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Payment for Ecosystem Services: An Ecosystem Services Trading Model for the Mnweni/Cathedral Peak and Eastern Cape Drakensberg Areas

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Payment for Ecosystem Services: An Ecosystem Services Trading Model for the Mnweni/Cathedral Peak and Eastern Cape Drakensberg Areas Title INR Report No. IR 281 Authors An Ecosystem Services Trading Model
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Payment for Ecosystem Services: An Ecosystem Services Trading Model for the Mnweni/Cathedral Peak and Eastern Cape Drakensberg Areas Title INR Report No. IR 281 Authors An Ecosystem Services Trading Model for the Mnweni/Cathedral Peak and Eastern Cape Drakensberg Areas Mander, M., Blignaut, J. Schulze, R., Horan, M., Dickens, C., van Niekerk, K., Mavundla, K., Mahlangu, I., Wilson, A and McKenzie, M. Document history First version provided to MDTP, DEAT, DBSA and EKZNW Current version. Final report Changes to previous version. Editorial Date 22 January 2008 Status For distribution to MDTP, DBSA, DEAT and EKZNW and stakeholders Correct reference for citation Maloti Drakensberg Transfrontier Project (2007) Payment for Ecosystem Services: Developing an Ecosystem Services Trading Model for the Mnweni/Cathedral Peak and Eastern Cape Drakensberg Areas. Mander (Ed) INR Report IR281. Development Bank of Southern Africa, Department of Water Affairs and Forestry, Department of Environment Affairs and Tourism, Ezemvelo KZN Wildlife, South Africa. Institute of Natural Resources P O Box Scottsville 3209 Fax +27 (0) Tel +27 (0) Prepared under contract from: Maloti Drakensberg Transfrontier Project and Development Bank of Southern Africa Limited Client representatives: Kevan Zunckel and Lindeni Kumalo Project No. DBSA Ref Authors Myles Mander - Futureworks James Blignaut - Jabenzi Roland Schulze - UKZN Mark Horan - UKZN Chris Dickens INR Kate van Niekerk - INR Khulile Mavundla Futureworks Isaiah Mahlangu INR Adrian Wilson Adrian Wilson and Associates Margaret McKenzie - Futureworks Making Environments Work for People! A collaborative effort This work has been a collaborative effort between a number of authors and a wide range of stakeholders. The work is a reflection of a potential market, with the various possible sellers and buyers of services articulating their perceptions and positions in such a market, in this work. To a large degree the work is a product of the inputs of the market stakeholders. This report is also a product of many contributors, and a synthesis of all the work that individuals have undertaken. A number of separate reports are available that cover the details of particular aspects of the work, and are available to interested persons. Acknowledgments The investigation has benefited from a many people s inputs. Some 536 people and institutions have been associated with the investigation contributing in various degrees. These have included people from KZN, the Eastern Cape and Gauteng. We would like to thank all those people who have contributed to this work, making it a success. We would like point out a few groups who have put considerable effort into supporting the work. The project steering committee has helped to direct the project, and they include: Julie Clark - DBSA Lindeni Khumalo - DBSA Kevan Zunckel - MDTP Rabson Dhlodhlo DEAT (Chairman) Christo Marais Working for Water / DWAF Steve McKean Ezemvelo KZN Wildlife There have also been a number of key stakeholder groups that have assisted enormously in the work, including: The Okhombe Community The Ongeluksnek Community Cedarville Farmers Association The Department of Water Affairs and Forestry There have also been a number of individuals that have contributed to the work who need be thanked, including: Terry Everson University of KwaZulu-Natal Colin Everson Council for Scientific and Industrial Research Graham von Maltitz - Council for Scientific and Industrial Research Johan van Rooyen DWAF, Water Resources Planning Johan Geringer DWAF, Chief Engineer Option Analysis East Carl Freese - University of KwaZulu-Natal Richard Lechmer Oetel - MDTP Noah Scovronick Anchor Environmental Consultants Jane Turpie Anchor Environmental Consultants Mazwi Mkhulisi - MDTP The project implementation was funded by the Development Bank of Southern Africa and the Maloti Drakensberg Transfrontier Project. Their support is gratefully acknowledged. This document summarises information presented in a number of project reports which provide detailed information for each aspect of the Payment for Ecosystem Services Project. All these reports are included in the complete project document entitled Maloti Drakensberg Transfrontier Project (2007) Payment for Ecosystem Services: Developing an Ecosystem Services Trading Model for the Mnweni/Cathedral Peak and Eastern Cape Drakensberg Areas. Mander (Ed) INR Report IR281. Development Bank of Southern Africa, Department of Water Affairs and Forestry, Department of Environment Affairs and Tourism, Ezemvelo KZN Wildlife, South Africa. The specific reports referred to in the