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Incentive measures

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Incentive measures

     CBD

    Distr.

    GENERAL

    UNEP/CBD/SBSTTA/14/17

    25 January 2010

     ORIGINAL: ENGLISH

    SUBSIDIARY BODY ON SCIENTIFIC, TECHNICAL

    AND TECHNOLOGICAL ADVICE

    Fourteenth meeting

    Nairobi, 10-21 May 2010

    Item 4.6 of the provisional agenda*

    INCENTIVE MEASURES (ARTICLE 11): INFORMATION AND GOOD-PRACTICE CASES

    FROM DIFFERENT REGIONS ON THE IDENTIFICATION AND REMOVAL OR

    MITIGATION OF PERVERSE, AND THE PROMOTION OF POSITIVE, INCENTIVE

    MEASURES

    Note by the Executive Secretary

    EXECUTIVE SUMMARY

    1. The present note contains a condensed version of the report of the International Workshop on the Removal and Mitigation of Perverse, and the Promotion of Positive, Incentive Measures, convened pursuant to paragraph 6 of decision IX/6 of the Conference of the Parties and held in Paris from 6 to 8 October 2009, with the financial assistance from the Government of Spain. The Workshop was hosted by the Division of Technology, Industry and Economics of the United National Environment Programme (UNEP-DTIE). The Workshop was tasked with collecting, exchanging and analysing information, including case-studies on, good practices for, and lessons learned from, concrete and practical experiences in identifying and removing or mitigating perverse incentive measures, and in promoting positive incentive measures, and to identify a limited number of good-practice cases from different regions. In analysing the information provided, the Workshop made a number of observations, and identified conclusions and consolidated lessons learned. The full report of the Workshop will be made available to participants in the fourteenth meeting of SBSTTA as an information document.

    2. On identifying and removing or mitigating perverse incentives, the workshop made observations related to: (i) the general importance of environmentally harmful subsidies among perverse incentives; (ii) the regionally uneven distribution of subsidies and their effects; (iii) the effects of subsidies on world market prices; (iv) the international dimension of subsidy reform, with reference to the Doha work programme of the World Trade Organization (WTO); (v) the opportunities to reforming environmental harmful subsidies both in OECD and non-OECD countries; (vi) the need for holistic assessments of subsidies addressing the complex relationship between subsidy programmes and the surrounding institutional and policy framework; (vii) the need to enhance transparency and highlight the evidence; (viii) the role of political interventions as a barrier to subsidy reform; (ix) the need to consider scale and social implications; and (x) the use of subsidies for environmental purposes.

    * UNEP/CBD/SBSTTA/14/1.

    /...

     In order to minimize the environmental impacts of the Secretariat‟s processes, and to contribute to the Secretary-General‟s

    initiative for a C-Neutral UN, this document is printed in limited numbers. Delegates are kindly requested to bring their copies

    to meetings and not to request additional copies.

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    3. The workshop concluded that there are ample opportunities for identifying and removing or mitigating perverse incentives, both in developed and in developing countries, which could make a critical contribution to reducing the current rate of biodiversity loss. The consolidated lessons learned identified by the workshop address: (i) the social implications of subsidy reform; (ii) the role of transparency; (iii) the role of leadership and stakeholder engagement; (iv) the need for more complete data and analysis; (v) the need for better communication and coordination.

    4. On promoting positive incentive measures, the workshop made observations related to: (i) the role of economic instruments as a source of revenue for positive incentive measures; (ii) the role of economic valuation and complementing national accounts for the calibration of positive incentive measures; (iii) the need for capacity-building and training; (iv) the importance of gender awareness; (v) the coverage of payments for ecosystem services programmes (PES programmes); (vi) limitations of PES programmes in poverty alleviation; (v) limitations of offset programmes; (vi) balancing conservation and sustainable use objectives with livelihood development in implementing community-based natural resource management; (vii) opportunities and limitations of business-driven activities. 5. The consolidated lessons learned identified by the workshop addressed direct incentive measures, including PES programmes, and community-based natural resource management. On positive incentive measures, the workshop identified consolidated lessons learned related to: (i) the need for long-term financial sustainability; (ii) the need to build institutions and trust; (iii) the relationship between the provision of positive incentive measures and the removal or perverse incentives; (iv) the need to understand the life choices of local communities; (v) ensuring no loss of income; (vi) the need to take equity and gender considerations into account; (vii) the need to take into account the risk of lack of additionality and of leakage, as well as the risk to create perverse incentives; (viii) the need for a regular review of positive incentive measures.

