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Bio-rights in theory and practice: A financing mechanism for linking poverty alleviation and environmental conservation

Authors:
Bio-rights in theory and practice Pieter van Eijk and Ritesh Kumar, 2009
Bio-rights in theory and
practice
A financing mechanism for linking poverty
alleviation and environmental conservation
Many poor communities in developing countries are entangled in the poverty
trap: to meet short-term livelihood needs they are forced to unsustainably exploit
the environment. This in turn deteriorates critical life-supporting ecosystem
services, such as sheries, timber resources, soil fertility and fresh water
provision.
Bio-rights is an innovative nancial instrument that addresses the poverty trap
by integrating sustainable development and environmental conservation. In
return for the provision of micro-credits, local communities involve in ecosystem
protection and restoration. Upon successful delivery of conservation services
these micro-credits are converted into denitive payments. Thus, the approach
enables community involvement in conservation while providing sustainable
alternatives to harmful development practices.
Bio-rights is a powerful tool towards addressing the environmental challenges of
our age including climate change, biodiversity loss and rural poverty. With this
report Wetlands International aims to introduce conservation and development
practitioners, policymakers, scientic institutes and the corporate and nance
to the rationale and theory behind Bio-rights and to provide extensive guidance
for initiating and implementing the approach in practice. This is illustrated by
a number of case examples from projects that have been implemented by
Wetlands International over the last few years.
Mission:
To sustain and
restore wetlands,
their resources and
biodiversity for
future generations.
For further information please
visit our website or contact our
office.
Wetlands International
PO Box 471
6700 AL Wageningen
The Netherlands
Tel: +31 318 660 910
Fax: +31 318 660 950
E-mail: post@wetlands.org
Website: www.wetlands.org
Pieter van Eijk and Ritesh Kumar, 2009
Bio-rights in theory and practice
A financing mechanism for linking poverty allevation and environmental conservation
Pieter van Eijk and Ritesh Kumar
Wetlands International
January 2009
© Wetlands International 2009
Pages from this publication may be reproduced freely for educational, journalistic, and other
non-commercial purposes (subject to any disclaimers). Prior permission must be given for all
other forms of reproduction. Full credit must always be given to the copyright holder.
This report was produced by Wetlands International, with financial support from the following
organisations:
Alcoa Foundation
Ministry of Foreign Affairs, The Netherlands
Technical support was provided by:
International Union for the Conservation of Nature (IUCN)
This report should be cited as follows: Eijk, P. van & R. Kumar, 2009. Bio-rights in theory and
practice. A financing mechanism for linking poverty alleviation and environmental conservation.
Wetlands International, Wageningen, The Netherlands.
Published by Wetlands International
www.wetlands.org
Design, figures and tables by Natuurlijk in Vormgeving! - Oscar Langevoord
Printed by Boom & van Ketel grafimedia, The Netherlands
Printed on unbleached paper, approved by FSC
Keywords: Bio-rights, innovative finance, poverty trap, conservation, sustainable development,
micro-credits.
Cover picture: Restored shrimp pond system in Pemalang, Central Java (Indonesia).
Photo: Pieter van Eijk
Bio-rights in theory and practice
3
Table of contents
I. Summary ................................................................................................................................ 5
II. Acknowledgements ............................................................................................................... 9
III. Acronyms and glossary ...................................................................................................... 10
1. Introduction ......................................................................................................................... 11
1.1 Purpose of this report ......................................................................................................... 11
1.2. Reading guide ...................................................................................................................12
Part I. Analytical review of the Bio-rights approach ................................................................ 15
2. Background and rationale ................................................................................................... 17
2.1 Problem formulation ...........................................................................................................17
2.2 Linking poverty alleviation and nature conservation ............................................................. 19
2.3 Key requirements for reconciling sustainable development
and environmental conservation ...............................................................................................19
3. The Bio-Rights Approach .................................................................................................... 21
3.1 Overall framework ............................................................................................................... 21
3.2 Preconditions for successful implementation ......................................................................24
3.3 Priorities for implementation ................................................................................................ 27
3.4 Actors involved ................................................................................................................... 28
3.5 Organisational structure ...................................................................................................... 30
3.6 Costs ................................................................................................................................. 33
3.7 Project sustainability ...........................................................................................................33
3.8 Contracting and contract enforcement ...............................................................................34
3.9 Contract duration ...............................................................................................................35
3.10 Loan disbursement and verification ................................................................................... 36
3.11 Bio-rights and policy ......................................................................................................... 37
3.12 Project scales ................................................................................................................... 37
3.13 Challenges and constraints ............................................................................................... 38
4. Bio-rights in the wider conservation and development portfolio ........................................ 39
4.1 The process .......................................................................................................................39
4.2 Aligning to existing approaches ..........................................................................................40
4.3 Adapting Bio-rights ............................................................................................................. 42
5. Bio-rights in relation to other nancial mechanisms for conservation
and development ..................................................................................................................... 44
5.1 The Basis for use of financing mechanisms ........................................................................44
5.2 Financing mechanisms within the Conservation - Development Sector ............................... 47
5.3 Bio-rights in comparison to ICDPs, PES and micro-finance ................................................51
5.4 Lessons learnt and emerging best practice ........................................................................ 52
A financing mechanism for linking poverty alleviation and environmental conservation
4
Part II. Manual for implementers ............................................................................................. 57
6. Implementing Bio-rights ...................................................................................................... 59
6.1 Introduction ........................................................................................................................59
6.2 Step 1. Project initiation ...................................................................................................... 60
6.3 Step 2. Project development .............................................................................................65
6.4 Step 3. Contract development ............................................................................................ 73
6.5 Step 4. Project implementation ........................................................................................... 74
6.6 Step 5. Project monitoring and evaluation .......................................................................... 77
6.7 Project duration .................................................................................................................. 79
Part III. Examples from the eld ..............................................................................................81
7. Bio-rights 1998-2008 ..........................................................................................................83
7.1 Bio-rights history ................................................................................................................83
7.2 Plans for the future .............................................................................................................84
7.3 Outlook ............................................................................................................................... 84
8. Case I. Mangrove restoration on Java, Indonesia ............................................................... 86
8.1 Introduction ........................................................................................................................86
8.2 Project initiation ................................................................................................................. 87
8.3 Project development ........................................................................................................... 88
8.4 Contract development ........................................................................................................ 89
8.5 Project implementation ....................................................................................................... 90
8.6 Project outcomes ............................................................................................................... 92
9. Case II. Restoration of Tsunami-impacted coastal areas on Sumatra, Indonesia ..............97
9.1 Introduction ........................................................................................................................97
9.2 Project initiation .................................................................................................................. 98
9.3 Project development ........................................................................................................... 99
9.4 Contract development ...................................................................................................... 101
9.5 Project implementation ..................................................................................................... 101
9.6 Project outcome ............................................................................................................... 103
10. Case III. Water bird conservation in the Inner Niger Delta, Mali ...................................... 108
10.1 Introduction ....................................................................................................................108
10.2 Project initiation .............................................................................................................. 109
10.3 Project development ....................................................................................................... 110
10.4 Contract development .................................................................................................... 111
10.5 Project implementation ................................................................................................... 112
10.6 Project outcome ............................................................................................................. 114
11. References ......................................................................................................................116
Annex I. Assessing suitability of Bio-rights as a tool for project implementation ................. 119
Annex II. Decision support system for site selection ............................................................121
Annex III. Checklist for project development ........................................................................124
Annex IV. Checklist for contract development ...................................................................... 125
Annex IV. Bio-rights: summary of implementation steps and responsibilities....................... 127
Bio-rights in theory and practice
5
I. Summary
Bio-rights is an innovative financing mechanism for reconciling poverty alleviation and
environmental conservation. By providing micro-credits for sustainable development, the approach
enables local communities to refrain from unsustainable practices and be actively involved in
environmental conservation and restoration. Micro-credits are converted into definitive payments
upon successful delivery of conservation services at the end of a contracting period. Integrating
market-driven instruments and more traditional conservation and development measures, Bio-
rights offers a novel approach in which global stakeholders pay local communities to provide
ecosystem services such as carbon sequestration, fresh water supply and biodiversity. Thus,
the approach unites the conservation and development aspirations of NGOs, governments,
the private sector and local communities alike. Projects in the field have demonstrated that
Bio-rights can serve as a powerful tool that addresses the major environmental challenges of
our age, including climate change and biodiversity loss. In the light of major efforts in relation
to REDD development and the Millennium Development Goals, Bio-rights has the potential to
translate global objectives into concrete action.
This report describes the rationale and theory behind Bio-rights and offers extensive guidance
for implementing Bio-rights in the field. A detailed step-by-step description of activities indicates
what needs to be done to successfully initiate and manage a project. A number of detailed
case descriptions from Indonesia and Mali illustrate how these steps have been implemented
in practice and the results that have been accomplished to date. The report is targeted at
conservation and development practitioners interested in incorporating the approach into their
work. It also aims to provide policymakers, donors and private-sector stakeholders interested in
financing approaches with insights into the theory behind the approach as well as an overview
of experiences from the field.
Part I. Theory and rationale
Rising population pressures, linked to decreased availability of land, have decreased development
opportunities for rural communities throughout the developing world. Many of the rural poor are
caught in a ‘poverty trap’: to meet short term livelihood needs they are forced to unsustainably
exploit the natural environment. The exploitation itself leads to increased vulnerability and further
constrains their development opportunities. There is an urgent need to address this negative
spiral of increased poverty and severe environmental degradation in order to successfully meet
the major conservation and development challenges of our age.
Many previous efforts to integrate poverty alleviation and environmental conservation have met
with limited success. They have often had only marginal impact in promoting sustainability and
there has been a persistent conflict between environmental integrity and development aspirations.
Bio-rights offers a novel approach to linking conservation with development. The approach
builds on lessons learned from these previous approaches and incorporates successful and
established tools for conservation and development with promising (market-driven) financing
instruments that have recently emerged.
Bio-rights can be seen as an incentive mechanism, not unlike systems for Payments for
Environmental Services (PES). Based on three simple but powerful steps, the approach
accomplishes community involvement in the preservation of environmental assets that are of
global importance:
A financing mechanism for linking poverty alleviation and environmental conservation
6
Step 1.• Local communities receive micro-credits to develop sustainable income generating
activities.
Step 2.• Communities repay their loan and the associated interest in the form of conservation
services, such as reforestation, habitat protection and refraining from unsustainable land
use practices.
Step 3.• Micro-credits are converted into definitive payments and subsequently into
community-based revolving funds for sustainable development, once the conservation
measures prove successful and sustainable.
Incentives for conservation are accompanied by intense capacity building for sustainable
development, environmental conservation and group formation. This involves awareness raising
about the importance of sustainable resource management in improving livelihoods, which in
turn has a positive influence at different levels. At the field level, Bio-rights improves livelihoods
and solves environmental issues that hamper sustainable community development. For
global stakeholders, the mechanism ensures the future existence of environmental goods and
services considered crucial for future generations or for the sustenance of long-term business
objectives.
The Bio-rights approach was developed by Wetlands International, Alterra Green World
Research (Wageningen University) and a number of partner organisations in the late 1990s.
The approach was formulated as a response to complex social, environmental and economic
issues encountered in the field, which proved to be difficult to solve through conventional natural
resource management approaches. Following the success of initial pilots, the mechanism has
Figure 1. The main steps in Bio-rights implementation.
STEP
3.
CONTRACT
MATTERS
:
A) CONTRACT NEGOTIATION
B) SIGN BIO-RIGHTS CONTRACT
STEP 4. PROJECT IMPLEMENTATION:
A) CAPACITY BUILDING AND AWARENESS RAISING
B) MICRO-CREDIT DISBURSAL
C) INITIATE CONSERVATION AND DEVELOPMENT
ACTIVITIES
STEP 5. PROJECT MONITORING AND EVALUATION:
A) MONITOR PROJECT OUTCOME
B) MICRO-CREDIT CONVERSION
C) EVALUATING LESSONS LEARNED
STEP
2.
PROJECT
DEVELOPMENT
:
A
)
STAKEHOLDER
CONSULTATION
II:
EXPLANATION
OF
CONCEPT
AND
GROUP
DEVELOPMENT
B
)
STAKEHOLDER
CONSULTATION
III:
SET
GOALS
AND
DEVELOP
A
PLAN
C
)
OPTIONAL
:
FURTHER
FIELD
STUDIES
D
)
FITTING
BIO
-
RIGHTS
PLAN
IN
GREATER
CONTEXT
E
)
ADDRESS
POLICY
HURDLES
STEP
1.
PROJECT
INITIATION
:
A
)
CONCEPT
DEVELOPMENT
AND
ASSESSMENT
OF
APPROACH
B
)
GENERATE
FUNDS
C
)
IDENTIFY
INTERESTED
STAKEHOLDERS
D
)
SELECT
PROJECT
SITES
E
)
NETWORK
DEVELOPMENT
AND
STAKEHOLDER
CONSULTATION
F
)
SELECT
LOCAL
PROGRAMME
MANAGER
G
)
TRAIN
LOCAL
PROGRAMME
MANAGER
Bio-rights in theory and practice
7
been further fine-tuned through a number of small- and medium-scale projects in South-east
Asia and Africa by Wetlands International.
Part II. Implementing Bio-rights
A Bio-rights project can be roughly divided into 5 implementation phases within which there
are, approximately 20 different sub-activities (see Figure 1). These are facilitated by a ‘Bio-rights
Project Manager’ who oversees the overall implementation process and represents the interests
of the investing stakeholder. A ‘Local Programme Manager’ - usually a local NGO - represents
the local community (‘the seller’) and is responsible for day-to-day project management.
Implementation of the actual conservation and development activities is in the hands of the local
community, with technical support provided by the Bio-rights Project Manager and the Local
Programme Manager.
A Bio-rights project starts with the Project Initiation phase, which consists of fund raising,
identification of conservation objectives and the preliminary selection of project sites. In this
stage, stakeholder networks are also developed and local project management structures
established. Next, in the phase of Project Development, through community negotiations the
potential for signing a Bio-rights deal is assessed. If communities are interested, a concrete
project implementation plan is established which is mainstreamed into regional policies
during multi-stakeholder meetings. In the Contract Negotiation stage a contract is negotiated
between the ‘selling’ and ‘buying’ parties. Contracts between the community and the
investor are concluded in an official contract signing ceremony. Often government bodies are
involved as formal signatories to the contract. The Project Implementation stage starts with
extensive capacity building and awareness raising, to familiarise stakeholders with important
conservation and development aspects, which is followed by the disbursal of micro-credits.
Next, conservation and development activities are implemented, usually in parallel. The success
of these conservation and development interventions is assessed in Project Monitoring and
Evaluation stage. Conversion of micro-credits into definitive payments takes place on the basis
of the conservation outcomes. Project evaluation activities are undertaken during the project,
to ensure that it is optimally adapted to local site conditions, and after the project so as to
draw lessons for future interventions. The duration of individual Bio-rights initiatives can vary
significantly from short (3-4 years) projects that aim to support local communities in creating
sustainable land and resource use practices, to long term (10+ years) projects in which Bio-
rights is implemented as a Payments for Environmental Services-based approach.
Part III. Experiences from the field
Bio-rights started to be implemented approximately 10 years ago with small pilots targeted at
mangrove rehabilitation and peatland restoration in Indonesia and water bird conservation in Mali.
