70510 MAKING BENEFIT SHARING ARRANGEMENTS WORK FOR FOREST DEPENDENT COMMUNITIES -- Insights for REDD+ initiatives INTRODUCTION As donors pledge growing support for protecting and managing forests to address climate change, the question of how to pay tropical countries to reduce their emissions from deforestation and forest degradation assumes greater urgency. Depending on the detailed implementation of REDD+ at a national and international level, forest nations may be able to secure funding from a range of sources, including donors and multilateral funds (a funded approach) and the voluntary and compliance carbon markets (a carbon markets-based approach). These payments are supposed to act as financial incentives that will engender changes in behavior and policy frameworks, spur the development of appropriate institutional arrangements and needed technologies, and motivate both national and international coordination to achieve REDD+ objectives. Forest dependent communities will have to be actively involved in translating many of the proposed REDD+ activities into practice. Key custodians of the world‘s natural forests, these people will be expected to act as forest managers, adopters of new technology, champions for change, rule enforcers, and performance monitors. Forest dependent communities will have to subscribe to the motivation and objective of REDD+ for it to be successful and sustainable. This is where well-designed benefit sharing mechanisms will make a difference. A country‘s benefit sharing mechanism will determine who is involved in REDD+ activities and the ways in which benefits are shared. Existing evidence indicates that the establishment of a suitable benefit sharing mechanism is achievable, provided realities on the ground and a certain number of challenges are addressed effectively. These challenges include, for example, being able to identify REDD+ beneficiaries when carbon rights are unclear, establishing a streamlined and well monitored mechanism for transferring funds from the national (or subnational) level to the local level, working effectively with local institutions, preventing elite capture, and measuring how carbon emissions have changed compared to a predetermined baseline. Key questions for policy makers include: Who should benefit This brief offers an overview of recent from REDD+? What are the different benefit sharing work supported by the Program on options? Which mechanism is the most effective? What Forests (PROFOR). type of investments and support would facilitate an effective benefit sharing arrangement? The brief includes: 1. Identifying and working with REDD+ beneficiaries when rights are unclear............................................p.2 2. Mechanisms for transferring benefits...........................................p.5 3. Examples of benefit sharing in practice....................................p.12 PROGRAM ON FORESTS BRIEFING NOTE NOVEMBER 2011 aspects of REDD+. Even more confusing, WHAT DOES BENEFIT SHARING INVOLVE? however, is the identification of local beneficiaries. International accords associated with the United Nations Framework Convention on The sustainability of REDD+ initiatives requires Climate Change often refer to ―safeguarding‖ an adequate determination of local as well as key social issues. While not explicitly stated, in national beneficiaries. While REDD+ offers a the context of REDD+, there is growing unique opportunity for new benefit streams for consensus that safeguarding key social issues forest dependent people, it intensify struggles will require, among other things effective for rights and control of these forest lands benefit sharing arrangements. because it recognizes new value in remote forest lands. To prevent conflict, influential A benefit can be monetary or nonmonetary parties involved in REDD+ will need to work with and shared among individuals, groups, complex situations at the local level and be communities and organizations. In the context willing to engage with a broad range of of REDD+ the benefits can be derived from stakeholders. This work can result in significant forest rent associated with the management of transaction, negotiation and enforcement a forest resource and incentives that can be costs, diminishing the benefits that reach the both monetary and non-monetary. Examples local level. To reduce costs, the identification of monetary incentives include cash payments, of beneficiaries and efforts to work with them loans, microfinance, salaries, or tax relief. must be both legally correct and pragmatic. Examples of nonmonetary incentives include formal land titles, goods and materials, Designing benefit allocations is in part a matter capacity building, price guarantees, cost of compensation for rights foregone, but other sharing arrangements, improved law interests need to be addressed as well. It is enforcement, improved market access, and so critical to create incentives for cooperation on. with the REDD+ initiative. This is the key because in many countries, the government‘s These benefits can be shared with subnational enforcement capacity is limited. While most or local level forest dependent communities in REDD+ initiatives will require some degree of a manner that reflects either the beneficiaries‘ enforcement, few will succeed without input (e.g., share of forest asset or labor that effective incentive strategies. they have provided); or the incentive required to motivate a specific set of activities (e.g., Property rights, interests and income streams monetary incentive and technical assistance for forest restoration). In some cases, the The creation of a market for trading property benefits may be more a form of compensation rights requires that the rights be clearly defined to recipients for not carrying out certain and not contested by anyone. In the case of activities, or social obligations required by law. forest resources, property rights are rarely clear and secure because national laws regarding 1. IDENTIFYING AND WORKING WITH these resources are often poorly formulated BENEFICIARIES OF REDD+ REVENUE and enforced. Beyond issues of interpretation and gaps in law, in many countries different systems of law with different origins co-exist. For The notion that benefit sharing is important for example, customary rights in forest resources effectively achieving the objectives of REDD+ is may be an important reality on the ground widely accepted. What remains somewhat and yet not be recognized by national law. In unclear is who should benefit from REDD+. such cases, it may be difficult to establish Looking at the bigger picture, financial flows which system applies. In addition, there may associated with REDD+ will need to support be interests in forest resources, which are an institutional and legal changes at the national important source of income, that have no and subnational level in many sectors, provide legal basis, and may even be illegal. incentives for improving private investors‘ practices, finance needed technology, and motivate sustainable resource management In circumstances of legal uncertainty, it will and use. Where there are overlapping legal often not be possible to obtain legal reforms to frameworks, there may be confusion regarding address these issues effectively in a reasonable which ministries have a mandate over certain time frame. Reliance may be placed on MAKING BENEFIT SHARING ARRANGEMENTS WORK FOR FOREST DEPENDENT COMMUNITIES ‗lower-level‘ legal instruments that do not Distinguishing among beneficiaries require legislative approval, such as a ministerial regulations and instruction. The most Following a preliminary identification of effective legal instrument, however, will be communities and other stakeholders and the contracts among the interested and affected benefit they derive from the natural resource, it parties. These are vitally important tools for will be important to classify them based on the reaching understandings and common legal basis