Developing pro-poor markets for environmental services in the ...

3 Institutional support mechanisms for environmental service
markets – current issues and problems
While existing markets for environmental services in the Philippines are not widespread and
largely nascent affairs, a number of preliminary lessons may be highlighted relating to the
necessary institutional backdrop for these markets. Government involvement has been key in
cases that do exist. There are more or less two types of markets: the first is made up of
arrangements that were created through national government policies or initiatives; while the
second type involves local government efforts. These are not markets in the widely
understood sense of the word, because private-property rights have not been established, and
government is still at the helm of the ‘market exchange’ (see Section 1). Nevertheless, it is
through the establishment of economic instruments, in which government influences supply
and demand through the pricing mechanism, whereby such quasi-markets for environmental
services come into being. This is further illustrated in the discussion on Protected Area
Management Boards (PAMBs) below.
There is, however, a third type of market which is evolving in the country. These are less
dependent on government intervention and more rooted in community-based management of
protected areas. One case study is examined in this report: that of a local organisation that has
managed its watershed, particularly its natural springs and forest lands, for decades, long
before environmental issues became important (details are contained in the second case study
of this section).
In what follows, we examine in more detail examples of two types of markets. We look first
at the national government’s system of integrated protected areas, which includes the
Integrated Protected Area Fund (IPAF), and how this works as a centralised system for
channelling payments for environmental services to providers. Then we consider communitybased
efforts to set up payment systems at the local level, focusing on the particular case of
watershed-protection financing in Balian, Laguna. For both case studies the stakeholders
involved in the provision of the relevant environmental services are outlined. Also mentioned
is the policy and legal framework which helped create the market in question. Finally, the
institutional mechanisms developed to support the relevant initiatives will be discussed,
including some lessons learned on how such mechanisms affect the development of markets
for environmental services.
3.1 National Integrated Protected Areas System (NIPAS)
3.1.1 NIPAS Act
In 1992, the Philippine Congress enacted Republic Act No. 7586 establishing the National
Integrated Protected Areas System (NIPAS) for the Philippines. The NIPAS law mandates
the creation of protected areas to conserve biodiversity. It further provides the basic
framework for the conservation and management of protected areas in general. One of the
features of the Act is the establishment of an Integrated Protected Area Fund (IPAF) to
finance projects of the system. All funds generated from the protected areas shall accrue to
the IPAF, 75 per cent of which will be retained by the area where the funds were generated,
and 25 per cent going to a central IPAF to finance other non-revenue-generating PAs and the
operations of the IPAF governing board. Figure 3.1 illustrates how funds flow through the
IPAF to and from the protected areas (PAs) under the NIPAS system.
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