Since then, the approach has been significantly upscaled under Wetlands International’s Green
Coast project and the Wetlands and Poverty Reduction Programme (WPRP), in which several
conservation, development and micro-credit institutions have become involved in implementing
the approach. Currently, several thousand hectares of mangroves have been rehabilitated, as
well as significant stretches of peat swamp forest habitat. Other ecosystems targeted under the
approach include flood forests, sand dunes and lagoons. Improved ecosystem services have
decreased vulnerability and increased incomes for more than 100,000 poor, wetland-dependent
people living in and around the target areas. Several thousand community members have been
directly involved as contract signatories. They used their micro-credits to develop a broad range
of economic activities, including sustainable fisheries, poultry and goat breeding, farming and the
development of small enterprises. Most projects have been successful in delivering conservation
A financing mechanism for linking poverty alleviation and environmental conservation
8
and development benefits, although some pilots failed for various reasons, including weak
local governance and limited capacity for Bio-rights implementation among Local Programme
Managers.
In general, it can be concluded that Bio-rights is an effective means of accomplishing sustainable
community-based conservation and development. As long as Bio-rights complements existing
conservation and development approaches and as long as key implementation requirements
are taken into account, the approach is likely to be successful. However, lack of technical
conservation and development knowledge, inappropriate site selection and ineffective training
and awareness raising could potentially hamper successful implementation.
More extensive investigation and piloting is needed to fully assess the potential of the approach
and to further enhance its efficiency under different circumstances. Increased cooperation with
scientists, development workers and the private sector will help to establish rigorous monitoring
frameworks, incorporate multi-sectoral knowledge and ensure appropriate embedding in other
processes that link conservation and development. Future developments will be documented
and shared with relevant stakeholders through publications and web-based dissemination of
experiences.
9
II. Acknowledgements
Numerous experts from various disciplines have worked extensively on the design and
implementation of the Bio-rights approach. For almost a decade, practitioners have been piloting
the approach in the field. In parallel, economists, ecologists and development experts have
developed the mechanism’s theoretical framework, based on rigorous analysis of previous field
experiences, lengthy discussions on the root causes of poverty and environmental degradation,
and on possible solutions. These painstaking efforts have culminated in the development of this
report, the first detailed description of how Bio-rights operates in practice, including a synthesis
of experiences from the field.
We thank Bakary Koné, Alue Dohong, Yus Rusila Noor, Nyoman Suriadiputra and Iwan Tricahyo
Wibisono and all field staff involved in WPRP, Green Coast and earlier Bio-rights initiatives for
their key role in piloting the approach in the field. They have helped to develop Bio-rights as a
realistic tool, adjusted to local site conditions. The community groups in Pemalang, Aceh and
in the Inner Niger Delta are thanked for their hospitality during field visits and for sharing their
first-hand experiences on Bio-rights. We are grateful to Herbert Diemont and Marcel Silvius,
who developed the theoretical concept of the approach and whose efforts linked the approach
to global policies and the wider discussion on Payments for Environmental Services. Special
thanks also go to Alex Kaat, Tunde Ojei, Marie Jose Vervest and Trevor Wickham for ensuring
that Bio-rights was appropriately incorporated into the Green Coast project and the Wetlands
and Poverty Reduction Programme. They provided extensive support for the evaluation of field
experiences and facilitated the publication of this report. Henk Hoefsloot, Pieter Leenman, Mike
Ounsted, Adrian Wood, Sander Carpaij, Susanna Tol and all the participants of the Bio-rights
workshop, which was held in August 2008 in Jambi (Indonesia), are thanked for their constructive
comments on an earlier version of this report. Several partner organisations, including CAMEC,
CARE, Mitra Bahari, Oxfam Novib and WWF provided valuable expertise during development
and implementation of the approach. We wish to thank Joshua Bishop for his technical input
during the design of this document. Diana Simon, Ilana Kutzig and Caitlin Burton are thanked
for facilitating arrangements Alcoa Fellowship Programme, as part of which this report has
been developed. We are grateful to the Alcoa Foundation and the Dutch Ministry of Foreign
Affairs (DGIS) for their financial support. IUCN is thanked for its facilitating role under the Alcoa
Foundation Fellowship Programme.
A financing mechanism for linking poverty alleviation and environmental conservation
10
III. Acronyms and glossary
Bio-rights Project Manager National or international NGO representative(s), responsible for
overall project management, concept design and negotiation
with investing stakeholders
BPM Bio-rights Project Manager
‘Buyer’ Investing stakeholder, i.e., the buyer of an ecosystem service
CB-NRM Community-based Natural Resource Management
CBO Community-based Organisation
Conditionality The principle that contract signatories should meet certain
mutually agreed conditions at a certain stage of project
implementation, before being eligible for receiving resources
CCFPI Climate Change, Forests and Peatlands in Indonesia project
CIDA Canadian International Development Agency
DGIS Directoraat Generaal Internationale Samenwerking;
development aid department of the Dutch Ministry of Foreign
Affairs
Ecosystem services The Millennium Ecosystem Assessment (2005) defines
ecosystem services as “the benefits people obtain from
ecosystems”
FSC Forest Stewardship Council
ICDP Integrated Conservation and Development Project
IPCC International Panel on Climate Change
Leakage The displacement or generation of a harmful practice as a result
of a conservation measure in a certain locality
Local Programme Manager Local NGO representative(s) responsible for on-the-ground
project management, facilitation of local community actions
and representation of community needs during contract
negotiation
LPM Local Programme Manager
MEA Millennium Ecosystem Assessment
MDG Millennium Development Goal
MSC Marine Stewardship Council
NGO Non-governmental Organisation
PES Payments for Environmental Services
REDD Reduced emissions from land degradation and deforestation
‘Seller’ The owner of an ecosystem service, providing conservation
services in return for a payment by an external stakeholder
VERs Voluntary Emission Reductions
WI-IP Wetlands International Indonesia Programme
WPRP Wetlands and Poverty Reduction Programme
Bio-rights in theory and practice
11
1. Introduction
NGOs in the conservation and development sector and governments alike have faced great
difficulties in their efforts to reconcile conservation and development activities. Although the
intricate linkage between poverty and environmental degradation is widely acknowledged,
interactions between both fields have proved highly complex and difficult to conceptualise.
As a result, past approaches to linking conservation and development, such as Integrated
Conservation and Development Projects (ICDPs), have met with limited success. Considering
these difficulties, many conservationists and development workers have called for innovative
approaches that build on the lessons learnt from the past, avoiding the weaknesses of earlier
initiatives. In parallel, there has been increased momentum for the development of market-
driven instruments to aid conservation efforts. Such mechanisms internalise the economic value
of ecosystem services into markets. This can generate significant funding for environmental
conservation and allows for the development of trading systems in which resource users
provide payments to resource owners in return for the sustained provision of certain goods and
services.
The Bio-rights financial mechanism has been established by Wetlands International and Alterra
(Wageningen University and Research Centre) in response to the above developments. Bio-
rights provides micro-credits for sustainable development to local communities in return for
community involvement in conservation. The loans are converted into definitive payments upon
successful delivery of conservation services. The approach started as a small pilot scheme
in coastal areas of central Java, involving poor fishermen in mangrove restoration in return
for development support. Less than a decade later Bio-rights, has developed into a leading
approach for reconciling conservation and development within Wetlands International’s major
programmes. Currently a range of other organisations, including conservation and development
NGOs as well as a micro-credit institution, have started implementing the approach. Demand
from the private sector for sustainable resource management is also increasing and a number
of major global initiatives linking sustainable development and conservation are underway. While
many innovative financing mechanisms so far only exist on paper, the Bio-rights approach has
proven successful and efficient in the field. Thus, Bio-rights is well-positioned to become a
leading tool for linking conservation and development.
1.1 Purpose of this report
This report provides an introduction to the theory behind the Bio-rights approach and familiarises
the reader with the practical steps required to incorporate the mechanism into existing and
future conservation and development initiatives. Case study descriptions provide experiences,
the lessons learned and the challenges that remain to be addressed.
As a relatively novel approach, Bio-rights requires further piloting and extensive evaluation. This
will provide the necessary insight to improve the approach and better judge its effectiveness in
relation to other mechanisms and under different, site-specific, conditions. Anticipating these
developments, this report should be considered a ‘living’ document, open to further modification
as new insights emerge. It is hoped that this report will challenge conservation and development
practitioners, policymakers and investors to investigate and pilot the approach. Their experiences
will provide vital contributions to the further development of Bio-rights as a tried and tested tool
for linking conservation and development.
A financing mechanism for linking poverty alleviation and environmental conservation
12
1.2. Reading guide
This report has been subdivided into three sections which reflect upon the Bio-rights approach
from different angles and at different levels. The approach is introduced and placed in a context
based on i) an analytical review of the Bio-rights approach; ii) a manual for implementers; and iii) a
selection of case examples from the field. Thus, it attempts to meet the information requirements
of the different stakeholder groups which this report aims to reach. The table below provides
more detailed reading guidance for those interested to familiarise with the approach.
Part I. Analytical review of the Bio-rights approach
Contents: A description of the theory and rationale behind Bio-rights including an overview of where
Bio-rights fits within the larger conservation and development context. One section specifically
addresses how Bio-rights relates to other innovative financing approaches for conservation and
development that are currently being implemented.
Target audience: Policymakers, donors, corporate funders and representatives from conservation and
development organisations; field practitioners aiming to gain general understanding of the
approach and its wider context.
Objective: This part aims to provide an overall theoretical overview. In a nutshell, it describes what Bio-rights
is, why it has been developed and how it operates. It is essential reading for those who wish to
acquire basic understanding of the approach, without getting into too much detail.
Part II. Manual for implementers
Contents: An extensive description of all the steps that need to be taken to successfully implement and
complete a Bio-rights initiative. It includes information on a range of issues including project
development, contract negotiation, project implementation, monitoring and evaluation, together
with information on the role and responsibility of different stakeholders in the implementation
process. Several annexed checklists provide crucial aspects to consider in relation to site
selection, contract development and overall project implementation.
Target audience: Field practitioners seeking to link conservation and development objectives through Bio-rights
implementation.
Objective: The manual aims to guide the reader through all the steps of project development and
implementation that are necessary for success.
Part III. Examples from the field
Contents: Three case studies demonstrate how Bio-rights has been implemented in practice. Following
the implementation steps identified in the manual (part II), the stages of project development,
implementation and the outcomes are described for two Bio-rights projects on mangrove
restoration in Indonesia and a project on water bird conservation in the inner Niger Delta in Mali
respectively.
Target audience: Field practitioners interested in how Bio-rights has been implemented in practice; policymakers,
donors, corporate funders and representatives from conservation and development
organisations interested in accomplishments to date.
Objective: This part describes practical experiences and lessons drawn from the pilot schemes
implemented so far.
Bio-rights in theory and practice
13
Part I. Analytical review of the Bio-rights
approach
Gunung Gede Pangrango National Park. Upperpart of a
catchment in west Java, Indonesia.
Photo: Pieter van Eijk
A financing mechanism for linking poverty alleviation and environmental conservation
16
Bio-rights in theory and practice
17
2. Background and rationale
2.1 Problem formulation
In the developing world rural communities face increasingly constrained development options
(UN, 2000). Traditional means of escaping poverty, such as migration to urban areas, have
become a a less viable option over the last few years for a large proportion of the world’s rural
poor. At the same time, growing population densities, linked to decreased availability of land
are compromising per capita revenues from farming and forestry. As a result, these traditional
sources of income have become increasingly insufficient to support the livelihoods of many
small-holder communities. These developments have forced many poor people to unsustainably
use the environment in order to meet their short-term livelihood requirements. They are forced
into a poverty trap: to fulfil short-term needs, they overexploit environmental resources, and
this over-exploitation constrains long-term development opportunities and drives further
degradation. This has a far-reaching impact on the livelihoods of the communities involved in
unsustainable exploitation, as well as on stakeholders elsewhere who depend on the ecosystem
services that are being degraded. Limited awareness among communities about the importance
of ecosystem services for sustaining livelihoods exacerbates the harmful impact of this negative
feedback loop on both livelihoods and the environment.
The wide-scale destruction of mangrove forests in West Africa clearly demonstrates the
poverty trap. In many regions it is driven by the demand for fuel wood, which is often used
in the production of salt. The salt - which is extracted by boiling seawater - provides a limited
number of very poor communities with a very meagre income, barely sufficient to meet daily
needs. At the same time, with the destruction of the mangroves, the salt producers unwittingly
deteriorate the livelihood base of hundreds of thousands of people throughout the region.
Similar patterns of environmental degradation occur in other areas, where short-term profits
gained from unsustainable resource extraction are outweighed by disastrous long-term losses.
Approximately 75 percent of the world’s poorest people currently live in rural areas (Word Bank,
2006). Many of these are confronted with choices similar to those of the salt producers from
The poverty trap in Indonesia: poverty-driven illegal logging activities lead to large scale forest
degradation and destroy the livelihood-base of forest dependent communities. Photos: Marcel
Silvius (l) and Wim Giesen (r).
A financing mechanism for linking poverty alleviation and environmental conservation
18
West Africa. This renders the poverty trap an influential root cause of environmental degradation,
particularly in the developing world.
In recent years, recognition of the need for improved environmental conservation and natural
resource management has been on the rise partly as a result of such influential publications
as the Millennium Ecosystem Assessment (2005) and the IPCC 4th assessment reports (2007),
among others, which highlight the direct economic benefits of ecosystem services to global
economies, as well as the negative socio-economic impacts of environmental degradation.
The recognised need for improved resource management has also been spurred by the
physical impacts of environmental degradation on societies themselves, which have become
increasingly visible in the last decade. Climate change, biodiversity loss and desertification
are well known examples of environmental issues that all hit the headlines on a regular basis.
So far, efforts to combat these major environmental hazards our age have met with limited
success. One reason is that the poverty trap is insufficiently addressed as a root cause of
environmental degradation in policies and plans formulated by governments, NGOs, the private
sector and others involved in natural resource management and environmental conservation.
Restricted access to land and resources might be a necessity from a conservation perspective,
but often constrains the development opportunities of local communities. Photo: Pieter van
Eijk.
Bio-rights in theory and practice
19
2.2 Linking poverty alleviation and nature conservation
The linkage between poverty and environmental degradation underlines the need to reconcile
conservation and development. However, there also are various practical considerations that
justify such integration. Traditional approaches to environmental conservation have been criticised
for sometimes constraining the development opportunities of local communities. Limited access
to land as a result of the establishment of protected areas or restricted access to resources
resulting from fish or timber harvest quotas, are examples of measures that might be considered
necessary from an environmental perspective but can be a burden on the livelihoods of the rural
poor. Some restrictive conservation measures conflict with traditional community rights to land
and resources, some of which have been in place in certain localities for hundreds of years.
Such controversy is likely to increase as pressures on environmental resources - and measures
to combat these - increase.
These conflicts between conservation and development have led to the perception of local
communities as obstacles to conservation rather than as potential allies. The potential of
working with communities as stewards of conservation remains undervalued. Too often local
communities remain largely ignored in the development of natural resource management policies
and plans, and community-development objectives are often poorly incorporated in conservation
measures in the field. This is questionable from an ethical point of view and - particularly in
densely populated areas - is unlikely to be sustainable. These considerations further strengthen
the case for a better integration of approaches to poverty alleviation and nature conservation
that address the poverty trap and turn local communities into an opportunity for, rather than a
restriction to, environmental conservation.
