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 371

The advantages of Tier 2 methods are as follows: quantitative estimates are given;
long range projections are possible; some attribution is possible; and costs are
lower (compared to Tier 3 methods). In addition, Tier 2 methods can be cost-effective
ways of marketing PES projects such as in the case of Kalahan, where for a mini-
mal investment, environmental benefits were quantified. These methods can also
be used for preparing feasibility studies where cost and benefits can be estimated.
As illustrated in the case of Bakun, the role of the watershed condition in producing
water has been shown.
The main disadvantage of Tier 2 methods is that simulation models are only as
good as the input data and assumptions. Their output is at best estimate of the envi-
ronmental services being provided.

17.2.3 Tier 3: Quantitative and Site Specific Approaches

Tier 3 methods involve the most accurate measurement of environmental services.
They can be a combination of the above plus actual on-site measurements of the
service being provided. For example in the case of water resources, this may
involve actual monitoring of streamflow as a result of tree planting activities in the
watershed. Or in the case of climate change mitigation, this may involve actual
measurements of the carbon sequestered in plants and soil. Tier 3 approaches may
be most appropriate when there is a market for an environmental service as in the
case of the Kyoto Protocol-driven market for carbon. In such cases, sellers must
conform to certain standards of measurements before their “goods” can be sold in
the market.

17.2.3.1 Case: The LLDA-Tanay Streambank Rehabilitation Project

This project is being implemented in the Laguna Lake Basin, close to Metro
Manila, Philippines. The main proponents/sellers of this project are the Municipality
of Tanay and the Laguna Lake Development Authority (LLDA) while the imple-
menters will be farmers in the Tanay watershed. The main objective of the project
is to reduce greenhouse gases (i.e., CO 2 ) in the atmosphere while helping rehabili-
tate the Tanay watershed and providing socio-economic benefits to the local people.
Specifically, the project aims to reforest 70 ha of private lands and establish 25 ha
of agroforestry farms. There are three components of the project: streambank reha-
bilitation, reforestation and agroforestry orchard development.
Streambank rehabilitation aims to increase the riparian forest cover of the Tanay
river in order to reduce erosion. Reforestation will be implemented in upland areas
near the headwaters of the Tanay river in order to reduce erosion. The planting of
agroforestry orchards aims to provide an income for the Katutubo village through
fruit production, while reducing erosion in the upland areas. This component will
be undertaken on an area of 25 ha of communal land belonging to this IP
community.