above document are referenced below: Blignaut, B.J. (2007) Estimate of finances available for the purchase of activities to improve the delivery of water related ecosystem services. Blignaut, B.J. and Mander, M. (2007) Benefits of the Drakensberg: Developing the range of incentives for improved management. Blignaut, B.J. & Mander, M. (2007) Understanding the catchment services, producers and their economics. Mander, M. (2007) Report on the willingness to pay for ecosystem services. Mander, M. (2007) Understanding the catchment services, consumers and their economics. Schulze, R.E. and Horan, M.J.C. (2007) Hydrological Modelling as a Tool for Ecosystem Services Trading: Case Studies from the Drakensberg Region of South Africa. University of KwaZulu-Natal, Pietermaritzburg, School of Bioresources Engineering and Environmental Hydrology, ACRUcons Report 56. pp 71. van Niekerk, K., Mahlangu, I., Mavundla, K. and Mander, M. (2007) Identification of current land use management practices and associated costs influencing water related services in the Ukhahlamba region. van Niekerk, K., Everson, T., Turpie, J., Scovronick, N., Mander, M. and McKean, S. (2007) Identification of land use practices impacting on water related ecosystem services. Wilson, A. (2007) Developing an ecosystems services trading model for the Mnweni/Cathedral peak and Eastern Cape Drakensberg areas: Institutional options for implementation. Contents 1. INTRODUCTION Motivation for project The background to the project The legal mandate for a trade system The demand for a trade from stakeholders Project Approach HYDROLOGICAL MODELLING AS A TOOL FOR ECOSYSTEM SERVICES TRADING Background Hydrologically Related Ecosystem Services Changes in Services Resulting from Modified and/or Damaged Ecosystems Management as a Determinant of Ecosystem Services Objectives of the Hydrological Study Economics Related Questions Hydrological Modelling Related Questions The Upper Thukela Catchments The Eastern Cape Drakensberg Catchments Management scenarios for which hydrological responses are to be simulated Management Issues and Questions They Raise Delineation of Case Study Areas into Catchments and Sub-Catchments Considerations when Simulating Effects of Veld Burning on Hydrological Responses Considerations when Simulating Effects of Overgrazing on Hydrological Responses Veld Management Decisions for Hydrological Simulations Results 1: Changes in accumulated stormflows due to degradation Results 2: Changes in sediment yields due to degradation Results 3: Changes in baseflows due to degradation Results 4: Changes in stormflows due to degradation Overall conclusions THE ECONOMIC MODEL Introduction Background Structure Input data and assumptions Landcover and Hydrology Options for ecological restoration and land use management change: Assumptions and costs Economic values: Assumptions and estimates Evaluation Criteria Working with the model: User input and results User input Main output Catchment output Quinary output Conclusions of the model outputs i 4. RECOMMENDED INSTITUTIONAL OPTIONS FOR IMPLEMENTING A PAYMENT FOR ECOSYSTEM SERVICES SYSTEM Introduction Scope of the rehabilitation work to be undertaken Upper Thukela Umzimvubu Key Challenges Potential Funding Streams Governance Arrangements Programme Management Steering Committee (PMSC) Project Management Teams Catchment Liaison Committees and Sub-catchment Liaison Committees Catchment Implementation Teams and Sub-catchment Implementation Teams Criteria for Payments Management Arrangements, Skills and Key Resources Upper Thukela Management Team Umzimvubu Management Team Skills needed Indicative costs Institutional Options Implementation Model Options Options for the Umzimvubu Catchment Options for the upper Thukela Catchment Carbon and Biodiversity Trading Conclusions on implementing institutions CONCLUSIONS REFERENCES ii List of figures Figure 1. The payment for ecosystem services process proposed in this study... 8 Figure 2. Figure 3. Figure 4. Figure 5. Location of the Quaternary Catchments making up the Upper Thukela case study area (Source: futureworks!, 2007) Location of the Quaternary Catchments making up the Umzimvubu case study area (Source: futureworks!, 2007) Flowpaths of the Quaternary Catchments making up the Upper Thukela case study area A schematic of the flowpath configuration between Quinary and Quaternary Catchments when modelling at Quinary scale Figure 6. Present (2001) land use in the Upper Thukela catchments (NLC, 2005) Figure 7. Present (2001) land use in the Umzimvubu catchments (NLC, 2005) Figure 8. Figure 9. Veld management decisions for hydrological simulations in the Upper Thukela catchments Veld management decisions for hydrological simulations in the Umzimvubu catchments Figure 10. Changes in median annual accumulated streamflows due to degradation in the Upper Thukela catchments Figure 11. Changes in median annual accumulated streamflows due to degradation in the Umzimvubu catchments Figure 12a. Changes, due to degradation, in median annual sediment yields in the Upper Thukela catchments Figure 12b. Changes, due to