PAYMENT SCHEME for AESTHETIC and BIODIVERSITY VALUES of RUSENSKI LOM NATURE PARK Author: Maya Bankova-Todorova, WWF DCP Bulgaria

WORKING TOGETHER TO INSPIRE SUSTAINABLE SOLUTIONS

TECHNICAL REPORT

PAYMENT SCHEME FOR AESTHETIC AND BIODIVERSITY VALUES OF RUSENSKI LOM NATURE PARK Author: Maya Bankova-Todorova, WWF DCP Bulgaria

Co-authors: Yulia Grigorova and Raina Popova, WWF DCP Bulgaria

Technical adviser: Julio Tresierra, PhD, independent consultant

With the contribution of: Milko Belberov, Tzonka Hristova and Georgi Georgiev, Directorate of Rusenski Lom Nature Park, Mariana Tzvetanova, freelancer, Milan Jousten, Intern, Monia Martini, WWF DCP Romania

Graphic design: Boyan Petkov Cover photo: © Veselina Kavrakova Back cover photo: © Alexander Ivanov

WWF is one of the world's leading independent environmental organizations with 5 million volunteers and a global network, which operates in more than 100 countries. WWF's team in the Danube-Carpathian region is responsible for leading and implementing WWF's efforts to preserve, restore and sustainably manage the natural values of the Danube-Carpathian ecoregions. The team works across political borders developing model projects, influencing policy, capacity building, raising awareness and seeking solutions to the challenges that the region faces in order to ensure prosperity, sustainability and biodiversity conservation.

All material appearing in this publication is copyrighted and may be produced with permission. Any reproduction in full or in part of this publication must credit WWF Bulgaria as the copyright owners.

The designations of geographical entities in this publication, and the presentation of the material, do not imply the expression of any opinion whatsoever on the part of WWF or its supporting organizations concerning the legal status of any country, territory, or area, or its authorities, or concerning the delimitation of its frontiers or boundaries.

Suggested citation: Todorova M. (2013). Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park. WWF Bulgaria, Sofia.

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 TABLE OF CONTENTS

INTRODUCTION 2 1. BACKGROUND AND CONTEXT 4 1.1. HISTORICAL OVERVIEW 4 1.2. THE PROBLEM ADDRESSED BY THE PROJECT 7 1.3. THE NATIONAL SYSTEM OF PROTECTED AREAS 7 1.4. BIODIVERSITY AND ECOSYSTEMS WITHIN RUSENSKI LOM PILOT SITE 9 2. DESIGN 12 2.1. IDENTIFICATION OF THE TARGETED ECOSYSTEM AND ITS SERVICES 12 2.2. IDENTIFICATION OF THREATS AND RISKS TO THE ECOSYSTEM (AND ITS SERVICES) 13 2.3. PES AS A SOLUTION TO THE BIODIVERSITY PROBLEM 18 2.3.1. AREA TO BE COVERED BY PES 18 2.3.2. POTENTIAL BARRIERS FOR IMPLEMENTING PES 19 2.3.3. PAYMENTS FOR AESTHETIC AND BIODIVERSITY VALUES AND UNREGULATED TOURISM 20 2.3.4. LOGICAL FRAMEWORK OF THE SCHEME 20 3. PES IMPLEMENTATION 26 3.1. LEGAL FRAMEWORK 26 3.1.1. SELLERS 26 3.1.2. BUYERS 27 3.2. FINANCIAL FRAMEWORK OF THE SCHEME 28 3.2.1. VALUE OF THE SERVICE 29 3.2.2. FINANCIAL SCENARIOS 30 3.3. SUPERVISION AND MONITORING FRAMEWORK 31 3.3.1. TIME FRAME 30

4. RESULTS AND LESSONS LEARNED 33 4.1. LESSONS LEARNED 37 5. NEXT STEPS AND RECOMMENDATIONS 40 6. ANNEXES 43 1.1. HISTORICAL OVERVIEW 4 1.2. THE PROBLEM ADDRESSED BY THE PROJECT 7 1.3. THE NATIONAL SYSTEM OF PROTECTED AREAS 7 1.4. BIODIVERSITY AND ECOSYSTEMS WITHIN RUSENSKI LOM PILOT SITE 9 INTRODUCTION

This report presents the work of the WWF DCPO on testing a scheme of payments for ecosystem services (PES) for one pilot area in Bulgaria, Rusenski Lom Nature Park, as part of the commitments established in the project Promoting payments for ecosystem services and other related sustainable financing (SF) schemes in the Danube river basin. The report elaborates upon the steps taken to design and implement a scheme of payments for ecosystem services focused on resolving conflicts/ establishing sustainable links between tourism development and the maintenance of aesthetic and biodiversity values provided by ecosystems of the targeted protected area.

The project Promoting PES and other related sustainable financing schemes in the Danube river basin (hereafter Danube PES project) in its essence aims at promoting and demonstrating the feasibility of PES/ SF in the Lower Danube river basin. Five pilot sites in Romania and Bulgaria were selected for the purpose, Rusenski Lom Nature Park being one of them.

The project also plays an important role in awareness raising and capacity building at the local, national and Danube river basin level for the scaling-up and uptake of the ecosystem services approach into public policies and funding instruments.

The GEF Danube PES project has been coordinated by the WWF with financing from the GEF, and implementation support from the UNEP since October 2009. The project is operational until the end of 20141. This report covers the period between 2010 (when the works of developing PES started in the pilot site) and May 2013. The work in the pilot area was preceded by a 10-month period devoted to baseline data collection and pre-feasibility studies.

Size and location of the pilot area Rusenski Lom Nature Park is located in the northeast of Bulgaria, in the canyon-like valley of the Rusenski Lom River, the last major tributary of the Danube in Bulgaria, before it flows into the Black Sea. The area comprises a natural complex of ecological, historical and cultural significance. It lies in the intersection of 3 protected areas, namely:

Rusenski Lom Nature Park – 3 408 ha. According to the World Database on Protected Areas, Rusenski Lom, ID Number 604, falls under category V of the IUCN protected area categories, i.e. Protected Landscape2

1 The project was designed to last until the end of 2013. However, after the project mid-term evaluation, WWF proposed a one year non-cost extension, which was approved by GEF. 2 IUCN Category V: Protected landscape and protected seascape the area covers an entire body of land or ocean with an explicit natural conservation plan in the interest of nature conservation, but usually also accommodates a range of for-profit activities. The main objective is to safeguard regions that have built up a 'distinct character' in regards to their ecological, biological, cultural or scenic value. In contrast with previous categories, Category V: Protected Landscapes and Seascapes permits surrounding communities to interact more with the area, contributing to the area's sustainable management and engaging with its natural and cultural her itage. Landscapes and seascapes that fall into this categor y should represent an integral balance between people and nature, and can sustain activities such as traditional agricultural and forestry systems on conditions that ensure the continued protec tion or ecological restoration of the area. Category V is one of the more flexible classifications of protec ted areas. As a result, protected landscapes and seascapes may be able to accommodate contemporary developments, such as ecotourism, at the same time as maintaining the histor ical management practices that may procure the sustainability of agrobiodiversity and aquatic biodiversity.

2 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Introduction

• Lomovete Natura 2000 site (BG0002025) designated under Directive 2009/147/EC of the European Parliament and of the Council on the conservation of wild birds (EU Bird Directive), 33 451,13 ha.

• Lomovete Natura 2000 site (BG0000608) designated under Directive 92/43/EEC on the conservation of natural habitats and of wild fauna and flora (EU Habitat Directive), 32 488, 93 ha.

The overlapping area between the two Natura 2000 sites is 32 177 ha (96 % of BG0002025; 99 % of BG0000608). Both Natura 2000 sites include the territory of Rusenski Lom Nature Park.

The pilot site covers 3408 ha, which is the entire area of Rusenski Lom Nature Park. However, the actual pilot intervention area is smaller, nearly 10% of the total area, including several settlements and their adjoining territories, where tourism is more intensive.

This report comprises four chapters. Chapter 1 presents a short summary of the situation in the pilot site and outlines the main environmental facts about Rusenski Lom Nature Park.

Chapter 2 is dedicated to the design of a scheme of payments for ecosystem services. It provides information on ecosystem services delivered by Rusenski Lom Nature Park and on a selection of ecosystem services. It also offers details about the threats to the selected ecosystem services and the intervention area, and potential barriers to the implementation of a PES scheme in this pilot area. Chapter 2 is followed by a logical framework of the scheme.

The legal, financial, monitoring and reporting frameworks of the scheme of payments for cultural ecosystem services, as developed by the Danube PES team, is presented in Chapter 3. It gives information on the buyers and sellers of the targeted ecosystem service subject to the PES scheme.

Finally, Chapter 4 presents the results acieved until May 2013 and lessons learned.

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 3 1. BACKGROUND AND CONTEXT

1.1. HISTORICAL OVERVIEW

Rusenski Lom Nature Park has been a priority area for the WWF for 10 years. The plan for establishing a PES scheme in Rusenski Lom was conceived as a continuation to a programme initiated by the WWF Macroeconomics Programme Office entitled “Promoting Payments for Ecosystem Services (PES) and Sustainable Financing (SF) for Rural Conservation and Development”. WWF DCPO acted as an anchor for PES activities in Eastern Europe during the period 2005-2008. The aim of this work has been to show clearly that protected areas provide not only environmental but also economic benefits to society and business, and PES has been seen as an instrument for linking the users of these benefits with their providers, the managers of protected areas.

The work completed thus far has resulted in important improvements in the management of protected areas, including: (i) increased respect for management norms and regimes of protected areas in terms of the use of these areas and their biodiversity for economic activities; (ii) awareness raising and an increase in the participation of local communities in the management – creating a responsible and positive attitude to the protected area; (iii) offering economic solutions to local communities for continuing their economic activities and sustaining their livelihoods under management regimes and norms; (iv) new employment opportunities and (v) generation of financial resources for targeted conservation activities in protected areas.

At the same time, PES have been relevant also in meeting rural development challenges, since natural capital – ecosystems and rich biodiversity – is concentrated in these areas. In Bulgaria, similarly to other European countries, rural areas suffer from serious socio-economic problems, which also affect the enhancement and provision of environmental benefits (global, national and local). There is an increasing social and economic gap between rural and urban areas, and PES can address this issue by promoting an integrated approach addressing environmental, social and economic problems.