of their claims. The latter determines expectations, even where they may be difficult the extent to which certain kinds of benefits to enforce. and compensation may be due by law versus benefits and compensation that need to be Identifying beneficiaries negotiated. Potential REDD+ beneficiaries could be classified based on whether the Achieving clarity and security of rights requires claims are: time and investment. In the interim, practical steps can be taken to ensure that key • property or other legal rights (including stakeholders are included in benefit sharing. those who have customary rights recognized Furthermore, while allocation of benefits is by the national law) about compensating rights foregone, benefit sharing has to also create incentives for • customary claims to such rights which cooperation with the REDD+ initiative. The are not recognized by national law latter will help reinforce enforcement measures taken to achieve REDD+. • established benefit streams from the resource Identification of beneficiaries should be done in a participatory manner involving local Property rights as a benefit stakeholders, experts, and government. Key steps include: While benefits have typically been thought of in terms of compensation or jobs, a third • Assessment of the legal framework and approach is to provide greater security of land property rights relevant to forest resources; tenure as a benefit. Secure land tenure is a potential determinant of production of • Assessment of perceived rights and environmental services, and more secure rights interests (this would include claims to land and over land and other resources can be used as resources that have not be made for some an incentive or reward for the delivery of time). These perceptions can affect the environmental services. Security of tenure sustainability of the REDD+ initiative, and benefits will usually take time to deliver. They therefore should inform benefit sharing; should not be seen as a substitute for more immediate, highly tangible benefits, but as a • Identification of communities and supplement which can be critical for other stakeholders and the benefit they derive sustainability. from the natural resource. Dealing with uncertainty Prior to identifying beneficiaries, it is necessary to develop a tentative understanding of what Lack of clarity regarding rights and claims can ―legitimacy‖ means in a given context. This be a medium-term impediment to payments would provide a framework for consultations for environmental services, including payments and negotiations with the various stakeholders. for carbon. The call for secure tenure through The notion of legitimacy should be tied to formal legal recognition of local rights to forest, identifying people whose claims and use of forest land and forest products and rights to natural resources should be recognized and shared benefits is justified and should be the addressed, and also people whose incentives objective. The challenge, however, is need to be changed among the local conclusively resolving the issues in a satisfactory stakeholders. timeframe. There are some immediate term options that could contribute to the larger goal of secure rights. A legal option worth exploring is the use of regulations under the appropriate 3 laws, e.g., forestry law. Regulations do not alter Contracts that clearly identify interests to be the law or nullify existing property rights, but recognized, specify which uses may continue where the law is vague, regulations can be and what uses must be foregone, and specify used to clarify it or even fill gaps. Where legal the compensation (whether financial or other) changes are not feasible in a timely fashion, an provide a remarkably flexible means for option is to resort to negotiated agreements addressing the issues surrounding ownership with potential beneficiaries and other entities. and rights with identified beneficiaries. These agreements may be needed even where the law is not ambiguous. Agreements Creating and realizing expectations on benefits such as contracts allow for parties to specify their assumptions about ownership and other A good process helps reduce risks when rights while acknowledging that the proceeding in a context where rights to assumptions may be corrected by later events forestland and forest carbon are uncertain and and specifying what will happen if those there are multiple significant and competing assumptions turn out to be wrong. claims. Processes for consultation, negotiation, and capacity building at national and ELEMENTS OF A GOOD CONTRACT subnational levels can help ensure that all necessary parties and their interests are A list of good practices for forest contracts fall identified, that they agree on their respective into several broad categories: rights and responsibilities, and that they have the capacity to perform their agreed obligations. • Ensuring that the contract is legally valid. Consultation is needed, and is well addressed in many REDD initiative. Actual engagement • Ensuring that the contract is clear, and negotiation with all concerned if often less understandable, and complete. well done. Negotiation processes help flesh out how the principles and standards that underpin • Ensuring that the contract addresses the agreement will be implemented in the points that promote agreement-keeping, case at hand. The negotiation process puts including practicality, verification, flesh on those bones, but because of the communication, and incentives. discrepancies in power and knowledge among parties, the negotiations and outcomes • Ensuring that the contract provides must be held to clear standards. Negotiation ways of handling disputes short of going to processes can enhance the enforceability of court. the agreement of project partners and reduce risk of nonperformance and unintended • Ensuring that the contract considers consequences. Where a project brings common issues that have led prior partnerships together multiple parties with different rights, into disagreements. interests, levels of sophistication and experience with legal systems, it will be important to use tools that can help organize The structure and content of contracts should and guide the negotiation process. be informed by the purpose of the contract. Contracts can contain a variety of approaches and ideas for establishing formal An important outcome of capacity assessment communication, grievance-resolving institutions mentioned above will be processes to build the dealing with shared risks, structuring of ability of key institutions to make management milestones, transparency, and other issues of decisions and enforce them. Carbon projects general interest to forest partnerships. add additional complexity to the already significant issues in capacity building because carbon projects are inherently output oriented, Source: World Bank, 2009. Rethinking Forest requiring reliable monitoring to support the Partnerships and Benefit Sharing. Insights on concept in an environment of uncertain legal Factors and Context that Make Collaborative rights. Capacity building will be important in Arrangements Work for Communities and areas such as negotiation, site specific Landowners. Washington, DC: World Bank. technical areas and knowledge sharing, transparent financial systems, monitoring, legal MAKING BENEFIT SHARING ARRANGEMENTS WORK FOR FOREST DEPENDENT COMMUNITIES frameworks, and organizational, management often a precondition for effective resource and general business skills. management. Implementation processes will be more • Initial implementation may be successful to the extent that they are also disappointingly slow; attention to the needs participatory and involve key stakeholders. noted above may result in significant start-up Enforcement processes will always be required times and transaction costs for effort, but it lays and will be made easier if incentive structures the basis for smooth implementation down the for