Tuesday, Jan 27 2015
In order to overcome the gap that generally exists between the financing needs for adequate management of Marine Protected Areas (MPAs) and the available funds, MPAs often have to explore alternative financing mechanisms. This article will discuss a system approach to explore sources of sustainable financing or improve the effectiveness of existing financing streams. The practical structure that will be presented uses the “The Economics of Ecosystems and Biodiversity” (TEEB) framework (Millennium Ecosystem Assessment, 2005) to identify potential sustainable financing mechanisms within the ecological and governance context of the specific MPA, thereby also creating insights into the feasibility of the identified financing mechanisms.
Identifying and unlocking finance streams in 10 steps
Using TEEB, a practical system approach that follows 10 steps can be applied to identify and assess potential financing mechanisms for an MPA. Each of these steps, divided in two phases, is described below. This approach is based on the premise that a successful sustainable financing strategy needs to identify context-specific obstacles for financing instruments and generate solutions on that basis.
1. MPA Ecosystems: The first step is to identify the relevant ecosystems of the particular MPA. Additionally, it is also useful to identify which threats are the most important in affecting the health of the terrestrial and marine ecosystems.
2. Ecosystem Services: Next, the services that the ecosystems deliver need to be assessed. Ecosystem services are described as the benefits that humans derive from these ecosystems (Millennium Ecosystem Assessment, 2005). For the particular MPA, the societal and economic benefits that are derived from the protected area are to be evaluated, as well as their relative importance for the protected area and the beneficiaries of these services. Some of the typical ecosystem services derived from the most common marine and coastal ecosystems are: recreation (for tourists and locals), food (fish) and coastal protection.
3. Beneficiaries: Following the identification of the ecosystem services, the stakeholders that are affected or benefit from those ecosystem services need to be established. Some of these may appear evident, like fishermen in relation to food production or tourists in relation to recreation. However, it is important to think broader and also consider beneficiaries outside of the borders of the protected area.
4. Finance Streams: Ideally, all beneficiaries from the ecosystem services provided by the MPA should pay for their enjoyment of those benefits. However, this is hardly the case for MPAs. The next step is therefore to make an inventory of all the, current and potential, financial streams that may flow from these beneficiaries. In other words, to identify mechanisms through which these financial flows can be transferred from the beneficiary to the management of the MPA. At this stage, a valuation of these flows is not necessarily required and it is important, again, to be broad with the inventory.
5. Influential people/decision makers: Next, we need to look into the decision makers that ultimately decide on the funding of nature management in relation to the MPA. These decision makers are the ones that have influence on the rules and regulations that allow or limit the possibilities of the MPA to generate its own funds. At the same time, they may also be in control of the revenues that are generated at the MPA level and/or allocate funds for nature management (see step 7 below).
6. MPA Managers: These are the ultimate persons responsible for the day to day operation and management of the MPA. They are the ones that will use the funding of the MPA to address the threats to the ecosystems of the MPA and implement appropriate conservation measures. Different schemes of MPA management exist through the world. The specific management structure will be an important determinant of the viability of potential financial mechanisms.
Hereafter, it could be advisable to focus on just a number of the beneficiaries and finance streams identified, and carry out the next steps of the assessment based on this selection. This prioritization can be made on the basis of different criteria, for example likelihood of implementation, time required, level of complexity, etc. Finance streams could also be quantified at this stage in order to determine their economic importance (Berghöfer, 2012).
Flow of funds: It is now necessary to determine the flow of financial resources from the beneficiaries to the MPA managers. This assessment will comprise not only the finance streams identified in step 4, but also the flow of current funds, which may include the regular government budget that might be periodically allocated to the MPA from central/local government. This step could show, for example, that the decision makers tap directly from the beneficiaries and pass those funds through to the MPA managers for nature management purposes or, to the contrary, use the resources generated at the MPA level for other means (e.g. overall government spending).
Obstacles in the system: After closing the loop of stakeholders and flows in the financing system, we proceed to identify obstacles and bottlenecks in the system that prevent the financial flows to be realized or to flow to the appropriate level of MPA management. These obstacles can include gaps, problems, challenges, etc. By way of example, these could refer to the level of entrance fees charged, the ineffectiveness of collection of funds, the inappropriate allocation of green funding, lack of information, miscommunication between the MPA management and the decision makers, etc.
Possible solutions to obstacles: Depending on whether a prioritization was made after step 6, it might be advisable to select a number of target areas from the obstacles identified, which are to be discussed and analysed further in order to look for potential ways to address such obstacles. The measures to tackle the obstacles will of course depend on the obstacles identified in the particular MPA. Using some of the examples mentioned in step 8, these could include increasing the amount charged for entrance fees, implementing or diversifying the system of nature-related user fees, implementing alternative ways of collecting fees, creating a funding structure that would allow direct allocation of funds to the MPA managers, etc.
Next steps: After potential measures to address the identified target issues have been discussed, it will probably be necessary to undertake certain actions that would help highlighting and better identifying the issues at stake, as well as provide direction or insights in how to achieve the desired measure to address the obstacles. Based on the previous examples, some of these next steps might include gathering of additional information from stakeholders, conducting ‘Willingness to Pay studies’ to assess an appropriate level of MPA fees, engaging in dialogue with the decision makers, introducing financial expertise to the MPA management organisation, etc.
The approach presented here is meant as one of the stages in the elaboration of a sustainable financing strategy. Given its generic nature, it could be applied to different geographic regions and in MPAs with very different levels of protection and financing needs. In each case, the specific context of each MPA will determine which financial mechanisms are feasible and where the focus for a sustainable financing strategy should be laid. For example, the focus could be on addressing the obstacles that prevent the effectiveness of existing financing mechanisms or on capturing value from finance streams that are currently not being exploited. Throughout the assessment, attention should be paid to financial, legal, environmental, administrative and social indicators that will help evaluating whether the selected financing instruments may result in a sustainable financing strategy (Luján Gallegos et al., 2005).
Berghöfer, A. (2012). Introducing the TEEB stepwise approach to appraising ecosystem services. CBD capacity-building workshop for North Africa and the Middle East on TEEB, Beirut, 21–23 February 2012.
Luján Gallegos, V., Vaahtera, A. and Wolfs, E. (2005). Sustainable Financing for Marine Protected Areas. Lessons from Indonesian MPAs, Case Studies: Komodo and Ujung Kulon National Parks. In: Holleman, A., Luján Gallegos, V. and Massey, E. (Eds.). Mastering Environmental Resources Management. Essays from IVM Master’s students. Institute for Environmental Studies, VU University, Amsterdam.
Millennium Ecosystem Assessment (2005). Ecosystems and Human Well-Being: Synthesis. Island Press, Washington, DC.
Viviana Luján Gallegos is a consultant at Wolfs Company. She studied Law (University of Costa Rica) and Environment & Resource Management (VU University Amsterdam). Her recent experience includes 7 years as Senior Associate at two top-tier international law firms, where she mainly advised on climate change & emissions trading, finance and renewable energy. She also has experience with the regulation of coastal and marine areas and resources, and stakeholder engagement. In her work, she currently focuses on sustainable finance, environmental regulations, ecosystem services valuation, resources’ ownership and sustainable development. Viviana has been a CFA members since 2014 and can be reached at email@example.com.
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