Excerpt from Paying for the Biodiversity, OECD, 2010

Biodiversity and associated ecosystem service loss and degradation present one of the major environmental challenges facing humankind. Despite the significant economic, social and cultural values they provide, such as food provisioning, clean water, genetic resources, climate regulation, and recreation benefits, biodiversity continues to be lost and in some areas at an accelerating rate. Given these trends, there is an urgent need for both (i) greater application of policies and incentives to address biodiversity conservation and sustainable use, and (ii) more efficient use of available finance in existing programmes. The latter is especially important in the context of the current economic crisis where public and private budgets are increasingly constrained and are competing with multiple demands.

4 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Background and context

The testing of PES in Bulgaria and Rusenski Lom by WWF has been especially relevant given the requisites of the Natura 2000 network in the country, operating since the accession of Bulgaria to the EU in 2007. As part of the EU, Bulgaria has been provided with many funding opportunities under EU Programmes such as the National Rural Development Programme (RDP), Operational Programme (OP) “Environment”, OP “Fisheries” and OP “Regional Development”. All these programmes prioritize funding for the environment and biodiversity protection. This represents a great opportunity for a variety of potential beneficiaries, including farm and forest land managers, aquaculture producers, small- and medium-sized enterprises in rural areas, as well as non-profit organisations and public bodies such as directorates of nature parks. In 2010, WWF commissioned an analysis on the Use of EU Funds for Ecosystems Services and Potential Public Funding for PES Schemes 3. The analysis showed that EU funds already cover many of the environmental needs of the country. Various Programmes provide funding for capital investments related, for example, to the modernisation of farm enterprises, diversification of farm activities and establishment of new enterprises in rural areas (through the development of services or production of non-farm products). Under the Rural Development Programme there are several payment schemes – Agri- environmental payments – addressing the components of the environment, targeting their improvement towards reaching a good ecological status of species and lands. Among these are organic farming payments and payments for agricultural lands of high-nature value. There are also compensation payments for lands in Natura 2000 sites. In addition, the Operational Programme “Environment” provides many funding opportunities to nature park directorates for improving their management through building their expertise and technical capacity. However, none of these programmes takes into consideration tourism and its impact on protected areas (especially the cumulative impact of tourism activities). Besides, these funds are provided for a limited period of time (3-5 years, depending on the measure and programme). After this period beneficiaries must ensure the sustainability of results by using their own limited resources. This is particularly true of public-funded structures, such as nature park directorates.

After screening experience around the world, WWF identified PES as a possible long-term funding instrument for protected areas. In this particular case, PES may not cover all financial needs but through private deals (renewable each 5 years) they may ensure small amounts in the longer term as supplements to available state and public funding for protected areas.

WWF identified two possible sites for demonstration projects in Bulgaria: the area of Rusenski Lom, in the vicinity of Rusenski Lom Nature Park near the town of Ruse; and the lower sections of the Vit and Osam Rivers in Pleven District in north- central Bulgaria. Both possible project sites are located within the designated area of the Lower Danube Green Corridor.

The PES activities in the Rusenski Lom Nature Park pilot area began in 2006. Some possible priority activities and issues in the area of Rusenski Lom were: maintaining and enhancing the biodiversity values of Rusenski Lom Nature Park, maintaining existing High Nature Value Farmlands, including pastures and meadows; converting some of the arable land along the Rusenski Lom River into grasslands; marketing locally produced food and food products from high nature value grasslands and meadows, and implementing sustainable forestry management in the park forests.

3 Kazakova, Y., 2010. Report on Use of EU Funds for Ecosystems Services and Potential Public Funding for PES Schemes, , WWF DCPO, in English language, www.panda.org/dcpo

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 5 Background and context

Some possible funding mechanisms for supporting these activities include national payment schemes as well as levies from tourists visiting the area. The local tourism providers set up an association called “Nature Tourism” willing to support activities in the Nature Park, recognizing the importance that the nature value of the region has for the success of their businesses.

Excerpt from the report on the Workshop on sustainable tourism for local tourism providers (The workshop was held by the WWF DCP in March 2008, with the financial support of the BBI Matra Programme.)

Initially, the assessment of the impact of tourism on the protected area did not come naturally to the local businesses even if they were promoting their places as being part of the Nature Park. The benefit was mostly one-sided – the tourism businesses were attracting visitors using the values of the Nature Park. The presentations and provocations during the workshop discussions really helped them think also of the other direction of a potential positive influence. Naturally, the business performance was still at the top of the thinking and planning but at least the tourism service providers began considering the other impacts as well.

The future activities will be focused on strengthening the capacity of the Association (note by the author: Natural Tourism Association, current project partner of WWF in the Danube PES project) to manage itself and to provide tourism services. The second focus, which is more important to the current report, is the idea of developing a payment scheme which will support the conservation of biodiversity impacted by tourists in the area. The PES scheme under consideration envisages the following payments: tourists pay a small fee per bed per night in the local accommodation places, which then transfer it to the PES fund; buyers of local food products coming from high nature value grazing systems pay a small fee (included in the food product price) which is also transferred to the PES fund; exemption from/ reduction of local municipal taxes for businesses contributing to the PES fund. PES fund money will be spent on direct conservation activities in the Nature Park. The development of the PES scheme in the region currently has the support of the local tourism businesses and administration. However, it needs to be taken further soon in order to use the momentum and expectations created. The chances for success are high if we continue to support the initiative of the Nature Tourism Association. So far their capacity for developing it by themselves is rather limited despite their high enthusiasm. Thus, external support both in terms of PES expertise and moderation / negotiations is required.

According to pre-feasibility studies, tourists and tourism businesses were identified as potential buyers of ecosystem services, and the body legally responsible for the management of the protected area (Rusenski Lom Nature Park Directorate) as a potential seller of these services.

6 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Background and context

1.2. THE PROBLEM ADDRESSED BY THE PROJECT

Today, tourism is increasingly shaping local livelihoods in this rural area. This process is driven by European funds that provide support to (start-up) enterprises and to farmers who like to diversify their economic activities. In both cases tourism development is eligible for funding. Since the EU accession of Bulgaria, the number of tourist accommodation places in Rusenski Lom has doubled and the number of visitors has increased by 76%. At the end of 2012, a new hotel opened in Rusenski Lom, with a capacity of 90 beds, in an area where the actual capacity is around 20 beds. The environmental impact of an individual tourism business is small because of the relatively limited accommodation capacity. However, the overall/ cumulative impact was never been assessed and/or addressed, although the footprint of tourism on local species and habitats is evident. As tourism and agriculture will most likely remain the main productive activities in rural areas, including in Rusenski Lom Nature Park, it is safe to conclude that their footprint will also increase the detriment to biodiversity in the ecosystems.

According to CICES4, Tourism is not the only economic activity exerting pressure on Rusenski Lom cultural services are ecosystems. However, the Danube PES team selected the cultural ecosystem services primarily defined as – aesthetic and biodiversity values – because, even if not perfect, there are already the physical settings, funding instruments for nature-friendly land use practices. locations or situations that give Also, payments for cultural services can open a window for PES and give the rise to changes in opportunity for further layering5 ecosystem services - a payment for aesthetic and the physical or biodiversity values can also contribute to improving other ecosystem services, such mental states of as carbon sink, pollination, and flood regulation. In this context, the vision for people, and whose Rusenski Lom Nature Park, formulated on the basis of discussions with local character is stakeholders, is: Rusenski Lom will become a place with restored and fundamentally protected ecosystems and biodiversity, bringing socio-economic values dependent on living to actively involved local communities. processes; they can involve individual This pilot project addresses the actual and potential loss of aesthetic value and species, habitats and biodiversity in Rusenski Lom pilot site caused by unregulated tourism. It should be whole ecosystems. noted that normally the tourist season begins in early spring and ends in early autumn, which overlaps with the breeding period of wild animals in Rusenski Lom Nature Park. Therefore, continuous unregulated tourism, as practiced at the moment, leads to disturbance of the wildlife and contamination with waste.

1.3. THE NATIONAL SYSTEM OF PROTECTED AREAS

The pilot site Rusenski Lom6 is one of the 11 nature parks in Bulgaria. It was designated as a nature park in 19707 to protect biological and landscape diversity, as well as the cultural and historic heritage in the area.

4 Common International Classification of Ecosystem Services (CICES), which is a way of describing ecosystem outputs as they directly contribute to human well-being. 5 Layering of ecosystem services multiple buyers of separate environmental services jointly finance start-up and recurrent costs of ES provision from the same pilot 6 Information about Rusenski Lom Nature Park by the Bulgarian Executive Environment Agency, http://eea.government.bg/zpo/en/area.jsp?NEM_Partition=1&categoryID=5&areaID=3 7 Ordinance RD 567 dated 26.02.1970

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 7 Background and context

Box 1: The National Ecological Network (NEN) in Bulgaria

NEN in Bulgaria is developed according to the Biological Diversity Act. Its objectives are: long-term conservation of biological, geological and landscape diversity; provision of areas sufficient in size and quality for breeding, feeding and resting, including for migrating, moulting and wintering wildlife; creation of conditions for genetic exchange between separate populations and species; participation of Bulgaria in European and global environmental networks; limitation of the negative anthropogenic impact on protected areas. The National Ecological Network consists of protected areas designated under the Protected Areas Act, which are in accordance with the requirements of Directive 92/43/EEC on the conservation of natural habitats and of wild fauna and flora and Directive 2009/147/EC of the European Parliament and of the Council on the conservation of wild birds. The National Ecological Network includes with priority CORINE sites, Ramsar sites, and important plant and birds areas.

At present in Bulgaria 955 protected areas have been designated, covering approximately 5.1% of the country's territory. According to the Protected Areas Act, the protected areas divided into 6 categories: reserves (55), national parks (3), natural monuments (350), managed nature reserves (35), nature parks (11), and protected sites (501).

The protected sites are part of the European ecological network NATURA 2000. At present 114 protected sites for the conservation of wild birds, covering 20.3 % of Bulgaria's territory, and 228 protected areas for the conservation of habitats, covering 29.5 % of the territory of Bulgaria, are adopted by the Council of Ministers. At present 332 Natura 2000 sites covering a total of 33.89 % of the country's territory are adopted by the Council of Ministers.