communities and households are well line. designed, encouraging them to participate constructively in enforcement tasks such a • Contracts can be used to vest rights to monitoring violation of agreements. Because carbon and transfer rights to carbon from the disputes will always arise, conflict resolution state to local groups. Contracts are flexible processes need to be built into agreements. legal tools that allow the parties enormous While it may not be possible to deal with legal freedom to adapt the terms to specific confusions and gaps regarding rights to carbon circumstances or avoid some terms altogether. before REDD initiatives are launched, they should be an ongoing element in creating sustainability, and will often best be accomplished incrementally, building on experience. Lessons learned from examples Good practice examples from Madagascar, Ethiopia and Brazil highlight the importance of: • Adequate up-front analysis of the legal framework and both legal and customary interests in the REDD resource. Such analysis can help identify how local communities could take advantage of the formal law in order to 2. MECHANISMS FOR TRANSFERING have their customary rights recognized. BENEFITS • Identifying perceived rights and In the context of REDD+, benefit sharing interests, to create benefit packages that mechanisms can range from local level contribute to the legitimacy and sustainability arrangements between private companies of the REDD initiative. Consultations are and communities, to national level public important to understand these perceptions. payment mechanisms. When considering Consultations can bring to the surface different mechanisms for transferring funds, divergent interests in a group and can indicate there are two ways to classify them based on the extent of relevant social and economic relationships at the local level. • the scale of operation: national versus subnational; • Negotiation of relatively simple, flexible • the conditions that need to be met for contracts among the interested parties are disbursement of benefits: input based versus perhaps the most critical step in the creation of performance based. an effective REDD initiative. These create clear expectations and common understandings, These categories of benefit sharing and can fill gaps and resolve confusions in the mechanisms are not mutually exclusive and law concerning rights in the REDD resource. may be implemented simultaneously within a country. • Good practice projects benefited from significant capacity building for local National level benefit sharing mechanisms communities, various government entities, and distribute benefits from a national to project implementers. Institution building is subnational or local level. Benefits may either 5 be distributed directly to the end recipient (e.g. sharing mechanism performance (verification community groups) or via a subnational may be carried out by independent party); organization (e.g., local government continually improve benefit sharing mechanism institutions). National level benefit sharing governance and operations based on mechanisms are applicable to national monitoring findings; assess long term impacts of approaches to REDD+. benefit sharing mechanism; and contract out parts of the benefit sharing mechanism Subnational benefit sharing mechanisms management process to external providers distribute benefits from a subnational to local where appropriate level (e.g., from a provincial government institution to community groups) or between • Implementing agencies: provide subnational actors (e.g., benefits disbursed training and capacity building services; from provincial to municipal government). operate monitoring systems; assist with Subnational benefit sharing mechanisms are mapping and demonstrating community land applicable to subnational or nested rights (e.g. through collaborative GIS approaches. mapping); capacity building and training; and develop public infrastructure for the benefit of Performance-based arrangements distribute benefit sharing mechanism beneficiaries benefits on the condition that the partners receiving the benefits (e.g., community groups) • Independent verifiers: verify the have achieved a predefined, measurable and monitoring and reporting findings from fund verifiable standard of performance against a manager or administrator; and provide baseline (e.g., have restored or protected X potential training and capacity building role for hectares of forest). fund manager or administrator should this be required In input-based arrangements, beneficiaries agree to carry out specified actions, or refrain from certain actions, in return for up-front monetary or non-monetary inputs. No link is provided between the distribution of benefits and future measurable performance in forest management. Potential actors Various actors are linked to the mechanism used. The following groups are generally involved: • Funders: provide funding to cover benefit sharing mechanism establishment costs; administrative costs; monitoring costs; benefit payments; and funding expansion and replication. • Beneficiaries: provide resource inputs, services or access rights to forests in exchange for forest rent, compensation for opportunity costs, incentives and support for sustainable land use and livelihoods, or support for forest governance and institutional development. • Managers or administrators: provide fund management services; administer contractual arrangements with beneficiaries; monitor, report and possibly verify benefit MAKING BENEFIT SHARING ARRANGEMENTS WORK FOR FOREST DEPENDENT COMMUNITIES Figure 1: Framework of a national performance-based benefit sharing mechanism Performance-based International carbon International international donor Public funds fund carbon markets funding (incl. Fast Start) National budget or National benefit sharing mechanism Finance department KEY: Monetary National benefit sharing mechanism Local government administrator (e.g., REDD+ agency, benefit bodies partnership with civil society, flow academia, private sector) Non- monetary Benefit sharing mechanism benefit beneficiaries: Independent verifiers (i.e., NGO, flows  Communities academic institution, consultancy) MRV data  Individuals  Land use Civil society/private sector industries Figure 2: Framework of a subnational performance-based benefit sharing mechanism Performance-based International NGO/ International carbon International carbon international donor Private foundation Public funds fund markets funding (incl. Fast Start) funding Centralized national REDD+ agency KEY: Subnational benefit sharing mechanism Local government bodies administrator (e.g., provincial REDD+ Monetary agency, partnership with civil society, benefit flow academia, private sector) Non- monetary Benefit sharing mechanism benefit flows beneficiaries: Independent verifiers (i.e., NGO,  Communities academic institution, consultancy) MRV data  Individuals  Land use industries Civil society/private sector Figures 1 and 2 show how two different benefit sharing performance-based mechanisms would work. In reality it is unlikely that so many potential actors would be present in any one given mechanism. 