The “Bayad Kalikasan” program has two basic premises.  First, providers of environmental services such as watershed protection, biodiversity conservation, carbon sequestration, and maintenance of ecological functions should be compensated for their services.  Since these services have economic values and the providers incur some opportunity costs, (e.g. protecting a forest area for watershed function vs. cutting down of trees for timber value), it is proper that payments should be made.

Second, users of these environmentally beneficial services should pay for their provision since they result in welfare improvements.  These improvements may take the form of better water quality, more stable water supply, prolonged service life of water infrastructures, increased diversity of resources, reduced carbon emissions, or improved recreational or aesthetic value of the natural ecosystem.

Past efforts to provide environmental services have usually come from externally-funded government projects, international development agencies or environmental NGOs.  Examples of these programs are: tree planting, marine protected area management, mangrove rehabilitation and poverty alleviation projects that target communities dependent on degraded ecosystems.

Providers of environmental services through these programs are paid for their cooperation in the program implementation —mostly, in terms of the labor services rendered.  Some may have also received material support in the form of free planting materials and livelihood assistance, complemented with technical training and provision of rural infrastructures.   Such forms of assistance, however, are viewed more as rewards for participation in environmental program activities rather than ‘payments’ for rendering environmental services.   As a consequence, the provision of environmental service has been short-lived or staggered and dependent on the life span of the environmental programs.

REECS, through its Bayad Kalikasan Program the institutionalization of a system that would create markets for these non-market environmental services wherein services providers will be compensated for their services through payments made by the service beneficiaries.  Such a system would be sustainable since it will provide incentives for both groups to protect the integrity of the forest and coastal resources.
   

REECS' Bayad Kalikasan framework consists of five major components for an effective and well-designed payment for environmental service (PES) scheme.   Such a scheme must be anchored on RESEARCH, where the science, economics, social, legal and institutional dimensions of the following linkages are clearly analyzed and understood: a) between ecosystem condition and the level of environmental service provision, b) between the ES providers and the beneficiaries, and c) between the external agents (GO and NGO) as ES intermediaries with ES providers and beneficiaries.

To be effective, the PES scheme must undergo careful process of DESIGN and IMPLEMENTATION.  Such a process must involve the active participation of all the stakeholders in the PES scheme.

INFORMATION, EDUCATION, and COMMUNICATION campaigns are necessary in order to promote a high level of participation and social acceptability.  The campaign must convey the message that: sustained environmental services is only possible if those who provide the services are compensated for their efforts and those who benefit pay for the services they avail of.

A critical element to a PES scheme is a built-in MONITORING AND EVALUATION (M & E) system to ensure that ES are being provided and that those who receive the services are paying and that those providing them are being compensated.  This M & E system shall be carried out by the institutions managing the PES scheme on a regular basis, together with the occasional monitoring of an external party to provide a new perspective.
   

   
As part of the initial activities of the Bayad Kalikasan Program, REECS is disseminating information on PES to the public through its monthly bulletin, the Bayad Kalikasan Policy & Research Notes. It has just started implementing a study on the economic value of conserving and protecting the Philippine Eagle.

REECS works with experts affiliated with various research, government, and non-government organizations such as the following, among others: UP Marine Science Institute, World Bank Institute (Washington DC), Ateneo de Manila University, Vrije University (Amsterdam), Philippine Institute of Development Studies, UP College of Forestry, Economy and Environment Program for Southeast Asia (Singapore), and the Kahublagan sang Panimalay Foundation Inc.

The following Bayad Kalikasan-related services are offered by REECS:

	Research on identifying link between ES and environmental changes and identification of the ES beneficiaries and their willingness to pay, as well as the ES provider of services and their own willingness to accept payments.
	Design and establishment of appropriate institutional arrangements and acceptable payment schemes to both buyers and sellers of ES.
	Information, education and communication works and policy advocacy to mobilize community government support.
	Monitoring and evaluation to set up an effective monitoring system to help ensure effective PES implementation.
	Brokering/facilitation that entail the provision of technical assistance and training to support the implementation of an ES payment in forest or coastal areas.