The Park is managed by the Rusenski Lom Nature Park Directorate, on the basis of a management plan which was officially approved in 20058. The Management Plan for the area is valid for 10 years and is revised after the first 5 years. The Directorate is a specialized territorial unit of the Executive Forest Agency (EFA), which is under the mandate of the Ministry of Agriculture and Food. The Directorate of Rusenski Lom Nature Park has the mandate to implement the Ordinance for the Designation of Rusenski Lom Nature Park, the two Natura 2000 sites and some other areas along the Danube. The Directorate is a separate legal person funded by the state (from the state budget). The budget is provided per annum based on a financial plan of estimated overheads and events. However, this funding resource is rather limited. The Directorate finances its activities through EU-funded projects. These funds, however, also run for 2-3 years and do not provide sustainable, long-term funding for conservation activities. The Directorate can also generate income from activities such as tour guiding, training and sales of promotional materials. If the income is not spent within the same reporting period when generated, it is transferred to the EFA account. Whether this income will come back to the Nature Park in the budget for the following year depends on the EFA's funding priorities at the national level. This structure generates uncertainty as to whether or not a potentially generated PES fund will be available to the Directorate to generate/ sustain the flow of ecosystem services paid for. The time gap between the generation and expenditure of funds and the uncertainty regarding their possible return to the Directorate's budget is an additional source of insecurity among potential buyers of the ecosystem service. Should these financial uncertainties persist, they may compromise the feasibility of a successful PES mechanism.

3 Decision No539 dated 06.06.2005

8 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Background and context

1.4. BIODIVERSITY AND ECOSYSTEMS WITHIN RUSENSKI LOM PILOT SITE

Rusenski Lom Nature Park was designed especially to protect the natural and historical heritage and landscapes of the area. The flora in the Park includes 902 species (23% of the Bulgarian flora), including 30 Balkan and one Bulgarian endemic species. Endemic flora species in the Park comprises 3,4%. Rusenski Lom watershed is the only place in Bulgaria where the Balkan endemic species Verbascum dieckianum Borb. & Degen can be found.

Picture 1: Chamaecytisus kovacevii (Velen.) Rothm, Bulgarian endemic species located only in the north of the Danube plain

Source: © Directorate of Rusenski Lom Nature Park

The region of Lomovete supports 149 bird species9, 37 of which are listed in the Red Data Book for Bulgaria (1985). Of the birds occurring there, 59 species are of European conservation concern (SPEC) (BirdLife International, 2004), 3 of them are listed in category SPEC 1 as globally threatened, 17 in SPEC 2 and 39 in SPEC 3 as species threatened in Europe. The area provides suitable habitats for 48 species included in Annex 2 of the Biodiversity Act, which need special conservation measures, of which 44 are listed also in Annex I of the Birds Directive. Lomovete holds the biggest breeding population in the country of the Ruddy Shelduck (Tadorna ferruginea). It is one of the most important sites in the country also for the Egyptian Vulture (Neophron percnopterus), the Long-legged Buzzard (Buteo rufinus) and the Black Kite (Milvus migrans). The Short-toed Eagle (Circaetus gallicus), the Lesser Spotted Eagle (Aquila pomarina), the Eagle Owl (Bubo bubo), the Roller (Coracias garrulus), the Grey-headed Woodpecker (Picus canus), the Tawny Pipit (Anthus campestris) and the Barred Warbler (Sylvia nisoria) breed there in considerable numbers. The valley of Rusenski Lom River is the most western part of the Via Pontica migration route, which is used mainly by raptors. It is one of the main corridors where migrating Lesser Spotted Eagle enter Bulgaria on its way to the south.

9 Information on bird species obtained from the internet site of Bulgarian Society for the Protection of Birds - http://bspb.org/ovm.php?id=25&menu_id=65

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 9 Background and context

Rusenski Lom Nature Park is home to 70 species of mammals (more than 70% of the mammal fauna in Bulgaria), including 30 species protected under Bulgarian laws and 41 under the Bern Convention.

Ecosystems and main threats

Rusenski Lom Nature Park is represented mainly by terrestrial ecosystems – forests and grasslands. Freshwater ecosystems occupy only 2% of the total Park area of 3,408 ha.

Forests are presented by 27 species and occupy 2,808 ha, which is approximately 82% of the Park territory. Over 70% of forests consist of local species but their ecological status is not good. 30% of forest areas consist of foreign tree species. The ecological status of forests in the Park territory with regard to their biodiversity and functionality is much lower than their potential. The main reasons for that are anthropogenic pressure and improper forestry practices, leading to the destruction of essential elements of biodiversity (e.g. deadwood and hollow trees). Although at present the biodiversity conservation status is questionable, the forest restoration capacity in the pilot area is still good, which is a positive signal10.

Grasslands comprise the second major ecosystem in the area but they have a comparatively smaller area than forests – nearly 600 ha.

Improper farming practices on grasslands and abandoning of traditional extensive farming practices present the main threat to their good ecological status and to the conservation of related species, as habitats are degraded and benefits associated with them are lost. Grasslands also play a role for the carbon stock, especially wet meadows. This area is the main provider of natural fodder and a habitat for species of special interest to tourists. Rusenski Lom is one of the top places for nesting birds in Bulgaria. Some of the birds are endangered in Europe and are under Bulgarian and EU protection. However, here protection is not incompatible with human activities. Many of the species inhabit open, semi-natural areas and their survival is contingent upon the practice of low-intensity farming. Some of the most attractive inhabitants of the dryer grasslands are the European Ground Squirrel (Spermophilus citellus), the Marbled Polecat (Vormela peregusna) and the Steppe Polecat (Mustela eversmanii). All three species are of Community interest according to the EU Habitat Directive.

The pilot PES scheme covers several "hot spots" where tourism is intensive and already poses a threat to biodiversity by causing disturbance to threatened species, noise and waste pollution, as well as degradation of grasslands because of improper camping and fire-lighting. In some places, inappropriate tourism has caused rare bird species to abandon their usual nesting areas, e.g. Black Storks in Nissovo. Before 1990, abandoned fish farms provided a quiet place, rich in food, for the Black Stork. At present, however, fish farms are newly leased and consequently the number of bird pairs has halved. Human activities have resulted in a sharp decrease in the number of Egyptian Vultures from 10 nesting pairs to ca. 3-4 today. Among the reasons for this decrease are the visits of tourists and the closing of regulated waste dumps of the villages.

10 Lazarov S, 2012, Revision of Rusenski Lom Nature Park, Forests and Forestry Measures, Directorate of Rusenski Lom Nature Park

10 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Background and context

The following map shows the territory of the Nature Park and the intervention area:

N Ruse R u RUSENSKI LOM se n NATURE PARK AREA sk i L o m ri ve r Pisanetz

Koshov Nisovo

Cherven

Source: © Directorate of Rusenski Lom Nature Park

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 11 2. DESIGN

2.1. IDENTIFICATION OF THE TARGETED ECOSYSTEM AND ITS SERVICES

Rusenski Lom Nature Park is one of the 11 nature parks in Bulgaria included in the National Ecologic Network. Although it is relatively smaller than other nature parks (3,408 ha), this protected area generates economic benefits of more than 2 million euro annually, according to WWF and external experts' valuations. These include different ecosystem services provided by forests, grasslands and the biodiversity of Rusenski Lom Nature Park, such as food and fodder provision, water quantity and quality regulation, flood protection, carbon sink, recreational and educational value, pollination, etc.

Table 1: Annual value of ES provided by ecosystems in Rusenski Lom (in euro)

Section Division Group Description Euro Value

Cultural Physical and intellectual Physical and Eco-tourism 67,200 interactions with biota, experiential ecosystems, and land- interactions /seascapes

Regulation & Mediation of flows Liquid flows Flood protection 7,500 Maintenance Maintenance of physical, Water conditions Water purification 15,340 chemical, biological conditions Atmospheric Carbon sink by 2,321,570 composition and forests and wet climate regulation meadows

Provisioning Nutrition Biomass Fruits and wild 250 berries

Game 230,000

Materials Biomass Timber and wood 80,000

Fodder (hay and 66,000 fresh grass)

Note 1: Valuation by the Danube PES team based on CICES

This flow of environmental services directly benefits 35,000 rural inhabitants and 150,000 urban population, living in the urban area near the Nature Park – the city of Ruse. According to official statistics, each year Rusenski Lom Nature Park is visited by nearly 20,000 people. These generate an annual income of 67,000 euro for local economies but it is believed that this is rather a pessimistic value because there is no system for monitoring the number of visitors to the area and the number of tourists has been calculated only from official statistics. Interviews with tourism information centres in Ruse and Ivanovo, with hotels and tour operators show that the popularity of Rusenski Lom is growing, and so is the number of visitors and tourists.

12 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Design

The trend in the numbers of tourists shows that it will be even more difficult to exercise control over tourist activities in the area. Telephone interviews in 2010- 2012 on the types of tourist activities in the area revealed that all accommodation places rely on the aesthetic value of the area; however, 5 out of 12 respondents were not aware that their tourism services might have a negative impact on habitats and the biodiversity. Such services include providing ATV riding in the Park, accessing nests of birds, using trails passing close to bird nests. 8 out of 12 respondents were ready to invest money on their own in developing eco trails, and 6 of them were not familiar with the fact that they had to coordinate this with Rusenski Lom Nature Park Directorate.

Biodiversity and landscapes provide conditions and opportunities for different forms of tourism, such as bird-watching, cave exploration, rock climbing, water tourism, etc. Also the 3 cultural and historical sites in the area are major assets for the tourism industry. Yet, tourism businesses do not invest any part of their income into the management of these assets, in spite of their key role.

2.2. IDENTIFICATION OF THREATS AND RISKS TO THE ECOSYSTEM (AND ITS SERVICES)

The rationale for focusing on cultural services is:

(1) There is mounting pressure on the integrity of habitats and biodiversity related to the growth of tourism in the region

It is difficult to obtain an accurate estimate of the number of tourists in the area as there are no comprehensive official statistics. The Nature Park does not have a system for counting and monitoring the number of tourists; local accommodation places do not provide correct information (for costs and tax-related reasons) to municipalities on the number of tourists staying with them officially. There are even places that provide accommodation but are not formally registered at all. The only data on the tourist flows in the area can be obtained from the Regional Museum of History (RMH), whose administration is responsible for the maintenance of the historical sites in Rusenski Lom. According to data from the RMH, the number of visitors to the Ivanovo Rock Churches and the medieval town of Cherven in 2011 was 9,597 tourists. This figure is 56% larger than the number of visitors in 2005. The chart below provides information on the growth in the numbers of tourists in the period 2005-2011.

Annual number of visitors of Ivanovo Rock Churches

15000

10000

5000

0 2005 2006 2007 2010 2011

*2007 Data cover Jan-Sept, Source: Ruse Regional Museum of History

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This data covers only organised groups visiting the historical sites in the area. It does not cover visitors from Ruse and Bucharest (the capital of Romania) for rock climbing, biking and hiking, water-sport lovers and other individuals who camp in the Nature Park.