7 Strengths of different arrangements be taken into account before a performance based national or subnational REDD+ system is National input-based benefit sharing begun. mechanisms can support the different phases of REDD+ programs in the following ways: Subnational performance-based benefit sharing mechanisms can support REDD+ • Providing a useful mechanism to build programs by: REDD+ readiness as both Phase 1 (Readiness and capacity building) and Phase 2 • Linking directly with national (Implementation of policies and measures) of performance-based benefit sharing REDD+ can involve an upfront distribution of mechanisms, allowing the effective nonmonetary benefits. This is also an important implementation of the nested approach to role of subnational input-based benefit sharing REDD+ mechanisms (see below). • Allowing states and provinces with • Being viable in countries with low higher MRV capacity to advance to Phase 3 of capacity for monitoring, reporting and REDD+ within the subnational approach to verification (MRV). REDD+. National performance-based benefit sharing Lessons Learned mechanisms can support REDD+ programs by: Several lessons emerge from a detailed review • Meeting the requirements for Phases 2 of different benefit sharing arrangements and Phase 3 (Payment for performance) of drawn from examples in Brazil, Cameroon, REDD+ for which a national-level approach is Canada, Colombia, Mexico, Uganda, and taken, regardless of whether a nonmarket- or elsewhere. market-based approach is applied. However, an approach that blends an input-based and • A clear legal mandate/framework performance-based benefit sharing should underpin benefit sharing arrangements. mechanism could also work for Phase 2. • Use an appropriate system for • Providing an added level of allocating benefits to forest rights holders, accountability and assurance that benefits taking into account the challenges presented disbursed are having the desired effect. by unclear or unrecognised land rights. Where Performance data can add further accuracy rights are unclear, the initial transfer of benefits to the benefit sharing mechanism review can be linked to an agreement that process, and can form help improve the design safeguards against misappropriation. The and workings of the benefit sharing mechanism clarification of rights can be an important over time. benefit. Subnational input-based benefit sharing • Using existing benefit transfer channels mechanisms can support REDD+ programs by: or institutional arrangements can help keep transaction costs moderate and reduce the • Being designed to meet different need to build a new arrangement. provincial or state-level REDD+ readiness needs. • Where a preexisting institutional structure does not exist for benefit sharing, a • Allowing provinces or states to process that involves experts and implement demonstration projects to test representatives from key stakeholder groups concepts and address stakeholder concerns should be used to design a suitable institutional around REDD+: Demonstration projects play an arrangement. important complementary role for REDD+ policy development. They allow trial runs for • Having an effective mechanism to REDD+ policies and benefit-sharing safeguard against mismanagement of funds or arrangements with different stakeholder misappropriation is important to prevent groups. Lessons learned from these trials can inequitable benefit allocation. MAKING BENEFIT SHARING ARRANGEMENTS WORK FOR FOREST DEPENDENT COMMUNITIES • Local government must have sufficient Assessing suitable options for benefit sharing technical forest management, community development and planning capacity to The Options Assessment Framework is designed support beneficiaries effectively. Resources are to assist policy makers and development made available for the entity providing this partners to make an initial assessment of the support. nationally appropriate mechanism or mechanisms for distributing REDD+ benefits in • In low governance and monitoring their country, taking the following four ‗building capacity environments, the most effective blocks‘ into account: initial benefits may be in capacity building and land tenure assistance, building up to 1. Government, civil society, community performance-based benefits later. and private sector institutional capacity • Third party monitoring and audit 2. The national or subnational legal organization within a benefit sharing framework relevant to REDD+ mechanism encourages good governance, transparency and better financial controls. 3. Fund management capacity and experience • Effective use of partnerships with civil society organizations, NGOs, and extension 4. Monitoring capacity and experience units regarding communication, capacity building, and also to draw on local knowledge The Options Assessment Framework can be and networks, can play an important role in used in three different ways, depending on the the success of benefit sharing mechanisms. stage that the REDD+ process has reached in the relevant country. It can be used: • Alignment of the benefit sharing mechanism with national strategy especially • by decision-makers who need to poverty alleviation can help galvanize political identify and select the most appropriate support. Fitting a benefit sharing arrangement mechanism to be applied in their country. In within national economic development plans this case, the Options Assessment Framework can assist in scaling up an effective pilot helps to compare and select which benefit scheme. sharing mechanism types may be most suited to the institutional capacity, legal framework, • To effectively achieve REDD+ fund management and monitoring capacity of objectives, benefits from REDD+ financial the country. resources will need to reach relevant entities involved with research, monitoring and • by decision-makers who already have enforcement in addition to the local a clear view of which REDD+ benefit sharing communities. arrangement should be used in their country. Here the Options Assessment Framework helps to identify a set of ‘enabling actions’ needed But how will policy-makers know which in order for a country to implement its chosen benefit sharing mechanism is best mechanism successfully. suited for their country? This is where the Options Assessment Framework • by development partners who wish to comes in. ascertain the viability of the REDD+ benefit sharing mechanisms already chosen by a partner country, and to identify areas for supporting the country in delivering this mechanism successfully. 9 Use of the Options Assessment Framework should involve key stakeholders in the REDD+ arena. Figure 3 illustrates the uses of the Framework. It allows users to: • Select which benefit sharing arrangement types to assess (e.g., whether it is a national performance-based arrangement or a subnational input-based arrangement). • Assess the country‘s capacity in the four critical ‗building block‘ areas mentioned above. This step involves generating a score for the country against a set of components associated with each building block. Aggregate scores provide an indication of where the country is overall with regards to each of the building blocks. Individual scores provide a sense of which components are strong and which components need to be improved in the country. • Analyze the results. For policy makers and development partners who have a clear view of the suitable benefit sharing mechanism, the Framework would reveal enabling actions needed to strengthen components and building blocks that received a low score. For policy makers and development partners aiming to identify an appropriate mechanism, the analysis would reveal which type of mechanism is most suited for the country‘s context. • Identify next steps and prioritize among them. MAKING BENEFIT SHARING ARRANGEMENTS WORK FOR FOREST DEPENDENT COMMUNITIES Figure 3: Using the Overall Assessment Framework Stakeholders select the mechanism they want to evaluate Stakeholders characterize components for the country Building Block / Component Characterization Building Block 1 : Institutional Capacity Component 1: Capacity of intended implementing agency Component 2: Capacity of CSO Component 3: … Building Block 2: Legal Framework Component 1: Existence and enforcement of laws Component 2: Clarity of laws Component 3: … Building Block 3: Fund Management Capacity Component 1: Presence of government agency or NGO that has managed funds Component 2: Community access to banks Component 3: … Building Block 4: Monitoring Capacity Component 1: Presence of monitoring agencies Component 2: Use of third party monitoring Component 3: … Stakeholders score each component and determine feasibility Building Blocks Total score as % of maximum score for each