From Principles to Numbers: Approaches in Implementing Payments for Environmental Services (PES) in the Philippines - Smallholder Tree Growing for Rural Development and Environmental Services - page 364

environmental service functions, received by the sellers or paid by the buyers of
the environmental service(s) (Van Noordwijk 2005). Compensation and incentives
can be economic, social and moral. Economic incentives may be made in terms of
direct payments, financial incentives, or in kind. Rewards and payments in kind
may include the provision of infrastructure, market preference, planting materials,
health and educational services, skills training, technical assistance or other mate-
rial benefits. In addition to indirect and direct monetary payments, rewards can take
the form of land tenure security (which may be considered an economic incentive).
Social and moral incentives and rewards may address non-material aspects of pov-
erty including recognition and respect in the community, and personal satisfaction
for doing something, which is currently considered beneficial to the society now or
in the future.
The Philippines has a severely degraded natural resources capital base which has
adversely affected the environmental services they provide. In the early 1900s, it
was estimated that 70 percent of the country was covered with 21 million hectares
of forests (Garrity et al. 1993). However, at present only about six million hectares
of forests remain (FMB 2004). Thus, in the last century alone, the Philippines lost
almost 15 million hectares of tropical forests.
Since the early 1970s, when extensive reforestation efforts began in the
Philippines, various incentives schemes have been devised and implemented to
encourage people to plant trees on private and public land. However, after more than
three decades of support, reforestation in the Philippines has largely been ineffective
and inefficient (Garrity et al. 1993; Chokkalingam et al. 2006), partly because the
incentives provided were either inappropriate or did not consider the long-term
nature of reforestation. On public forest lands for instance, the 25-year renewable
CSC instrument of land tenure is not a sufficient incentive to invest in long-term
forestry and environmental protection (Garrity et al. 1993). Moreover, resource-use
rights are transferred just partially. Short-term contracts and direct payments to
farmers were not able to draw a genuine interest in tree planting either.
Partly in response to the limited success of government-initiated programs, a
number of local governments, research organizations and NGOs in the Philippines
are testing various PES schemes as a way of reversing environmental degradation.
The environmental services being compensated in existing projects include water
resources (i.e., RUPES Bakun), carbon sequestration (Lasco et al. 2005), seascape
and landscape beauty, and biodiversity (Padilla et al. 2005). Smallholder tree farm-
ers are the intended beneficiaries of most of these efforts. For example, carbon
sequestration projects under development for the Kyoto and voluntary markets in
the country are targeted for small holder tree farmers.
However, the sustainability and long-term success of PES mechanisms is limited
by various institutional, social, political and operational factors, and several issues
remain, such as quantification and attribution of ES, which require rigorous techni-
cal work to achieve technical accuracy. In addition, the design of payment schemes
is marred by complex social issues - all these affect the speed and timeless of
implementation of PES mechanisms. In trying to address these issues, we propose
a way to classify PES projects based on how environmental service payments are