In order to obtain reliable information on the number of tourists, the Danube PES project team also conducted interviews with 6 local accommodation places and the local municipalities11. According to the information provided by accommodation places, they hosted 4,335 tourists in 2011. In comparison, Ivanovo Municipality, where 3 of the interviewed accommodation places and the two historical sites are located, reported 19,957 tourists in 2011. This considerable difference in the number of tourists causes uncertainty in the analysis. It can later affect the PES scheme, as visitors and tourists to the pilot area are among the target buyers of ecosystem services. This is also problematic for the assessment of the natural carrying capacity of Rusenski Lom for tourism, which in turn is relevant for the intervention measures needed to mitigate the impact of tourism.

Furthermore, information on the number of tourists was found in the regional statistics provided by the Ruse Tourism Information Centre and Ruse Municipality; according to this data, more than 500,000 tourists visited the city of Ruse in 2011. However, it was not possible to obtain information on the share of the people who visited the Nature Park. Our (pessimistic) assumption after discussing the issue with the Ruse Tourism Information centre is that at least 5% (25,000 tourists) visited the Nature Park.

The main pressures on biodiversity resulting from unregulated tourism at the moment include:

• Disturbance of wildlife Loud noises, improper tourism practices, such as coming close to bird nests during breeding and nesting, and the large number of visitors are the main irritating factors for animal species, especially bird species. In some cases, these disturbances are due to the limited capacity of the visited place, while in others, visitors are simply not well-informed about the impact of their behaviour. Such problems have been observed in places intensively visited by tourists, such as historical sites, tourist shelters, rocks and caves. The mid-term progress review of the Danube PES project points out that the pilot site has a small but important breeding population of Egyptian Vulture (Neophron percnopterus), which is listed as globally endangered12 and sensitive to visitor disturbance. The Park also has other breeding species listed under the EU Birds Directive, which are similarly sensitive to disturbance during the nesting period, e.g. Black Stork (Ciconia nigra). Unfortunately, although there is a Management Plan for the Park, it is very basic and there are virtually no resources for its implementation, including the adequate management of visitors. Many of the trails are known to pass close to breeding sites of these birds.

• Contamination with waste by tourists Not surprisingly, there is no waste management system in Rusenski Lom because it is a protected area and the access of vehicles is restricted. Inside the Park, every tourist should collect their own waste. Although there are information boards instructing tourists on waste disposal, pollution with various waste produced by tourists is a common problem in the visited areas.

11 The WWF team is deeply grateful to the District Governor of Ruse (2011), whose Administration supported us in collecting data on tourism from local municipalities. 12 http://www.birdlife.org/datazone/speciesfactsheet.php?id=3371

14 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Design

(2) Control over tourism is insufficient but difficult to exert

The geography of the area allows easy access to almost all areas of the Park. This becomes a problem when compounded by (a) the low level of communication (dialogue) between the Nature Park Directorate and accommodation places, (b) the lack of staff within the administration of the Directorate for specifically facilitating these relations, as well as relations with farmers, bee-keepers and other users of the area. At the same time, the contribution of the Directorate to creating conditions for eco-tourism development should be acknowledged: the Directorate implemented several EU-funded projects for developing trails, shelters, information boards and markings. This is a good attempt at managing and informing the tourists in the area but it is not sufficient – it is also necessary to appoint an employee in the Directorate who will communicate exclusively with tourists and tourism businesses to provide different services, helping to mitigate the impact of tourism on biodiversity and habitats. This includes, among others, services of guiding and training/coordinating local guides, awareness-raising, as well as establishing and maintaining liaisons with the sector and relevant stakeholders in general.

(3) There is limited state funding to support running conservation costs

The Directorate of Rusenski Lom Nature Park is responsible for the management, protection, conservation and restoration within the Nature Park. The regimes of use and management of Rusenski Lom Nature Park are regulated by the Protected Areas Act and the Management Plan for the Nature Park.

The Park has developed a business plan on sustainable tourism, including marketing and advertising policies. However, annual state funding is not sufficient to cover the conservation needs of the area, including management and monitoring of tourist flows. The Directorate has done a lot to create conditions for tourism but this effort has been supported mostly with external funding, which finances activities within a limited project timeframe. It is difficult to maintain trails, marking and tourism infrastructure because of the limited state funding and frequent damage to the infrastructure (vandalism, destruction and theft of boards, benches, and shelters). According to a series of interviews with the Director, Mr. Milko Belberov and the main expert, Mrs. Tzonka Hristova, the annual state budget is sufficient to cover only 1/3 of costs of the conservation activities envisaged in the Management Plan. In 2010, the financial resources (without salaries) on conservation measures as allocated by the state to the Directorate of Rusenski Lom Nature Park amounted to approximately 10,000 euro, i.e. about 3 euro/ ha. This amount is extremely small, given the great variety and number of biological species and ecosystems demanding different management (conservation) activities all year round. Estimations show that roughly an amount of 40,000 euro per year is required to cover only the management of the tourist flow in the pilot site.

(4) There is no economic instrument for mitigating/ decreasing the impact of tourism on ecosystem services in Rusenski Lom

There is a variety of EU funding tools effective in Bulgaria, but few of them address the impact of tourism on nature. Operational Programme “Environment” supports conservation activities but does not provide long-term funding.

WWF has been working on PES in the area since 2006. In all projects dealing with economic tools for nature conservation, tourism was identified as one of the key sectors to be involved in the management of the protected area. In 2008, the local coordinator of WWF facilitated the establishment of a local NGO,

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 15 Design

the Nature Tourism Association, by local tourism developers. One of the goals of the NGO is to support and promote nature-responsible tourism. In the course of 2 years, the coordinator supported the NGO in developing project proposals for funding the start-up costs of a small scale payment scheme. The scheme was intended to generate funds for nature conservation and mitigation of tourism-related impact on habitats and biodiversity. Part of the scheme envisaged the collection of PES by means of selling promotional materials. However, the use of the donor's funds for producing materials for sale was considered as an income-generation activity, although the income would not profit the applicant. This was the main reason why the project proposal evaluators rejected the project.

The scheme currently developed under the Danube PES project is based on this experience and brings together members of the Nature Tourism Association and other tourism entrepreneurs with a common awareness of the need to create a privately-generated fund for targeted conservation activities enhancing the aesthetic and biodiversity values for tourism. This leads us to the next reason.

(5) There is no link between the users of natural capital and the costs related to the sustainable management of the natural capital in Rusenski Lom

Users include businesses ranging from farmers to forestry and tourism entrepreneurs. While some forestry activities provide financial resources for forestry sustainable practices, agriculture and tourism do not re-invest any part of their profits in the conservation of natural capital, to which they owe significantly for their financial gains. This financial gap contributes significantly to the loss of biodiversity in the area. Currently, 15 accommodation places are operating on the territory of the Nature Park. There are also several NGOs based in Ruse specialising in adventure and eco-tourism. These entities also benefit from Rusenski Lom thanks to the opportunities the Park provides for various forms of tourism – rock climbing, canoeing, cave exploration, bird-watching etc. Most of these businesses, when asked, acknowledge that their profits depend on the nature of Rusenski Lom and are willing to invest into maintaining its value.

(6) There is no awareness of ecosystem services among potential buyers and other local stakeholders

The term ecosystem services has been very difficult to understand by local stakeholders. A good understanding of this somewhat complex concept was achieved only after numerous interviews, meetings and workshops held locally for different target groups – farmers, fishermen, tourism developers, NGOs, public administrations (Nature Park administration, local governments, and agricultural extension services) – between 2010 and 2012. For example, during a workshop on presenting the values of the area organised for local journalists, the participants were not aware of natural functions or of any economic instrument (including carbon deals) for investing back in nature. In this context, cultural services are more easily understood by local stakeholders than other ecosystem services. They are considered as an entry level of the PES approach in the area.

16 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Design

To tackle these problems, on the basis of the pre-feasibility studies the Danube PES team decided to design a payment scheme to enhance aesthetic and biodiversity values of Rusenski Lom Nature Park, linking the users and providers of these services into a mutual partnership.

Figure 1: The process of developing PCES in Rusenski Lom

Are aesthetic Yes, aesthetic Can we values of Are targeted values of grass- Yes, they are identify the grasslands and ecosystem lands and the threatened by supplier and biodiversity in 1 services 2 biodiversity of 3 4 unsustainable 5 users of the Rusenski Lom defined? Rusenski Lom tourism. ecosystem under threat from Nature Park. service? human activities?

The supplier is Yes, clear Does the Yes. One of the the Directorate evidence for demand indicators is the Can we assess of Rusenski this has been side have an loss of income the losses caused Lom Nature Park. provided by 10 interest in 9 for the tourism 8 by unsustainable 7 The users are 6 local tourism stopping sector, valued tourism? local tourism businesses. the threat? at 67,000 businesses euro/year. and tourists.

Is there a legal The existing There are Can we identify requirement environmental Are there available funds and quantify for the demand legislation does available funds but not really measures for 11 side to engage 12 not address 13 for addressing 14 addressing 15 protecting in addressing unsustainable threats/ risks? unsustainable aesthetic the threat? tourism. tourism. values?

Work with Yes. According stakeholders to to estimations, indentify the the measures payments for incur running aesthetic values 17 costs of roughly 16 and apply a PES 40,000 euro deal in Rusenski (capital costs Lom Nature Park. not included).

Note 2: Based on the PES process under the Danube PES project. See the Annex, Todorova M. and Martini M.2012.

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 17 Design

2.3. P ES AS A SOLUTION TO THE BIODIVERSITY PROBLEM

The goal of this PES scheme is to enhance the protection and maintenance of the aesthetic value and biodiversity wealth of Rusenski Lom Nature Park through active involvement of the

2.3.1. AREA TO BE COVERED BY PES The area of the scheme covers the whole territory of Rusenski Lom Nature Park (3408 ha). However, several spots are more intensively used for tourism in the Nature Park. These locations will be the focus for the planned intervention. PES intervention areas include:

• Ivanovo Rock Churches – this is a famous tourist site of global significance, included in the UNESCO World Heritage List. A large number of tourists visit to Ivanovo Rock Churches every year. 9,500 people visited the churches in organised groups in 2011.

The rocks of Ivanovo Rock Churches are a nesting place for vulnerable bird species, such as the Eagle Owl, the Red-footed Falcon and the European Roller. All of them are exposed to noise and close visits by tourists. Another problem is the collection of flowers by visitors, ignoring specific prohibitions.

Ivanovo Rock Churches are the exit/entry point to one of the eco-trails which links the Churches with two other settlements – Koshov and Nissovo. These trails go along the river of Rusenski Lom. Currently, they are in a very bad state, which leads tourists to look for alternative ways, not knowing that they are threatening wild species. It is extremely hard to monitor and control these damaging practices. One solution could be to restore the existing trails. Alternatively, it is also possible to define and develop another route for tourists, which will mitigate the impact on the biodiversity and habitats.

