• landscape beauty.
These benefits are generally not measured. In many cases deals take place in land that is already protected and the value of additional biodiversity benefits may be negligible. Where measurements are produced, they are often based on
extrapolation from existing scientific studies, rather than on local data. Conservation International, for instance, makes reference to work by the Smithsonian Institution Migratory Bird Centre in Chiapas, Mexico which shows that shade coffee is associated with 140 bird species, while sun farms housed only 5-6 species. ACRI stands out for its emphasis on the need for primary data collection in Latin America and Africa. It has chosen to undertake this research prior to setting up payment systems for shade cocoa. The research will extend beyond looking at impacts for biodiversity, to consider how shade cocoa impacts on soil fertility, soil erosion and pest and disease resistance (ACRI, 1999).
3.5.4 Impacts for poor people
As markets for biodiversity protection spread and are increasingly responsible for generating wealth, understanding how the poorest are impacted is critical. Apart from ethical concerns, poor communities living in or near forests are often key stakeholders in delivering forest protection. Yet, the literature is virtually silent on the issue of distribution. The explicit or implicit assumption of numerous studies reviewed in this paper is that the list of economic, social and environmental costs and benefits highlighted above will be captured by marginalised groups living in and near forests. Such an assumption, however, is potentially misleading. Not all people living around forests are poor, nor is it necessarily those adjacent to forests that benefit from payments for biodiversity services. Notwithstanding the absence of recorded evidence, in what follows observations are made on the likely opportunities and risks of markets for poor people.
The long list of economic, social and environmental benefits highlighted above suggests significant potential for poor forest stewards to gain. In addition to offering new streams of income, markets introduce forest dependent households with an opportunity to diversify their livelihood base and reduce their
vulnerability to shocks. For subsistence households, the additional security brought by a diversified income base is extremely valuable.
Markets may also bring a number of longer-term gains. Increased education, training and improved health all contribute to both current welfare and build human capital which provides opportunities for the future. The strengthening of social and political capital is also key, providing poor households with new tools with which to tackle community problems and increasing their power to influence the broader policy debates. Improvements in natural assets (e.g. water, soil, air and landscapes) provide local communities with a firmer base for investing in complementary natural resource based activities, e.g. fishing, NTFP production and/or agriculture.
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While the potential rewards for poor groups from market development are alluring, a number of risks should be flagged. Critically, the extent to which poor households gain access to markets or realise their positive spin-offs is not clear. As has been highlighted in the literature, setting up and participating in markets can involve heavy transaction costs. For poor families, these costs may block market access. This is particularly true since transaction costs are likely to be highest for small forest holders who lack basic organisational, forest management and marketing skills. Monitoring and certifying delivery of biodiversity management, for instance, will tend to be more expensive for a number of small plots than for larger landholdings. Where a minimum area is required to qualify for a
biodiversity protection contract, additional costs are born by smallholders who must co-ordinate amongst themselves before negotiating with buyers.
The risks for poor people do not rest solely with the fact that they may be excluded from market benefits. There are also serious concerns that they may be negatively impacted. As markets for biodiversity protection raise the value of biodiversity rich forest areas, competition for control over these areas can only intensify. Poor communities living in these areas without formal title may be pressured to leave. Far from strengthening forest stewards’ natural assets, markets may lead to exclusion. In such cases wealthier newcomers would capture the benefits, while the costs are born by poor people.
3.6 Constraints to biodiversity market
development
This review has pointed to three categories of constraints to market development in the biodiversity sector:
• Factors that raise transaction costs and undermine market viability. Complex and uncertain legal and policy contexts in source countries are the main culprits, raising the risk associated with biodiversity transactions and thus transaction costs21. The lack of guidelines for obtaining access rights, unclear authority over biodiversity reserves, non-existent mechanisms for negotiating with local communities, lack of property rights legislation, conflicting and changing policies all introduce risks and impose costs on market participants. • Factors that undermine supply. Willingness to supply is not only determined by
the price offered for biodiversity commodities, but also depends on cultural factors such as whether payments for biodiversity services are an “acceptable” transaction. Even where transactions are culturally acceptable, suppliers may hesitate where they lack an understanding of deals. Furthermore, supply depends on capacity to bring the commodity to the market and abide by the terms of transactions. This capacity may be lacking in many developing countries.
21. While none of the studies reviewed measure transaction costs, there is wide appreciation of the importance of costs to market development (ten Kate and Laird, 1999; Rosenthal, 1997; Environmental Policy Studies Workshop, 1999; Perelet, 2000; Guerin-McManus et al, 1998).