	Developing Payments for Environmental Services: A Case for Philippine Upland Dwellers – Vrije University
	Development of Market-Based Instruments (MBI) for the Management of the Makiling Forest Reserve – UNEP-UPLB-EEPSEA
	Developing Pro-poor Markets for Environmental Services in the Philippines – IIED
	Operationalizing Sustainability of Protected Areas Management: Development of Economic Instruments for Protected Areas – NIPAS Inc.- DENR
	Formulation of Management Plans for Kaliwa and Maragang Watersheds - FMB, DENR
	Samar Island Biodiversity Study – USAID-DENR
	Manual for the Implementation of the Fee System Guidelines in PAs - ENRAP-USAID-DENR

POLICY NOTE Special Edition
Under the banner of its International ReSource Award for Sustainable Watershed Management initiative, Swiss Re grants the winning project in the Philippines USD 80,000

POLICY NOTE #11
Potentials of Establishing Payment for Environmental Services: The Case of Comprehensive Philippine Eagles Conservation
A Contingent Valuation (CV) research study was conducted to value endangered species protection in the country. The CV method was employed to estimate the use and mostly non-use values of a Comprehensive Philippine Eagles Conservation Program to protect the country’s endangered national bird, the Philippine Eagle (Pithecophaga jefferyi), and its habitat. Household surveys were implemented in Davao Region (Davao City, Tagum City, and Digos City) and in Metro Manila primarily to solicit the willingness of households to support the conservation program.

POLICY NOTE #10
Environment and Poverty: PES in the Spotlight
As it is commonly described, Payment for Environmental Services (PES) is a market-based environmental protection mechanism which seeks to capture the benefits from so-called environmental services and goods, and to compensate the natural resource owners or managers for generating these services. The fundamental principle behind PES is that the different stakeholders in ecosystem management can be engaged in a mutually beneficial exercise of trading benefits generated from a demand and supply of a healthy ecosystem system.

POLICY NOTE #9:
Payment for Environmental Services:
From Theory to Experience in the Field
We begin this article by reaching back into the core idea behind PES: It is a mechanism designed to capture (at the minimum) a portion the benefits derived from environmental services; and compensate the natural resource managers who generate these services. PES meets the dual-objectives of ecosystem protection and income generation but within the context of mutual benefit as best characterized by market trading. The PES initiatives seek to capture part of the benefits derived from environmental services (such as clean and stronger flowing water) and channel them to natural resource managers who generate these services. It is premised on the idea that the different stakeholders in ecosystem management could be enticed to engage in mutually beneficial exercise of trading the benefits and services of a healthy ecosystem for income.

POLICY NOTE #8
Designing PES for Watershed Protection Services: 
The REECS/PREM Experience (Part 2)
Bayad Kalikasan PRN #4 (February 2005) discussed the experience of REECS in designing a PES scheme for two sites in the Cagayan Valley. The project was undertaken in 2003-2004 and was funded by the Institute of Environmental Sciences, Vrije University in Amsterdam, The Netherlands, under its Poverty Reduction and Environmental Management Program (PREM). The research team was provided technical assistance by the regional offices of the Dept. of Environment and Natural Resources and Conservation International. It focused on the design process and methodology, while this issue focuses on the key findings and policy recommendations.

POLICY NOTE #7
Some Early Lessons from PES Implementation in Other Countries
This issue of Bayad Kalikasan Policy and Research Notes highlights a number of important lessons from the implementation of PES in selected countries. Although the PES is considered a relatively young market-based instrument for environmental protection, there are PES experiences that provide early lessons for learning by other countries embarking on PES, like the Philippines. This review draws from three recent assessments that examined the experiences of countries with national and local PES programs, mostly in Latin America. It focuses on three themes, namely, PES design, participation of the poor, and financial sustainability. Lessons on additionality, capacity development, replicability, institutional structures and others will be tackled in subsequent BK-PRN issues.