• Cherven is a well-known destination by tour-operators because of the Medieval Town. The main problems here are similar to the ones in Ivanovo Rock Churches. Firstly, many tourists drop their litter in improper places. Secondly, one of the trails to the archaeological monument is increasingly eroded, causing a bad effect on the landscape. Thirdly, the wet meadows are degraded due to uncontrolled and non-regulated use by visitors for picnics. Fourthly, for budget reasons meadows are not mown even once a year. Most of them are overgrown with shrubs and ruderal plants. To solve this problem, the experts from the RLNPD suggest that instead of using the riparian meadows for picnics, the meadows farther from the river should be maintained for tourist activities.

• The village of Nissovo is one of the entry points to the Park. There are a few trails starting from Nissovo: one connecting it with the village of Pisanetz; a second one leading to a history and culture site – the Great Monastery of Nissovo; a third going to Svalenik village; a fourth one, which is a dendro-trail, passing close to a fishpond and leading to a 600-year old tree (the Ancient Elm tree13). The trails to the Elm tree and the Great Monastery are especially

13 Due to natural forces the Ancient Elm Tree fell in May 2013. The Nature Park Directorate is planning to keep the trail and conser ve the Elm tree.

18 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Design

sensitive. Indeed, they pass very close to the nests of Black Storks and the Egyptian Vultures. Furthermore, Nissovo attracts an increasing number of tourists, including bird-watchers. For the moment, most bird-watching groups are guided. However, it is necessary that all the people are guided to avoid disturbing the animals.

• Pisanetz – at this site, pressure comes mainly from camping and fire-lighting on wet meadows along Beli Lom River. It is especially difficult to control these disturbances because of the easy access to the area. In most cases the implicated people are non-organised visitors to Rusenski Lom. Moreover, a Pisanetz guest house offers off-road trips in the Nature Park, which have an extremely negative impact on the flora and fauna in that area of Rusenski Lom. This practice should be stopped but a penalty will probably not work in this case. It is important, therefore, to think of a wider solution. For instance, the Ministries of Environment and the Economy could work on conditioning licenses for tourism operators and accommodation places active in protected areas upon good practices/ norms or regimes. With a more restrictive regulation like this, the situation can change.

During the pilot phase, the above sites form the intervention area of the scheme for payments for cultural ecosystem services. It comprises approximately 10% of the Park area.

2.3.2. POTENTIAL BARRIERS FOR IMPLEMENTING PES There are several issues which might prevent a successful PES scheme:

• The lack of a normative act stipulating the legal conditions for setting up mechanisms for payments for ecosystem services. Ecosystem services and PES are only mentioned in the Forestry Act. However, there is no clear legal definition of these new concepts. Under the Danube PES project, the team has started working on incorporating the terms ecosystem services and PES into policies, even if so far there is no experience with PES at the national level. Hence, there is no legal framework and/or document regulating the rights and obligations of buyers and sellers of ecosystem services, as stipulated in Wunder's definition (2005).

• The management of revenues by the Directorate of Rusenski Lom Nature Park following EFA regulations and the resulting uncertainty about the possibility of using this revenue for implementing a PES arrangement. Indeed, if it is not expended within the same period when generated, the income of the Directorate of Rusenski Lom Nature Park should be transferred back to the Executive Forest Agency account. Spending the annual income in such a short period is not possible, as the measures that are part of the scheme include restoration and maintenance activities of grasslands and trails, as well as species protection. These measures can be implemented starting in early spring. The PES should be accumulated in order to allow for utilizing this income for the purposes of the scheme. It is necessary to think of a solution to this situation or buyers may not be willing to enter into a PES agreement.

• The tax treatment of costs and benefits associated with the implementation of the scheme on both the providers and buyers of ecosystem services reflects on the financial framework of PES. There is no specific legal framework dealing with the treatment of costs for and benefits from nature management. This limitation/omission may create reservations among potential buyers and

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 19 Design

providers of ecosystem services. In the case of Rusenski Lom Nature Park, accommodation places and tour operators/agencies are the potential buyers of the cultural ecosystem services. These businesses are usually legal entities registered under the Trade Act and their main activity is tourism. Costs for environmental services, such as aesthetic and biodiversity values cannot be justified as related to their main economic activities. Therefore, these costs will not be deducted from the tax base and will increase the tax burden on the potential buyer.

On the side of the provider, the Directorate of Rusenski Lom Nature Park, the income will be subject to revenue tax.

This can be problematic, especially at the beginning of the scheme implementation, when the amount generated is still very small. • Collection of income According to the proposed PES scheme, payments are accumulated by applying a percentage on the income gathered from accommodation or other services provided by tourism entrepreneurs in the pilot site. However, some providers of tourism services are not officially registered, while others do not report officially all of their income. This can be pose problems for the proper functioning of the scheme.

2.3.3. PAYMENTS FOR AESTHETIC AND BIODIVERSITY VALUES AND UNREGULATED TOURISM The purpose of the scheme is to involve as many users as possible benefiting from the aesthetic and biodiversity values of Rusenski Lom. Income generated by these users will be applied for the management of visitors' behaviour in the Park and for conservation activities that will prevent further degradation of biodiversity caused by tourism. This can be reached through the promotion of "responsible" tourism. The scheme for payments for cultural ecosystem services in Rusenski Lom considers tourism “responsible” when recreational activities are conducted taking into account the natural carrying capacity of Rusenski Lom ecosystems and are practiced with respect to natural processes and biodiversity (finding a habitat, breeding and feeding). Responsible tourism requires coordinated and joint actions by the protected area manager and tourism entrepreneurs to prevent the impact of tourism on nature through awareness-raising and investment back into protecting, maintaining and restoring aesthetic and biodiversity values for tourism and recreation.

In this pilot area, it is a priority to raise the awareness of local tourism entrepreneurs of the ecological sensitivity of Rusenski Lom Nature Park to their business activities. Next, there is a need for better coordination and cooperation between the Directorate of Rusenski Lom Nature Park and the business sector to change the behaviour of visitors. The establishment and development of this link could be facilitated by the WWF. Actions that can change tourists' behaviour and mitigate their impact are:

• Maintenance of land and water trails with a minimal environmental impact on ecosystems and the biodiversity

• Protection/ restoration of semi-natural grasslands

• Protection of emblematic species of value for tourism – Egyptian Vulture, Black Stork, Corncrake, and European Ground Squirrel.

20 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Design

• Training of local guides

• Marking and installation of information boards. These activities are considered as the most urgent to undertake in the short run. However, they do not exhaust the list of measures required for efficient protection of the ecosystems.

Monitoring the implementation and effectiveness of measures is an essential part of the scheme. Therefore, the generated future payments should also secure sufficient funding for monitoring activities.

To enable the implementation of the PCES, it is also necessary to address the barriers described above by:

• Developing a document – a contract or an agreement – which will bind the parties and will support the implementation of PES. The legal document should also take into consideration the legal status of all parties concerned and their possibilities for income generation.

• Appointing a manager of the scheme who will operate with the revenues generated in a timely and accurate manner, without being limited by the procedures of the EFA. The logical partner for this task is the non-profit association of the Directorate of Rusenski Lom Nature Park. This NGO is called “Friends' Club of Rusenski Lom Nature Park” (FCRLNP) and was established by the Directorate of Rusenski Lom Nature Park, who manages the territory of the pilot area.

• Identifying legal possibilities for lowering the tax burden on the scheme – for example, Bulgarian legislation allows companies to donate up to 10% of their income before taxes to NGOs registered in the public interest (tax shield). In the Rusenski Lom pilot area, this will not be possible if the Directorate, a state unit, is to be the seller. Indeed, the NGO “Friends' Club of Rusenski Lom Nature Park” is registered in the private interest and falls out of the scope of this legal donation scheme. However, this situation could evolve as the Bulgarian legislation for non-profit organisations allows the change in the status from private into public interest – the only requirement is a decision in writing by the founders and members of the Association. In any of the above cases, it is necessary to lower as much as possible the tax burden on the newly established scheme. At the same time, it is important the scheme is transparent and clear to the buyers and revenue authorities.

• Identifying a mix of payment collection tools, such as selling specially developed marketing materials (post-cards, bags, etc.), in order to ensure an optimal level of income.

A logical framework of the scheme is presented overleaf.

2.3.4. LOGICAL FRAMEWORK OF THE SCHEME

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 21 fect the biodiversity – fects the biodiversity and , as well illegal activities such payment scheme to enhance the aesthetic ourism negatively af ourism developers in Rusenski Lom Nature ourism developers are willing and ready to T T T There are enough payments to undertake A All conservation needs are defined A: grasslands in Rusenski Lom Nature Park A: Park realise the need to maintain biodiversity A: participate in a payment scheme A: and BD values in Rusenski Lom can prevent further degradation and loss of habitats/ BD caused by tourism A: R: Climate change may af beyond the capacity of scheme R: Other economic activities, such as agriculture, forestry poaching, collection of birds eggs, etc. may also impact ecosystems and BD, beyond the capacity of this scheme R: Withdrawal of business partners from the Agreement because of loss interest, financial complications, etc. A: All amounts collected will be spent specifically for the PCES in Rusenski Lom A: “Friends' Club of Rusenski Lom Nature Park” has the capacity to manage private funding for conservation activities A: conservation activities Risks and assumptions Agreement, Partnership agreement, Annual conservation plans Budget spending Partnership Annual conservation plans Budget spendings Contracts Monitoring reports Public report, including internal reports Annual conservation plan Means of verification ulture, Agreement ha of pastures (grasslands) maintained, habitat of the European Ground squirrel Indicators 3408 ha included in the scheme 4 key species covered by the scheme – Black Stork, Egyptian V Corncrake, Ground Squirrel 545 ha of grasslands restored/ maintained No further decrease in the population of 4 key species due to tourism activities 52 km of ecotrails with lowest impact on the BD developed, maintained and monitored 10 tourism enterprises signed Partnership 52 km of low impact eco trails maintained no change in the number of 4 species - 6 pairs of Balck stork, 1 pair of Egyptian vulture, 12 adult individuals per ha of European ground squirrel 10 ha of grasslands maintained, habitat of the Crex 200 12 information boards o enhance the protection and o generate funds from users maintenance of the aesthetic values and the biodiversity of Rusenski Lom Nature Park through introduction of a scheme for payments cultural ecosystem services of the aesthetic and biodiversity values of Rusenski Lom for visitors control and conservation activities that will prevent their further degradation from tourism T T The PCES in Rusenski Lom supports targeted conservation activities contributing to the restoration and improvement of the aesthetic and BD values in Rusenski Lom Logical Framework of the PCES in Rusenski Lom Goal Purpose Output 1 Description able 2: T