    6. On community-based natural resource management, the workshop identified consolidated lessons learned related to: (i) the role of community participation as a long-term commitment; (ii) the importance of sustaining inputs; (iii) the need for tangible and appropriately tailored and scaled benefits; and the importance of recognizing the role of local communities as traditional resource managers. 7. The Workshop identified a limited number of good-practice cases from different regions, using criteria related to: (i) contribution to conservation and sustainable use of biodiversity; (ii) example of positive practice and innovation; (iii) replicability.

    SUGGESTED RECOMMENDATION

    The Subsidiary Body on Scientific, Technical, and Technological Advice may wish to recommend that the Conference of the Parties at its tenth meeting adopt a decision along the following lines:

    The Conference of the Parties

    1. Welcomes the work of the international workshop on the removal and mitigation of perverse, and the promotion of positive incentives, held in Paris, from 6 to 8 October 2009; and expresses

    its appreciation to the Government of Spain for providing financial support in convening the workshop, to the United National Environment Programme (UNEP) for hosting the workshop, and to IUCN the

    World Conservation Union and UNEP for providing support to the write-up of the good-practice cases;

    2. Takes note of the information, including lessons learned, and the compilation of

    good-practice cases from different regions on the removal or mitigation of perverse incentives, and the promotion of positive incentive measures, identified by the international expert workshop, as contained in the note by the Executive Secretary on the subject submitted to SBSTTA ( UNEP/CBD/SBSTTA/14/17);

    3. Requests the Executive Secretary to disseminate the lessons learned and good-practice cases through the clearing-house mechanism of the Convention and other means;

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    4. Invites Parties and other Governments, as well as relevant international organizations and initiatives, to take the lessons learned and the compilation of good-practice cases into consideration as voluntary guidance in their work on the identification and removal or mitigation of perverse incentives, and the promotion of positive incentive measures for the conservation and sustainable use of biodiversity, while emphasizing that any collection of good-practice cases is, by necessity, not comprehensive, and that the absence of a particular case from such a collection does not imply that such a case could not also be considered good practice;

    5. Recognizing that perverse incentives are harmful for biodiversity while frequently being not cost-efficient and/or not effective against social objectives, urges Parties and other Governments to

    prioritize and significantly increase their efforts in actively identifying and removing or mitigating existing perverse incentives, and to take into account, in the design of new incentive measures, the risk of generating perverse effects for biodiversity;

    6. Invites Parties and other Governments to promote the design and implementation of

    positive incentive measures for the conservation and sustainable use of biodiversity;

    7. Recognizing the importance of assessing the economic value of biodiversity for the

    enhanced calibration of positive incentive measures, invites Parties and other Governments to take

    measures and establish, or enhance, mechanisms with a view to fully account for the value of biodiversity and ecosystem services in decision-making, including by revising and updating national biodiversity strategies and action plans to further engage different sectors of government and the private sector, building on the work of the initiative on The Economics of Ecosystems and Biodiversity (TEEB), under the aegis of the United Nations Environment Programme (UNEP), the regional initiative of the United

    Nations Development Programme (UNDP) on the importance of biodiversity and ecosystems for sustained growth and equity in Latin America and the Caribbean, and other relevant initiatives;

