Inequality and Economic Inclusion

Saturday, 01 November 2008

Making Markets work for People and the Environment: Employment Creation from Payment for Eco-Systems Services


We conducted a partial sectoral analysis of the market for ecosystem goods and services in SouthAfrica by doing the following:

  • We mapped the areas of high eco system productivity and poverty. By overlaying the two datasets, we identified the priority areas for developing markets for ecosystem goods andservices.
  • We estimated the potential size of the ecosystem market. 
  • We developed a potential institutional mechanism through which the value of such a market could be unlocked.

The development of markets for ecosystems goods and services is an increasingly important issue in the face of environmental degradation and increasing pressures on remaining natural capital. What are the implications of natural capital being increasingly scarce? Firstly, the value increases. The value of land and natural resources and the production of ecosystem goods and services are becoming precious commodities implying that those w ho currently have access or tenure over them are holders of an asset of which the value is set to rise. This has an impact on the political economy of managing natural resources. But, as w ill be show n, those w ho stand to gain from this new economy, though it w ill require a concerted and focussed effort, are the marginalised and the poor. As the value of natural capital increases, so will the value of the land and the ability of the landowners/users to seek environmental and economic justice also increase, for instance. Secondly, as the value of natural capital increases, so does the need to invest in natural capital, the limiting factor, to protect the capital base and compensate the owners of the resource for their custodianship. Thirdly, this unique juncture in time, with natural capital becoming increasingly the limiting factor and therefore the valuable asset, implies the opportunity for the development of new markets - markets for commodities that never before existed. These new markets are likely to give rise to new social constructs, a new vocabulary and a new paradigm concerning development. Sustainable development is no longer a nice-to-have, it is now essential for progress. Fourthly, the establishment of these new markets carry in and with it the opportunity, if well-conceived, to address poverty and stimulate economic development and growth in ways unknow n before. We have to, how ever, caution that if this process is n ot w ell-managed, as financial capital follow s value - i.e. natural capital - so does the opportunities to further exploit and marginalise the poor and economically vulnerable. While the impending increase in value ofland and natural resources can be the greatest single factor in catapulting the poor from oblivion to a position of meaningful participation in the economy, one should guard against this blessing becoming a curse.

We identified large parts of the Eastern Cape, KwaZulu-Natal, Mpumalanga and the Limpopo Province as priority areas for the development of markets for ecosystems. It is in these areas where ecosystem productivity is high and poverty rife. While it was not a consideration in this study, it is interesting to note the high degree of overlap between the areas of high priority from a market for ecosystem goods and services perspective and those of biodiversity importance.

Is the development of such a market viable and does it offer sufficient scale to justify further consideration and investigation? While the supply of the services originates mainly from those municipalities that offer significant ecosystem services and which are generally poor, the demand for ecosystem services is in the cities. Those on the demand-side and those on the supply-side are therefore geographically apart, yet it is in this that the market for ecosystem services can act as a bridge to enable the development of new market opportunities for those w ho are currently "un- marketed" - those operating in the second economy. While there is evidence of such an emerging market at various places, it is very far from its potential and it is highly unlikely that the market w ill achieve its full potential without a concerted effort. If one only focuses on energy, water and carbon, it is clear that the potential market size is substantial, as can be seen in Table I. We focus on energy, water and carbon since they could be considered umbrella services. They are easily understood, in high demand, does have market prices associated with them, and by effectively managing them one is likely to address a range of other conservation and economic objectives simultaneously.