22 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 ficient for training ulture and Black Stork oo high monitoring costs value of Rusenski Lom Nature Park the negative impact of tourism on populations of Egyptian V T Amounts collected are not suf The NGO has the capacity to develop The NGO will act responsively to annually The NGO has the necessary equipment to These measures will enhance the biodiversity The Management Plan of Rusenski Lom provides This measure will ensure the minimization of Risks and assumptions A: conservation plans A: update the plans A: А: R: R: implement the measures for maintaining eco-trails A: correct information on trails of low impact to the biodiversity А: local guides R: Local guides do not have the capacity for guiding foreign tourists

ACP) Annual conservation plans Means of verification Report on the impact of eco-trails on the BD (biologists and ornithologist) Monitoring reports (for implementation of the Reports on birds/ Ground Squirrel counting by the Directorate experts – at least no change in the number of individuals/ pairs Report on number of species by an independent expert Protocols of training Feedback from hotel/ guest house owners and tour operators on using trained guides Contracts Reports Recommendations for improvement ensuring minimisation , ulture during the nesting period Indicators 1 person, part-time, from the NGO “Friends' Club of Rusenski Lom Nature Park” responsible for developing/ updating the plan At least 2 people hired part-time to maintain eco-trails, marking and to fix info boards At least 3 eco-trails maintained, provided with information boards and marking 12 boards/ 6 entry points to the Park area installed At least, no change in the number of species 1 part-time person responsible for guarding the nests and feeding of Egyptian V 1 part-time person working with fishpond managers to prevent damages to the population of the Black Stork 1 part-time person working with/ supporting farmers to encourage traditional mowing/ grazing practices to help stop the loss in the populations of Corncrake and the European Ground Squirrel At least 8 local guides trained 1 independent biologist/ ornithologist hired to monitor the impact of scheme, hired annually of tourism impact on species ulture, Black Stork, Corncrake rain local guides in guiding tourists and managing tourist flows in the Park Develop and update an annual conservation plan Define, maintain and mark eco-trails with low impact to the biodiversity Sustain the populations of 4 key species – Egyptian V and European Ground Squirrel – in Rusenski Lom T Monitoring the impact of conservation activities Logical Framework of the PCES in Rusenski Lom Activity 1.1 Activity 1.2 Activity 1.3 Activity 1.4 Activity 1.5 Description able 2: T

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 23

fect the volume - - - - The global economic crisis may af the financial viability of scheme

Appropriate instruments/ ways of collecting the payments have been developed ------Risks and assumptions A: R: R: Potential beneficiaries are not willing to pay of funds collected annually R: Other economic activities may also impact ecosystems and BD beyond the capacity of this scheme -> withdrawal of business partners A: Willingness to pay is correctly assessed A: It is necessary to diversify income sources ensure

The payments are transferred to the account defined for PCES every three months Annual budget as approved by the SC Annual financial report Annual budgets approved by the SC Fundraising plan, including attraction of partners Agreements or annexes to the existing agreement Financial reports Independent financial report Means of verification Bank account operations and financial reports Materials produced and distributed to partners EUR generated under EUR invested in activities Indicators 10,000 the Scheme 10,000 of the annual conservation plan At least 3 types of instruments introduced to collect PES 1 financial manager responsible for the preparation of annual budgets 1 person responsible from the NGO At least 3 new partners in the next 5 years attracted, maintaining current partners 1 financial manager 1 independent financial expert to assess the financial viability of the scheme Financial manager Partners reporting money accumulated at least every 3 months 2000 post cards/year 1000 bags/ year The PCES scheme in Rusenski Lom is financially viable, ensuring long-term sustainability for implementing the conservation and monitoring objectives of the scheme Develop and update annual budgets Ensure timely and accurate accounting of accumulated financial resources Ensure the availability of materials as a form of collecting PES Attract new partners to support the scheme in order to improve financial viability of the scheme and/ or diversify funding sources Financial monitoring Logical Framework of the PCES in Rusenski Lom Output 2 Activity 2.1 Activity 2.2 Activity 2.3 Activity 2.4 Activity 2.5 Description able 2: T

24 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 - - - The developed site is not widely known to the public Amounts collected are enough to cover conservation ------Risks and assumptions needs but not information R: R: Internet site/ Facebook Reports uploaded/ copied Mailing list and semi- annual newsletters distributed Internet sites and relevant documents Protocols of the meetings of the SC Decisions taken – approved documents Internet site/ Facebook Reports uploaded/ copied Semi-annual newsletter Means of verification 1 internet site/ link to a site updated at least once a month All financial, technical (conservation) reports and documents of the scheme can be accessed on site and virtually in the national English language All supporters receive a 6-month update on the amounts collected Indicators 1 internet page/ profile in a social network 1 person from the NGO responsible for maintaining the site Semi-annual newsletters Supporters database 1 part-time person from the NGO, responsible for carrying out annual SC meetings Develop and maintain an internet space of the scheme, accessible for everybody Develop and distribute semi-annual newsletter to all possible supporters of the scheme Carry out regular meetings of the Steering Committee, at least once a year for reporting the progress and planning next year The PCES in Rusenski Lom is a transparent instrument, clear to all the relevant stakeholders as well as policy/ decision makers, scientists and the wider society Logical Framework of the PCES in Rusenski Lom Output 3 Activity 3.1 Activity 3.2 Activity 3.3 Description able 2: T

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 25 3. PES IMPLEMENTATION

Work in progress thus far includes: - Development of a legal and operational framework - Development of a financial framework - Development of a monitoring and reporting framework

3.1. LEGAL FRAMEWORK

The PES scheme is based on a Framework Partnership Agreement (FPA), which constitutes the legal and operational framework for both sellers and buyers of the service. The development of the Agreement was coordinated with the Directorate of the Nature Park and the Friends' Club. The Agreement was prepared by a private legal consultant in coordination with the Danube PES team. It provides the conditions under which the provision of services is ensured, the allocation of funds and operational and financial monitoring protocols. The Agreement is established between two main parties: • the seller, who also manages the scheme, and • ten buyers – small- and medium-sized enterprises and NGOs developing tourism on the territory of Rusenski Lom Nature Park

WWF plays a facilitation role in the first 3 years of the scheme as stipulated in (one of the clauses of) the Agreement. The NGO is considered a special member of the Steering Committee. It has the right to exercise a casting vote in case of contradictions and/or disputes among the members of the SC of the scheme in matters regarding conservation targets and prioritisation of spending.

3.1.1. SELLERS “Friends' Club of Rusenski Lom Nature Park” is the seller of the service. The Club is a non-profit private organisation, established in 1998 to support the implementation of the Management Plan for Rusenski Lom Nature Park. One of the main purposes for establishing the Club was to enable the Directorate to access external funding (non-state). The Club has gathered considerable experience in developing and implementing conservation and sustainable development projects on the territory of Rusenski Lom and in the Lower Danube river basin. It is well-known in the conservation community in Bulgaria. Its reputation among local stakeholders and partners is good, with a high level of credibility. The Club is also a partner of the WWF in the Danube PES project. Before this project, the Club had little awareness of PES. Now, their understanding and capacity has increased, and the Club is really interested in the scheme for payments for cultural ecosystem services. Jointly with the Directorate it was involved in the design of the PES scheme, particularly regarding legal matters, financial issues, development of conservation measures and promotional materials. Although well qualified to carry on managerial activities, additional support should be provided to the Friends' Club in the early stages of the PES scheme.

The Club will manage the scheme. It is a signatory of the legal document as one of the parties. In its capacity as a seller, the Club is responsible for the development

26 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 PES implementation

and submission of an annual conservation programme and budget (to the sellers) for approval by the steering committee.

The Club is also responsible for opening a bank account to be specifically used for the purposes of the PES scheme. It will be allowed to use the money accumulated after the approval of the Steering Committee according to the conservation priorities identified in the conservation programme, and then organise the implementation of the activities paid for. The Club also has various administrative responsibilities – organising the steering committee meetings, taking notes and producing memos of the SC meetings. It is also accountable for organising independent financial and environmental monitoring.

The Club is able to allocate staff – a coordinator of the scheme, a financial manager and an ecologist to support the implementation the PES scheme. Their remuneration is a percentage of the money collected – this will help to lower to a minimum the administrative load on the scheme, at least initially.

3.1.2. BUYERS The buyers of services are the tourism business developers in the area, including NGOs registered in the public and private interest, hotels and guest houses, tour operators and agencies. The Danube PES team identified 8 partners to be involved in a PES scheme. They have different legal status but all of them operate on the territory of Rusenski Lom Nature Park. These include 4 small enterprises offering bed and breakfast, located in the villages of Rusenski Lom Nature Park (Nissovo, Ivanovo, Koshov and Dve Mogili), 1 tour operator from the town of Tutrakan (out of the Nature Park but bringing organised tourists to the area) and 3 non- governmental non-profit organisations specialised in adventurous and eco-tourism, all of them registered in Ruse. WWF has been working with most of these partners since 2007. They have also been familiar to the Directorate and the Club. WWF has played a facilitation and capacity building role on both sides – the conservation community of Rusenski Lom and tourism businesses, so the links between the Directorate, the Club and the accommodation places have been further developed.

According to an assessment conducted by WWF these parties have the willingness and capacity to enter into a PES scheme. There are some challenges that will have to be confronted as part of the development of the scheme. These include expectations of immediate tangible benefits prior to a commitment to invest in the costs of the operation. It has been established, however, and is clear to most of the partners, that it is not possible to implement all activities without considerable initial funding.

Payments are currently collected in small amounts to supplement other funds managed by the Club. In this way PES ensures the continuity of funding after the external donors' money is over. The following PES-generation instruments are used as part of the provision of cultural ecosystem services:

• Promotion of information materials – post cards and bags. The amount for these is fixed. The generated income will be entirely used for targeted conservation activities defined in the conservation programme, after reducing production costs.

• An add-up/ charge over the standard price of tourist services or packages, between 1 and 5 per cent. This is a voluntary fee paid by the tourist.

• Donations to the funds to be spent entirely on the maintenance and protection of ecosystem services.