2.3 Key requirements for reconciling sustainable development and environmental
conservation
A framework for project implementation
Making the linkage between poverty alleviation and environmental conservation as a means
to address the poverty trap requires a sound framework for project implementation. First
of all, such a framework should provide local communities with the means to escape from
the poverty trap, e.g., by supporting the development of sustainable economic activities as
alternatives to practices that cause environmental degradation. It should also build on-the-
ground technical knowledge and awareness of sustainable natural resource management as
a basis for sustainable community development. At the same time, objectives for high-quality
environmental conservation should not be compromised by the anticipated development
actions. The framework should rigorously consider the key factors for success, including multi-
stakeholder involvement, equity, conditionality and long-term sustainability. Most importantly it
needs to build on the lessons learnt from earlier projects that - not always successfully - aimed
to reconcile conservation and development. The Bio-rights approach is a framework that has
demonstrated success in linking poverty alleviation and environmental conservation since its
development about 10 years ago. This report describes the methods involved in implementing
this approach.
Generating resources
Key to having a successful project is to have sufficient resources available for sustained funding
of Bio-rights activities. The main means for helping local communities escape from the poverty
A financing mechanism for linking poverty alleviation and environmental conservation
20
trap is to provide them with support for developing sustainable alternatives to harmful practices
and this requires considerable financial resources. Traditional sources of funding such as bi-
or multi-lateral aid can be applied, but to address the poverty trap on a global scale, much
more (and longer-term) funding is needed. This can be accomplished by sourcing funding from
those who benefit from the sustainable management of environmental resources. This includes
a range of stakeholders including the global community as a whole, which has interest in, for
example, mitigation of climate change and reduced air pollution, as well as more specific groups
in the private sector which, for example, have interest in maintaining ecotourism values, timber
stocks or clean fresh water supplies.
Internalising ecosystem services into markets
Different resource users often take the availability of certain ecosystem services for granted,
without paying their actual price. This resulted in market failures, with environmental services
being available at low cost in the short term, but degrading at a rapid pace, constraining their long-
term availability. By internalising the cost of social and environmental aspects of natural resource
management in global markets for ecosystem services, these market failures can be addressed.
Appropriate pricing of ecosystem services would lead to the delivery of a significant source of
finance, provided by resource users, which can be used to incentivise communities to manage
their environment in a sustainable manner. This will not only contribute to addressing the needs
for sustainable management within these communities themselves, but also those of the global
community. Creating such a stream of finance that flows from global to local stakeholders can
provide ample opportunities for both sustainable development and environmental conservation.
To date attempts at addressing these market failures are still in their infancy. The extent to which
markets pay the real prices of the sustained provision of ecosystems services will depend on
global resource users, and particularly the private sector. Market mechanisms for climate change
mitigation (including the trade in carbon credits from reforestation and REDD), are currently being
developed and piloted at an increasing scale. These efforts provide an interesting test case for
the development of adequate pricing systems for other services. Experiences gained under PES
schemes and related mechanisms such as Bio-rights can help to optimise the channelling of
cash flows to local resource providers. This is a critical step towards successfully establishing
these new markets for ecosystem services.
Bio-rights in theory and practice
21
3. The Bio-Rights Approach
3.1. Overall framework
Bio-rights is an innovative financial mechanism that addresses environmental degradation by
providing (convertible) loans for sustainable development to local communities in return for their
active involvement in the conservation and restoration of the natural environment. It serves as a
payment scheme in which an investing party pays the local community (as the resource owner)
for the provision of environmental services. As such, the approach addresses the poverty trap
as a driving force behind rural poverty and environmental problems such as biodiversity loss,
ecosystem degradation and climate change. The Bio-rights approach has been developed as
a tool to complement existing conservation and development instruments and accommodate
the growing need for market-based mechanisms that address complex issues related to
environment, global economies and rural poverty.
The approach is based on the recognition that local communities, as rightful resource owners,
often exploit the natural resources in their environment unsustainably in order to meet their short-
term livelihood requirements, and that financial support has the potential to enable communities
to adopt sustainable resource use practices and ensure the maintenance of critical ecosystem
services for the global community (see Box 1).
Bio-rights schemes aim to accomplish the integration of these conservation and development
objectives through three consecutive steps:
Step 1. Provision of micro-credits for sustainable development
Following agreement among relevant stakeholders upon the initiation of a Bio-rights initiative and
after the formulation of a full project plan, Bio-rights implementation starts with the provision of
micro-credits to local community groups. These micro-credits can be used for the development of
all kinds of ecologically, socially and economically sustainable activities as alternatives to harmful
practices that pose a threat to the environment. Examples include the initiation of (sustainable)
agriculture, fisheries and forestry practices, ecotourism development or handicraft production.
Other livelihood supporting activities such as the establishment of facilities for education or
healthcare are also applicable.
Bio-rights is based on the recognition that local communities have rights to the natural resources in
their immediate environment. Such rights are related to a broad range of ecosystem services such as
biodiversity, habitats, water supply, flood mitigation, carbon storage and storm protection. By developing
a ‘rights trading mechanism’, global stakeholders can buy these rights, ensuring sustained provision of
certain ecosystem services without constraining the development needs of local communities. Hence
the name Bio-rights. In many cases local communities demonstrate a clear willingness to sustainably
manage local natural resources, but they are often unable to accomplish this objective given their
short-term livelihood needs. Tradable ‘Bio-rights’ schemes can help communities to accomplish their
sustainable development objectives, at the same time ensuring successful conservation outcomes.
Box 1. Bio-rights: from ownership to stewardship
A financing mechanism for linking poverty alleviation and environmental conservation
22
Micro-credits are usually disbursed at the group level rather than to individuals, to enhance
cooperation among community members and create a feeling of project ownership within the
group. In addition, by making the community-group responsible for individual behaviour, the risk
of project failure is significantly mitigated. To ensure sustainability and the optimal usage of the
micro-credits provided, beneficiaries receive active support on selected development activities.
This includes technical training, study visits to other communities and interactive workshops to
share ideas and plans.
Step 2. Implementation of environmental conservation and restoration activities
Local communities repay their micro-credits and associated interest in kind, in the form of an
active contribution to the conservation of the environment. This can entail a wide range of activities
including, for example, biodiversity and habitat conservation and ecosystem restoration, as well
as the provision of specific services such as clean water and carbon sequestration. Community
contributions can, depending on local conditions, restrict to refraining from unsustainable
practices (e.g., hunting or deforestation), but can also include preservation of the environment
against external impacts or active restoration of services that have been degraded in the
past. Community obligations for conservation are formally registered in a multi-year contract
and measurable indicators for success - e.g., seedling survival rates, degradation rates or a
decrease in hunting pressure - are agreed upon and monitored. Participating communities have
an obligation to assure that these preconditions are met. Capacity building and awareness raising
activities provide participants with the required technical knowledge to successfully implement
the agreed conservation measures and to reinforce insights into the importance of sustainable
natural resource management in improving livelihoods.
Step 3. Conversion of micro-credits
Upon termination of a contractual period the micro-credits are converted into definitive payments,
providing the conservation activities prove successful. If conservation measures do not meet certain
predefined standards, the beneficiaries are required to repay part or all of the funding provided.
For reforestation projects implemented in the past, for example, it was agreed that seedling
survival rates exceeding 75 percent would result in the complete conversion of the micro-credits
provided. If survival rates were lower, a relative proportion (related to the proportion of seedlings
surviving) was to be reimbursed. Thus, conditionality - and high-quality conservation - is ensured.
Community consultation, negotiation and contract signing in Kalimantan, Indonesia. Photos:
Pieter van Eijk (l) and Yus Rusila Noor (r).
Bio-rights in theory and practice
23
MIC RO-CR EDI TS
FOR SUSTA INAB LE
DEV ELO PME NT
MIC RO-CR EDI T TO BE
REI MBU RSE D BY SEL LER
CON SER VATION
ACT ION SUCC ESF ULL ?
OPT ION AL:
‘Buying’
investing
party
Conservation
action
NO
YES
Sustainable
development action
‘Selling’ local
community
Community-based
revolving fund for
sustained funding
Micro-credit
converted into
definitive payment
A force majeure clause protects local communities against unexpected events such as natural
disasters or civil unrest and places project risks in the hands of investing parties (the providers
of financial resources). In some cases, a revolving fund is being developed as a means for the
disbursal of the micro-credits: communities can borrow from this fund, but need to repay their
loan at a given stage and with a small interest rate. Upon termination of the contractual period,
this revolving fund is converted into a community-based savings scheme. The advantage in this
approach is that cash remains in the community beyond the project lifetime, enabling community
members to sustain and expand their sustainable development activities.
These steps of project implementation contribute to a win-win outcome of both environmental
conservation and improved livelihoods. Local communities benefit from increased development
opportunities as a result of micro-credit provision as well as from the natural capital provided by
the ecosystem services that they have sustained and restored. Investors in Bio-rights receive
the ecosystem services that they have paid for. This includes services that are important for the
overall fulfilment of their daily needs (e.g. clean air, freshwater etc.) or business objectives (e.g.,
a sustainable supply of wood, ecotourism values). Thus, Bio-rights essentially operates as a
business-deal between the local community as a ‘selling’ partner and resource ‘owner’, and a
regional, national or international ‘buying’ partner who has interest in the preservation of these
resources.
The sustainability of Bio-rights interventions is ensured through a strong emphasis on capacity
building for sustainable natural resource management and awareness raising on the importance
of ecosystems services for supporting livelihoods. This increases the recognition among local
communities of the need for improved environmental management. As a means to escape the
Figure 2. Simple schematisation of the Bio-rights approach. In case of successful conservation or restoration of ecosystem
services by the local community, micro-credits can be converted into one-off definitive payments. Alternatively communi-
ties might be requested to reimburse their loan in a community-based fund, which ensures sustained cash availability
beyond the project implementation lifetime (dashed arrow).
A financing mechanism for linking poverty alleviation and environmental conservation
24
poverty trap, Bio-rights can help to re-establish a sustainable balance between development and
conservation. A single (several-year) Bio-rights initiative often suffices to accomplish this. However
under certain circumstances, conservation and (local) development may remain in conflict with
each other. For example, a forest area might be much more economically attractive if converted
into crop land, no matter what alternative income generating activities are developed. Under
these circumstances, continuous community payments (similar to those provided under PES
schemes) might be required to ensure the long-term provision of certain ecosystem services.
3.2 Preconditions for successful implementation
The Bio-rights approach is not applicable under all circumstances. Successful implementation
depends upon a range of site-specific socio-economic and environmental factors as well as on
local governance structures and related policies.
The following site-specific factors are of particular relevance:
Land tenure:•
Land and resource tenure issues are critical determinants of successful Bio-rights
implementation. If local communities have formal property rights over land and resources,
they are in the legal position to engage in a Bio-rights deal and can be held liable for the
intervention’s final outcome. Commonly however, local communities have no legal rights
over land or ecosystem services, despite their dependence on these for sustaining their
livelihoods. Involving such communities in a Bio-rights deal can be risky since, despite the
local communities’ good intentions in fulfilling requirements, the formal land owner (e.g.
government or a private-sector stakeholder) might have other objectives that are in conflict
with the Bio-rights deal. Objectives for forest conservation, for example, might be overruled
by a land owner’s plans for plantation development or timber exploitation. The only means
of implementing Bio-rights under such conditions is to incorporate the formal land owner as
a third-party in the contractual agreement. This reduces risk of conflicting objectives, while
parties can be formally held liable in the case of violation of contractual agreements. Another
option would be to negotiate a formal property rights provision for local communities as a
starting point for Bio-rights implementation.
The Bio-rights approach was developed in the late 1990s by Wetlands International, Wageningen
University and Research Centre (Alterra) and a number of other organisations. Supported by DGIS, Oxfam
Novib and the British embassy, among others, it has been successfully piloted in Indonesia (Kalimantan,
Java, Sumatra) and Mali (Inner Niger Delta). Bio-rights conservation actions conducted to date include
rehabilitation of mangroves and other coastal ecosystems, peatland restoration and decreasing hunting
pressure on migratory water birds. Development activities undertaken include sustainable agriculture
and fisheries development, handicraft production and development of small enterprises. The approach
has recently been scaled-up under Wetlands International’s major programmes, including the Wetlands
and Poverty Reduction Programme (WPRP) and the Green Coast tsunami response project, and have
been actively shared with other conservation and development organisations. Efforts are currently
underway to link the approach to large-scale climate change mitigation schemes such as REDD and
the Global Peatland Fund, which aims to curb greenhouse gas emissions from peatland degradation.
See chapter 7-10 for more information on experiences from the field.
Box 2. The history of Bio-rights
Bio-rights in theory and practice
25
Community support and social heterogeneity:•
Successful Bio-rights interventions require the full support of the communities involved.
If a considerable proportion of the community opposes the contents of a contractual
agreement, long-term sustainability is unlikely to be achieved. The extent to which
agreement and support among individuals can be accomplished depends primarily upon
the social and economic heterogeneity of the communities involved. In some communities
there are large differences in the levels of wealth, education, awareness, and social status
of different members, as well as different religions and ethnic backgrounds. The position of
men and women to a great extent determines both the overall functioning of a community
and the social position of individuals. These differences increase the likelihood of conflicting
objectives for land and resource use within a community and thus significantly decrease the
chances for successful Bio-rights implementation. Another important consideration for Bio-
rights implementation relates to the motives for community involvement. Although financial
incentives are an important motive for community involvement, these should not be the
only reason to sign a Bio-rights deal. In order for the approach to be successful in the long
term, communities should also express the intention to cooperate, around non-financial
considerations such as, for example, the recognised need for improved natural resource
management as a pillar for livelihood security.
External factors:•
Communities do not always have full control over the land and resources they own, even
if they might have formal property rights. Well-known examples are encroachment of
Social heterogeneity should be considered during project design and community consultation.
Photo: Pieter van Eijk.
A financing mechanism for linking poverty alleviation and environmental conservation
26
community land by large companies and harmful activities such as poaching, pollution and
environmental degradation by outsiders. Community conflicts over ecosystem services are
also commonly observed. These factors pose potentially significant threats to successful
Bio-rights implementation, particularly in cases where local communities have insufficient
power to curb external influences. Under certain conditions, support provided as part of the
Bio-rights agreement can suffice to address these impacts. In other cases, external impacts,
and therefore the risk of project failure, despite the good intentions of local communities,
might be simply too large.
Enabling political environment:•
Where possible, Bio-rights agreements need the approval of relevant government bodies at
the national, regional or local level. To be successful they should comply with - and preferably
be incorporated in - policy, plans and legislation. Failure to meet these criteria might cause
conflict with, for example, land-use planning and resource allocation policies and therefore
increase project risks. Political instability or failing governance - as a result of, for example,
corruption - also increase the risks related to successful Bio-rights implementation.
At least as important as the above site-specific parameters, the way in which Bio-rights is
implemented is a crucial determinant to success. Failure to consider specific organizational
aspects of project implementation, without exception, affects a project’s outcome. The following
elements are of particular importance:
Equality:•
Full involvement and consideration of all relevant stakeholder groups is crucial for successful
Bio-rights implementation. Development opportunities for different groups within communities
should be equal, and efforts should be made to adequately reach minority groups. The
approach should be explicitly pro-poor and appropriately address gender equality. Bio-
rights is a ‘business-deal’, implying that in the process of project development and contract
negotiations, all stakeholders involved should have equal rights and opportunities to share
their views, priorities and needs. At no stage should the approach become overly top-down
as a result of certain measures being imposed on communities or community needs being
ignored.