building block Institutional Capacity Options Assessment Framework: Assess Legal Framework Fund Management Monitoring Capacity If stakeholders are trying to If stakeholders know the choose among different mechanism they want to mechanisms establish Stakeholders analyze results for each benefit Stakeholders analyze results and identify which sharing mechanism and determine which one is components need to be strengthened and the most suitable for the country context possible actions for addressing this need If mechanism is feasible in near term Stakeholders develop or modify an initial blue print of the benefit sharing mechanism Stakeholders identify and prioritize next steps for establishing benefit sharing mechanism 11 3. BENEFIT SHARING IN PRACTICE project might work. The initial set-up took 17 months. SELLING ENVIRONMENTAL SERVICES: Farmers benefit by providing water to Dar Es Salaam, They identified one ―buyer,‖ utility company Tanzania called Dawasco based in Dar es Salaam, and 144 ―sellers,‖ or farmers, from four villages. Dawasco agreed to pay the farmers $65,000 to Project: Equitable Payments for Watershed voluntarily adopt eco-friendly farming Services (EPWS) practices so that the company could spend Location: Morogoro, Tanzania less on water purification. The participating Type: Payment for Ecosystem Services External Funder: Dawasco (a utility company) Facilitator/Implementing-Monitoring Agency: farmers agreed to build terraces using ditches CARE Tanzania and WWF and uphill mounds, to stop slash-and-burn Other Parties: Local government; university that agriculture, to plant trees and elephant provides training grasses, and to sow two or more crops in close Community Stakeholders: 144 local farmers in proximity to produce a greater yield, a process known as alley cropping. In return for changing four villages their farming practices, farmers earned cash, but also obtained other benefits, including In the Morogoro region of Tanzania, farm supplies, animal manure, and agricultural the rugged Uluguru Mountains form part of the training from a local university. CARE Tanzania watershed used by Tanzania‘s largest city, Dar facilitated the contracts, and oversaw the es Salaam. Slash-and-burn farming practices implementation and monitoring of the project. left swaths of unusable land, and the region experienced a doubling in the percentage of Implementation began in 2008, when cultivated land between 1995 and 2000, at the Dawasco made an initial payment through expense of forests and woodland. The CARE, which deposited the money into a deforestation and poor land use practices village bank. Local councils then distributed caused soil erosion and siltation of waterways. the funds to the farmers according to specific To combat this ecological damage and criteria, including how much land the farmer improve water quality in the capital, CARE had subjected to improved farming practices, Tanzania and the World Wildlife Fund (WWF) the number of trees they planted, and the type initiated the Uluguru Equitable Payments for of land management adopted (bench Watershed Services (EPWS) project in 2006. The terraces or other). Other factors included project sought to establish a scheme for whether the farmers had used mixed cropping payment-for-ecosystem-services in which or had refraining from cultivating sloped land water users would pay farmers who agreed to and river banks. An additional 690 farmers from adopt better land use practices. 350 households received training on tree planting, farming techniques, and the use of The Scheme farm animals for manure production. The international NGOs first identified ―buyers‖ The Benefits and ―sellers‖ who could benefit from such an arrangement. They met with the head of the The benefits to the villages included not just environmental section of Tanzania‘s Vice financial rewards, supplies, and training to President‘s Office, District Council members farmers, but also restored ecosystems, greater and the District Executive Director, the local community empowerment, and the water office, which provided hydrology formulation of a water user association. services, and members of a nearby nature Dawasco profited from improved water reserve and a conservation fund. They quality, availability and reliability, a reduction in consulted village leaders, conducted water-treatment costs, and enhanced public- interviews, held discussion groups, and carried private relations. The government benefited by out household surveys to find sellers. They being able to implement its water resource completed a hydrological assessment, a cost- plans, and to increase its capacity and benefit analysis, and an examination of existing knowledge development. Additionally, there legal and institutional frameworks to determine was a noticeable positive impact on the which parties could benefit and how the environment, including reduced soil erosion, PROGRAM ON FORESTS BRIEFING NOTE NOVEMBER 2011 fewer trees cut illegally, and more trees methods require intensive manual labor to planted. The number of bush fires was reduced build terraces and plant trees, as well as animal and the forest was no longer receding. manure, which is not easy to procure for most villagers. Ensuring timely incentives would Farmers surveyed in two of the four villages entice more farmers to adopt the practices reported that they were happy or very happy and increase the viability of this payment for with the way the project was going, and most ecosystem services scheme. also reported financial gains and a greater sense of financial security, though income improvements were difficult to ascertain because payments varied greatly. Most felt that the scheme was fair and that they were justly compensated for their efforts. Most also noted that the farming network had been strengthened and that there was greater exchange of knowledge about farming practices. In general, productivity increased up to four times the pre-project levels, convincing more farmers to join the project or adopt the practices. Factors Leading to Success The leadership provided by the international NGOs was central to the success of EPWS, and proved to be a key ingredient that helped farmers to voluntarily let go of traditional farming methods. Both CARE and WWF earned the trust of the farmers, another essential element that allowed the NGOs to preserve the integrity of the project by overseeing the payments being distributed by local governments that farmers did not trust. The farmers were patient and persistent, laboring at difficult tasks and then waiting for rewards. Expectations were clear and understood by the parties involved, and the link between action and payment was easy to verify. Importantly, villagers discovered the non- monetary value of the project, including access to better fertilizers, markets for farm products, and training. Future Viability A permanent mechanism for paying the farmers needs to be created. The farmers received an initial payment through CARE, but the NGO is only a temporary facilitator. Land laws remain unclear, and trust between the farmers and local governments needs to be strengthened. There needs to be a better mechanism for disseminating information to farmers regarding both the project‘s benefits and the process for payments. More emphasis should be placed on the practicality of the activities. For instance, the new farming 13 The Carbon Sequestration Scheme The project was initiated by the Edinburgh Centre for Carbon Management, which assessed the potential for carbon schemes in Uganda. Social and environmental assessments were undertaken, as well as a biomass inventory. Ecotrust coordinated the project by finding buyers abroad who were looking to purchase carbon offsets and villagers who were willing to plant trees. The World Agroforestry Center (ICRAF) provided technical assistance, while Ecotrust offered training to tree growers and monitored the SHARING BENEFITS FROM CARBON: Villagers in planting and