    8. Welcomes the work of relevant international organizations, such as the Food and

    Agriculture Organization of the United Nations (FAO), the United Nations Conference on Trade and Development (UNCTAD), the United Nations Development Programme (UNDP), the United Nations Environment Programme (UNEP) and its initiative on the Economics of Ecosystems and Biodiversity (TEEB), and the Organisation for Economic Co-operation and Development (OECD), IUCN The World

    Conservation Union, as well as other international organizations and initiatives, to support the efforts at global, regional and national levels in identifying and removing or mitigating perverse incentives, in promoting positive incentives for the conservation and sustainable use of biodiversity, and in assessing the value of biodiversity and associated ecosystem services, and invites them to continue and intensify

    this work;

    9. Requests the Executive Secretary to continue and further deepen his cooperation with relevant organizations and initiatives, with a view to catalysing, supporting, and facilitating the work spelled out in paragraphs 1-8 above and to ensure its effective coordination with the programme of work on incentive measures as well as the other thematic and cross-cutting programmes of work under the Convention;

    10. Invites Parties, other Governments, and relevant international organizations and

    initiatives to report to the Executive Secretary progress made, difficulties encountered, and lessons learned, in implementing the work spelled out in the paragraphs above;

    11. Requests the Executive Secretary to disseminate, through the clearing-house mechanism of the Convention, the information submitted pursuant to the invitation expressed in the previous paragraph, as well as to synthesize and analyse the information submitted and to prepare a progress report for consideration of the Conference of the Parties at its eleventh meeting.

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    I. INTRODUCTION

    1. Pursuant to its in-depth review of the programme of work on incentive measures, the Conference of the Parties at its ninth meeting decided to put more emphasis on the implementation of the programme of work through enhanced sharing of information on good practices, lessons learned, difficulties encountered, and other practical experience on its implementation, and requested the Executive Secretary to convene an international workshop on the removal and mitigation of perverse, and the promotion of positive, incentive measures, consisting of government-nominated practitioners with balanced regional representation, as well as experts from relevant organizations and stakeholders (decision IX/6, para.2). The workshop was tasked to collect, exchange and analyse information, including case-studies on, good practices for, and lessons learned from, concrete and practical experiences in identifying and removing or mitigating perverse incentive measures, and in promoting positive incentive measures, and to identify a limited number of good-practice cases from different regions, for consideration by the Subsidiary Body on Scientific, Technical and Technological Advice at its fourteenth meeting and review by the Conference of the Parties at its tenth meeting.

    2. In paragraph 7 of the same decision, the Conference of the Parties requested the Executive Secretary to compile and analyse relevant information, including analyses and studies from relevant international organizations, such as the Organisation for Economic Co-operation and Development (OECD), on the impacts of positive and perverse incentive measures, to disseminate this information through the clearing-house mechanism of the Convention, and to make it available to the workshop on the removal and mitigation of perverse incentive measures.

    3. Pursuant to these requests, the Executive Secretary issued notifications 2009-045 of 1 May 2009 and 2009-070 of 30 June 2009, inviting Parties, relevant international organizations and stakeholders to nominate experts and observers for the international workshop.

    4. By the same notifications, Parties, relevant international organizations and stakeholders were also invited to submit any relevant information, including analyses and studies, which would be of use for the work of the experts. Submissions were subsequently received from Cuba, Egypt, the European Commission and India as well as from the Food and Agriculture Organization of the United Nations (FAO), the Organisation for Economic Co-operation and Development (OECD), the initiative “The

    Economics of Ecosystems and Biodiversity” (TEEB), the German League for Nature and Environment, and the Institute for Environmental Decisions of the Swiss Federal Institute of Technology (ETH) Zurich. 5. The compilation of relevant information requested in paragraph 7 of decision IX/6 was made available through a dedicated website, accessible under http://www.cbd.int/incentives/workshop.shtml .

    The compilation includes the submissions received pursuant to the notifications, as referenced in the previous paragraph, as well as other relevant information on the impacts of positive and perverse incentive measures. The website also provides a link to the online database on incentive measures, which provides relevant information, collected over the past years, on the reform of perverse incentives and the design and implementation of positive incentive measures, including earlier submissions received from Parties as well as relevant organizations and initiatives on these topics.