POLICY NOTE #6
Users Fees for Ecotourism Financing
This issue of Bayad Kalikasan Policy and Research Notes presents two examples of effective systems of user fees that are currently being implemented in two sites in the Philippines, namely, The Tubbataha Reef National Marine Park and The Apo Island Protected Landscape & Seascape. Both sites are under the National Integrated Protected Area System (NIPAS). Although these examples cannot be strictly labeled as PES programs in as much as the user fees collected are not channeled directly to the service providers, they demonstrate the potential of such economic instruments such as to finance the sustainable management of ecotourism.

POLICY NOTE #5
Empirical Evidence on Willingness to Pay for Watershed Protection in Selected Philippine Watersheds
This issue of Bayad Kalikasan Policy and Research Notes briefly reviews and summarizes the recent empirical evidence on the willingness to pay (WTP) of different water users for watershed protection. Three studies conducted by various Philippine researchers during the past 4 years indicate a positive WTP for watershed protection that can be translated into user fees to improve watershed management. The first study is on market-based instruments for water resources in Mt. Makiling; the second is on improving the management of the different watersheds providing water to Metro Manila; and the third is on designing payments for environmental services in two watersheds in Northern Luzon (see BK-PRN No. 4).

POLICY NOTE #4
Designing PES for Watershed Protection Services:
The REECS/PREM Experience
This issue of the Bayad Kalikasan Policy and Research Notes outlines briefly the experience of the Resources, Environment & Economics Center for Studies (REECS) and the Institute for Environmental Studies of the Vrije University in Amsterdam, in examining the potential application of payments for environmental services (PES) in two study sites in the Cagayan Valley (Region 2). It will focus on the design process while a subsequent issue will discuss the results. The study was undertaken over a period of one year starting in July 2003 and was funded by the Poverty Reduction and Environmental Management Program (PREM) of the Vrije University.

POLICY NOTE #3
Philippine Research Initiatives Supportive of Building Mechanisms for Environmental Service Payments
This issue of the Bayad Kalikasan Policy and Research Notes presents a summary of the studies undertaken by various individuals and organizations that have some relation to development of payments or markets for environmental services. Many of the studies focus on valuation of environmental services and some have resulted in the imposition of user charges in selected nature-based tourism sites in the country. In addition to the four major types of environmental services, two additional types where some kind of PES scheme has developed in the country are also discussed.

POLICY NOTE #2
Philippine Experience on Payments for Environmental Services
The Bayad Kalikasan framework calls for buyers and sellers of environmental services to come together through an intermediary and to engage in the trade of an environmental service. At this stage, the Philippines does not have experience in the implementation of a full-scale environmental service payment scheme. However, there are some experiences that closely approximate this arrangement. The cases presented here demonstrate the possibility of getting beneficiaries of watershed protection (e.g. water districts, fisherfolks, lowland farmers) to contribute to efforts of protecting the watersheds that support their livelihood. The contributions are in the form of cash payment by the Metro Iloilo Water District in the case of Maasin watershed, reforestation activities in critical watersheds supported by a private business entity in the case of Mt. Kanlaon Natural Park, and the provision of material support to undertake watershed management efforts in the case of the Balian watershed.

POLICY NOTE #1
Payments for Environmental Services:
Overview and Some Country Experiences
Nature provides society with valuable environmental services, many of which are used for free because these are not traded in the regular market place. In spite of the intensifying pressures from demographic and economic forces, the provision of these environmental services is made possible in some areas because communities and individuals continue to conserve and protect the natural environment. And yet, the providers of these environmental services are not compensated for their efforts and the beneficiaries do not pay for the services they enjoy. This situation results in inadequate levels of provision and use of environmental services because providers have no added incentive to produce more of these services and beneficiaries tend to use them excessively since there are no payments involved.