Payment for Environmental Services

Viet Nam
Vietnam’s rapid economic growth over the past decade has raised many out of poverty and moved the country into lower-middle-income status. This dramatic progress, however, has come with high costs in terms of environmental degradation. In a relatively small, densely populated country such as Vietnam, the impact of such degradation is particularly evident. In addition, it also contributes to green-house gas emissions, and Vietnam is one of the countries most vulnerable to the impacts of climate change.
One innovative approach for limiting degradation of environmental resources, and simultaneously promoting improved livelihoods, is Payments for Environmental Services (PES), defined as “the practice of offering incentives to farmers or landowners in exchange for managing their land to provide some sort of ecological service.” The 2005 UN-supported Millennium Ecosystem Assessment identified 24 specific ecosystem services, with three of these comprising the main focus of PES efforts: climate change mitigation, watershed services and biodiversity conservation.
In 2004 the Government of Vietnam passed the Forest Protection and Development Law, which recognized the value of forest environmental services, in addition to their direct-use value. This was followed in 2008 by the Biodiversity Law, and in April 2008, the Government of Vietnam issued a Pilot Policy for Payment for Forest Environmental Services. Services supported by the policy include water regulation, soil conservation, and tourism landscape protection.
Project Definition
Winrock International’s Asia Regional Biodiversity Conservation Program (ARBCP), funded by the US Agency for International Development, supported the government of Vietnam to develop the first national pilot PES project in South East Asia. Under guidance from the Vietnam Office of the Government and the Ministry of Agriculture and Rural Development, the lead agency for PES, the project selected Lam Dong province as the pilot site.
The PES policy enabled buyers in the utilities and tourism sectors to invest in the province of Lam Dong’s forest environmental services. At least 70 percent of the funds generated were to be invested in poor, local-level households who provide the services, targeting specifically those headed by women and ethnic minorities.
The project implementers worked with provincial authorities and businesses interested in paying for the environmental services to establish values for the services and monitor the benefits for both buyers and providers.
• One challenge of PES in Vietnam revolved around the issue of land tenure. Most PES projects have been implemented in locations where ownership over the land that will provide the services is clear. In Vietnam, where the state owns property and manages the economy, the government manages payments to communities; this is the first time PES has been used in a stateplanned economy. Land-tenure rights of smallholders were not fully addressed in the pilot.
• There has been some overlap between agriculture and rural development sector and the natural resources and environmental sector that requires clarification.
• The consultation mechanism only involved local actors to a limited extent.
Policy makers, managers, and beneficiary communities have gained increased awareness of the value of forests and forest services.
Beneficiaries of the project included 13 state actors (forest companies and management boards), 564 households were assigned legal rights to the forest, and 3,342 households contracted to protect forests. Over 584,000 hectares of forest land in Lam Dong province were covered in the pilot project. Average annual income per households ranged from approximately 250,000 Vietnam Dong (VND; approx. US$13) to 7.25 VND (approx. US$ 362).
Financial benefits also accrued to state forest administration and local authorities and the buyers of environmental services (e.g., hydropower plants, water utilities, and eco-tourism companies).
Building on the promise of the pilot policy, a Decree on Payment for Forest Environmental Services was issued in September 2010, setting the stage for additional PES projects.
Author: Matthew Tiedemann, Country Director
Organization: Pact Vietnam