growth of the trees to determine Uganda are paid to plant trees to offset the payments due to the tree growers. CARE carbon emissions International provided advisory services, and DFID, USAID, and the Uganda Forestry Project: Trees for Global Benefits Program Coordination Secretariat provided funding. The (TFGB) goals were to plant hardwood and fruit trees, Country: Uganda establish forest reserve boundaries and buffers, Type: Subnational level PES and conserve and rehabilitate forests. Anyone External Funder: Carbon offset purchasers in the four designated areas who owned land abroad, funded through Ecotrust, a national and was willing to plant trees qualified to NGO participate in the scheme. Facilitator: None Implementing-Monitoring Agency: Ecotrust Agreements between the tree growers and Other Parties: World Agroforestry Center Ecotrust are performance-based. Each grower (ICRAF); the Edinburgh Center for Carbon is paid according to the number and the Management species of the trees planted, the agroforestry Community Stakeholders: approximately 400 system adopted, and the tree growth rates tree growers in four villages; the Carbon over a 10-year period. The tree growers are Community Fund paid 30% of the total amount due when 50% of the trees are planted (assuming there is a Villagers in parts of rural Uganda carbon buyer and an agreement signed). traditionally rely on forests for their livelihood Another 20% is paid when the remaining 50% is and energy needs. Forests provide wood for planted. If 85% of the trees have survived by poles, charcoal, and fuel, the main energy the third year, the farmer is paid another 20%, source for 90% of the population. To and if 85% continue to survive by the fifth year encourage forest conservation, the and are growing well , the planter is paid an Environmental Conservation Trust (Ecotrust), a additional 10%. If the trees continue to grow national NGO, initiated the Trees for Global well after 10 years, the final 20% is paid. Carbon Benefits Program, a cooperative carbon offset sales payments are channeled through village project that aims to reduce carbon emissions banks, which distribute the proceeds to tree by paying villagers to plant trees in selected growers. Tree growers receive 55% of the total areas near national parks and forest reserves. carbon income, while a Carbon Community The project began in 2003 with 30 villagers and Fund managed by Ecotrust to benefit the has grown to include 400 villagers in four larger community receives 6%, the Plan Vivo districts in southwestern and mid-western Foundation receives 6%, verification costs Uganda. Villagers volunteer to plant trees and consume 5%, and Ecotrust keeps 28%. Ecotrust in return receive payments for the amount of inspects ledgers at village banks and asks carbon they sequester. The goal is to reduce growers how much money they have received. global carbon emissions by providing carbon Buyers also visit to ensure growers are being offsets to overseas buyers, while enhancing the paid. livelihoods of villagers and reducing their reliance on wood from the forest reserves. PROGRAM ON FORESTS BRIEFING NOTE NOVEMBER 2011 The Benefits 85% of growers said they thought the scheme was fair. Growers showed the patience and Tree growers benefit financially from the perseverance needed to succeed because scheme, though later arrivals to the project profits were not immediate but instead are have benefited more because the price of being distributed over a 10 year period. carbon offsets in the international market has gone up, while early tree growers were locked Future Viability into their sales prices. The infusion of cash has helped the local economies as growers bought The future viability of the project depends furniture, built homes, and opened savings heavily on Ecotrust‘s ability to continue to find accounts. Local business have thrived because international buyers, which are scarce. While the growers spent money and sold poles to the number of growers has steadily increased, local shops, which sold them for shade and many of them complained that they were not fencing. Local banks were strengthened from able to fully bargain the terms of the contract, increased customer savings, allowing them to including the carbon price negotiated extend more credit. There have also been non- between Ecotrust and the buyer and that monetary benefits to villagers who did not there was limited flexibility in the terms of the grow trees. For instance, trees planted in contract. Communication and access to schoolyards are being used to teach science; information has become difficult as the some species provide medicinal herbs; and number of participants increases and because wood is now obtained from fallen branches participants have to walk to town to access and pruning, so women no longer have to go the Internet and many are not familiar with in search of firewood. There has been a computers. Growers also worried that the long- marked rise in enrollment in secondary term nature of the scheme might mean that education because parents can afford to send they would not reap the benefits of years of their children to school. The trees are used for work should the agreement with Ecotrust end beekeeping and provide shade for animals, or the carbon market dry up. The growers also windbreaks, and help to decrease soil erosion, complained that payments were sometimes which has led to reduced silting of rivers. delayed because of the large number of Property planted with trees has become more participating growers and the fact that they valuable. were scattered, which made it difficult for Ecotrust to carry out the required monitoring Factors Leading to Success and verification prior to payment. Exchange rates fluctuate, resulting in varied pay for The scheme benefited from trust established growers, who are compensated in U.S. dollars. between the growers and Ecotrust, which Seedlings are considered to be expensive. allayed early fears among growers that the Sometimes they were stolen and planted government would take their land once the elsewhere, and some trees were destroyed by trees were planted, and dispelled skepticism fire. Initial payments did not cover the cost of that foreign buyers would purchase carbon, a planting the trees, requiring a high degree of ―commodity‖ that they couldn‘t see or use. initial labor without monetary reward. However, This was important since many growers didn‘t many growers say they are willing to take the understand the carbon market. Continued risk because they hope eventually to sell the engagement has also been ensured by having trees they have planted as timber. the agreements signed by village chairmen. This has helped override concerns among buyers and Ecotrust that growers, once paid, would migrate, sell their land, or cut the trees for timber. Other factors leading to success included the legal validity of the agreements. Additionally, the agreements were voluntary, the market for carbon has remained strong, and the project was practical because growers were provided with the tools and the training to successfully grow trees. Compliance was verifiable and PROGRAM ON FORESTS BRIEFING NOTE NOVEMBER 2011 forest management. Prior to this time, JAGWOOD+--a regional Forest Trade Network – became active in Nicaragua and worked to aggregate community-run forest enterprises, service providers, and small to medium wood product manufacturers. Both these initiatives aimed to reduce poverty and marginalization of indigenous rural communities by creating opportunities for them to benefit from a niche market for certified wood. They promoted small- and medium-sized forestry and wood processing enterprises by integrating them into a value chain for certified products, and ensuring concrete benefits and fair prices along the value chain. SHARING REVENUES FROM TIMBER: Lessons from the Tasibaiki Wood Bank in Nicaragua The Wood Bank Arrangement Project: Tasbaiki Wood Bank The Tasbaiki Wood Bank