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 27 PES implementation

3.2. FINANCIAL FRAMEWORK OF THE SCHEME

Following a series of consultations with stakeholders and the revenue authorities, the team developed several models of financial flows from the perspective of the seller and buyers. Different forms of collecting the payments (PES) were considered and examined by tax authorities and a financial consultant. Finally, an operational structure showing the money flow was developed. In this operational structure, the Friends' Club of Rusenski Lom Nature Park as the manager of the scheme (seller of ES) provides promotional materials for sale to the business partners. The generated income is used exclusively for funding the management and conservation of aesthetic and biodiversity values for tourism. Promotion materials are sold at the accommodation places belonging to the partners and by tour operators who are signatories of the Partnership Agreement. Alternatively, they can charge from 1 to 5% over the standard price of tourist services offered, with the knowledge and consent of the customer.

Figure 2: Operational structure of Rusenski Lom PCES

Friends of Rusenski Lom Nature Park 5 Protect nature's benefits in Rusenski Lom

Provide materials Manage Photo 1 4 for sale income © Alexander Ivanov Business – partners Bank account

Hotels, guest houses and other Transfer income 3 to the bank Rusenski Lom Nature Park Tour operators, tourist companies account

Consumers Sell materials and/or apply charge per night/product (eco-charge) 2 Tourists and visitors

Source: Todorova M., 2012

28 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 PES implementation

3.2.1. VALUE OF THE SERVICE The value of the service subject to this PES scheme is estimated taking into account the cost of the activities designed to mitigate the impact of tourism on grasslands and their biodiversity. The following activities are stipulated in the Partnership Agreement:

• maintenance of water and land tourist trails with a minimal impact on the biodiversity,

• marking and installation of information boards, • training of local guides, • activities for the conservation of natural habitats, natural formations and species.

Monitoring (internal and external) and administration costs of the scheme are also included in the value of the service.

The total value of the service amounts to nearly 46,200 euro (average annual value). (See Table 3 below).

Table 3: Estimated annual average running costs of the Rusenski Lom PCES scheme for 10 years Cost item Average Sources of funds annual cost* (Euro)

Maintenance wet meadows 9,296.76 Agri-environmental payments, NRDP Maintenance pastures 65,077.31 Agri-environmental payments, NRDP Feeding of Egyptian Vulture 11,109.18 PES Protection of nests of Egyptian 3,949.93 PES Vulture and Black Stork PES Maintenance eco-trails 2,286.89 PES Marking 114.34 PES Fixing boards 623.29 PES Printing costs (postcards) 4,868.06 PES Re-production (bags) 12,170.14 PES Telephone costs 137.21 PES Working clothing 411.64 PES Fuel 308.73 Oil 11.43 PES Other costs 343.03 PES Internet information 228.69 PES Biologist/ Manager 3,430.33 PES Financial expert 857.58 PES Monitoring/ ornithologist 2,058.20 PES Monitoring/ subsistence 457.38 PES

Total cost 117,740.14 Total cost excl. EU funding 46,199.35

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 29 PES implementation

The estimated annual costs listed above are the average for a 10-year period. They represent only running costs of the scheme for implementing the measures. The maintenance of grasslands (positions 1 and 2 in the table above) can be covered by European funds. Two payment schemes under the National Rural Development Programme, Axis II, could be used to cover these costs: payments for high-nature value farmlands (Measure 214, Agri-environmental payments) and compensatory payments for farmlands in Natura 2000 (Measure 213), both available to farmers. These costs, therefore, should be excluded from the value of the service to avoid double funding for the same measures. Subtracting these costs from the total gives the average value of the service per year over a 10-year period. However, it should be acknowledged that some of the grasslands in Rusenski Lom are not managed at all or are not managed by farmers, and this is where the Directorate and the Club should engage to ensure the good conservation status of these lands. These costs should also be taken into consideration in the future implementation of the scheme.

Capital investment is not included in the table above. Equipment needs have been identified by the Club and the Directorate and include mowers, motor cutters and even heavy equipment to be used for cleaning water ways for tourism and removal of solid waste. These could be covered by European Union funds. For example, the Operational Programme “Environment” provides many opportunities to the directorates of nature parks for building and improving their technical capacity. That is why these costs are not included in the financial scenarios.

3.2.2. FINANCIAL SCENARIOS The costs above are compared with the possible income to be generated under the PES scheme. The income will be generated through:

• sale of post cards valued at 1 euro per piece • sale of bio-cotton bag valued at 5 euro per piece • add-up of 1-5% over the standard price of tourist service/ package.

The calculation of the expected income is based on nearly 17,700 tourists, representing approximately 88% of the total number of tourists who visited Ivanovo municipality in 2011, under the following conditions:

• 60% of them could purchase a post card

• 20% of them could purchase a bag • 1% add up on annual income generated from accommodation places in 2011.

Table 4: Assumption of the allocation of individual buyers of PES by type of PES collection means Means of PES generation Value (per unit Share of tourists by or percentage) PES collection means

Post card 1 euro 60%

Bio-cotton bag 5 euro 20%

Add-up over the standard price 1% 100%

30 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 PES implementation

The team developed several financial scenarios showing financial flows if one or a combination of several options for collecting the payment is applied, for a 10-year period.

Applying only a 1% charge on the annual income from accommodation has no production cost but it generates the lowest possible income from users of aesthetic services. Annually this amounts to 627 Euro on average over a 10-year period. The net present value (NPV) of such a scheme is negative. The NPV in this scenario becomes positive when the charge over accommodation is raised up to 27%.

The income from selling bags to 20% of the tourists generates the highest income – an average annual amount of 22,312 euro for a 10-year period – but also the highest production costs (see the table of costs above).

Introducing only cards as an instrument for generating the PES is not sufficient for covering the costs of measures. The average annual income is approximately 13,300 euro and the net cash flows remain negative over the whole period. The analysis shows that it is necessary to apply a mix of means for collecting the PES. The best will be to combine cards and bags. This logically means that the Partnership Agreement should also include other providers of tourism services in the area but this is a process that should be further developed jointly by the partners who signed the Agreement. A full financial analysis of the scheme can be found in the Annex.

3.3. SUPERVISION AND MONITORING FRAMEWORK

The scheme of PCES in Rusenski Lom will be internally and externally supervised. Internally, the supervision is carried out by a Steering Committee (SC) comprising 7 members – 3 permanent and 4 selected on a rotational basis. Each member has one vote. The role of the SC is to watch closely the implementation of the scheme; to review and agree on an annual conservation programme, working plan and budget; to undertake corrective/adjusting measures to the scheme when necessary.

The SC will be chaired by the director of RLNPD. WWF also sits on this Committee as a special member. It has the right to exercise its special vote related to conservation activities and their budgeting in the first 3 years of implementation of the scheme (by 2015). Included in the Statute of the SC, this special right of the WWF is a mechanism for guaranteeing the targeted spending of funds. The SC meets once a year.

Externally the monitoring is organised by the Manager of the scheme. The monitoring covers conservation and financial aspects and is carried out annually. Monitoring of conservation priorities should be undertaken by an independent expert, preferably an ornithologist or a biologist. The monitoring must include a review of the conservation priorities and programme, and also field visits. The expert should provide a report on findings and recommendations for improvement.

The financial monitoring is normally performed by the civil servants of the National Revenue Administration, who will monitor both the sellers and buyers of the scheme. A report on findings will be prepared by the financial manager of the scheme, a part time employee of the Club.

All reports will be public, published on the internet site of the Club, www.lomovete.org.

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 31 PES implementation

Figure 3: Supervision and reporting framework of the Rusenski Lom PCES scheme

After signing the partnership agreement between the Club and the business partners:

NGO WWF Rusenski Lom Local authorities Business Rotation of the Casting vote in Nature Park Rotation of the Rotation of the representative the first 5 years Directorate representative representative

Established the Steering committee

STEERING COMMITTEE Accept/reject Every year proposes the annual work plan measures for protection of and the budget the nature benefits for the Observe tourism and prepare a the Club's work budget for the next year

Organize independent control and monitoring of the initiative Source: Todorova M., 2012

3.3.1. TIME FRAME The Partnership Agreement is the basic legal document of the scheme and will be initially valid for 5 years, after which it can be renewed. The Agreement may be terminated by mutual consent of the parties at any time, as well as in case of force majeure. It may be terminated by any of the parties unilaterally in case of systematic failure to perform their obligations.

The Agreement provisions the application of penalties for both parties in case of not reporting funds (for the business partner) or not implementing the budgeted activities within the annual conservation plan set (for the Club).

The Agreement gives an opportunity to add new partners on the buyers' side before the termination - it is only necessary to add them in an Annex to the Agreement.

The renewed Agreement may include a larger area, for instance the Natura 2000 area under the Bird Directive. Layering or bundling of ecosystem services from Rusenski Lom would be better addressed in separate agreements in order to better deal with the specifics of the agreement (in terms of buyers and sellers). Therefore the plans for carbon or water PES schemes would be best set in a separate legal document - please see Section 5 Next steps and recommendations.

32 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 4. RESULTS AND LESSONS LEARNED

The Partnership Agreement for PCES in Rusenski Lom as proposed by the WWF was signed on 11 December 2012.Source ©WWFThe signatories of the Agreement included 8 tourism developers working on the territory of Rusenski Lom, as the buyers, and the Friends' Club of Rusenski Lom Nature Park, as the seller.

Picture 2: Four of the eight partners, signing the Partnership Agreement before media

Source: © WWF

The eight partners who signed the Agreement are:

• Black Stork Hotel, located in Nissovo village, http://www.black-stork.com

• Edelvais Family Hotel, in Dve Mogili town, http://edelvais.biz/

• Kladenetsa Hotel, in Ivanovo village, http://hotel-kladeneca.com/

• Villa Angel, in Koshov village, www.vila-angel.com/

• Salvinia Travel tour operator and travel agency, located in Tutrakan, out of the nature Park, but bringing organised tourists to Rusenski Lom,http://salvinia.eu/

• Byala Zvezda Ruse Adventure Club NGO, located in Ruse, operating in Rusenski Lom, http://www.bialazvezda.com/

• Akademik Tourism and Nature Protection Club NGO, located in Ruse, operating in Rusenski Lom, http://academic.uni-ruse.bg/

• Prista Tourist Association NGO, located in Ruse, operating in Rusenski Lom, http://tdp.free.bg/.

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 33 Results and lessons learned

On the same day the Steering Committee of the scheme was established by 7 founders, including the Director of Rusenski Lom Nature Park, a representative of the Ruse District Governor (both permanent members), 2 NGOs, 2 business representatives and a representative of the WWF.

On 22 December 2012 the first promotional materials were produced and afterwards distributed to partners. Four types of postcards were produced in Bulgarian and English languages. 1,000 postcards in total were produced. They were developed and designed by WWF with the support of the Club. The cost of design, including the rights for using the pictures, was covered by WWF but the cost of production was covered by the Club.