degradation, in median January sediment yields in the Upper Thukela catchments Figure 13a. Changes, due to degradation, in median annual sediment yield in the Umzimvubu catchments Figure 13b. Changes, due to degradation, in median January sediment yield in the Umzimvubu catchments Figure 14. Changes, due to degradation, in median annual baseflows in the Upper Thukela catchments Figure 15. Changes, due to degradation, in median annual baseflows in the Umzimvubu catchments Figure 16a. Changes, due to degradation, in median annual stormflows in the Upper Thukela catchments Figure 16b. Changes, due to degradation, in median January stormflows in the Upper Thukela catchments Figure 17. Changes, due to degradation, in median annual stormflows in the Umzimvubu catchments Figure 18. Schematic diagram relating objectives and strategies for ecological restoration in terms of the three Conventions of the 1992 Rio Summit as motivations in a purely conceptual space at various levels Figure 19. Overview of the model iii Figure 20. The restoration and management intervention decision flow diagram applied in the model to determine the URV s for each of the 60 quinaries in the two case study catchments Figure 21. Possible Programme Governance Arrangements Figure 22. A possible organogram for Mnweni Figure 23. A possible organogram for Umzimvubu List of tables Table 1. Ecosystem Services supplied by the Maloti Drakensberg Area... 2 Table 2. Reconciliation of water requirements and available water resources for the Thukela WMA for the year 2005 (million m 3 /a) (Source: DWAF, 2004) Table 3. Criteria used to identify productive quinaries Table 4. Main input data Table 5. Maloti - Drakensberg Transfrontier Park: Economic Feasibility of PES - Summary of Key Results Table 6. Outputs of quaternary catchments Table 7. These tables provide one more layer of detail, namely the outputs and results per quinary. Here the results for both the upper Thukela and Umzimvubu are presented Table 8. Umzimvubu Rehabilitation Cost Breakdown Table 9. Umzimvubu Maintenance Cost Breakdown Table 10. Upper Thukela Rehabilitation Cost Breakdown Table 11. Upper Thukela Maintenance Cost Breakdown List of photos Photo 1. Aerial views of the Upper Thukela catchments Photo 2. Examples from the Upper Thukela catchment of veld burning Photo 3. Examples from the Upper Thukela Catchment of grazing management iv Acronyms ASGISA BOTT DWAF CMA EKZNW IA IGR P & G PES PMSC R & D TCTA WFW Accelerated and Shared Growth Initiative of South Africa Build-Operation-Train-and-Transfer Department of Water Affairs and Forestry Catchment Management Agency Ezemvelo KwaZulu-Natal Wildlife Implementing Agency Inter-Governmental Relations Preliminary and General Payment for Ecosystem Services Programme Management Steering Committee Research and Development Trans-Caledon tunnel authority Working for Water v 1.1. Motivation for project 1. INTRODUCTION Ecosystem goods and services, such as water quality and quantity, are in increasing demand as local, national, regional and global economies and populations expand. With regard to water specifically, Scholes (2001) pertinently states: The availability of water of acceptable quality is predicted to be the single greatest and most urgent development constraint facing South Africa. Virtually all the surface waters are already committed for use, and water is imported from neighbouring countries. In the same vein, prominent economist Herman Daly wrote: More and more, the complementary factor in short supply (limiting factor) is remaining natural capital, not manmade capital as it used to be. For example, populations of fish, not fishing boats, limit fish catch worldwide. Economic logic says to invest in the limiting factor. That logic has not changed, but the identity of the limiting factor has (Herman Daly, pers. communication, 25 Jan. 2005). It is therefore essential to invest in the limiting resource from a developing perspective: Water. An efficient way to invest in water security is to protect it at its source through prudent land management. In this way, investing in land management becomes a water augmentation, quality and regulation intervention. Within South Africa, the Maloti Drakensberg mountains are the most strategic water source in the region, supplying much of the sub-continent through rivers, and national and international inter- basin transfers. The Maloti Drakensberg mountains fall within the country s most important water supply area. River catchments within the bioregion form the source or contribute to a number of major rivers, including the Umzimvubu, Umzimkulu, Umkomazi and Thukela on the South African side, and the Vaal and Orange / Senqu Rivers on the Lesotho side. The rivers rising on the South African side contribute over 8000 million m 3 in mean annual runoff (MAR) to systems within the region (Diederichs and Mander 2004). This initiative has developed a model for investment in water security by using the trade in ecosystem services as sustainable foundation. Two priority case study areas have been assessed, namely: Mnweni/Cathedral Peak and The Eastern Cape Drakensberg. 