    6. An analysis of the relevant information compiled was made available to the expert workshop as document UNEP/CBD/WS-Incentives/3/2. The document is available in electronic form under https://www.cbd.int/doc/?meeting=WSIM-03 .

    7. The participants in the Workshop were selected from among government-nominated practitioners, taking into account their expertise and the need to ensure balanced geographical distribution, and with due regard to gender balance. Representatives of stakeholder organizations and international organizations and initiatives were also attending the meeting. Through notification 2009-098 of August 2009, the Executive Secretary informed Parties as well as relevant international organizations and stakeholders of the selection of experts.

    8. The workshop was held from 6 to 8 October 2009, with financial assistance from the Government of Spain and was hosted by the Division of Technology, Industry and Economics of the United National

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Environment Programme (UNEP-DTIE) in Paris. The report of the workshop is made available as an 1information document.

    II. COLLECTION, EXCHANGE AND ANALYSIS OF INFORMATION,

    INCLUDING CASE-STUDIES ON, GOOD PRACTICES FOR, AND

    LESSONS LEARNED FROM, CONCRETE AND PRACTICAL

    EXPERIENCES IN IDENTIFYING AND REMOVING OR MITIGATING

    PERVERSE INCENTIVES, AND PROMOTING POSITIVE INCENTIVE

    MEASURES

    9. Under this item, government-nominated practitioners as well as representatives of international organizations and stakeholders provided and analysed information on their experiences in identifying and removing or mitigating perverse incentives, and in promoting positive incentive measures.

    A. Identification and removal or mitigation of perverse incentives

    10. In analysing the information provided, the workshop made a number of observations, summarized below:

    11. While not being the only type of perverse incentive, subsidies with harmful effects on

    biodiversity are an important example of perverse incentives for the conservation and sustainable use of biodiversity. Subsidies provided and their effects, including the possible perverse effects for biodiversity conservation and sustainable use, differ largely between countries. It is important to recognize the regionally uneven distribution of subsidies and their effects, particularly regarding developed countries and developing countries. Reference was made in this regard to the overexploitation of fish stocks resulting from agreements for foreign fleets, and to the problem of illegal fishing, problems which would be exacerbated by changing fish migration pattern due to climate change. In terrestrial ecosystems, current trends in contract farming would also tend to exacerbate the impacts of subsidy regimes. 12. While it is important to not overstate or oversimplify the case of environmentally harmful subsidies, it is important to remember that there are many studies saying that world market prices are depressed because of subsidies, to the detriment of agricultural exporters from southern countries. 13. The international dimension of subsidy reform needs to be taken into account, bearing in mind that progress can only be achieved if it is helpful to all countries involved. The negotiations currently under way at the WTO, under the Doha work programme, are important in this regard, and in particular the negotiations on domestic support in the agricultural negotiations, and the negotiations on fisheries subsidies.

    14. Regarding the environmental harmful effects of certain subsidies, similar conclusions could be drawn for many OECD and non-OECD countries. While findings would vary from sector to sector and country to country, and while there would be other resource endowments and social outcomes, there is a significant number of examples on environmentally harmful subsidies not just in OECD countries, but also in many non-OECD countries in particular subsidies to fertilizers and irrigation water. Identifying and removing or mitigating their perverse effects are important areas for further work, and the OECD checklist is a useful tool including for addressing biodiversity impacts.

    15. The assessment of subsidies and their effects should not just address environmentally harmful effects, but rather take a multi-criteria, holistic approach, which should also address the cost-effectiveness

    and the social effects of subsidies. The whole chain of cause and effect matters and could also be addressed through sensitivity analysis.

    16. Sometimes, subsidies are removed but environmental quality is not improved. Hence, reforming subsidies may not be sufficient and further assessments are needed in these cases in order to disentangle the complex relationship between subsidies and the surrounding institutional and policy framework.

