As the world accelerates action to tackle climate change, nature-based solutions and climate action by local communities are critical for success. 

One growing mechanism to fast-track financing for ecosystem conservation is referred to as ‘Payment for Ecosystem Services’ (PES). This compensates farmers and local communities for conservation of biodiversity, carbon sequestration, or regulation of the water cycle. A few countries have integrated PES schemes in their Nationally Determined Contributions (NDC) to the Paris Agreement.

Paying or compensating nature´s stewards for the benefits provided by forests and other natural ecosystems is a way to recognize their value and ensure that these services continue to be provided well into the future. UNDP supports PES programmes in many countries including Costa Rica, Ecuador, Brazil, and Cote d’Ivoire. Across the world, there are over 550 programmes supporting an estimated US$36–42B in annual transactions.

Barriers to effective Payment for Ecosystem Services

However, despite the broad adoption of PES, the lack of effective digital systems is one of the main barriers to ensure the efficiency. Limited data sharing, lack of long-term finance sources, or coordination across similar incentive mechanisms are also hindering their success. Current digital barriers are: 

• The lack of a holistic approach. Community data collection, forest monitoring, and payments are often developed as separate non-interoperable solutions that do not effectively exchange information. This leads to a lot of manual work for programme management and execution.
• Limited ability to update to new technology options. Once a country has a system that is working, there are limited opportunities to upgrade to newer and more cost-efficient (or free) technologies as they arise such as mobile data collection or e-payments.
• Lack of interoperability and open data policies. Interoperability is a relatively new concept that allows systems such as the national forest monitoring system, Nationally Determined Contributions tracking system, global forest monitoring systems, or private sector supply chain management systems, to speak to each other.   

Developing holistic, flexible digital architecture 

Digital technology can help overcome these barriers. Some ways include:

• Building systems that talk to each other, allowing for real-time updates. Most PES systems pull data from different databases and overlay geospatial information manually, which is very labour-intensive and prone to errors. 
• Mobile phones can also greatly improve and reduce the cost of collecting field data, including georeferenced information on farmers, communities, their land, and forests on their land. They also can support distributed ownership of this data and allow for wider use. 
• Satellite imagery allows better data  collection particularly in more remote locations, where collection of field data can be especially challenging, providing a first assessment of land use, leaving the collection of the PES-related field data as primarily a  verification exercise. It is also critical for monitoring forest status. 
• Artificial intelligence can be key to the automation of decision-making . AI can support the automation of farm boundary detection, differentiation between arable land and forest, eligibility criteria verification, monitoring of the forest, and decision-making on whether key elements of the contract were fulfilled or not. Currently, most of these analyses are done manually. By developing a system that combines different data sources and any other available information for the most accurate and reliable forest monitoring results, PES systems can be greatly improved. 
• Distributed ledger technologies such as blockchain can avoid tampering with verified data or ensure the traceability of contracts and payments.
• Digital ID and digital payment systems can ease the process of contract verification and cash distribution to communities or individuals.

At present these digital solutions are being implemented piece-meal in different countries. Applications to collect farmer data are widely used; incentive-based systems support cash transfers to beneficiaries across a variety of development contexts; and remote sensing imagery to map and monitor land use has greatly advanced over the last 15 years. However these have not been integrated.

Calling for partners

UNDP is exploring how a flexible digital architecture, based on the evidence provided by countries that are planning or have already successfully developed PES, can support such systems. UNDP proposes to take a Digital Public Good approach, where national governments, international development, and financing partners invest in modular, open source, open algorithms that can be shared or replicated while configured to national needs.

Rather than having a one-size-fits-all solution, a ‘library’ of tools that are interoperable and follow an agreed data architecture and data standard can provide flexibility and improve efficiency. We call on private, public, and academic institutions working on solutions to join forces with us. 

Please reach out to the authors if you would like to take part in this journey with open-source solutions!

Special thanks to Marco Arlaud, Pascale Bonzom, Leif Pedersen for inputs. 
 

For more information, please contact Reina Otsuka (reina.otsuka@undp.org), Marco Chiu (marco.chiu@undp.org), Simone Bauch simone.bauch@undp.org; Valeriya Zaytseva (valeriya.zaytseva@undp.org)