Contracting - conditionality and sustainability:•
Bio-rights deals should always be conditional, i.e., micro-credits are only converted into
definite payments once conservation measures prove successful. To ensure that all the
parties involved agree with these requirements, a contract is signed which describes the
rights and obligations of the different stakeholders involved. The contract should have a
formal legal status to enable enforcement in case obligations are not met by one of the
signatories. Aligning the contract with (local) legislation and policies and involving relevant
officials in contract negotiation and signing can increase the chances for successful
enforcement. Contracts also help to ensure the sustainability of project interventions.
By incorporating details on the duration of a certain conservation action, long-term
conditionality is ensured. Contracts can range from several years to more than a decade,
the exact duration depending on local circumstances. Other means to ensure long-term
sustainability include capacity building and awareness raising activities. These help the local
communities and other involved stakeholders to accomplish sustainable development and
build recognition of the importance of ecosystem services for supporting livelihoods.
Bio-rights in theory and practice
27
Complementarity:•
Bio-rights, if regarded purely as a financial mechanism, is not likely to be successful on
its own. Rather it should be complementary to existing conservation and development
strategies, such as capacity building, awareness raising, law-enforcement, micro-credit
provision and the development of community-based savings schemes. Bio-rights builds
on such current and past approaches and serves as an innovative solution to the major
challenges that remain - in particular, by facilitating an integrative approach to conservation
and development and by ensuring the involvement of local communities in environmental
conservation. Both issues have recently emerged as major challenges to successful
conservation in the developing world.
Flexibility:•
Socio-economic and environmental conditions differ greatly between sites. This should
be considered in project design. Accommodating the framework to local circumstances
and community preferences will contribute to the success of projects. At the same time it
should be ensured that the approach’s key characteristics are maintained and that its major
requirements are being well considered.
3.3 Priorities for implementation
If the above preconditions are fully taken into account, Bio-rights can be applicable under a
wide variety of circumstances and can support a multitude of conservation and development
objectives. Given the huge global challenges regarding conservation and development,
some prioritisation is desirable to ensure a maximum return of capital invested, both from an
environmental and a social perspective. First of all, to optimise conservation investments, the
conservation value of a proposed project area should be assessed. This value should be high
from an international, national or local perspective. An ecosystem may be prioritised according
to different criteria: for example, a water purification company will value the purification and
regulation properties of an intact watershed whereas an international conservation NGO might
prioritise a project area based on its biodiversity or aesthetic values.
As Bio-rights also is a mechanism for alleviating poverty, it is preferable to implement the
approach in an area with high poverty rates, where the socio-economic spin-off of the approach
is likely to be the highest. The potential of an area to generate significant income through land
cultivation (or conversion) should also be considered as part of the prioritisation process. This
is purely an economic consideration: if degrading practices provide local communities with
significant income, considerable payments need to be provided to cover lost opportunity
costs and thus enable communities to convert to sustainable practices. On the other hand,
if degrading practices only provide a meagre contribution to daily incomes (which often is the
case), relatively small payments can accomplish considerable conservation gains. A last major
consideration for site selection is the current level of threat (or anticipated future threats) to
the natural resources that are to be protected. Obviously, areas under pressure are in more
immediate need of conservation compared to areas that remain pristine. The final prioritisation
of a project area depends on the combination of the above considerations. The specific needs
of the investor, combined with environmental, social and economic site conditions determine the
location in which the anticipated cost-benefit ratio will be optimal.
A financing mechanism for linking poverty alleviation and environmental conservation
28
3.4 Actors involved
Nature provides a number of important services. The Millennium Ecosystem Assessment (2005)
recognises provisioning, regulating, cultural and supporting services, which together make up
the ‘natural capital’ provided by nature. Other authors have created similar categorisations,
distinguishing, the direct use, option, ecological function and existence values of nature
(Edwards & Abivardi, 1998; see Figure 3). It is obvious that these values are prioritised differently
by different groups of stakeholders. For local communities, the direct use value - the value
related to the direct exploitation of resources such as timber, fish and other products - might
be the most important. Governments might prioritise certain regulating services, whereas
for others the aesthetic value of nature is considered of particular importance. Contradictory
priorities and needs with regard to the exploitation and conservation of the environment can
compromise different conservation and development objectives and lead to conflict among
different stakeholder groups. The strength of the Bio-rights approach is that it converts such
conflicts into opportunities by enabling local communities to refrain from unsustainable practices
and to provide ecosystem services which are paid for by an external investing stakeholder. Thus,
as a market-based financing scheme, Bio-rights is of potential use to all parties with an interest
in the provision of ecosystem services (see Table 1).
Local communities, who often are the ‘owners’ of certain ecosystem services are among the
most crucial stakeholders in a Bio-rights scheme. In many areas they determine how resources
are managed or exploited. At the same time, conservation needs and actions often have a direct
impact on their daily lives. Community involvement and support therefore is a necessity for
success. Local communities have a lot to gain through involvement in Bio-rights: first of all, they
directly benefit from the provision of financial resources and technical support for sustainable
development. This is a first important step towards escaping from the poverty trap. Secondly,
improved environmental conditions contribute to enhanced livelihood security. Restoration
of coastal ecosystems, for example, can lead to increased income from fisheries as well as
decreased vulnerability to extreme events, such as storms and floods. As an additional benefit,
Bio-rights helps communities to organise themselves and to raise their voices at local and
regional policy development platforms. This increases equality among stakeholder groups and
contributes to critical processes such as acquiring land tenure and resource rights.
Figure 3. An example of different environmental values and their potential prioritisation by interest groups. The exact pri-
oritisation of actors depends on individual or organisation specific objectives and on local site conditions. Adapted from:
Edwards & Abivardi, 1998.
DIRECT USE
VALUE
OPTION VALUE
TOTAL NATURAL VALUE
USE VALUESNON USE VALUES
ECOLOGICAL
FUNCTION VALUE
EXISTENCE
VALUE
- Private sector
- Finance sector
- NGOs (development)
- NGOs (conservation
and development)
- Governments
- NGOs (conservation)
- Governments
- Local communities
- Finance sector
- Public sector
Bio-rights in theory and practice
29
Through its focus on environment and poverty, Bio-rights can contribute significantly to achieving
the objectives of both conservation and development NGOs. The approach can contribute
to solving complex issues such as forest degradation or climate change, which require a
multidisciplinary approach to address the socio-economic drivers of environmental degradation.
Integrated Conservation and Development Projects (ICDPs), which were intensely piloted towards
the end of the 20th century, have met with limited success in their efforts to reconcile conservation
and development (Mc Shane & Wells, 2004). Learning from the weaknesses and strengths of
ICDPs, Bio-rights introduces a number of innovative aspects that, over the last decade, have
demonstrated success in targeting conservation and development in a consolidated way. Recent
global policies regarding conservation and development increasingly require a multidisciplinary
approach. Many of the objectives formulated under the United Nations Millennium Declaration
(2005), for example, require integration of poverty alleviation and environmental conservation.
This particularly applies to the objectives of accomplishing environmental sustainability (MDG 7)
and eradicating poverty and hunger (MDG 1).
The objectives of local, national and international governmental bodies are very similar to those
of NGOs. In addition to environmental conservation and direct on-the-ground poverty alleviation,
Bio-rights can also enhance economic performance at a national level through improved
production of goods, improved markets for products and sustained ecosystem services, all of
which contribute to macro-level economic development.
Many stakeholders in the corporate and finance sector have a direct interest in the sustained
provision of specific ecosystem services. An ecotourism company, for example, depends on
nature’s aesthetic values and the fisheries sector relies entirely on the availability of fisheries
resources. By investing in Bio-rights, private-sector stakeholders can ensure that specific
Table 1. Reasons for being involved in Bio-rights initiatives among civil society, government and private-sector
stakeholders.
Local communities X X X
Conservation and development NGOs X X X
Governmental bodies X X X X X
Corporate sector X X X X X
Finance sector X X X X X
Direct income for development
Provision of environmental goods and services
Producing ‘green’ products (FSC, MSC etc.)
Meeting obligations
Linking to multi-sectoral policies and plans
New tool for conservation and development
Corporate Social Responsibility
Macro-economic development
Increased stability and improved markets
A financing mechanism for linking poverty alleviation and environmental conservation
30
services are maintained and restored. The approach can also contribute to accomplishing
Corporate Social Responsibility objectives, which have become increasingly important in the
private sector’s day-to-day business. Bio-rights might also serve as a tool for complying with
regulations on, for example, climate change, habitat degradation or water pollution. The positive
social impacts of Bio-rights benefit the private sector as well. Improved livelihoods, enhanced
community organisation and increased social and political stability can also - indirectly - contribute
to a substantial improvement of economic markets.
3.5 Organisational structure
Bio-rights essentially functions as a business deal between a buying partner with specific
interests in the maintenance or restoration of certain ecosystem services and the local
community as a selling partner who provides these services in return for support for sustainable
development. To enable successful contract negotiation and project implementation, a firm but
Figure 4. Framework for Bio-rights implementation. Potential buyers are depicted within dashed line.
Bio-rights Manager
(NGO, Goverment)
Local programme Manager
(NGO, Government)
Other Local
Stakeholders
Local Community
Local
Government
Private Sector
GovernmentNGO
Finance Sector
Bio-rights in theory and practice
31
simple organisational framework has been developed (see Figure 4). This framework ensures full
consideration of important criteria such as equality among stakeholder groups, conditionality and
permanence. It is built around a limited number of key actors responsible for project development
and day-to-day implementation. Equality is considered of particular importance, not only from an
ethical perspective, but also from a practical point of view: a top-down approach is not likely to
render the desired conservation and development outcomes. The mainstreaming of Bio-rights
with local policies and the priorities of other stakeholders is facilitated, as much as possible,
through establishing active linkages with, for example, local government bodies, interest groups
and the corporate sector.
Two key actors play a crucial role in Bio-rights implementation: the Bio-rights Project Manager
and the Local Programme Manager (Table 2). The Bio-rights Project Manager usually is a
representative of a governmental institution or NGO. In small-scale projects this task is fulfilled
by an individual, whereas larger projects might require a project coordination team. Sometimes
the Bio-rights Project Manager is the buying partner itself, for example, in cases where an NGO
pays for the provision of certain ecosystem services. More commonly however, the Bio-rights
Project Manager is an intermediary between an investing party (e.g. a company or donor agency)
and the local community (and associated representatives). An important task of the Bio-rights
Project Manager is to oversee overall project progress and facilitate project development. This
entails generating interest and funding among investors (in cases where the Bio-rights Project
Manager is not the buying party himself), selecting appropriate project locations and ensuring
fulfilment of contract obligations. The Bio-rights Project Manager also serves as a ‘buying party
representative’, by ensuring that investors’ needs are well communicated to local communities
and incorporated within the project design and contract formulation. Thus, the Project Manager
takes responsibility for ensuring that a buying party gets what it paid for. The Local Programme
Manager usually is a local NGO or CBO with strong working experience in the region and
extensive knowledge of local ecological and socio-economic conditions. Its main task is to guide
day-to-day Bio-rights implementation by building capacity and raising awareness among local
communities, ensuring timely implementation of project activities and monitoring and evaluating
project proceedings. Thus, it ensures that project objectives and contractual obligations are met.
The Local Programme Manager also acts as a community representative, by communicating local
needs and priorities to other stakeholders in the process of project development and contract
negotiation and during actual implementation of conservation and development activities. To
ensure mainstreaming of Bio-rights in local policies and plans, the Local Programme Manager
also liaises with other relevant local stakeholders throughout the project.
Table 2. Main responsibilities of Bio-rights manager (l) and Local Programme Manager (r) in project implementation.
Bio-rights Project Manager Local Programme Manager
Attracting buyers and generating project funding Network development and facilitation of contract
negotiations
Assessing and selecting potential project sites Capacity building and awareness raising,
provision of technical support
Appointing Local Programme Manager Monitoring and evaluating project activities
Representation of the buying party Representing the local community
Overall project management Liaising with local stakeholders
Ensuring fulfilment and enforcement of contractual obligations Day-to-day project implementation
A financing mechanism for linking poverty alleviation and environmental conservation
32
The local communities and the investors themselves also have a significant role to play in
ensuring smooth project implementation. Local communities are crucial determinants of
success, given their direct involvement in the implementation of actual conservation measures
and development activities. Besides relying on the Local Programme Manager as a facilitator
and representative, local communities are also directly involved in project development and
contract negotiations. This is enabled, for example, through community consultations, which
serve as an important tool to incorporate local needs, to fit projects with local socio-economic
conditions and to ensure that local (traditional) knowledge is incorporated into project design.
Similarly, stakeholder consultations provide the buying party with ample opportunities to be
involved in project development and contract negotiation.
The consultations also enable local government agencies and other local actors to be involved.
Initially, these consultations should involve all relevant stakeholders, including the Bio-rights
Project Manager and buying parties. Once projects are being implemented and local support
is ensured, most contacts with local stakeholders are maintained by the Local Programme
Manager.
Figure 5. Relationship between opportunity costs for Bio-rights implementation, willingness to pay by global buyers and the
potential value of ecosystem services. Adapted from Mulder (2004).
POTENTIAL VALUE OF
ECOSYSTEM SERVICES
WILLINGNESS TO PAY BY
THE GLOBAL COMMUNITY
FOR CONSERVATION OF
ENVIRONMENTAL SERVICES
LOST OPPORTUNITY
COSTS FOR LOCAL
COMMUNITIES
PAYMENT
GROWTH
POSSIBILLITY
DIFFERENCE
BETWEEN
WILLINGNESS TO
PAY BY BUYERS AND
LOCAL OPPORTINITY
COSTS
$
Bio-rights in theory and practice
33
3.6 Costs
The total costs for implementing Bio-rights consist of three distinct elements: i) lost opportunity
costs, ii) implementation costs and iii) overhead expenditures. A significant proportion of the
budget is spent on incentivising local communities to develop sustainable alternatives to harmful
practices. To accomplish this, the payment should at least cover lost opportunity costs and
potential use costs, i.e., the income that would have been generated in the short term in the
absence of conservation measures (the business as usual scenario). These costs differ greatly
among locations. In densely populated areas with a high potential to generate significant income,
lost opportunity costs are likely to be high, whereas in many poor regions with low population
densities they are often low. Opportunity costs should be realistic and preferably be calculated
based on the perception of the local community itself, rather than on world-market values or
potential values which have not yet been internalised in existing markets or which only exist
on global markets. The total monetary value of a tiger, for example, based on (world) market
prices and aesthetic considerations, might be (very) much higher compared to the local value
it would represent to local communities. If payments to communities were linked to such a
potential global valuation, they may well be excessive from a local perspective, and insufficiently
attractive to external buyers. However, by appraising goods from a community perspective,
a fair and affordable payment scheme can be ensured which meets the requirements of the
local community and in line with the ‘willingness to pay’ of the buying party (see Figure 5).