     1 The World Conservation Union, with financial support by the United Nations Environment Programme (UNEP), provided support to the write-up of the good practice cases. Both contributions are gratefully acknowledged.

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    17. Access to, and the provision of, relevant data is often insufficient, and enhancing transparency is an important step, and critical precondition, for identifying and reforming environmentally harmful subsidies. Initiatives taken by countries to enhance transparency were welcomed. In this context, there is a need to recognize that OECD subsidy estimates are conservative ones.

    18. For instance, while the results of the Green Paper on the Reform of the Common Fisheries Policy are not yet validated and turned into political action, it is useful to point to the evidence in order to generate a credible process towards subsidy reform. For instance, with regard to fish exports to the European Union and sustainability in export zones, the Green Paper notes that European stock is so overfished that imports need to come from somewhere else.

    19. Ad hoc political interventions are sometimes an important barrier to the effective reform of subsidies. Subsidy removal is also an issue of scale, in particular with regard to social implications. As an example, reference was made to the need to support the livelihoods of small and artisanal fisheries. Subsidies can also be useful to protect the environment, if properly designed and targeted towards environmental objectives.

    Conclusion and consolidated lessons learned

    20. While support provided and its effects differ largely between countries and sectors, and while there would be other resource endowments and social outcomes, there are generally ample opportunities for identifying and removing or mitigating perverse incentives, both in developed and in developing countries. Such reforms could make a critical contribution to reducing the current rate of biodiversity loss and it is important to pursue this work. The analytical and guidance tools developed by the OECD and UNEP would be useful in this regard, including for addressing biodiversity impacts. 21. The meeting identified a number of succinct consolidated lessons learned on how to organize subsidy reform, including on how to address obstacles to reform:

    1. Subsidies can create dependency in the subsidized sectors. Attention should be paid to where vested interest is. The social implications of subsidy reform must also be taken into account, especially when the subsidy is linked to a resource used in particular by indigenous and local communities and marginalized segments of society;

    2. Transparency must be improved on what amount of subsidies is given to whom, in order to assess how funding allocations affect biodiversity loss, and in order to mobilize support for subsidy reform. Increasing transparency can also assist in ensuring the subsidy‟s effectiveness against its stated

    objective, its cost efficiency, and in minimizing environmental impacts;

    3. A strong leadership and broad coalition, based on broad stakeholder engagement, combined with a well-managed process, is necessary to stage reform and take advantage of beneficial circumstances;

    4. Better and more complete data and analysis on subsidies are needed, including more comprehensive assessments on the complex interactions between different subsidy programme and other policies. For example, reforming the perverse incentive can release funds for positive incentives, or simply alleviate the need for a positive incentive;

    5. There must be better communication and coordination among policy/decision-makers, as well as between policy/decision makers and relevant stakeholders to showcase the potential benefits of

    reforming subsidies, and/or to ensure coherent implementation of reforms at governmental levels.

    B. Promotion of positive incentive measures

    22. In analysing the information provided, the Workshop made a number of observations, which are summarized in the following paragraphs.

    23. Economic instruments (taxes or user fees) play a potentially important role as a source of revenue for funding the provision of positive incentive measures. However, economic instruments, even when applied in the first place, are frequently being set too low to effectively change behaviour (that is, act as

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    disincentives) or to meet resource requirements for the provision of positive incentive measures. The calibration of economic instruments needs to be improved, both in developing and developed countries.

    24. Assessing the economic value of biodiversity and ecosystem services, and complementing existing national accounts to reflect depreciation of natural capital, can play an important role in better calibrating economic instruments and positive incentive measures for the conservation and sustainable use of biodiversity. The initiative on The Economics of Ecosystems and Biodiversity (TEEB) to promote common understanding and broader application of these tools is welcome. There is an information gap in 2this regard between developing and developed countries.

    25. It is important to enhance capacity in, and provide training for, the design and implementation of positive incentive measures. Recent efforts to expand university curricula on environmental economics, 3undertaken for instance by India and to build regional programmes and networks are welcome. Such

    efforts need to be broadened.

