Economic instruments to sustain natural capital
Type of instrument Description Performance-based regional incentive mechanism
Increased budget allocation to sub-national governments based on performance measured by natural capital indicators.
Regulated Payment for Ecosystem Services (PES) at scale
Payments made by private sector and households at the level of a river basin channeled through a funding mechanism.
Biodiversity offsets (Biobanking)
Compensation payments for a projects’ significant residual impact on biodiversity. Sectors will undertake biodiversity offsets to ensure “no net loss” in the context of their operations, and preferably a net gain.
Government investment programmes
Financial institutions
International carbon market finance
Incentives to certified logging concessions
Incentives to certified palm oil concessions on existing degraded land
Government injects capital into the development of biodiversity-based enterprises, innovative green sectors and support activities such as reforestation and expansion of Protected Areas. Other interventions may include support for energy efficiency. Low-interest financing and favorable loan arrangements to green business; tax breaks on investments; risk sharing (e.g. a Multilateral Development Bank could share the risk of lending with a local bank or provide a first-loss facility on an investment). Payments to stakeholders who reduce their carbon emissions from forest areas or conserve carbon stocks, through activities such as sustainable forest management, reduced impact logging, forest restoration and conservation, etc. Tax deduction, financial incentive or other forms of economic incentives to private sector, for example: • a reduced amount of annual checks (like waiving heavy equipment license); • given allowance to export a percentage of their products directly to the export market; • given a priority for new permits to expand areas and new concessions; • paying fees in accord to actual harvesting volume and not upfront. Tax deduction, financial incentive or other forms of economic incentives to private sector: • release from land tax; • providing fertilizer subsidies to plasma farmers; • issue palm oil permit only for degraded land; • increased tariff on timber from the converted forest land to oil palm plantation; • increased income tax for palm oil plantation in forest area.
Incentives for responsible mining
Taxes or charges on pollutants and wastes or other forms of economic incentives
Market instruments
Responsible consumers’ and corporations’ demand for sustainable products has set in motion a voluntary process through which an independent third party issues a certificate guaranteeing that management of a forest/plantation is carried out according to established criteria and standards.
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Heart of Borneo: Investing in Nature for a Green Economy
Green economy solutions and critical steps While governments can set the stage, a green economy cannot be delivered by governments alone. A wide range of stakeholders have roles to play in realizing this vision. Throughout 2011 and early 2012, stakeholder consultations and workshops were held to explore the potential for, and local views on, a green economy in Borneo and HoB’s potential role. These participatory processes have identified potential on-the-ground green economy solutions which can help to guide government, business and other stakeholders towards an economy that values natural capital, reduces poverty and builds local economies. Many of these solutions are already starting to emerge, but not yet at scale.
Five types of sector-specific solutions appear most promising: •
Biodiversity-based enterprises run by community-managed areas, where communities are directly involved in marketing biodiversity-based (including agroforestry) products;
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Transboundary ecotourism, an integrated strategy for which would enhance biodiversity, local livelihoods and help to sustain Dayak culture;
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Future biodiversity-based businesses, which include market-based mechanisms that recognize natural capital as an asset. Examples include bio-banking, bioprospecting and ecosystem restoration as a commercial service;
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Innovative green sectors, which include green energy such as micro-hydro power and technologies which turn waste into raw materials for generating energy or other useful products (e.g. processing of palm oil effluent to energy);
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Greening large-scale, high-impact sectors, including logging, palm oil cultivation and mining requires a range of investments to enhance sustainability.
Besides sector-specific solutions, several essential cross-cutting solutions require a collaborative approach among various sectors: •
Participatory ecosystem-based spatial planning, a tool for landscape management uses ecosystem boundaries as the delineating factor rather than district, state or other administrative boundaries;
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Integrated watershed management, an approach which promotes the coordinated development and management of water, land and related resources in a watershed in order to maximize economic and social welfare and equity without compromising the sustainability of vital ecosystems and the environment;
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Expanding protected areas networks and improving connectivity helps to preserve their ecological integrity for enhanced flow of ecosystem services while facilitating gene flow and building resilience in a changing climate.
Executive Summary
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