Stakeholder consultations and baseline inventories can help to establish an accurate estimate
of lost opportunity costs. As Bio-rights also aims to improve livelihoods, payments to local
communities should not just match the lost opportunity costs in relation to the business-as-
usual scenario, but preferably also provide additional funding that will help communities to make
a fundamental improvement in their local economy. The extent of additional funding needed
depends on local socio-economic conditions and specific community needs as expressed
during the project development phase.
Funding should be made available as well for the costs related to the actual conservation
measures. In the case of community-based patrolling, for example, fuel and transport costs
should be covered. For reforestation activities, costs related to nursery development, seed and
seedling procurement, and sometimes also protective measures, should be considered. The
exact implementation costs within a Bio-rights initiative depend on the selection of specific
conservation measures. If local communities receive payments for refraining from environmental
degradation, these costs are usually low. If communities are involved in the actual restoration of
entire ecosystems, they can be much higher.
A small proportion of the overall project budget is allocated for overhead costs. These cover
the human and financial resources required by the Bio-rights Project Manager in the process
of project development, contract negotiation and project management. Similarly, the overhead
budget pays the Local Programme Manager, who is hired by the Bio-rights Project Manager.
3.7 Project sustainability
As described previously, various mechanisms are put in place to ensure the long-term
sustainability of Bio-rights interventions, including conditionality (through contractual agreements),
stakeholder equality, policy alignment and capacity building. One particularly important means
for accomplishing sustainability is awareness-raising among communities, emphasising the
A financing mechanism for linking poverty alleviation and environmental conservation
34
importance of sound environmental management for livelihood sustenance. Under certain
circumstances this awareness - combined with some initial financial support - is enough to
address the poverty trap and accomplish long-term sustainability. Sometimes however, when
unsustainable exploitation and associated land conversion remain commercially more attractive
than maintaining existing resources, continuous funding is needed to ensure that communities
keep managing their environment in a sustainable way. In these cases it is an absolute necessity
that continuous cash flows are secured, for example, by making a linkage with other mechanisms
such as tradable credit or labelling schemes or by establishing a trust fund. More details are
provided in Chapter 4.
Another way of maximising project outcome and accomplishing long-term sustainability is
to incorporate financial mechanisms that ensure long-term community access to funding for
sustainable development. This can be arranged, for example, through the development of a
revolving fund, which is managed by the community involved. Instead of converting micro-
credits into a definitive payment upon delivery of success, it can be agreed that communities
reimburse their loan into an internally managed revolving fund. This revolving fund can, in turn,
be used to provide additional loans to individual community members based on sustainability
conditions that were predefined in the Bio-rights contract. This approach ensures the continuity
of sustainability criteria and development opportunities for local communities beyond the defined
contractual period and enhances the maintenance and expansion of well-organised community
groups.
3.8 Contracting and contract enforcement
Contracts are a key tool for ensuring conditionality (of payments) and, associated with that, long-
term sustainability. They register the practicalities of an agreed project intervention and include
the rights and obligations of both the buying and selling parties. Sometimes a third stakeholder
needs to be incorporated in the contract - particularly when local communities don’t have
formal rights over land or resources. In this case, the rights and obligations of the formal land
owner should also be included in the contract, including an expression of explicit support for the
proposed Bio-rights intervention. Failure to acquire formal support from the official land owner
(and to register this in a contract), significantly increases project risks at a later stage, as their
land and resource management objectives might be in conflict with the undertaken interventions.
Contracts are the end product of an intensive process of discussion and consultation in which
all relevant stakeholders are involved. Care should be taken to ensure that contract negotiations
are based upon the full equality of different stakeholder groups.
A sound Bio-rights contract should at least incorporate the following issues:
Services delivered by the local community:• detailed description of the specific ecosystem
services that are to be delivered by the selling party, including, where applicable, the quantity
and duration of service delivery. The contract should specify and describe the different
measures undertaken to accomplish service provision.
Resources provided by the buying party:• detailed description of financial and non-financial
support provided to the local community by the buying party. Details of financial support
should include the quantity and mode of disbursement (number of instalments, duration of
funding, etc.). Non-financial support might include the provision of goods and non-material
services, such as technical training and awareness-raising.
Bio-rights in theory and practice
35
Development activities undertaken:• detailed description of development activities undertaken
under the project. Specification of sustainability criteria related to the use of the financial
resources provided.
Miscellaneous obligations:• other obligations for the buying and selling parties not described
above. These will differ among individual projects but could include obligations to provide or
attend training and capacity building activities, monitoring and evaluation requirements, etc.
They also include agreements between stakeholders on strategies to curb potential side
effects such as leakage and increased immigration.
Third parties• : Description of the roles and obligations of any third parties (including formal
land owners) included in the contract.
Conditions for micro-credit conversion:• Details on the monitoring and evaluation of the
project interventions and on success indicators that will be used to determine whether
contractual obligations have been met. Description of different scenarios for project
outcomes, identifying when micro-credits are fully converted into definitive payments, under
which circumstances only part of a micro-credit is converted and when full reimbursement
of a micro-credit is required.
Description of participants and project area:• Details on (the number of) participants
involved in the initiative and on how individual community beneficiaries relate to each other.
Information should be provided as to the extent to which group members are responsible for
each other’s activities and at what scale micro-credits are disbursed (e.g., at the individual,
group or village level). Data on the delineation of the area in which project interventions are
to be undertaken.
Liability:• Description of options if one of the parties involved does not fulfil project obligations.
Including details on project termination and (legal) enforcement in case of violation of the
terms and conditions.
Force majeure clause:• details on rights and obligations in case of unexpected events such
as natural disasters, political unrest or war.
Contract duration•
The exact status of a Bio-rights contract depends to a great extent on the governance situation
in the project location. In areas with poor governance, contracts have a rather weak status. In
this case, building trust and building on governance structures within communities are likely to
be far more effective than relying solely on formal law enforcement. In other areas contractual
agreements might be much more readily enforceable. Irrespective of the, the local governance
situation, efforts should always be made to ensure that contracts have, as much as possible, a
formal status and that project activities are formally endorsed by the relevant (local), governmental
agencies.
3.9 Contract duration
The appropriate duration of a Bio-rights initiative is highly site-specific. If communities themselves
are direct beneficiaries of improved ecosystem conditions, a short-term (several year) project
might suffice to ensure ecosystem service provision. Once communities have escaped from the
poverty trap and awareness of, and technical capacity for sustainable resource management has
been raised, there is no need for further funding. If the provision of certain ecosystem services
does not sufficiently benefit the communities themselves, a permanent incentive mechanism
is needed to ensure the provision of sustained services. In this case, as with Payment for
Environmental Services (PES) approaches, continuous project implementation under renewable
contracts is required.
A financing mechanism for linking poverty alleviation and environmental conservation
36
3.10 Loan disbursement and verification
Micro-credits are usually provided at the community group level, each group consisting of, on
average, 20-50 people. Disbursing loans to groups, rather than to individuals, ensures that
group participants motivate each other and take responsibility for each other’s actions. In
addition, a group-level approach facilitates successful community consultations and efficient
capacity building and awareness raising activities. Usually, loans are provided through a single
payment at the beginning of a project. Sometimes, however, loan disbursal in several instalments
throughout the project might be more desirable, particularly in cases where the project risks are
high. Verification of project outcomes - and subsequent conversion of micro-credits - takes
place through the field monitoring of project activities. Specific contractual agreements on
ecosystem service delivery serve as a reference in this process, with indicators for success
being described in the contract and their nature being dependent on the agreed conservation
measures. Examples of such indicators might include seedling survival rates within reforestation
projects, or the number of dams constructed in drainage canals within peatland restoration
projects. For large-scale conservation and restoration initiatives, modern techniques such as
remote sensing and GIS can help to measure and quantify success.
Where possible, verification of project outcomes takes place through joint monitoring by the
Local Programme Manager and the local community itself. Involving the community in the
monitoring process ensures project transparency and enhances environmental awareness
among participants. The Bio-rights Project Manager oversees the project monitoring process
to make sure that conservation requirements are met. Where applicable, external auditors
might also be involved. This might be particularly relevant for large-scale projects that need to
comply with international standards such as reforestation and REDD activities under voluntary
or compliance carbon markets.
The conservation and development communities face several complex challenges, including
accomplishing the United Nations Millennium Development Goals by 2015 and addressing global
climate change and biodiversity loss. It is increasingly recognised that there is a need for market-
driven instruments that can generate the resources required to accomplish these objectives as well
as the importance of involving local communities in environmental conservation. Based on these
developments, there is a growing interest in innovative financing mechanisms that effectively channel
global funding for conservation and development to people on the ground. Bio-rights may well prove to
be a promising approach to accomplish this. Individual projects have demonstrated Bio-rights’ ability to
deliver a range of social, economic and environmental benefits that are in line with the win-win objectives
of the global community. Making the leap from implementing individual projects to developing a single,
coordinated Bio-rights fund might help to target major conservation and development challenges even
more effectively. A single fund would enable effective dissemination of funding to project areas where
the conservation and development outcomes are likely to be optimal. Similarly, a centrally coordinated
fund would have the advantages of reduced overhead costs, improved transfer of knowledge among
individual initiatives and an alignment of actions on the ground. In contrast to individual projects, which
usually have funding available only for a short timeframe, a Bio-rights fund might provide sustained
funding to specific areas in need of constant support. This is an important criterion for market-based
payment schemes to be successful.
Box 3. Towards a Bio-rights fund
Bio-rights in theory and practice
37
3.11 Bio-rights and policy
Successful Bio-rights implementation depends very much on the local, national and international
policy and governance environment. It is important that the specific conservation and
development objectives of a Bio-rights initiative match those of local or national governments.
This helps to avoid project failure due to conflicting interests. Land use planning policies and
plans, particularly, should be taken into account. Secondly, there should be an enabling policy
environment in place that is supportive of the specific framework under which Bio-rights operates.
Recognition of community rights over land and resources is very important, as this is a key
determinant for increased community interest in conservation and facilitates the development
of community contracts. As Bio-rights aims to work as much as possible through community
consultations based upon the equality of stakeholder groups, local policies should preferably
also be in favour of community involvement in policy development and planning processes.
In some areas such an enabling environment is already in place, but often there is an urgent
need to advocate for rights provision and increased community participation. The development
of multi-sectoral working groups within governments to address this issue and the initiation of
schemes to develop community-based natural resource management (CB-NRM; see Chapter
4) can help to accomplish this. This can be undertaken in advance of, or in parallel with Bio-
rights implementation.
Besides the need for a (local) policy framework that fits with the specific community-based
approaches adopted under Bio-rights, there also is a need to build national and international
support for the concept of providing payments for environmental services. First of all, appropriate
pricing of environmental goods and services needs to be established, particularly through
the development of regulations that should be set by national governments and international
conventions. Secondly, the rights of local communities over ecosystem services and their
role in environmental conservation should be recognised. These two factors will enable the
establishment of large-scale global payment mechanisms to channel international finance for
conservation to local communities in return for the provision of ecosystem services. The REDD
mechanism which is likely to be piloted at a large-scale in the coming years, might be a good
test case for such a payment scheme, provided that the role of local communities is sufficiently
recognised (see Chapter 4).
3.12 Project scales
Bio-rights projects can be implemented at various scales, ranging from small-scale initiatives
targeted at very specific community groups, to major programmes, focusing on the entire
population of a certain area. Irrespective of the anticipated scale of a proposed project, success
depends on adopting a community-level approach, targeting uniform community groups of
a limited size. For large-scale initiatives this implies a need for division into many small sub-
projects through, for example the creation of a small-grant programme involving a large number
of local NGOs or CBOs which adopt the role of Local Programme Managers. If this is the case, a
single Bio-rights Project Manager will liaise with a large number of Local Programme Managers,
establishing individual contracts with the local communities.
A financing mechanism for linking poverty alleviation and environmental conservation
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3.13 Challenges and constraints
Various challenges and constraints, commonly encountered in other conservation and
development initiatives, are also applicable to the Bio-rights approach. These should be
taken into account and actively addressed during the site selection, project development and
implementation phases to avoid complications or even project failure. Leakage is one of the
most prominent constraints in conservation initiatives: how to prevent, for example, conservation
activities targeted at a forest area or a coral reef from merely displacing environmental degradation
to another nearby location? Local socio-economic and environmental site conditions are the
most important drivers of leakage. The geographic location of certain high-value natural areas,
as well as the ease with which certain practices that lead to degradation can be transferred
from one place to another, strongly influence the extent to which leakage occurs. This in turn is
influenced by certain community characteristics, such as the extent to which they are sedentary,
as well as the level of poverty and awareness. Leakage can also be market driven. If demand for
certain products (for example, fish or timber) is high, the reduction of resource extraction through
a conservation initiative might lead to increased market prices and thus increased exploitation
elsewhere, even in locations far away from the conservation action. These constraints should be
considered when selecting of project sites where Bio-rights may be implemented. In addition,
the specific design of a Bio-rights intervention might in itself help curb leakage risks. Adjusting
the scale of an initiative can ensure that entire high-value conservation areas are protected,
instead of targeting only minor sections. This significantly reduces local leakage risks. Similarly,
leakage issues can be incorporated into community contracts, for example, by explicitly stating
that certain bans on resource exploitation and environmental degradation also apply to areas
outside project locations (and ensuring that these are enforced). Leakage risks linked to (global)
market demands cannot be so easily mitigated within a single project intervention. Instead,
active advocacy will be required to influence policies, change regulations and raise awareness
among the relevant stakeholders.
Another risk is related to immigration into a project area. If a Bio-rights intervention turns into
a great development success, people’s improved livelihoods can act as a magnet to poor
communities from surrounding areas and lead to renewed pressures on environmental resources,
and further environmental degradation. Local socio-economic conditions such as population
density, poverty levels and, in particular, land ownership are critical determinants of immigration
risks. Project and contract design can help to address this issue by developing strategies with
local communities in the project area to avoid increased human pressure on their land.
Local communities can potentially use their earnings from development initiatives implemented
under Bio-rights for unsustainable practices such as land conversion or overexploitation
of resources. This poses a serious risk for long-term project sustainability, and this needs to
be taken into consideration. One way to mitigate this risk is to make sure that Bio-rights is
embedded in a wider framework of conservation and development activities. By ensuring that
strict law enforcement is in place, illegal activities can be halted. Community-based environmental
resource management structures can ensure the mainstreaming of conservation activities with
local development needs. By placing a strong focus on awareness-raising activities, communities
can be made aware of the implications of unsustainable practices on local livelihoods. Thus, an
optimal balance can be created between top-down enforcement of formal legislation, bottom-up
involvement of local communities in policy development and conservation, and facilitation by
third parties such as development and conservation NGOs. In this wider framework, Bio-rights
is no more than a tool that links community development with conservation and brings various
stakeholders together.
Bio-rights in theory and practice
39
4. Bio-rights in the wider conservation and
development portfolio
This report has often reiterated that Bio-rights is not a stand-alone approach, but one element
within a package of measures required to successfully accomplish conservation and development.
Understanding the process required, the linkages to ongoing activities in the regions and the
options for tailoring Bio-rights to local site conditions is key to successful project implementation.
Those implementing Bio-rights projects are unlikely to be successful unless they appreciate
and understand critical aspects in the wider realm of conservation and development. This
requires expertise in a broad range of fields, extensive experience with on-the-ground project
implementation and eagerness to draw lessons from the past (also see box 8; ‘Learning from
the ICDP experience’). This chapter provides some insight into how Bio-rights fits into the bigger
conservation and sustainable development picture.