    26. Gender issues need to be taken fully into account when designing and implementing positive incentive measures, for instance, the impact of community forestry programmes on rural and forest-dwelling women through the redistribution of forest resources.

    27. Programmes implementing payments for ecosystem services (PES schemes) are most effective when seeking to cover, to the extent feasible, all ecosystem services provided by a particular ecosystem. In this context, reference was made to the requirement, implemented for instance in India, to compensate for the entire net present value of the forest ecosystem in case of forest loss or degradation. 28. In developing countries, negotiations for voluntary PES schemes are typically with the authorities (both formal and traditional), and it is very rare that all voices are heard. This may lead to equity issues as well as limited value of PES schemes for poverty alleviation objectives. While PES schemes can be designed in a pro-poor manner, it is important to recognize that PES schemes are not a poverty alleviation tool.

    29. Land ownership plays an important role in designing PES schemes. The allocation of formal land titles may generate important equity effects when introducing such schemes.

    30. While offsets are generally a valuable tool for biodiversity conservation, there are important

    limitations which need to be taken into account. For instance, some areas should be completely off-limits for offset activities, for instance sacred areas and groves as well as areas with a high degree of endemism. 31. Another important potential limitation of offsets is the definition of equivalence, given for instance the important time lags before ecosystems are restored completely wetland mitigation being a

    concrete example.

    32. Difficult decisions arise frequently in designing and implementing community-based natural resource management in the context of establishing protected areas, in particular with regard to the role of human settlements in protected areas and potential relocation decisions. There is a need to carefully balance objectives of biodiversity conservation and sustainable use, taking into account poverty alleviation and livelihood development objectives. Reference was made to the UNESCO Man and Biosphere Programme (MAB) as an approach to reconcile protected areas and human settlements and activities in buffer zones.

    33. Business-driven initiatives (e.g. large retail chains requiring food coming from sustainable sources, indicated by appropriate certification) can play a positive role in providing incentives for conservation and sustainable use. In general, the examples of the pharmaceutical and cosmetic industries, which rely increasingly on biodiversity-based products, show that opportunities exist to understand biodiversity and ecosystem services as an emerging economic sector. However, there is a need to be

     2 See paragraph 25.

    3 E.g., the Latin American and Caribbean Environmental Economics Programme, or the Economy and Environment Programme for Southeast Asia.

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    aware of potential limitations for instance, leakage may occur, resulting in more harmful effects from products that are not covered by certified products.

    Conclusions and consolidated lessons learned

    34. Participants noted a number of important conclusions and general lessons learned from their analysis of existing cases and related information.

    35. With regard to the promotion of direct positive incentives, including payments for ecosystem services, participants noted that:

    (a) A long-term commitment to providing positive incentives is important. Securing the long-term financial sustainability of providing positive incentives is critical, since positive effects on biodiversity will require time to take effect and since maintaining these positive effects will typically require the ongoing provision of positive incentives;

    (b) They are complex undertakings, and not necessarily only for financial reasons, involving the building of institutions and trust. The different mandates and interests, and subsequent dynamics among and between government representatives and stakeholders must be taken into account;

    (c) The important relationship between the provision of positive incentives and the removal of perverse incentives must be taken into account. The prior removal of perverse incentives will make positive incentives more effective, and can even reduce the need for providing positive incentives;

    (d) They have to understand farmers and life-choices. If the design of positive incentives does not reflect a deep understanding of local communities and farmers and the relationship between the users of natural resources and the resources themselves, they run the risk of not achieving their goals and harming already sensitive bonds of trust between local communities and formal institutions;

    (e) Payments must ensure no loss of income, as this could impact the trust built between actors within the scenario;

    (f) More generally, equity and gender considerations need to be carefully taken into account, since high poverty and widespread inequality are often part of the barrier to biodiversity conservation in the first place;

    (g) They can generate additionality issues and leakage, which must be taken into account during the design stage to ensure that positive incentives are cost-efficient and effective;

    (h) They can generate perverse effects when not properly designed and implemented. Understanding the relationship between perverse and positive incentives is also important in this context;

    (i) For this reason, there needs to be a regular review of positive incentive measures. Just as sunset clauses must be considered in the case of subsidies, positive incentive measures should be reviewed regularly to ensure that they have generated the intended impacts in a cost-effective manner and within a reasonable amount of time.

