pages: 96
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Table of Contents

  1. (pp. 1-2)

    The basic idea of “payments for environmental services”, or PES, is to create incentives for individuals and communities to protect environmental services by compensating them for the costs incurred in managing and providing those services (Mayrand and Paquin 2004). According to Wunder’s (2005) classic definition, PES consists of five key elements: voluntary transactions, a welldefined environmental service, at least one buyer of that service, at least one supplier of that service, and conditionality (the buyer makes payments only if the service supplier continuously secures the provision of that service). In this paper, “PES” refers to any compensation for service, merit...

  2. (pp. 3-6)

    The conceptual map guiding our analysis throughout the research is depicted in Figure 1.

    The success or failure of PES schemes and benefitsharing mechanisms depends largely on the institutional framework and setting (Archer et al. 2008; Corbera et al. 2009; Neef and Thomas 2009; Zabel and Roe 2009; Clements et al. 2010; Vatn 2010). Institutional frameworks influence actor relationships, funding flows and financial distribution, motivational factors such as the level of interest and involvement of beneficiaries, and the overall outcomes (Kosoy et al. 2008; Corbera et al. 2009). Therefore, the first step in our research was to review Vietnam’s laws...

  3. (pp. 7-14)

    After Vietnam imposed a logging ban in 1995, the forestry sector was undervalued compared with other sectors because of its small contribution to the country’s gross domestic product (GDP). The revised Forest Protection and Development Law 2004 changed this by recognizing the important role of forests in providing environmental services such as soil erosion control, water regulation, carbon sequestration, regulation of microclimates, biodiversity conservation and landscape beauty for recreational purposes. Following this law, a forest development strategy for 2006–2020 was approved. The strategy set out the need for a financial assessment of the value of forest environmental services. The...

  4. (pp. 15-43)

    Of the four services covered by Decree 99, arrangements are most advanced for watershed protection services. In 2003, payments from large hydropower plants totaled nearly USD 40 million, and payments in 2013 may total about USD 80 million. The revenue raised through payments by hydropower plants by region is shown in Table 5; as seen, about USD 26 million (50.2%) comes from the north, nearly USD 19 million (36.1%) from the central region and more than USD 7 million (13.7%) from the south.

    Rules for payments for watershed protection services are clearly established in Article 7 of Decree 99 as...

  5. (pp. 44-53)

    Wunder (2005), having defined PES as consisting of voluntary, conditional transactions, observed that, in Vietnam, neither buyers nor suppliers voluntarily enter into PES contracts and nor are payments truly conditional (Wunder et al. 2005); rather, PES payments in Vietnam can be seen either as “performance-based forest-ranger salaries” or “unconditional minor welfare subsidies”. Another observation is that those who plant and protect the forests are compensated for the opportunity costs of labor, not of land (Wunder et al. 2005).

    However, an approach that combines PES and more traditional command-and-control tools (Wunder et al. 2005) might be the most suitable for Vietnam’s...

  6. (pp. 54-60)

    Ensure secure tenure. As PFES payments are based on formal documentation of land allocation/contracts, suppliers of environmental services must hold some form of land tenure instrument to be entitled to benefits. However, insecure land tenure is a problem for PFES implementation in Vietnam (Wunder et al. 2005; Pham et al. 2008). Many residents of forest areas in Vietnam are poor, and engaging poor people in PFES is particularly important in cases where they are harming the forests in an effort to earn income. Securing households’ and communities’ use rights to state forest lands is therefore critical if the poor are...

  7. (pp. 61-62)

    The type, quality and quantity of services provided by an ecosystem are affected by the resource-use decisions made by individuals, communities and the private sector. The environmental, socioeconomic, political and dynamic context of a PFES policy is likely to interact with political realities to influence policy outcomes, including environmental effectiveness, cost-efficiency and poverty alleviation. Environmental services policies work by changing behaviors rather than by imposing rules or directives.

    PFES policies demonstrate the government’s commitment to forest protection and development. The context in which a PFES initiative is implemented has a strong impact on the effectiveness of the policy design and...