Incentives as a means to achieving sustainable land and water management in the Greater Mekong Subregion: developing a framework for payments for environmental services in the hydropower sector in the region

It is well recognized that increased exploitation of land and water resources in upper catchments of Southeast Asia, with associated fragmentation of native vegetation, results in increased sediment discharge; elevated nutrient loads that act to reduce water quality; significant impacts on the storage capacity of dams; and measurable increases in the frequency of flash floods in upper catchments and declining base flows during the dry season. More specifically, unregulated, indiscriminate and illegal deforestation due to a combination of war, commercial interests and agriculture has resulted in a significant decline in forest cover impacting negatively on the health of critical upper catchments in the Greater Mekong Sub-region (GMS).

High rates of economic growth and escalating market demands for agricultural commodities are encouraging farmers to replace food crops for non-food crops, which lead to greater dependence on market forces (Burgers et al., 2005). There is evidence to suggest that a shift from food production to market-based commodities (i.e. cassava, maize, jatropha) has resulted in a greater degree of land degradation associated with inappropriate management systems for these crops that may be exacerbated with the current move towards bio-ethanol production (Valentin et al., 2007). It is argued that if incentives are not put in place to reward communities for adopting appropriate land management systems, further land degradation will occur with increased off-site consequences for lowland communities. The focus of this study is to assess the potential development of effective incentives that enhance the productivity and income generation opportunities of farmers in upper catchments in the Greater Mekong Sub-region (GMS) that result in equitable distribution of benefits to upstream and downstream communities and the adoption of sustainable land and water practices. More specifically the study targeted the hydropower sector as a potential recipient of environmental services (ES) associated with the sustainable management of upper catchments. The study specifically reviewed the potential role of payment for environmental services (PES) as an incentive-based mechanism to enhanced the productivity and income generation opportunities for disadvantaged rural farmers in upper catchments in the Greater Mekong Sub-region in ways that would result in equitable distribution of benefits to upstream and downstream communities and the adoption of sustainable land and water practices.

The specific objectives of the project were:

  • In light of the current move to develop water resources for hydropower production (HP) in the Lao PDR and Vietnam, especially the need to maintain the integrity of the storage capacity of these investments, the management of sediment generation in upper catchments is critical. An assessment of the current and future HP development in the lower Mekong countries was undertaken and the potential benefits associated with the adoption of resource conserving practices by farmers and communities in the target areas; and identify factors/bottlenecks that influence adoption of sustainable land and water management practices.
  • Develop a framework for the establishment of the concept of incentives that focuses on the adoption of more sustainable resource utilization that willbenefit both hydropower generators and communities that inhabit these upper catchments.

The study consisted of several components that contributed to an overall assessment of the possible role of incentive based mechanisms, i.e. PES and benefit sharing. The following activities were undertaken:

  1. An assessment of hydropower development in the lower Mekong basin; a critical assessment of PES as a payment mechanism to support the adoption of sustainable land use management drawing upon published information; and a brief assessment of the processes of sedimentation. The aforementioned entailed a desktop approach using literature in the public domain.
  2. A comprehensive field based survey was undertaken to assess the drivers that influence the adoption of sustainable land management practices based on a survey of four ASIALAND conservation farming villages (CFV’s) in northern Lao P.D.R. This survey used traditional PRA and structured interviews of farmers in these villages with the objective of assessing the extent of adoption and continuance of technologies and techniques introduced during the project cycle.
  3. In Lao PDR a case study of two villages, Lardthahea and Parkcheak, in the Pak Ou District, Luang Prabang Province was undertaken to assess current livelihood strategies and to gauge the community’s feelings about the proposed hydropower development scheme.
  4. An assessment of the biophysical and socio-economic status in the Da River watershed before and after the building of the Hoa Binh and Son La hydropower projects in Vietnam was undertaken.

The key findings of this study were as follows.

There is clear evidence to support the notion that inappropriate land management options implemented by resource poor farmers are having, and have had, significant negative off-site impacts that bring into question the long-term viability of resource utilization. One of these resource degrading impacts is accelerated sediment generation associated with inappropriate land use. This has had profound effects on water quality and sedimentation of storage structures. Clear evidence of this accelerated sedimentation of storage structures is present for the Hoa Binh Dam in northern Vietnam where it is estimated that the effective life of the facility will decline to half of its design capacity (i.e. 250 years) in less than 100 years. 

A review of in Lao PDR of ASIALAND conservation farming villages (CFV’s) several years after its conclusion confirmed perceptions and anecdotal evidence that support the lack of continued adoption of sustainable land use after the completion of the project. While interest in sustainable land management (SLM) technologies and willingness to participate in new projects were still high among the respondents, common criticisms made about technologies introduced by the ASIALAND network were that the practices were too labour intensive/time consuming and that the returns gained from implementing the technologies were too marginal. These clearly are fundamental constraints that limit adoption and out scaling amongst communities and the concepts of incentive based approaches that would effectively reward farmers/landowners for appropriate stewardship would potentially result in greater degrees of adoption and sustainable resource use.

Whilst PES is viewed as a voluntary, conditional transaction with at least one seller; one buyer; and a well defined environmental service and would appear to be a simplistic approach to addressing issues associated with sustainable resource use and rewarding land stewardship, in reality the scheme is complex with significant transaction costs. Further it is questionable whether such an approach is suited for the task at hand, in this case the sustainable management of upper watersheds within a HP context. In general, the introduction of PES in Southeast Asia, Vietnam being a prime target for these schemes, has been less than positive and hence it is questionable as to whether this form of incentive-based scheme would have applicability in the HP sector.

The concept of benefit sharing extends the narrow focus on displaced people and the resettlement host communities who are adversely affected by HP development. It includes other households and communities living in the project impact zone who have their resource access permanently reduced or transformed by the project in some degree. Essentially the philosophy is that all people living in the project impact zone, who host the project, are eligible to participate in benefit sharing and become long-term partners in the project they must live with. It transcends the narrow focus of a one-off compensation approach to addressing the impacts of dam building to one of providing continual pre-determined income streams for the life of the scheme to those who are influenced negatively by the project. It is inclusive and equitable and clearly represents a mechanism of equitable distribution of benefits to those who have lost or had to forego a livelihood. This clearly represents an approach that would fit the scope of a hydropower development and should be considered by LMB countries as an effective mechanism for distributing the benefits of HP to those affected adversely by it. Vietnam is currently embarking on pilot sites for assessing the role of benefit sharing and a legal framework for its implementation has been established. However, a major hurdle that is perceived in the implementation of such a mechanism is in the willingness of developers and investors to consider this approach in their planning process. This can be addressed through governments providing legislation for such mechanisms within their HP policies.