    36. With regard to community-based natural resource management, the group noted that:

    (a) Community participation needs to start early on and be a long-term commitment. This ensures that positive incentives can be monitored for effectiveness, and that the programme gains credibility;

    (b) Inputs have to be sustained to gain the trust and confidence of local people, and build credibility;

    (c) Benefits must be tangible, tailored and appropriately scaled, so that stakeholder enthusiasm does not wane, and that communities remain committed to the projects;

    (d) The responsibility of local people as traditional resource managers must be acknowledged and used, as these communities often have a deeper understanding of how to maintain biodiversity and use it in a sustainable manner.

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    III. IDENTIFICATION OF A LIMITED NUMBER OF GOOD PRACTICE

    CASES FROM DIFFERENT REGIONS

    37. The Workshop used the following criteria for identifying good-practice cases as a basis for their

    work on this item:

    (a) The case should present a policy or policy reform with a substantial contribution to the conservation and sustainable use of biological diversity;

    (b) The case should present examples of positive practice and innovation, creative ways of overcoming barriers and resistance to change, and/or ways of making better use of resources;

    (c) The case should present a good possibility of replication at least within the region, possibly with some adaptation or modification; at the minimum, it should provide a useful reference when searching ideas for own initiatives.

    38. The result of the work of the groups is summarized in the annex to the present note.

    Annex

    COMPILATION OF A LIMITED NUMBER OF GOOD-PRACTICE CASES FROM

    DIFFERENTS REGIONS ON THE REMOVAL OR MITIGATION OF PERVERSE

    INCENTIVES AND THE PROMOTION OF POSITIVE INCENTIVE MEASURES

    In light of the request of the Conference of the Parties to identify a limited number of good-practice cases, the following list is by necessity not comprehensive. The Workshop wishes to underline that the absence of a particular case from the compilation below does not imply that such a case could not also be considered good practice.

    A. Identification and removal of perverse incentives

    ; Austria: removal of subsidies for wetland drainage To establish and run the National Park

    Neusiedler See, Austria used a package of incentive measures to support protected areas management.

    This included the removal of subsidies for the drainage of wetlands for agricultural cultivation. The

    use of a combination of economic incentives, information dissemination and paying individuals

    compensation for restricting land use proved to be successful. While the area is effectively protected,

    there is limited information available on actual biodiversity gains. The policy reform was innovative

    in that it combined a range of instruments to address competing uses and interests in the area.

    Establishment of the national park affected over 1500 land owners and negotiations had to address the

    competing interests/uses associated with agriculture, hunting, fishing, the reed industry, the local

    population and tourism. As this situation is relatively common in Europe, the scope to replicate this

    case seems good. (Source: Hubacek and Bauer (1999)).

    ; Ghana: removal of fuel subsidies. Faced with persistently high oil prices, in 2004, Ghana was

    unable due to fiscal constraints to continue subsidizing petroleum products. The Government

    launched a poverty and social impact assessment (PSIA) including all stakeholders. The PSIA found

    that price subsidies predominantly benefitted the better-off in society. When the Government

    eliminated fuel subsidies in 2005, leading to a 50 per cent price increase in fuel, the Government

    launched a campaign explaining the need for price rises and announcing mitigation measures.

    Mitigation measure included elimination of school fees and a programme to improve public transport.

    While benefits for biodiversity resulting from the removal of fossil fuel subsidies are presumably

    rather indirect, the case points to important general lessons with regard to increasing the social

    acceptability of reform measures. In fact, due to the compensation measures, the transparency of the

    reform process, and the public information campaign, the public generally accepted the measures.