1 Within these areas, this project assesses the feasibility to develop a payment for ecosystem services system with win-win solutions: improved water security, better water flow regulation and water quality, improved land management, improved livelihoods and reduced vulnerability The background to the project The Maloti Drakensberg Transfrontier Project (MDTP) undertook a baseline investigation in 2004 to identifying a strategy for developing incentives for land users in the Maloti Drakensberg Bioregion to maintain and / or enhance the supply of ecosystem goods and services for local, national and international users (Diederichs and Mander 2004). There were a number of reasons why these incentives for management were considered necessary: The area is important for the quality of life and economic development of households at the local, national and international level. The mountains are a World Heritage Site of international biodiversity, cultural and geological significance. The Maloti Drakensberg is a strategically important watershed, supplying 25% of South Africa s water. The Maloti Drakensberg mountains are a key tourist destination for South Africa and Lesotho. The investigation by Diederichs and Mander 2004 showed that the demand for ecosystem goods and services supplied by the Maloti Drakensberg Bioregion were significant, and would continue to increase into the future. Table 1 below is extracted from the Payment for Environmental Services Baseline Study (Diederichs and Mander, 2004) and shows those ecosystem services were identified as significant. Table 1. Ecosystem Services supplied by the Maloti Drakensberg Area Ecosystem Service Carbon Sequestration Climate Regulation Disturbance Regulation Description Carbon is taken up by plants in the growth process and stored in above and belowground plant biomass. In addition, litter production and decomposition lead to the accumulation of carbon in soil. The amount stored in plant biomass is a relatively constant function of total mass, but the rate of carbon uptake from the atmosphere depends on the growth rate of these plants. The amount stored in soils differs according to vegetation cover and land use, but in the Drakensberg environments the bulk of carbon is stored in the soil. Regulation of local climate is a service that is often associated with forests, especially large-scale tropical rainforests. However, the grasslands and open woodlands that dominate the bioregion would also be expected to influence local climate. Disturbance regulation is usually associated with wetlands, such as floodplain wetlands and coastal mangrove areas. Floodplain wetlands ameliorate the potential impacts of flood events by absorbing the flood peaks and lengthening the flood period 2 at a lower level. Coastal mangroves are considered to provide important protection to coastal areas from potential storm damage. These types of habitats are maintained to some extent by the freshwater flows that are delivered by the Maloti Drakensberg bioregion. These could be considered as indirect services yielded by the area. Water Supply and Regulation Erosion Control and Sediment Retention Soil Formation and Nutrient Cycling Waste Treatment Pollination and Biological Control Refugia and Genetic Resources Food Production, Grazing and Raw Materials The Maloti Drakensberg bioregion falls within the country s most important water supply area. River catchments within the bioregion form the source or contribute to a number of major rivers, including the Mzimvubu, Mzimkulu, Mkomazi and Thukela on the South African side, and the Vaal and Orange Rivers on the Lesotho side. The rivers rising on the South African side contribute over 8000 million m 3 in mean annual runoff (MAR) to systems within the region. The prevention of soil loss by vegetation cover and its capture in wetlands is a costsaving service that is provided by conservation of these ecosystems. Soil losses that might otherwise occur due to ecosystem degradation, such as through excessive grazing, would incur costs associated with increased turbidity of aquatic systems, siltation of aquatic habitats and siltation of water supply infrastructure and monitoring weirs. Higher silt loads in rivers and estuaries decrease light penetration and thus primary productivity, which in turn affects fisheries. Silt deposition within rivers, wetlands and estuaries decreases habitat and hence biodiversity in these systems. Siltation of dams and weirs reduces their capacity and lifespan, incurring costs through increased maintenance and/or augmentation and replacement schemes. Soil formation processes and nutrient cycling maintains the productivity of the land, which may benefit biodiversity or other land users such as farmers and pastoralists. These are localised benefits that cannot really be quantified as a separate entity. Aquatic systems can play an important role in the absorption and breakdown of organic and inorganic pollutants. Organic pollutants, such as nitrates and phosphates, and inorganic pollutants,
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