As the world accelerates action to tackle climate change, nature-based solutions and climate action by local communities are critical for success.
One growing mechanism to fast-track financing for ecosystem conservation is referred to as ‘Payment for Ecosystem Services’ (PES). This result-based financing mechanism compensates farmers and local communities for the ecosystem services provided on their land, such as the conservation of biodiversity, carbon sequestration, or regulation of the water cycle, due to specific actions and efforts undertaken by these communities. A few countries have integrated PES schemes in their Nationally Determined Contributions (NDC) to the Paris Agreement.
Paying or compensating nature´s stewards for the benefits provided by forests and other natural ecosystems is a way to recognize their value and ensure that these services continue to be provided well into the future. UNDP supports PES programmes in many countries including Costa Rica, Ecuador, Brazil, and Cote d’Ivoire. Across the world, there are over 550 active PES programmes supporting an estimated US$36–42B in annual transactions.
Barriers to effective Payment for Ecosystem Services
However, despite the broad adoption of PES as an effective tool to promote conservation and climate action, the lack of effective digital systems is one of the main barriers to ensure the efficiency of the mechanism. Limited data sharing, lack of long-term finance sources, or coordination across similar incentive mechanisms are also hindering their success. Current digital barriers to improve PES mechanisms are:
- The lack of a holistic system approach. Existing systems functions (such as community data collection, forest monitoring, and payments) are often developed as separate non-interoperable solutions that do not effectively exchange information. This leads to a lot of manual work for program management and execution.
- Limited ability to update to new technology options. Once a country has a system in place that is working, there are limited opportunities to upgrade the system to newer and more cost-efficient (or free) technologies as they arise such as mobile data collection or e-payments, making the systems quickly obsolete.
- Lack of interoperability and open data policies. Interoperability is a relatively new concept that allows systems such as the national forest monitoring system, Nationally Determined Contributions tracking system, global forest monitoring systems, or private sector supply chain management systems, to integrate and speak to each other, facilitating the transfer of information and checking criteria for example.
Developing holistic, flexible digital architecture
Digital technology can help to overcome these barriers. Some ways digitalization can be implemented to improve efficiency and efficacy, and decrease the costs, of the PES system include:
- Building interoperable systems that talk to each other, allowing for real-time updates across systems.Most PES systems currently pull data from different databases and overlay geospatial information manually, which is very labor-intensive and prone to errors.
- Mobile phones can also greatly improve and reduce the cost of the collection of field data, including georeferenced information on farmers/communities, their land, and forests on their land. They also can support distributed ownership of this data and allow for wider use.
- Satellite imagery allows the collection of data at scale particularly in more remote locations, where collection of field data can be especially challenging, providing a first assessment of land use on the ground, leaving the collection of the PES-related field data as primarily a ground-truthing – or verification – exercise. It is also critical for monitoring forest status and hence the progress of the PES programme.
- Artificial intelligence / Machine Learning (AI/ML) can be key to the automation of decision-making across the whole system. AI can support the automation of farm boundary detection, differentiation between arable land and forest, eligibility criteria verification, monitoring of the forest, and decision-making on whether some key elements of the contract/agreement were fulfilled or not. Currently, most of these analyses are done manually. By developing a system that combines different data sources and any other available information for the most accurate and reliable forest monitoring results, the PES systems can be greatly enhanced.
- Distributed ledger technologies such as blockchain can avoid tampering with verified data or ensure the traceability of contracts/agreements and payments.
- Digital ID and digital payment systems can ease the process of contract verification and cash distribution to communities or individuals.
At present, these digital solutions are being implemented piece-meal in different countries. For example, applications to collect farmer data are widely used (for example OpenForis by FAO); incentive-based systems support cash transfers to beneficiaries on the ground across a variety of development contexts; and remote sensing imagery to map and monitor land use has greatly advanced over the last 15 years. However, these technologies have not been integrated up to now.
Calling for partners: scaling up digital solutions to empower local climate action
UNDP is exploring how a flexible digital architecture, based on the evidence provided by countries that are planning or have already successfully developed and implemented PES, can support such systems. To reach a holistic digital transformation of national PES mechanisms, UNDP proposes to take a Digital Public Good approach, where national governments, international development partners, and financing partners collectively invest in solutions for modular, open source, open algorithms that can be shared or replicated across countries while configured to national needs.
Given the various levels of technological capacity in countries, rather than having a one-size-fits-all solution, a ‘library’ of tools that are interoperable and follow an agreed data architecture and data standard can provide flexibility and improve efficiency. We call on private, public, and academic institutions actively working on solutions to join forces with us to solve this puzzle.
Please reach out to the co-authors if you would like to take part in this journey with open-source solutions!
Special thanks to Marco Arlaud, Pascale Bonzom, Leif Pedersen for inputs.
 Salzman, James & Bennett, Genevieve & Carroll, Nathaniel & Goldstein, Allie & Jenkins, Michael. (2018). The global status and trends of Payments for Ecosystem Services. Nature Sustainability. 1. 10.1038/s41893-018-0033-0
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