scheme began in 2009 Country: Nicaragua following negotiations between GTZ, members Type: Subnational community-company of JAGWOOD+ (specifically furniture makers), partnership and community forestry cooperatives. The External Partner: GTZ and small- and medium- scheme involved local cooperatives supplying scale furniture manufacturers certifiable timber to the wood bank and Facilitator/Implementing-Monitoring Agency: furniture makers purchasing certified wood JAGWOOD+ and Masangni (a local NGO) from the wood bank. Six partners—three local Community Stakeholders: Three indigenous forestry cooperatives and three small furniture community forestry cooperatives manufacturers—bought investment shares in the Tasbaiki Wood Bank, created as part of a Nicaragua has one of the largest GTZ project, to provide certified wood so that tropical rainforests north of Amazonia. participating timber harvesters could sell to this Hardwoods such as mahogany and royal niche market. JAGWOOD+ and Masangni (a cedar are found in these forests which also local NGO) facilitated the project, provided serve as habitat for tapir, jaguar and other cat technical support, and linked the timber species, monkeys, and varieties of birds. producers to the furniture-makers. Logging operations in Nicaragua‘s Atlantic Approximately 700 people are associated with coast, where much of Nicaragua‘s remaining the three community forestry cooperatives and natural forests are found, has resulted in 150 furniture-makers have joined the unsustainable use of the forest resources and partnership. limited benefits for the region‘s indigenous communities. Responding to the developing Three or four contractors from each community crisis, in the late 1990s, the government cooperative take turns harvesting the timber imposed a ban on logging precious under one-year contracts. Timber harvesting hardwoods, but weak enforcement had the lasts from 15 to 65 days each year; the rest of unintended consequence of stimulating illegal the time community members earn a living logging activities. Also, indigenous communities through subsistence farming, fishing, and that historically had managed the area were mining. Each cooperative has a president who marginalized as the government treated the represents the cooperative on the Wood Bank land as government property. Currently, the Board. A few selected individuals from each country loses between 70,000 and 100,000 cooperative also manage the resources and hectares of forest each year. transfer proceeds from the sale of timber into local banks. The cooperatives receive a 30% Following the ban and rampant illegal logging, prepayment for their timber, and the the German development agency (GTZ) in remainder when the timber is sold. Each partnership with the Nicaraguan government shareholder receives a portion of the Wood launched a project to create certified wood Bank‘s profits. banks. The aim was to promote sustainable MAKING BENEFIT SHARING ARRANGEMENTS WORK FOR FOREST DEPENDENT COMMUNITIES The Benefits men, could not supplement their incomes with fishing, hunting, cattle ranching and The benefits accrued to loggers and villages subsistence farming. have not been easy to quantify because the scheme is only a year old and the community Lack of clear channels of communications left cooperatives were already investing in communities with limited knowledge and improving the quality of life of indigenous suspicions that the cooperatives‘ board communities prior to implementation of the members were using the partnership for their scheme. Participants reported that the personal gain. The scheme was criticized for partnership had not yet led to any obvious giving a limited voice to the broader increase in community investments. One community. They cited poor communication anticipated benefit was job creation, but among the six partners, a lack of clarity many respondents reported that they had felt regarding the role of each, limited social little economic impact from the arrangement. ownership within the community, and a lack of The respondents also indicated that the interaction among community members and expected improvements in environmental the Wood Bank Board. Community members conditions had not materialized. Only 17% of were concerned about how the board works participants in the scheme expressed high and some were unhappy about their levels of satisfaction at the individual level, and representation on the board. The Wood Bank‘s 13% said they were satisfied at the aggregate Board excluded traditional leaders, creating level; only 9% were satisfied at both levels. discontent among the local community. Local partners were concerned about Early Challenges mismanagement of their natural resources. Ecologically, the participants cited poor water quality, loss of biodiversity, and the removal of The Wood Bank faced challenges early on an important resource. because of disagreements between the cooperatives and furniture manufacturers regarding pricing and product classification. Future Viability Cooperative members felt they were selling at a low price and many said they were not paid Participants cited key elements necessary to a equally in practice, even though each partner successful partnership, including mutual is supposed to receive the same payment for respect, leadership, and trust, but said these each share in the Wood Bank. They took issue elements were not always present. Details of with how profits from the sale of timber are the partnership were unclear and distance distributed and felt the scheme benefitted only between the partners compounded the a subset of each community by providing a problem. The partnership didn‘t result out of small number of households with temporary self-determination and there was a lack of trust work extracting timber. The distance between and transparency in the process. the local and external partners and distance to banks were major hindrances to quick transfer Future viability of the scheme depends on of financial resources from wood sales to local whether the communities benefit from the sale communities. of their timber directly through job opportunities, and indirectly in the form of new At the village level, the dissatisfaction with the roads and schools. Timber providers need to partnership stemmed from a lack of tangible feel fairly compensated for the wood they sell. benefits. Villagers reported few new schools or Communication between the village roads attributed to the scheme. Prior to the cooperatives and the timber providers needs scheme, village cooperatives were already to improve, and the leaders of the providing benefits to the community, including cooperatives should be selected in a way that solar panels for electricity, scholarship for respects the customs of the indigenous people. students, and financial support to widows. At Furniture-makers suggested that the donor level, the project was not viewed representatives of the timber providers should positively because the communities had not have negotiating skills and a business benefitted from expected investments in social perspective. The partnership also must take into infrastructure. Women were more dissatisfied consideration the prior illegal activities that than men because they had limited occurred in the region and be able to opportunities through the scheme and, unlike outweigh those illegal interests. 17 to preserve the forest and lay the foundations of a future park. The government agreed to give the village councils enhanced control of resources in designated ―buffer zones‖ around the area demarcated to become the park in exchange for halting farming and wood- gathering in the designated ―core zones.