    (Source: ESMAP (Energy Sector Management Assistance Programme) (2006), cited in Bacon and

    Kojima (2006).)

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    ; India: reform of subsidy for chemical fertilizer - The Indian Government decided in April 2009 to

    reform the subsidy for chemical fertilizer. Large areas of farmland had become barren due to excessive use of a single fertilizer, urea, which, due to high subsidies, was cheaper than other fertilizers. The new policy provides more leeway to fertilizer manufacturers to mix nutrients needed for different kinds of soil and to sell them as separate products, and subsidies are based on the ingredients in each nutrient mix. This will lead to reduced overall nutrient levels and more adapted composition, which will augment biological resources in agricultural soils (e.g. bacteria, earthworm, micro-arthropods etc.). The increased efficiency of nutrient use is expected to compensate the reduced subsidy. In the transition of subsidy reform, all farmers will receive the new type of subsidy. While further consideration is given to reduce eligibility in the future to more targeted recipient, that is, small and marginal farmers. (Source: Dr. Asish Ghosh (personal comm.) and The Telegraph

    (Calcutta) 07.07.09.)

    ; Indonesia: removal of pesticide subsidies. After 1984, Indonesia reduced its support to agriculture

    including removal of pesticide subsidies and a ban on the import of broad spectrum pesticides in 1986 and removal of fertilizer subsidies in 1998. Overuse of pesticides had wiped out the natural enemies of the brown rice planthopper resulting in US$ 1.5 billion of damage to the rice sector. Following subsidy removal, pesticide applications halved while rice production grew by three million tons over four years. A well-funded national programme of Integrated Pest Management (IPM) was a critical factor in the maintenance of rice production and farm incomes. An additional benefit was the US$ 100 million fiscal saving resulting from subsidy elimination. The reduced use of agricultural inputs was positive for both agro-biodiversity and biodiversity in general. This experience suggests that subsidy removal is feasible even when there is strong opposition from some stakeholders. Subsidy removal was undertaken at the same time as IPM implementation and the decentralization of agricultural research and extension from national to province level. The financial stress associated with declining oil prices after 1984 provided further justification for cuts to government budgets. (Source: World Bank (2005)).

    ; Denmark: removal of adverse incentives in the forest sector - To increase the national forested

    area, the government combined grants for reforestation and compensation for voluntary conversion of private forests into reserves. To eliminate perverse incentives leading to forest degradation, Denmark reformed a regulation which made it illegal to leave unproductive major potentially productive forest areas with the aim to allow exemptions. Success was linked to the fact that the scheme was voluntary for landowners and that compensation was offered for avoided land use change. This case should be replicable in countries where there is significant private ownership of forest resources, a national commitment to maintain or increase forest cover and financial resources available for compensation. (Source: OECD (1999).)

    ; European Union: enhanced transparency on subsidy measures in the European Union and its Member States- A recent European Union financial regulation, agreed in December 2006, requires „adequate ex-post disclosure‟ of the recipients of all European Union funds, with agricultural

    spending transparency to begin in the 2008 budget. While compliance of Member States with the regulation is still uneven, the initiative seems to be important for promoting transparency of subsidy programmes, which has been recognized as an important precondition for successful reforms. In fact, the regulation spurred important watchdog initiatives such as farmsubsidy.org, caphealthcheck.eu or

    fishsubsidy.org, which seek to closely monitor compliance by EU Member States and assess the quality of the released data. (Source: TEEB (2009).)

    ; New Zealand: removal of agricultural and fisheries subsidies Prior to 1984, agriculture in New

    Zealand was highly protected via subsidies, and price and income support. This led to market distortions, over-production and degradation of marginal lands. In 1984, the Government faced a serious fiscal crisis and removed all agricultural subsidies (price and income support, fertilizer, transport and land development subsidies), devalued the currency and liberalized capital markets.

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