TNRC Guide Corruption Risks and Anti-Corruption Responses in Sustainable Livelihood Interventions | Module One
Corruption risks and anti-corruption responses in sustainable livelihood interventions
This TNRC Guide shares practical knowledge for program designers and implementers to reduce corruption’s impact on conservation.
Module One Payments for Ecosystem Services (PES): Corruption risks and responses
As the recent landmark Dasgupta Review noted, serious debates exist around PES, from its effectiveness (e.g., Gaworecki and Burivalova 2017) to its appropriateness (e.g., Van Hecken et al. 2015). Those rich debates are beyond the scope of this brief, but three of the points most often debated are relevant, corresponding to the corruption incentive, opportunity, and rationalization logic mentioned above.
- Incentive: PES schemes require creating, assigning, managing, and transferring value via “payments” or other forms of compensation that can add up to significant, tempting amounts.
- Opportunity: Such processes involve actors subject to, empowered by, and with discretion over rules and institutions.
- Rationalization: Such institutions create and reinforce power structures, social norms and hierarchies, and community dynamics (Van Hecken et al. 2015).
The following sections survey how these factors manifest at each step of the PES value chain. There are four steps in this (illustrative, highly stylized) PES value chain:
- Step 1: Identifying and valuing the ecosystem service and its ownership
- Step 2: Intermediating, facilitating, and managing agreements between provider and customer
- Step 3: Making the payments and resource transfers
- Step 4: Verifying additionality, conditionality, permanence, and non-leakage
Each step has a definition; possible corruption risks with examples; and anti-corruption responses that can be considered to reduce those risks.
Step one: Identifying and valuating the ecosystem service and its ownership context
This first step involves defining and measuring the ecosystem services in a particular area; determining their marketable value; and establishing the local political and legal context for control over and ownership of the service-providing resource (Forest Trends et al. 2008). A vast array of valuation methodologies exists, and each involves some prioritization of different stakeholder groups’ differing values. That prioritization occurs both at the stages of deciding on scale and scope (one section of a river versus the entire watershed, one forest versus an entire woodland region), up to the explicit negotiations between conflicting uses (local foraging communities versus agricultural interests versus the downstream city versus broader society) (Pascual et al. 2017). In addition, the PES scheme will have to accept (or try to change) the specific context of ownership for the resource in the specific area, with all of the variety (private, communal, customary, public) that could include (Fripp 2014).
Step two: Intermediating, facilitating, and managing agreements between provider and customer
The second step focuses on the contracts between those with rights over or ownership of the natural element providing the ecosystem service, and those who benefit from those services and pay for that benefit in some way. In addition, this step also involves identifying (or creating) the organization that will serve as go-between; verifying the legality of PES transactions and designing the additional rules that will govern them; setting a price that takes into account buyer willingness, seller needs, and transaction costs; and establishing what exactly that price will be based on (Forest Trends et al. 2008, Fripp 2014). This complexity provides fertile ground for corrupt actors (Locatelli et al. 2017). Finally, like the previous step, this step sets the foundation for the steps that follow, and so is key for closing loopholes actors may take advantage of later.
Step three: Making the payments and resource transfer
The third step is the execution of the system; the flow of services from owners to beneficiaries, and the flow of compensation from beneficiaries to owners. Corruption risks at this stage involve manipulating those flows to benefit private interests. That manipulation could take place when the fee (or tax) is levied on beneficiaries, when the funds are deposited or transferred, or when compensation is calculated and reaches the resource owners.
Step four: Verifying additionality, conditionality, permanence, and non-leakage
The final (yet continuous) step is to monitor and verify the PES system to ensure its proper functioning. Four aspects in particular are key to a PES scheme successfully supporting nature and benefitting participants.
- Additionality: The payments must contribute to a better environmental situation than would otherwise occur, either through increasing the services provided or avoiding the deterioration of existing services.
- Conditionality: Only those actors who contribute some level of additionality should receive compensation.
- Permanence: The act that is compensated (e.g., planting a tree, using a farming practice, preserving a mangrove during hotel construction) should not be reversed after receiving payment.
- Non-leakage: The PES scheme should not just shift a discouraged or avoided behavior to another jurisdiction (Forest Trends et al. 2008; Fripp 2014; Landell-Mills and Porras 2002; Wunder et al. 2008).
Corrupt behavior with these factors may involve both cheating and faking compliance and acts to avoid discovery or punishment for that cheating.
PES Annex: Miradi model results chain
In the graphic below, the corruption risks discussed above are mapped onto the generic Direct Economic Incentives results chain from the Conservation Action & Measures Library. A more advanced results chain is available here and via Miradi Share that illustrates where each of the anti-corruption responses may be integrated into a typical PES initiative.
 Adapted from Forest Trends et al. (2008), Fripp (2014), Smith et al. (2013), Wunder et al. (2008), and a variety of resources from the Natural Capital Project. Please see those resources for more technical guidance on designing a PES program.
 Permanence and non-leakage are most relevant for carbon-related services and so are further elaborated in the next module. Technically, some PES systems could still be successful if they “leaked”—avoiding the destruction of a relatively more biodiverse area at the expense of another or protecting a forest that was more important for water quality at the expense of one less important.