TGCC Assessment: Mangrove Payment for Environmental Services In Vietnam – Opportunities and Challenges

The natural environment provides important environmental services to local, regional, national and international stakeholders, such as erosion control and pollination to neighboring stakeholders, to carbon sequestration benefits to the global community. These services include goods (e.g. physical products), services (erosion control, water purification), and cultural benefits. Yet traditionally, the owners or managers of these habitats have had few ways to benefit economically from the services provided to broader beneficiaries. Payment for environmental service (PES) mechanisms have been proposed as an efficient way to incentivize those with management or ownership rights to manage land for these wider benefits to human welfare.

Vietnam has been a global leader in piloting PES, particularly in upland forests through user fees associated with hydropower and tourism. Yet these experiences have not trickled down to PES in coastal areas and mangrove forests, which provide numerous environmental benefits. This report provides an analysis of some of the barriers to PES in mangrove forests, and key issues to address in the design of a coastal mangrove PES scheme. The assessment recognizes that the Government of Vietnam (GVN) is interested in expanding PES to coastal systems and that there are upcoming investments, for example from the World Bank, KFW, and future U.S. Agency for International Development programs, and policies, for example the revised Forest Law and Coastal Forest Decree, that may promote further piloting of PES.

This assessment is informed by the academic and grey literature on PES in Vietnam and globally, as well as translated Vietnamese policy and legislation. A one week assessment was carried out in Haiphong Province, primarily in Tien Lang District and Cat Ba Island, to consider the local context around PES opportunities. Interviews were carried out with commune, district, and provincial government, as well as with a limited number of private sector and civil society organization actors.

The assessment follows a standard PES framework by examining the characteristics of:

  • Mangroves in coastal areas and their relationship to environmental services;
  • Potential “buyers” of the services; and,
  • Potential “sellers” of the services.

Throughout these descriptions, the assessment considers the transaction challenges and opportunities related to:

  • Monitoring of the services for purposes of conditionality;
  • Valuation, costs and the willingness of buyers and sellers;
  • Collecting revenue; and,
  • Distributing payments.

Legal and policy conditions are not addressed in detail, as these considerations are best developed in coordination with an expert on Vietnamese environmental and finance law, which was not available as part of this assessment. Recommendations are provided in bold throughout.

Recommendation: Further interviews and ground truthing with private sector actors across the region are necessary; further discussion with national government representatives to test the findings of this report is also needed.

PES was initially defined as a 1) voluntary transactions where 2) a well-defined environmental service (ES) is 3) being “bought” by a minimum of one ES buyer 4) from a minimum of one ES provider, 5) if and only if the ES provider secures ES provision (conditionality) (Wunder, 2007). Other definitions have focused on the concepts of conditionality and the use of positive incentives to promote environmental service delivery, recognizing that PES schemes are rarely voluntary transactions, with well-defined services and clear buyers and sellers (Sommerville, Jones, & Milner-Gulland, 2009; Wunder, 2015). In practice, few PES schemes that meet all of the above criteria are embedded within existing national or local frameworks that assign partial rights to land holders, and require government to create new institutions and markets (Vatn, 2010). Implied in the concept behind a functioning PES is that the positive incentives from engagement should outweigh the costs of lost opportunities for the service providers. PES was initially proposed as a simple, efficient approach because it stressed a direct transaction between buyers and sellers with clear monitoring provisions. However, as new institutions are created to receive and distribute payments, the transaction costs increase and the direct relationships between buyer and seller are easily lost.

Despite this theory and early excitement around the concept, PES schemes are relatively rare globally, though Vietnam has been a leader in piloting Payments for Forest Environmental Services (PFES). In 2010, Vietnam adopted a countrywide PES decree to scale up activities from early models in the Lam Dong and Son La, both upland forest areas, around service provision and also building on the Vietnam Forestry Development Strategy 2006-2020 and previous approaches to incentivize forest restoration. To date, Vietnam’s PFES has been primarily focused on contract approaches in upland areas and purchasing models have focused on direct government support and watershed protection associated with hydropower and tourism to a lesser extent. Vietnamese PES models have applied an approach where land is contracted to individual households or groups of households, but with restrictions on use, and payments have been provided based on both forest protection and forest establishment/planting (with planting receiving a higher value).