Institutional constraints and opportunities in developing environmental service markets: Lessons from institutional studies on RUPES in Indonesia
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World Agroforestry Centre (ICRAF)
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Summary: This report examines institutional constraints and opportunities in developing environmental service markets. It primarily draws from institutional studies on RUPES programs (Rewarding Upland Poor for Environmental Services they provide) in Indonesia. The studies combined desk reviews, field observations at RUPES sites in Sumber Jaya (Lampung), Bungo (Jambi) and Singkarak (West Sumatra), and in-depth interviews with key people in the field, relevant stakeholders and policy makers. The analysis mostly uses an institutional economic approach, combined with some quantitative analysis of transaction costs associated with existing and potential collective actions for reward transfers. The policy implications for institutional reforms were further enriched through discussion with fellow researchers, consultation with RUPES management, a review of literature related to environmental services, and comparison with similar cases in other parts of the world.
The RUPES program is developing best-practice working models for successful environmental transfer agreements adapted to the Asian context in General and the Indonesian context in particular. Targeted research is being conducted at sites across the nation, to identify environmental services and consider how they can be measured. The program also prepares mechanisms to anticipate changes (internally within the study sites and in response to external factors). Environmental services include clean and abundant water from watersheds, biodiversity protection, carbon stocks that may alleviate global warming, and beautiful landscapes for recreation and tourism.