4.1 The process
Bio-rights requires more than just an innovative financing approach complemented by capacity
building and awareness raising activities. To optimise success, the approach should be
embedded in a broader context that, among others, considers local policies, national-level
legislation, ownership rights and the organisation of stakeholders.
4.1.1 Linking to policies
Bio-rights initiatives are linked to policy in various ways. To a great extent, policies determine
what can be accomplished by means of Bio-rights. They determine the potential role of local
communities in natural resource management as well as the involvement of other relevant local
stakeholders in project implementation. They also determine the legal boundaries of what kind
of interventions are allowed. Thus, policies either do or do not provide an enabling environment
for Bio-rights projects. On the other hand, Bio-rights can serve as a tool to translate policies
into practice. Operationalisation of policies is considered a major challenge in many countries.
Thus, it is very important for Bio-rights and policy development to take place in parallel with each
other. Bio-rights project developers need to provide input into policy processes, while it should
be ensured that policymakers endorse proposed projects and provide input into their design.
4.1.2 Tenure rights
The securing of tenure rights to land and resources is a critical aspect of Bio-rights implementation.
Although not necessarily a precondition for a successful project (see Chapter 3.1.2), where local
communities have secure land tenure, this can significantly help to accomplish success. Most
importantly, it ensures that local communities have full responsibility for meeting the conservation
requirements stet out in the contractual agreement, which makes it less likely that a third party
will negatively interfere with project success. Tenure rights provision might also increase wise
stewardship of land and resources since communities are more likely to implement long-term
sustainable practices on land that is their own. A risk of granting rights to resources is that long-
term management strategies might be difficult to predict or influence. Assessing - and acting
on - the pros and cons of rights provision should form an integral part of Bio-rights development
and involvement in policy processes.
A financing mechanism for linking poverty alleviation and environmental conservation
40
4.1.3 Law enforcement
Involving communities in natural resource management linked to provision of incentives to
support changes in unsustainable land use practices is just one means of accomplishing
environmental conservation. The opposite approach, strict law enforcement, is also a potentially
powerful tool. The applicability of these approaches depends on local site conditions and
project objectives. Community-based conservation and top down law-enforcement are not
necessarily mutually exclusive. A potentially very powerful approach would be to incentivize local
communities to refrain from unsustainable or illegal resource exploitation by means of Bio-rights,
while simultaneously ensuring strict enforcement of contractual obligations. This can usually
be accomplished by involving government officials - e.g., staff of a government conservation
agency or park authority - or, alternatively, by making community members responsible for the
enforcement of formal regulations. Law-enforcement can also be applied to prevent outsiders
from committing illegal acts in an area in which Bio-rights is implemented.
4.1.4 Organising groups
Communities are usually diverse, consisting of individuals with very different socio-economic
backgrounds, incomes religious beliefs, education levels and professional backgrounds.
Often there is inequality between male and female group members. Limited organisation and
coordination within and between groups often impedes community development and limits a
community’s potential to be involved in local decision making processes. This also is often
a source of conflict. Considering its importance for ensuring successful conservation and
development, group formation and the full support of those with weak voices is an important
process that has to run in advance of and parallel to Bio-rights implementation.
4.2 Aligning to existing approaches
Several approaches that are advocated globally have significant potential for linkage to Bio-
rights. In many cases, Bio-rights can help to meet the challenge of efficiently channelling
financial benefits to local communities to ensure the sustainable use of resources. This section
summarises a number of concrete linkages that could be established.
4.2.1 Tapping into global markets
In recent years, regional, national and international markets have developed for the provision of
a range of ecosystem services. Most of these markets, including those targeted at watershed
services and biodiversity conservation, remain small scale and in early stages of development.
Others, including, for example, the carbon market, have become comparatively well established
and are rapidly expanding. Most interesting in this respect are the discussions on establishing
a system for Reducing Emissions from Deforestation and Land Degradation (REDD). While
activities targeted at reducing deforestation occur on a small scale through the voluntary carbon
market, a multibillion market might emerge if REDD is incorporated into post-2012 compliance
markets.
A major challenge for these markets is to ensure that financial resources are optimally used to
accomplish the desired conservation objectives while ensuring that payments are provided to
the right stakeholders. For REDD, for example, it would be desirable to ensure that financial
resources are provided to communities and park managers, who bear direct responsibility for
forest conservation, rather than ending up in the pockets of corrupt government officials. Bio-
rights could potentially serve as a very powerful tool to make REDD and other global payment
Bio-rights in theory and practice
41
schemes operational. The approach allows for effective channelling of funding to the ground
level, while avoiding bureaucratic hurdles and ensuring sound community involvement in
decision making. Adopting a Bio-rights approach, rather than sticking to largely funding-based
approaches such as Payments for Environmental Services (PES), would incorporate a strong
emphasis on awareness raising and on-the-ground training of local community groups and
NGOs. This will likely significantly enhance the sustainability of investments. While the payments
address possible trade-offs between conservation and development, the focus on training and
awareness raising will create long-term understanding of the importance of sound environmental
management among local people.
4.2.2 Community-based Natural Resource Management (CB-NRM)
Worldwide, efforts are being made to ensure greater involvement of local communities in the
development and implementation of policies for the management of natural resources in their
surroundings. This is considered desirable from an ethical perspective, but also to ensure that
policies are adequately transferred from paper into practice. Over the years, various institutions
gained experience with involving local communities in the process of consultation and policy
development. Translating these policies into practice, with the sustained involvement of local
communities, however, has so far lagged behind. Assuming availability of funding, Bio-rights
could serve as a promising means to implement policy plans and shape local perceptions to
favor sustainability.
Global markets for ecosystem services are rapidly developing, such as REDD schemes for
avoided carbon emissions. Photo: Wim Giesen.
A financing mechanism for linking poverty alleviation and environmental conservation
42
4.2.3 Community-based savings schemes
Oxfam and several other development organisations have made significant investments
to establish community-based savings schemes in which local community groups use
their own income to generate savings to fund development activities. These projects
focus on establishing groups, building capacity for managing financial resources and
implementing development initiatives. The skills built through these schemes - such as skills
in the distribution of tasks, taking independent action and designing development plans, for
example - could greatly contribute to success for Bio-rights implementation. Meanwhile,
payments provided for conservation and restoration activities could significantly augment the
savings process. Savings schemes and Bio-rights could be implemented in parallel to each
other, or consecutively, starting with a savings scheme (to build relevant capacity) followed by a
Bio-rights intervention.
4.2.3 Ecotourism
Many park managers allocate a certain fraction of the revenue from tourism for communities
living in or around a protected area. Often such payments are provided in cash. In some cases
this may result in payments being used in a socially, economically or ecologically unsustainable
manner, for example to purchase materials (such as chainsaws, fishing nets, etc.) that enable
overexploitation of natural resources. By disbursing community payments as part of a Bio-rights
deal, such risks could be significantly mitigated. Park managers and local communities would be
able to agree on sustainability criteria, while creating a platform that enables local communities
to be involved the management of their surroundings. This allows park management to be
better adjusted to local aspirations and needs, and enables conflict resolution. Thus Bio-rights
could help to transform the relationship between park management and local communities from
being strictly financial to a more durable cooperative relationship that allows for participative
management of protected areas.
4.2.4 Labelling
Demand for products with sustainability labels is on the rise. In recent years such labels have
developed for a range of goods including timber, fish, palm oil and coffee. To ensure compliance
with labelling requirements, production chains often require considerable reform of a large
number of social and environmental aspects. In cases where local communities are involved in
the use or cultivation of a certain product, Bio-rights might be well suited to guide this process.
The revenue from sales of labelled products can be passed on to local communities by means
of Bio-rights to cover the costs of modifying production processes and sustaining new ways of
working. Likewise, the approach can help to accomplish the high level of organisation and skills
usually required to fulfill labelling requirements.
4.3 Adapting Bio-rights
The typical Bio-rights approach as highlighted in this report consists of a several-year contract,
followed by micro-credit conversion and, in some cases, the subsequent establishment of a
community-based revolving fund. Obviously, under certain conditions a slightly modified funding
structure might be desirable. Below, two alternative approaches are described: the PES-type
approach and the micro-credit approach.
Bio-rights in theory and practice
43
4.3.1 The PES-approach
Bio-rights is most commonly presented as a mechanism that helps local communities escape
from the poverty trap. This is based on the assumption that a sustainable balance between
conservation and development can be accomplished through the temporary provision of
funding. Field pilots have demonstrated that in many cases it is indeed possible to trigger such
a transition. However, this is by no means always true. Sometimes the most attractive option
will still be to convert an intact natural area into intensive agriculture, no matter what changes
in land use practices are established. In other cases, trade-offs between conservation and
development will place strong pressure on a project’s outcome. In this case, temporary funding
will be insufficient to ensure long-term sustainability. Rather, there is a need for continuous
compensation for the opportunity costs lost because of a conservation measure. A Bio-rights
project can accommodate this by developing a renewable contract system. Instead of a one-
term contract, new contracts should be offered to the respective groups to provide continuity
when a Bio-rights deal expires. Obviously this is only possible if long-term project funding is
available. In this way a system similar to Payments for Environmental Services is established,
while the key characteristics of Bio-rights (convertible micro-credits and a focus on training and
awareness raising) are maintained.
4.3.2 The micro-credit approach
For many communities in rural areas it is very difficult to gain access to micro-credit schemes.
This is because of the perceived risk among lending institutions regarding lending to the poorest
of the poor. High poverty, vulnerability to extreme events and low education levels are all
factors that make micro-credit institutions disinclined to lend to these groups. Meanwhile, poor
communities in rural areas do have an instrumental role to play in sustainable natural resource
management. An alternative means of Bio-rights implementation might be to bring together the
need for these communities’ involvement in environmental conservation and the their needs for
micro-credits. This can be accomplished if the Bio-rights project covers the risk of lending money
to vulnerable communities in target areas, a risk normally born by the micro-credit institutions. In
other words, a given Bio-rights project could offer communities access to micro-credits in return
for their involvement in certain conservation or restoration actions. In theory, this approach could
serve as a cost-effective means of accomplishing significant conservation objectives, as there is
no need to convert the credits into definitive payments upon termination of a contractual period.
The only costs relate to management of the project, administration of the micro-credits and
covering unexpected loss of capital in case community members are not able to repay loans.
Obviously the applicability of this approach depends largely on the local need for micro-credits
and the willingness to undertake conservation efforts in return for access to lending.
A financing mechanism for linking poverty alleviation and environmental conservation
44
5. Bio-rights in relation to other financial
mechanisms for conservation and
development
This chapter provides an analysis of Bio-rights in the overall perspective of other financial
mechanisms used in the conservation and the development sectors. Three mechanisms
are reviewed: i) Integrated Conservation and Development Projects (ICDPs), ii) Payments for
Ecosystem Services (PES) mechanisms and iii) micro-finance schemes. The first part of the
chapter describes the overall rationale behind conservation finance approaches and presents a
brief overview of three financing mechanisms and lessons learned during their implementation.
The second part of the chapter describes how Bio-rights relates to these mechanisms. It
provides an overview of the applicability of Bio-rights to other instruments and describes what
can be learned from practical field experiences with the different financing mechanisms to ensure
successful Bio-rights implementation.
5.1 The basis for use of financing mechanisms
The fact that ecosystem services form the basis of human wellbeing is well expounded in
literature and practice. And yet in 2005 the World Resources Institute’s Millennium Ecosystem
Assessment revealed that more than two thirds of global ecosystem services were in decline and
that the “benefits reaped from our engineering of the planet have been achieved by running down
on natural capital” (Millennium Ecosystem Assessment, 2005). Efforts to reverse these trends
have been equally daunting. As one estimate puts it, as much as US$ 20 billion is raised from
public finance and private philanthropy for global conservation activities - much of the money
being used to maintain over 100,000 protected areas covering 12% of the world’s land surface
(Bishop et al., 2008). Ironically, as economies grow, ecosystems continue to degrade, posing
an immense challenge for policy and decision making in both conservation and development
sectors.
The linkage between ecosystem services and human wellbeing forms the basis for an economic
perspective on environmental policy. Based on the values1 people hold for their environment,
important repercussions for ecosystem services could be achieved just by making the link
between the economy and environment more explicit. Markets serve as the key economic
institutions to ensure resource allocation through the invisible hands of demand and supply.
However, markets fail to emerge for most of the ecosystem services primarily as they acquire
the nature of positive externalities or public goods2 (Cornes & Sandler, 1996). This could form
the central justification for government intervention making the public sector responsible for the
provision of the ecosystem services. However, governments have their own failings, in terms
1 Value is defined by the Millennium Ecosystem Assessment (2003) as the “contribution of an action or object
to user specified goals, objectives or conditions”. The value of ecosystems can be interpreted differently within
the perspectives of economic, ecological and sociological sciences. While the economic perspective stresses
the exchange value of these services, the ecological focus is on the importance of the ecosystem in maintaining
ecosystem health and resilience in order to provide the services (Bingham et al., 1995) and sociologists emphasise
measures of moral assessments as part of value (Barry & Oelschlaeger, 1995).
Bio-rights in theory and practice
45
of inefficient bureaucracies, misaligned incentives, imperfect knowledge and rent seeking. This
then calls for market-based approaches that aim to alter the incentives facing the providers of
ecosystem services. Experience has shown that well designed market-based instruments can
achieve environmental goals at less cost than conventional “command and control” approaches,
while creating positive incentives for continual innovation and improvement (Stavins, 2000). This is
where the genesis of financing mechanisms as a part of the policy mix should be understood.
Increased emphasis on financing mechanisms within conservation and development sectors is a
part of the policy shift that recognizes the success of markets to induce changes in individual and
institutional behaviour in a cost effective manner. Various multilateral conservation agreements,
for example, recognise incentive systems as potentially powerful policy tools. Article 11 of the
Convention on Biological Diversity calls on parties to “as far as possible and as appropriate,
adopt economically and socially sound measures that act as incentives for the conservation
and sustainable use of components of biological diversity”. Similar emphasis is present in the
decisions of the Ramsar Convention on Wetlands, Convention on Desertification and others.
Also, national and regional policies increasingly consider incentive instruments as a tool to
improve conservation effectiveness.
However, recent developments in institutional economics have challenged the long held
perception that markets are an optimal resource allocation mechanism, and instead place
markets within a multitude of institutional arrangements and hierarchies that guide decision
making and resource allocation (North, 1990; Williamson, 1985; Stiglitz, 1986). Thus, market-
based financial systems should not be assumed as to be “silver bullets” that will fix all the
problems of environmental degradation; instead they should be seen as part of a range of
While certain ecosystem services, such as fish (l), have a distinct monetary value, other services
- such as protection against storms (r) - have not been internalised into formal markets. Photos:
Pieter van Eijk
2 A good is public to varying degrees, depending on the extent to which it exhibits rivalry and excludability
characteristics. When a good is non-rivalrous, one person’s use is not affected by the other person’s use. So the
supply of the good cannot be controlled and therefore the willingness to produce it decreases. When a good is
non-excludable, it implies that there is no means of preventing people from using it, creating a problem of supply
and therefore its under provision. These characteristics lead to market failure because markets, by themselves,
are unable to provide the optimal level of good. When non-excludability and non-rivalry exist, they undermine
the formation of markets since beneficiaries of the goods or services have no incentive to pay the suppliers, and
eventually everyone wishes to “free ride”.
