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Research Report

Motivation for payments for ecosystem services in Laos: The essential alignment

William Robichaud
Copyright Date: Jan. 1, 2014
Pages: 26
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Table of Contents

  1. (pp. 1-1)

    The concept of payment for ecosystem services (PES) has garnered substantial international interest as a cost-effective means to improve environmental management. Although not specifically designed to alleviate poverty, PES has potential to provide alternative (or supplemental) income to people whose livelihoods depend directly on the exploitation of natural resources, while at the same time incentivizing their sustainable use of these resources.

    Laos (or the Lao People’s Democratic Republic, Lao PDR) is one of Asia’s least-developed, yet most natural resource-rich countries. It is largely rural, with substantial direct dependence on natural resources both for the livelihoods and incomes of its population,...

  2. (pp. 1-1)

    No formal definition of PES schemes exists, which has resulted in some confusion (Wunder 2007). However, there is general agreement that PES schemes share five fundamental elements: (1) a voluntary payment for a (2) well-defined ecosystem service (ES), with (3) at least one buyer, (4) at least one provider and with a (5) condition that the buyer pays only as long as the provider delivers the service (Wunder 2005).

    Pagiola et al. (2005) added a qualification to this list: the purchasers of an ES should also be users of that ES. Therefore, rather than having governments or donor agencies finance...

  3. (pp. 2-2)

    Laos has some characteristics that support the development of a clear system for implementation of PES schemes.

    First, significant legal foundations are already in place. Table 1 summarizes Lao legislation related to PES.

    Second, reflected in some of this legislation is clear policy support for the ‘user pays’ principle (especially Article 24 of the Water and Water Resources Law; Table 1).

    Third, the GoL relies extensively on forestry and hydropower sectors for national development, yet is in a near-constant mode of ‘giving away’ the country’s rivers and ‘lending’ watersheds to foreign investors, for the foreigners’ own income generation (through Build,...

  4. (pp. 2-4)

    Nam Theun 2 (NT2) is the largest and most complex hydropower project in Laos. Following several years of construction, at a cost of USD 1.3 billion, the gates of the dam on the Nam Theun river were closed in 2008. Commercial electricity generation commenced two years later (after the 450 km² reservoir filled and various infrastructure and engineering tests had been completed).

    Most of the dam’s electricity is sold and exported to Thailand. For Laos, the core function of NT2 is to generate revenue, not electricity for domestic use. The project is owned and operated by the Nam Theun 2...

  5. (pp. 4-7)

    Nam Theun 2 has been broadly promoted and characterized as a ‘user pays’ PES scheme, or at least a PES-like scheme, by its promoters and developers (e.g. World Bank and NTPC): some revenues earned from sending reservoir water through the turbines are spent to protect the source of that water, NNT NPA.

    Certainly, various WMPA activities are similar to components of PES schemes. These include tacitly ‘rewarding’ villagers with development aid in exchange for watershed forest conservation, and paying villagers to participate in ranger patrols against poaching (both illegal logging and wildlife hunting). Ultimately, revenues from the dam pay for...

  6. (pp. 7-9)

    It may be worthwhile to consider how the NT2 project could have been designed and structured to make it more PES-like (and thus presumably more effective at cost-efficient forest conservation). This will be examined in terms of the three most problematic of the five PES criteria in the NT2 case.

    The issue here is that the real buyer is not clear: the World Bank provides the motivation; NTPC provides the funding; and WMPA acts a both a seller (to NTPC) and a buyer (from villagers) of the ES of watershed protection. The NT2 project is like a stream, tumbling over...

  7. (pp. 9-11)

    There are some other PES-like schemes in Laos, both small and large scale. Small-scale examples are incentive-based nature tourism, wherein trekkers agree to pay local eco-guides a bonus for sightings of wildlife in lands at least partially managed by the eco-guides and their village (Eshoo in press), and protection of small watersheds (Mousquès et al. 2007; George et al. 2009).

    There are two other, large-scale projects in Laos that at least superficially share some elements of a PES scheme. First, for the last several years, the Xepon mine in southern Laos has been providing funds to WCS to conserve biodiversity...

  8. (pp. 11-14)

    Over the past several years, a number of initiatives and attempts towards putting PES on firm institutional and policy footing in Laos have been made. However, these actions have been disjointed and dispersed across various ministries and departments, with few concrete achievements to date. The attempts include (in addition to the hydropower and REDD initiatives described earlier):

    Drafting of legislation related to collection and use of a forest ecosystem service fee, including water-use fee. This was led by the Department of Forestry (DoF) of the Ministry of Agriculture and Forestry (MAF) and the National Assembly (NA).

    Meetings and discussions on...