‖ CARE International engaged the local communities in the project, identifying nine councils whose inhabitants could benefit from joining a profit-sharing scheme, and helping them create Village Conservation Committees (VCCs). CARE also engaged the Department of Commercial Crops, Fruits and Forestry (DCCFF) and Park officials to lay the SHARING REVENUES FROM CONSERVATION: groundwork for a profit-sharing scheme, put in Villagers trade crop harvest for share in park place in 2000, whereby the villages and proceeds in Zanzibar, Tanzania farmers were allotted a portion of the money collected from an $8 Park entrance fee. The money was funneled through an NGO called Project: Jozani Chwaka Bay National Park JECA, created by the VCCs to represent their Location: Zanzibar, Tanzania interests and determine which village projects Type: Sub-national level CBNRM to fund with the proceeds from the Park fees. External Partners: Government of Zanzibar The JECA also linked the VCCs and village through DCCFF councils to external partners to support projects Facilitator/Implementing-Monitoring Agency: through a specific community development Originally, CARE International; now none fund and to generate alternative methods of Other Parties: Farmers‘ and village councils, income, such as beekeeping and micro- farmers‘ association, and Community credits. Development Fund Community Stakeholders: 9 local villages From 2000 to 2008, the beneficiaries split the (about 14,000 villagers) and 99 farmers Park proceeds so that the Park and the DCCFF each received about one-third of the The Jozani Chwaka Bay National Park proceeds from entrance fees. The treasury got (JCBNP) in Zanzibar, Tanzania, is rich in flora 14%, and the farmers and the development and fauna, including the Red Colobus monkey, association split the remaining 22%, with 65% of and is a lucrative source of tourism. The Park that amount going to the farmers and 35% includes forests, mangroves, and private farm allocated to the Community Development plots. For years, nearby villagers‘ use of wood Fund. The JECA kept 10% of the community fuel and charcoal depleted the forest, and development fund‘s share to cover overhead. farmers killed monkeys that ate their crops. To One of the villages, called Pete, which owned control these practices, CARE International a boardwalk that attracted tourists, received facilitated an arrangement between the 40% of the boardwalk entrance fees and the government of Tanzania and nine villages farmers received 30%; the remaining 30% of closest to the Park whereby the villagers and boardwalk fees went to the JECA and the farmers would agree to refrain from killing government authority for conservation and monkeys and collecting wood illegally in return management of the Park - DCCFF. CARE‘s for rights to use natural resources and a share involvement ended in 2003 and the Park was of the profits made from entrance fees paid by declared a national reserve in 2004. That same tourists visiting the Park. The goal was to year, the farmers formed an association and provide villagers with alternate sources of bargained for a greater share of the profits. In income and compensate farmers for not being 2008, the treasury stopped receiving a share, able to farm in some areas. and the money went instead to the farmers. Conserving the Land and Sharing Profits The Benefits In 1995, the government of Tanzania created the Jozani-Chwaka Bay Conservation Project MAKING BENEFIT SHARING ARRANGEMENTS WORK FOR FOREST DEPENDENT COMMUNITIES Benefits have been both monetary and reported that they understood what was nonmonetary, including a first installment of TZS expected of each of them as per the 4.6 million given to the villages in 2000. The agreement and how the profit-sharing would JECA and the farmers‘ association both work. The parties generally trusted each other opened bank accounts. The farmers‘ and communicated well, factors that helped association transferred money to farmers, while dispel old feelings of animosity between the the JECA allocated proceeds to the government and the farmers. The project was Community Development Fund, Pete, and the practical in its ability to compensate farmers for VCCs. The Fund used the money to build lost income and generate new areas of schools, mosques, and water and electricity employment, and it was flexible in its ability to projects. The villages also accrued intangible reconfigure the profit-sharing scheme to better benefits, including the right to manage their reflect the needs of the farmers. land and issue permits for land use through the VCCs. VCC members received training on Future Viability conservation issues as well as employment in the Park and the gift shops (particularly Several factors challenge the future viability of women). The villagers benefited from the the project. Village boundaries were mapped, formation of the JECA as an advocacy but were never recognized, which has organization and the farmers benefited from generated some conflict. Some villagers their association, which successfully complained about a lack of easy access to represented their needs. Microfinance projects firewood, and noted that illegal harvesting of initiated by CARE through JECA provided wood continues. Additionally, questions about alternative household income. transparency have arisen because not everyone pays Park fees at the entrance gate. Of the 90 households that were surveyed in For example, tour groups use vouchers, leading three villages, a majority of households farmers to suspect skimming. There also is no reported they were happy or very happy with mechanism for formal financial auditing of the the partnership because it had improved their JECA and the Community Development Fund, quality of life, even though not all respondents and the farmers‘ association distributes benefits reported higher income. Most respondents without formal accounting procedures. The acknowledged that the old ways would have government has asked parties to appoint eventually had significant ecological someone to monitor the flow of revenues, but consequences. partners responded that they do not have the money to do so. Factors Leading to Success Transparency in the project, delivered through oversight mechanisms, was important. More specifically, the project was monitored and audited by the JECA, and VCC leaders had to show how they spent previous allocations of money before they could receive new allocations. A Park officer and a member of the community were always present whenever Park fees were paid. These factors helped ensure that the money was collected and spent properly, which in turned enhanced the villagers‘ perceptions that the profit-sharing scheme was fair. Other factors that led to success included the successful bargaining power of the farmers, though many of them reported they were not satisfied with the payment arrangement, either because they were left out or because they felt payment levels should reflect the level of individual effort. Additionally, all the parties 19 The complete report on Sharing the Benefits of REDD+, including a detailed review of benefit sharing mechanisms in different countries, is available on PROFOR‘s website: http://www.profor.info/profor/node/2010 This work was supported by the Program on Forests (PROFOR). John Bruce and Robin Nielsen conducted the research for Identifying and Working With REDD+ Beneficiaries When Rights are Unclear. The Climate Change and Carbon Market Services of PricewaterhouseCoopers LLP - UK implemented the study on Mechanisms for Transferring Benefits. The case work that informed Benefit Sharing in Practice was led by Steve Nsita in Uganda; Dr. George Kajembe and G.E. Mbeyale in Tanzania; Nitlapan in Nicaragua; and Kenneth Rosenbaum (Syenco) and Thomas Sembres in Washington DC. PROFOR is a multi-donor partnership that supports in-depth analyses and innovative processes that support the following goals: improving people‘s livelihoods through better management of forests and trees; enhancing forest governance and law enforcement; financing sustainable forest management; and coordinating forest policy across sectors. Learn more at http://www.profor.info MAKING BENEFIT SHARING ARRANGEMENTS WORK FOR FOREST DEPENDENT COMMUNITIES