A financing mechanism for linking poverty alleviation and environmental conservation
46
conservation-development options available to the decision maker and policy planner. This
reference position is critical to rationally appreciate the role of financial mechanisms in the overall
conservation-development debate.
The overall economic benefit arising from conservation of a particular ecosystem is presented by the
bar on the extreme left. Bars A and B show the income derived by people living in and close to the
ecosystem (A) and further away (B). This recognises that benefits are distributed unevenly from place
to place. For example, in the case of a wetland ecosystem, the local benefits (A) could be availability
of drinking water, fisheries, and valuable plants, while people living further away would benefit from
flood mitigation, sediment retention and other regulatory services (B). The local user may then see a
potential source of income (C) from ecosystem conversion - say, draining the wetland for agriculture
and residential purposes. Even though the overall economic benefit from the converted ecosystem (C)
is less than the overall benefit before conversion (A+B), the local user faces an opportunity cost in terms
of lost benefits if he or she chooses not to convert the land, represented by the difference between
bars A and C. To a rational local user, a payment of this difference constitutes a minimum incentive
to maintain the ecosystem. A rational downstream user, can pay an amount equivalent to the income
stream at stake if the land is converted (B). This induces the ex-situ user and an ecosystem service
buyer to enter into a contract for continued provision of the services, by providing a payment (E) to to
the local person or ecosystem services provider. The total income stream to the ecosystem services
provider (bar D plus E) thus is more than that of a converted ecosystem (C), making conservation viable.
The system thus internalizes what would otherwise be an externality (Pagiola and Platais, 2007).
Figure 6. The logic of Payment for Ecosystem Services. Adapted from: Pagiola and Platais, 2007.
TOTAL BENEFIT
FROM
ECOSYSTEM
CONSERVATION
PAYMENT FOR
ECOSYSTEM SERVICES
FROM THE
DOWNSTREAM USER TO
THE SERVICE PROVIDER
IN SITU BENEFIT
TO THE
ECOSYSTEM
SERVICE
PROVIDER AFTER
RECEIVING PES
IN SITU BENEFIT
FROM
CONVERTED
ECOSYSTEMS
NET OPPORTUNITY
COST LOSS TO
DOWNSTREAM
ECOSYSTEM
SERVICES USER -
MAXIMUM PAYMENT
FOR CONTINUED
CONSERVATION
NET OPPORTUNITY COST LOSS TO IN-SITU
USER-MINIMUM PAYMENT REQUIRED TO CONTINUAE
CONSERVATION
IN SITU BENEFIT
FROM
ECOSYSTEM
CONSERVATION
BENEFITS FROM
ECOSYSTEM
SERVICES TO
DOWNSTREAM
AND OTHER
USERS
A
B
C
D
E
Box 4. The logic of Payments for Ecosystem services
Bio-rights in theory and practice
47
5.2 Financing mechanisms within the Conservation - Development Sector
Three financing approaches have been identified as particularly closely linked to Bio-rights in
terms of their objectives and approaches: i) Integrated Conservation and Development Projects
(ICDPs), ii) Payments for Ecosystem Services (PES) mechanisms, and iii) microfinance schemes.
Their characteristics and implementation experiences are described in more detail below.
5.2.1 Integrated Conservation and Development Projects
The emergence of ICDPs in the 1980s was a response to the increased recognition of the
interconnectedness of community livelihoods and biodiversity, and therefore the ineffectiveness
of conservation initiatives that did not have the effective participation of local communities ICDP
has been defined as “an approach to management and conservation of natural resources in
areas of significant biodiversity value that aims to reconcile the biodiversity conservation and
socio-economic development interests of multiple stakeholders at local, regional, national and
international levels” (Franks et al., 2004). The attractiveness of ICDPs lies in their potential to
contribute to three core objectives of the sustainable development agenda: more effective
biodiversity conservation, increased local community participation in conservation and
development, and economic development for the rural poor (Wells et al., 2004).
Typically, an ICDP involves assistance to ventures that yield commercial output and ecosystem
protection as joint products (Ferraro & Simpson, 2003). Project activities include providing
rural communities with alternatives to environmentally damaging activities, creating livelihood
opportunities through environmentally benign activities such as ecotourism, micro-enterprise
development based on adding value to natural products and, more recently, investments in
rural infrastructure to improve quality of life. Programme design is based on the logic that, if
faced with higher prices for their eco-friendly products, or cheaper inputs, individuals would
demand greater areas of intact ecosystems, thereby indirectly protecting ecosystems and their
constituent services (Ibid, 2003).
The evidence, however, indicates that ICDPs have failed to meet expectations in terms of
conservation and development outcomes (for example, refer to Stocking & Perkins, 1992;
Barrett & Arcese, 1995; Sanjayan et al., 1997; Brown, 1998). A review of implementations by
Wells & McShane (2004) indicates the following reasons:
Projects are implemented with insufficient time, funds and scale to be able to address the •
behaviour that damages biodiversity;
Assumptions that biodiversity conservation and livelihoods will always go hand-in-hand fail •
to address the tradeoffs involved due to the interests and claims of multiple stakeholders;
Projects have an inappropriate focus on the activities of local people, with limited influence •
over large-scale developmental activities that have the potential to trigger large-scale habitat
degradation;
There is limited stakeholder engagement;•
There is disproportionate emphasis on detailed planning at the expense of •
implementation;
Projects focus on activities rather than impacts.•
The body of literature on ICDPs points out that, while the concept of integrating conservation
and development goals remains valid, it is the implementation that has failed in several respects.
Therefore, future ICDP-related interventions need to be developed with greater adaptability, with
A financing mechanism for linking poverty alleviation and environmental conservation
48
tangible conservation targets, and with partnerships that are able to address issues at multiple
scales.
5.2.2 Payment for Ecosystem Services
PES has attracted increasing interest as a mechanism for translating the external, non-market
values of the environment into real financial incentives for local actors to provide services (Engel
et al., 2008). Recently, there have been increasing attempts to define rigid characteristics for
PES, including the following definition proposed by Wunder (2005):
PES is a voluntary transaction where:a.
a well defined environmental service (or a land use likely to secure the service)b.
is being c. ‘bought’ by a (minimum of one) service buyer
from a (minimum of one) service providerd.
if and only if the service provider secures service provision (conditionality).e.
The logic of PES is shown in Box 4.
PES has been applied in a wide range of circumstances. Ravnborg et al. (2007) identify 167
PES cases based on hydrological services, biodiversity conservation, carbon sequestration and
landscape beauty. Landel-Mills & Porras (2002), in their global review, mention 287 cases of the
application of PES. However, Wunder (2008) emphasises that there are no more than a couple
of dozen cases that satisfy all the five criteria suggested in the definition.
The range of ecosystem services vary from specific services to ‘bundled-up’ situations, wherein
a particular service renders more than one ecosystem service. The Los Negros scheme in Bolivia
focuses on watershed and biodiversity protection wherein the Pampagranade Municipality pays
Santa Rosa farmers for forest and páramo (a neotropical wetland type) conservation (Asquith et
al., 2008). Vittel, a France-based water company pays the dairy farmers in a spring catchment to
maintain a form of land use that enables sustained supply of high quality mineral water (Perrot-
Maître, 2006). The Government of China initiated the Sloping Land Conversion Programme
focussing on watershed protection, wherein the central government pays rural households to
take cropland out of production and for afforestation (Bennet, 2008).
While PES schemes can be distinguished from each other in various ways, a useful basis is to
delineate PES programmes that are user-financed (in which service buyers are the actual service
users) and those that are government-financed (wherein government buys the service on behalf
of the end users). User-financed programmes are voluntary for the seller as well as the buyer,
whereas government-financed programmes are mostly voluntary only on the provider side
(Engels et al., 2008). Government-financed programmes are generally larger scale, for example
the Sloping Land Conservation Programme covers 12 million hectares (Bennet, 2008). Bulte et
al. (2008) propose a functional classification of PES schemes separating programmes that pay
for pollution control, conservation of natural resources and ecosystems from those aimed at
general or public good environmental amenities.
Despite an overwhelming emphasis on PES, there have been relatively few attempts to assess
their effectiveness and efficiency. Two recent attempts - Wunder et al. (2008) based on a review
of 14 case studies and Bulte et al. (2008) based on 10 cases - have the following insights to offer
on various aspects of PES implementation:
Bio-rights in theory and practice
49
Impacts on environmental service generation:• PES programs in general have a high rate
of attracting potential providers of ecosystem services. However, payments are rarely tied
to measured units, but to proxies. There is very limited evidence of additional conservation
benefits created by the PES projects, though this can be attributed to lack of monitoring
design. Many questions have also been asked about the permanence of the benefits of
PES programmes, particularly after the payments stop coming. Absence of an adequate
monitoring framework has also limited measurement of the extent of leakage. There has
also been evidence of the generation of perverse incentives due to implementation of PES
programmes (Tattenbach et al., 2006).
Distributional impacts:• Conceptually, PES programmes were not intended to be an
instrument for poverty alleviation, but for natural resource management. It is often assumed
that ecosystem services are derived from areas with a predominantly poor population, or
that have a relatively higher incidence of poverty. This remains an untested hypothesis to
date. In an analysis of highland Guatemala, Pagiola et al. (2007) do not find any correlation
between ecosystem services provision and incidence of poverty. In most of the cases that
are said to have attempted to integrate poverty alleviation goals, these were not the major
policy objectives but add-ons introduced due to political pressure or to ensure greater
acceptability. In terms of implementation, there has been hardly any complementarity
between the objectives, but instead the poverty reduction objective has competed with the
overall objective of ecosystem services provision.
Available evidence on the participation of poor people in PES programmes has been mixed.
Cases from Costa Rica have a bias in terms of participation from well-off households, whereas
others have a greater proportion of poor people involved. However, key factors that influence
households’ decisions to participate in PES programme include i) factors that affect eligibility to
participate; ii) factors that affect desire to participate; iii) factors that affect ability to participate;
and iv) competitiveness in terms of transaction costs. Some of the key conclusions that emerge
are:
In cases of user-financed programmes, poor service providers were able to access the •
programme and become ecosystem services sellers. This happened in spite of the fact that
none of the programmes had intentionally used poverty targeting mechanisms. These results
are also consistent, to a large degree, with the government-financed PES schemes.
Transaction costs are likely to be a much greater obstacle for poor households than their •
own limitations. High transaction costs associated with dealing with many small-scale
ecosystem service providers as opposed to few large-scale providers work against the
poor. Thus, the participation of the poor may require shifting (part of) the unavoidable
transaction costs from the buyers to the sellers and investigating options such as registering
communities as groups.
The extent to which poor people actually benefit from participation in PES programmes is •
very poorly documented. As long as participation is voluntary, there is a presumption that
the participants were at least not worse off than in a situation without PES. In the case of
non-voluntary participation such presumptions cannot be made.
There is little evidence that large benefits result from implementation of PES programmes. •
PES probably delivers small gains over the opportunity costs. However, even small pecuniary
gains could be significant when people have limited opportunities for supplementing their
incomes. In several situations, non-pecuniary gains could also be anticipated, with relatively
higher societal impacts. In Kalimantan for example, PES has induced more secure property
rights. In Costa Rica and Bolivia, PES contracts helped increase tenure security.
A financing mechanism for linking poverty alleviation and environmental conservation
50
In general, the two reviews conclude that poverty alleviation objectives within PES may come
at a cost to achieving environmental objectives, and in most situations be counter-productive
to the overall success of the scheme, undermining the basis for a quid pro quo deal between
service users and service providers. Poverty cannot be used as a fundamental criterion for
service provision; instead, the focus is on the ability to provide the service. An increased focus
on poverty is likely to increase programme costs and makeexternal financial necessary.
5.2.3 Micro-nance3
Unlike the above two instruments, micro-finance has an upfront focus on poverty. Poverty is
conventionally interpreted as a lack of access to the assets necessary for a higher standard of
income or welfare, such assets could include be (e.g., access to education, safe drinking water
and sanitation), natural (e.g., access to land, forests, wetland services), physical (infrastructure),
social (networks) or financial (credit, banking, etc.). Lack of access to credit is explained by the
absence of collateral that the poor can provide, forcing them to rely on moneylenders, who
often charge very high interest rates, forcing people further into poverty. Micro-finance aims to
help people escape this spiral through a wide variety of innovative measures, such as group
lending, regular saving schemes, establishment of close linkages between poor clients and
credit institutions and the like. Micro-finance as a tool for poverty alleviation works on separate
premises for different categories of the poor4. For the destitute, enhancing access to credit
enables people to finance production activities that allow income growth. For the transitory poor,
micro-finance provides an opportunity for ‘consumption levelling’ by providing credit in times of
need or even generating savings opportunities. Thus, micro-finance becomes an important tool
for poverty alleviation.
Though micro-finance has a long history, dating back to a seventeenth-century Irish bank,
modern micro-finance has its roots in Bangladesh in the 1970s. Muhammad Yunus’ experimental
research into providing credit to the poor led to the establishment of the world-famous micro-
finance institution, the Grameen Bank. In Bolivia, Banco-Sol was developed to address the
needs of the urban poor in the informal sector. In recent times, there is an increasing trend of
conventional banks expanding their operations to include micro-finance. Bank Dangang Bali
(Indonesia), ICICI Bank (India) and Banco del Dessarrollo (Chile) are among several to have
included micro-finance within their core business strategies.
Unlike the two other instruments, micro-finance has been subject to some rigorous effectiveness
assessments. Hume & Mosley (1996) in their assessment covering Indonesia, India and
Bangladesh, observed an increase in incomes of borrowers, with a relatively higher growth for
the relatively better off. MkNelly et al. (1996) records positive benefits in Thai villages. Khandekar
(1998) and Pitt & Khandekar (1998) in an assessment of Grameen Bank, report reduced poverty
within the micro-finance targeted villages, an increase in consumption and changes in attitudes.
Chen & Snodgrass (2001) have recorded an increase in average income of the participants
of India’s SEWA Bank micro-finance programmes. However, not all the studies conclude
3 Micro-finance and micro-credit are often used interchangeably, but essentially have different meanings. Micro-
credit refers to a small loan made to a low-income person, often without collateral. Micro-finance refers to a whole
range of financial services, including loans, saving, insurance and other products.
4 Poverty has its own heterogeneity (Montgomery & Weiss, 2005). Broadly, we can distinguish between long-term
or ‘chronic poor’ and those who fall into poverty as a result of adverse shocks (transitory poor). Within the chronic
poor, one group is those who are so physically and socially disadvantaged that they would remain poor without
welfare support (destitute category); another is those who are poor because of lack of access to assets and
opportunities. Furthermore, within the non-destitute category, we can distinguish in terms of depth of poverty, i.e.,
the distance from the poverty line. People significantly below the poverty line form the ‘core poor’.
Bio-rights in theory and practice
51
that micro-finance is able to reach the core poor. Amin et al. (2003) in their assessment of
Bangladesh’s Grameen Bank, BRAC and ASA observe that the programmes are successful at
reaching the poor but the vulnerable poor are effectively excluded from membership. Coleman
(2004) in assessing village banks in Thailand reports that the programmes reach relatively
wealthier communities rather than the poor. Duong & Izumida (2002) in their study of Vietnam
indicate that the poor have difficulties in accessing credit facilities. MkNelly & Dunford (1999) in
their assessments from Bolivia observe no evidence of improved household food security or
nutritional status due to micro-finance programmes. In general, in terms of cost effectiveness,
there is evidence of high transaction costs involved in the design and implementation of micro-
credit programmes (Montgomery & Weiss, 2005).
5.3 Bio-rights in comparison to ICDPs, PES and micro-finance
5.3.1 Overall similarities and differences
Bio-rights as a financing mechanism bears a high degree of similarity to the three mechanisms
described in the previous section. It has joint conservation-development objectives as in ICDPs.
It is an attempt to create an ecosystem service market as in PES. And lastly, it is a micro-finance
based incentive mechanism. Despite these commonalities, Bio-rights has a number of distinct
features:
Conservation targeting:• Bio-rights attempts to make conservation a viable option by linking
it to an incentive in the form of micro-finance. However, unlike PES, the conservation action
does not necessarily need to have a utilitarian basis in the form of a service provider and
a buyer. Since the incentive funds in some cases are sourced from a third party, i.e., the
donor, a decoupling of the demand and supply chain becomes possible at least in the short
to medium term. This widens the range of circumstances under which Bio-rights might be
applicable; for example, in the case of a forest regeneration scheme, there would not need
to be a downstream community benefitting from watershed functions.
Poverty targeting:• Bio-rights provides the flexibility to integrate poverty targeting, similar to
micro-finance and, to a limited degree, ICDPs. Being micro-finance based, the application
of Bio-rights is driven to areas where there is a demand for credit. People in these areas
do often have no access to regular micro-credit schemes. Also, this is unlike PES, wherein
the focus is on ecosystem service provision, and there is limited evidence of an overlap
between poverty incidence and ecosystem services generation.
Conditionality:• Bio-rights finance is conditional on the achievement of a certain conservation
target. Other conditions could be introduced to ensure the socio-economic and environmental
sustainability of enterprises supported through micro-finance. Weak conditionality has often
been identified as one of weaknesses of ICDPs, wherein incentives are delivered upfront on
the premise that they will create demand for conservation. However, there is a high degree
of likelihood that livelihood activities will continue to put pressure on natural resources or, in
the worst situations be completely de-linked from the main conservation objective. Thus,
the introduction of conditionality, both environmental as well as socio-economic, within Bio-
rights improves implementation targeting.
A financing mechanism for linking poverty alleviation and environmental conservation
52
5.3.2 Which mechanism to choose?
No generalisations can be made as to which approach is most suitable for accomplishing
conservation and sustainable development in a given situation. Selection of an appropriate
mechanism largely depends on the professional judgement of the project implementer, based
on local site conditions, investor requirements, community perceptions and specific project
objectives. Obviously, personal experiences and familiarity with different conservation and
development approaches also play an important role. Moreover, it is important to realise that all
of the above mechanisms can be implemented in a flexible manner, and have certain elements
in common. This makes it difficult to classify the approaches as being entirely ‘different’ and
to consider one approach applicable while completely rejecting another. Rather, judgment is
needed as to which elements are required for successful project implementation under given
site conditions. This is likely to result in a combination of several financing and non-financing
approaches that will jointly deliver optimal success. The financing mechanisms described in this
chapter should therefore not be considered as the whole solution to a problem, but instead as
among a range of tools required.
5.4 Lessons learnt and emerging best practice
The review of the literature on financing mechanisms reveals some important lessons, which
need to be considered and incorporated into the implementation of Bio-rights projects:
Management of transaction costs: Within any scheme, transaction costs occur primarily to
address the information needs and logistical requirements of programme implementation.
Typically, a PES programme has transaction costs in the form of opportunity costs of forgone
benefits; implementation costs of making and maintaining land use changes; and costs of
programme development and implementation, including capacity building, monitoring and
evaluation. Transaction costs for a micro-credit scheme involve time costs to the poor for
participation in group meetings costs of skill upgrading, maintenance of offices where applicable
and other costs. A Bio-rights programme would face higher transaction costs than a micro-credit
programme as it would also involve monitoring of conservation impacts. Inadequate coverage
of the transaction costs has been identified as a potential deterrent to active participation in
conservation-development programmes.
Key challenges for a project manager in relation to transaction costs are to ensure: i) that they
are fully accounted for; ii) that they are covered and iii) that they are kept as low as possible.
The third element deserves special attention because of Bio-rights’ upfront focus on poverty
alleviation. Some of the specific means for reducing transaction costs are collective contracting
and investing in local capacities for the devolution and decentralization of core management
operations.
Mitigation of leakage:• Leakages refer to situations where environmentally damaging activities
are merely displaced rather than reduced. At a local level, this would mean that degrading
activities are shifted outside the project area. At a broader level, restrictions on land use can
lead to degradation elsewhere, for example, preventing conversion of forests to cropland
at a wetland basin scale leads to increase in food prices, enhancing potential returns from
forest clearing in other areas. Leakages are most likely to take place when the size of the
intervention is sub-optimal in scale compared to the problem being addressed: for example,
if the Bio-rights project is designed to address the unsustainable harvest of fish from a
particular wetland, but covers only part of the wetland or some of the fisher communities.
Bio-rights in theory and practice
53
In principle, controlling leakage at multiple scales is practically impossible. However, at
local scales, the scope of the project should be comprehensive enough to address the root
cause of resource degradation.
Stakeholder targeting and participation:• Effective stakeholder targeting and participation are
crucial for the success of any conservation - development intervention. Historically, insufficient
stakeholder engagement has been identified as one of the major reasons for ICDP failure. In
PES programmes, stakeholder participation has been relatively more successful. Some of
the key factors that have determined stakeholder participation in these programmes have
been eligibility, desire, ability and competitiveness (Wunder et al., 2008). It is noteworthy that
conditions on eligibility and ability most often reduce inclusion of the poor as stakeholders.
‘Ability’ specifically links the design to resource use and asset tenureship. Thus the poor
with no access to land are directly excluded from the design when the ability to change
land use becomes a criterion for inclusion in a programme. Successful implementation of
Bio-rights therefore should be based on a detailed mapping of stakeholders and resource
linkages, ensuring their effective participation. This could also be used to determine the
overall scale of the programme, the most effective being the one in which all or most of the
stakeholders are included and able to benefit.
Visible additionality:• One of the key challenges of the ecosystem linked financial mechanism
remains the visibility of results. ‘Additionality’ here refers to the change over the baseline
condition brought about by the initiative. Bio-rights projects need to create visible impacts
in at least two contexts: ecological and socioeconomic. Most of the conservation-
development projects suffer from ‘missing baselines’, making it difficult to establish the
degree of change created by the project. In PES projects, it has been common to link
conservation additionality to proxies, rather than to a specific ecosystem condition, function
or process. Thus, improved protection downstream is assumed to have occurred when the
number of trees has increased, rather than when measurable changes in hydrography have
occurred. The case has been similar with ICDPs. Absence of visible results not only reduces
the attractiveness of the programme, it might also create problems in securing additional
or complimentary resources for the overall programme. Successful implementation of
Bio-rights, therefore, mandates design and implementation of a rigorous monitoring
and evaluation programme that creates a baseline before the project, and also provides
opportunities for mid-term adaptation and lesson learning. Investing in local capabilities
for monitoring and evaluation also has additional benefits in terms of reduced transaction
costs.
Avoid creating perverse incentives:• Weak project planning can actually create perverse
incentives that increase resource degradation rather than the reverse. This has happened
on several occasions. For example, if logging becomes the primary criterion for selecting
participants for an incentive programme, there is a possibility of increased logging to seek
membership to the scheme. There is sporadic evidence of such incidents in practice (for
example see Tattenbach et al., 2006). Mechanisms to address such situations have to
be location- and case-specific. They range from careful contract design to a sequence
of incentive systems based on market chains, and at times even creation of avenues for
regulatory systems to operate.
A financing mechanism for linking poverty alleviation and environmental conservation
54
In conclusion, a review of implementation experiences indicates that achieving conservation
and development outcomes through Bio-rights implementation implicitly involves the integration
of several elements. The first and fundamental premise is that degradation drivers must be
addressed at multiple scales among a multitude of stakeholders and conflicting interests. An
important element for programme success is to link conservation objectives to relatively tangible
conservation benefit flows. Adequate care is required to address leakage, perverse incentives,
and social and financial inefficiencies. Emphasis on comprehensive monitoring strategies would
help to assess the degree of additionality created through programme implementation. Keeping
transaction costs low is another challenge, which could be addressed by innovative approaches
such as group-level contracting. A fundamental investment would be to create Bio-rights as a
process rather than as projects in order to generate the necessary scale and amplitude required
to achieve conservation - development outcomes.
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Part II. Manual for implementers
Bio-rights group performing post-tsunami mangrove
rehabilitation works in Aceh, Indonesia.
Photo: Jane Madgwick.
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Bio-rights in theory and practice
59
6. Implementing Bio-rights
5 E.g. by submitting case experiences to www.wetlands.org.
6.1 Introduction
This section describes how Bio-rights can be implemented in the field. It provides a practical
step-by-step description to help conservation and development practitioners get started
with the approach. The approach is described based on the five major elements of project
implementation, i.e., i) project initiation, ii) project development, iii) contract negotiation, iv)
practical implementation and v) project monitoring and evaluation. Within these five major
steps, more than 20 individual sub-sections provide detailed guidance on specific aspects of
the implementation process. The different implementation steps are described in chronological
order. Some steps can, if site conditions allow, be implemented in parallel to each other, to
increase efficiency and speed up the - sometimes lengthy - process of project initiation and
development. A summary of the different implementation steps is provided in Annex 5.
The steps described in this chapter provide general guidance to project implementers. All key
factors for success, which have emerged after nearly a decade of piloting the approach, have
been included. It is strongly recommended to take these into account when implementing
the mechanism. On the other hand, one should also realise that the specific socio-economic
and environmental issues in individual locations do require a tailored, site-specific approach.
Therefore implementers are recommended to adapt the mechanism as much as possible to
local site conditions. This should be done in advance of the project, but also during project
implementation to accommodate unexpected developments. In addition, it is important to
realise that Bio-rights is unlikely to be successful by itself. Rather, it should be part of a larger
framework of conservation and development activities, and preferably also be aligned with
regional policies and plans (see chapter 4). Our objective is to share the approach with as
many relevant stakeholders as possible in civil society, governments and the private sector.
The approach and its name are therefore free for everyone to use, provided that the approach’s
key characteristics are respected. This is to ensure that future communications on Bio-rights
relate to the specific framework described in this report, rather than Bio-rights becoming a
general term for a wider family of mechanisms related to Payments for Environmental Services
(PES). Future Bio-rights implementers are invited to share their experiences and findings with the
authors of this paper as well as with a wider audience through the web-based dissemination of
experiences and lessons learned5.
The practical implementation steps mentioned below are described from the perspective of an
NGO or government body in the role of the Bio-rights Project Manager. Some of these steps are
implemented by the Bio-rights Manager, others are delegated to the Local Programme Manager
who is responsible for day-to-day Bio-rights implementation. Obviously, other stakeholders,
such as the corporate sector or community groups themselves, can also take the initiative
to initiate Bio-rights. Although this might slightly change the roles of different stakeholders in
the implementation process, this does not affect the different steps needed for successful
implementation that are identified in this chapter.
The division of roles performed within the implementation process by the Bio-rights Manager
and the Local Programme Manager is described in Annex 5. It should be noted that exact roles
and responsibilities depend on the specific experiences of the organisations involved, and that
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60
no generalisations can be made about who is responsible for each specific action. A Local
Programme Manager with limited project evaluation experience, for example, should not be
made responsible for project monitoring, but rather undertake this jointly with the Bio-rights
Manager. Similarly, if the Bio-rights Manager has a limited local network, it might be better to
leave stakeholder engagement to the Local Programme Manager. No matter how tasks are
distributed, it is of the utmost importance to ensure that the Bio-rights Manager and the Local
Programme Manager have sound communication skills. They will need to share details on
project developments, unexpected problems and support needs, as well as ensure full clarity on
the exact responsibilities of each partner involved.
6.2 Step 1. Project initiation
Step 1A. Concept development and assessment of appropriate approach
Each project starts with the development of an overall concept plan. Such a concept can be
developed by the implementing organisation itself, based on internal needs, or alternatively it can
be developed at the request of a third party, such as a private sector or government stakeholder.
One of the first steps in developing a concept idea is to identify appropriate approaches for
project implementation. In the context of this report, the main question to be answered is
whether Bio-rights is an appropriate mechanism for accomplishing the anticipated conservation
and development objectives. If so, the ways in which Bio-rights might be incorporated into other
planned or ongoing approaches should be identified. This includes assessing potential linkages
with global trading mechanisms for ecosystem services (e.g., carbon or water related) or labelling
schemes (e.g., FSC, MSC, RSPO), integration into policy processes and adjustment to existing
initiatives in the proposed project area. If Bio-rights is not likely to be successful, it should be
judged which other mechanisms (e.g. PES, traditional micro-credit schemes, establishment of
protected areas, CB-NRM) would be better suited instead for accomplishing project goals.
Annex 1 provides guidance on the overall judgement of the applicability of Bio-rights in the
anticipated project. Assuming that the approach proves appropriate, this forms the starting
point of the different implementation steps described below. It should be noted that the full
potential of Bio-rights can only be judged after implementation of steps 1B to 2A, which involve
consultation of relevant stakeholders (including the local community) and a rigorous assessment
of socio-economic and environmental site conditions. This means that the final decision to go
ahead with Bio-rights (or alternatively to opt for another approach), will only take place after
completion of a number of implementation steps.
Step 1B. Generate funds
Following the development of an overall Bio-rights concept plan, the next step is to generate
the financial resources required for project development and implementation. Some project
developers might have financial resources available internally but, more commonly, external
funding will be required from a ‘buying party’ interested in the restoration or conservation of the
ecosystem service. Potential sources of funding include i) ‘traditional’ donors, ii) the private sector
and iii) (local) governmental agencies. To bilateral and multilateral donors, Bio-rights might be
attractive as an innovative alternative to traditional approaches for addressing socio-economic
and environmental problems, in line with objectives stated, for example, in the United Nations
Millennium Declaration and under convention agreements. For private sector stakeholders and
governmental bodies Bio-rights could serve as a means to meet their obligations and ensure
the sustained provision of ecosystems services, such as, for example, the maintenance of clean
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61
drinking water supplies, carbon sequestration, flood protection and the conservation of existence
and option values. Revolving funds that generate income from tourism (e.g., park fees, wildlife
watching, eco-lodges, scuba-diving, etc.) can also serve as an important source for funding,
particularly when the explicit intention of a given ecotourism scheme is to directly channel profits
to nearby communities. More details on different motives for stakeholder groups to be involved
in Bio-rights are provided in chapter 3.1.4. Exact means of generating funding are not described
in this report. The web site of the Conservation Finance Alliance provides a wealth of information
on generating funds and resources for conservation in its Conservation Finance Guide (hosted
at www.conservationfinance.org).
Step 1C. Identification of other interested stakeholders
Conservation and development plans developed under step 1A are often linked closely to those
of other organisations. A thorough assessment of overlap in objectives and approaches and
of options for cooperation is recommended. The development of partnerships increases the
potential to generate additional project funding by tapping into the donor-networks of partner
organisations. More importantly, involving stakeholders from various disciplines enables the
matching of