Figure 4: One of the four types of post cards

The distribution to partners is based on a Consignment Contract and a Handover Protocol additionally developed by the WWF. These two are signed between the Club and each partner who has chosen this form of providing the PES. 6 out of 8 partners chose to collect the PES by selling postcards.

WWF also invested resources in the design of bio-cotton bags and contacted potential producers to define production costs. Six models of organic cotton bags were designed. The bags have not yet been produced. The Club took the responsibility to ensure budget for this under the future projects of the organisation.

In December 2012, Kladenetsa Hotel made the first private donation to the PCES in Rusenski Lom. The amount was small – only 250 euro – but it will serve as a good example to other entrepreneurs.

34 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Results and lessons learned

In January 2013, the Facebook page of the Initiative for Responsible Tourism in Rusenski Lom, the face of the PCES scheme, was developed by WWF and provided to the Club for further administration. Since then, it has gained 240 friends.

Figure 5: The Facebook page of the Rusenski Lom PCES

There were several meetings of the partners to discuss the promotion of the scheme and improve the coordination among themselves in terms of tourism activities and their impact on Rusenski Lom. One of the meetings was attended by representatives of a hotel with a capacity of 90 beds that opened recently. They expressed their willingness to be included in the partnership agreement.

Since the beginning of 2013, WWF started exploring opportunities for promoting the scheme abroad. The Corporate Team in Vienna established contact with the largest tour-operator in Vienna interested in the Lower Danube. A travel package was developed by WWF together with some of the signatories of the Agreement. A new partnership was established with a Bulgarian tour operator from Sofia, Traventuria Ltd, who supported the development of the packages at a professional level. A seven-day tour was the final result, which was offered to the Austrian tour- operator Hoffen Reisen14. However, the Austrian tour operator communicated to WWF that since posting the advertising on the package, the interest has been very low. However, new foreign partners can be targeted, especially ones that are specialised in eco- and small-scale tourism.

In 2013, the Directorate of Rusenski Lom Nature Park, under the guidance of the Club, signed a contract with local bee-keepers for the use of the protected area regional brand, Lomovete. The brand, owned by the Directorate, will be used by local entrepreneurs to promote their products under the condition that they respect the Park management regimes for economic activities. The brand is still quite new to the market and has low advertising/marketing power but this is gradually improving. One of the requirements of the contract with bee-keepers stipulates that they have to contribute to the payment scheme for cultural ecosystem services in Rusenski Lom (PCES), which is a new element in the scheme itself, initiated by the Directorate. Up to 2% of the revenues of bee-keepers from selling their products will be reinvested back into grassland management, which is important for bees.

14 Information about the package and presentation of Rusenski Lom on the site of the Austrian tour operator can be found here http://www.hofer-reisen.at/business/ers/rq/hofer_aldi.detail?svno=8288053

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 35 Results and lessons learned

In 2012, 2 projects of the Directorate were approved under the Operational Programme “Environment”. These projects are especially relevant to this PES scheme. Within the first project, Protection of habitats under sustainable natural resources use in Rusenski Lom Nature Park (to be ended in May 2015) it is planned to maintain grasslands and purchase some equipment for this purpose. The second project Activities of sustainable management of Rusenski Lom Nature Park (to be ended in March 2015), focuses more on tourism; it includes activities for developing and marking trails in order to mitigate the anthropogenic pressure, training of local guides and production of promotional materials, including bags. These projects will support the scheme during its first years of implementation, giving some time to test and improve the PCES scheme in Rusenski Lom.

The next table presents the implementation status of the scheme by May 2013. Table 5: Implementation status of the scheme, according to the log frame

36 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Results and lessons learned

4.1. LESSONS LEARNED

• Baseline information

The development of this PCES scheme required good data sets – environmental, economic and social. During the design phase, the available data was not sufficient. There was no accurate information on the number of tourists visiting the area of Rusenski Lom and the income generated from tourism in the area. This information was important for valuating the cultural ecosystem services and defining the amount of the expected income through the payments for environmental services. In order to improve the baseline information, the PES team had to gather information through interviews with tourism entrepreneurs and local governments in the area.

When data is not available, it is possible to use different techniques to obtain the necessary baseline information. Therefore, after carefully identifying and reviewing all available information apply interviews to fill in data gaps.

• Negotiations and ownership of the schemes

The level of involvement of local stakeholders in this scheme was good due to the fact that WWF had been present in the area and working with them for 7 years before the scheme was initiated. The image of the organisation in Rusenski Lom features high credibility. However, PES was quite a new concept for local stakeholders. Hence, the ownership of the scheme faced several challenges related to the capacity of the parties involved of understanding ecosystem services and the nature of PES and participating in the scheme.

During the first steps of the PCES, buyers were willing to participate only if there were immediate tangible benefits from their payments, for example maintained low- impact trails. At the same time, one of the major problems with the maintenance of such trails was clearly the lack of funding. Therefore it was necessary to pay in advance to ensure these benefits in order to build a descending-type of PES scheme within a given period of a time until the critical financial resource is generated, after which the level could be fixed. At the start of the scheme most buyers were not ready for this because of the financial crisis and their lack of financial capacity for participation. Another difficulty was the obligation of reporting the financial costs of the scheme within the accounting systems of buyers. This was relevant not only to the payments by the buyers of ecosystem services but to the possibility of sellers of ecosystem services for building their technical and expert capacity to deliver the ES (capital investments at the beginning of the scheme). The WWF PES team explored and used a mix of solutions to deal with this situation. These included:

finding and attracting influential market players to promote the area of Rusenski Lom without increasing the pressure on ecosystems and the biodiversity;

proposing different means to buyers for collecting the PES as a way of entering the scheme – in this case post-cards, a small percentage added to the standard price of service, and donations;

exploring existing public funding schemes to cover start-up costs of the scheme – these were extremely useful in covering capital investment and the initieal operational costs of the scheme;

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 37 Results and lessons learned

increasing the capacity of partners for better understanding of the essence of PES – it was necessary to emphasize repeatedly that normally there is a time gap between the payment and the generation of ecosystem services paid for because of the natural processes and the seasonality of actions to be undertaken.

Working with stakeholders at an early stage of developing a PES/SF is essential for the successful ownership and sustainability of a scheme. Other related aspects which should be carefully assessed early in the pilot project include: communications with different target groups, willingness and readiness (capacity) to participate. In the negotiation process, it is necessary to build a business case which shows market (employment) opportunities embedded in the PE project.

• Financial framework

A main challenge related to the PES design was the financial treatment of cash flows related to both buyers and sellers of PCES in Rusenski Lom. This related to:

(I) On the sellers' side, according to Bulgarian legislation, if the seller is an NGO, in accounting terms PES appears as an income and there should be a tax on it. If the income exceeds a certain annual amount, the NGO should apply for VAT registration, which would impact all other externally funded activities (especially EU-funded projects); if the seller is a state institution, the income again will be subject to a tax.

(ii) On the buyers' side, PES is regarded as costs that are related to the business' main economic activity. Therefore, these costs will not be deducted from the taxable base of the enterprise and this will increase the tax burden on the buyer because of PES.

A question discussed by the team was: should PES investments and activities in general be tax-free for both sides? After reviewing the national legislation, the team found some opportunities for decreasing the tax load on the PES scheme. However, since these issues were quite new for all relevant parties (the seller, the buyers, the tax administrators), the team decided to avoid uncertainties. The chosen procedure was to adopt an adaptive approach with respect to the revenue status of each partner giving it the freedom to follow official procedures of tax reporting. This decreased the amount of PES after tax but it brought certainty among the business partners as to the regularity of the deal.

Another financial aspect is the publication and official reporting of revenue by buyers. Some local buyers did not report their revenues to tax authorities and in most financial periods they showed financial losses. This can create obstacles for collecting the payment. Initially, it was planned to introduce only an add-up over the income generated from accommodation and tourism services. To challenge this issue, to avoid lower collection and to better promote the scheme, the team developed promotional materials that will generate part of the revenues (directly from tourists).

The financial framework should be carefully developed with the support of revenue and accounting experts. The elaboration of the different income-cost-tax related scenarios is necessary during the consultations with potential buyers and the seller. Moreover, the consultations on the financial framework with the national revenue authorities are a must. It builds transparency and credibility among the scheme partners.

38 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Results and lessons learned

• Legal framework

The main legal challenge in implementing PES in the pilot area is the fact that there is no previous experience at national level in payments for ecosystem services. Therefore, there are no legal frameworks and/or documents stipulating the rights and obligations of buyers and sellers of ecosystem services. Consultations were made with lawyers specialised in environmental legal practices. Even they needed to investigate the issue from different perspectives so that the eventual contract to be signed by the parties would not be in violation of tax and/or public administration legislation. One interesting aspect of the legal structure was the potential presence of an intermediary in the Rusenski Lom pilot area, the Directorate of Rusenski Lom Nature Park.

Initially, the team planned that the Directorate sign the Partnership Agreement (PAg) with businesses, but this would create problems with the generated income. The problem arose from the internal procedures of reporting revenues from economic activities (that would appear in the case of a PES deal). The income had to be transferred back to the EFA which the Directorate was subordinate to. This could create a time gap between the moment of providing the PES and the moment of implementing obligations under the PES deal. For this reason the signatory of the PAg in the Rusenski Lom pilot area is the NGO.

In addition to building a sound legal basis for the scheme, the team also found that trust must exist among all the different players as the baseline of business relations. When developing the Partnership Agreement, the team tried to define reasonable limits for both buyers and sellers, so that a trust relationship could be built.

A legal framework is crucial for the overall functioning of a PES scheme. If it does not exist it should be created with the support of legal and financial advisors. Trust is something that should exist even before the legal framework is set up. Indeed, if we are too suspicious of private companies and put too many limitations on them, the scheme may not start. Cooperation needs to be based on trust as well as on legal agreements.

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 39 5. NEXT STEPS AND RECOMMENDATIONS

The aesthetic value of ecosystems and the biodiversity is only a fraction of all the benefits Rusenski Lom provides locally and globally. It is clear from the set-up and scale of this payment scheme for cultural ecosystem services that exploring only one class of ecosystem services is rather limited. Therefore, the effect of the scheme on environmental, social and financial perspectives will be only partial. The vision for Rusenski Lom Nature Park as a place with restored and protected ecosystems and biodiversity, bringing socio-economic values to actively involved local communities goes beyond cultural ecosystem services. The Danube PES team investigated the variety of ecosystem services provided by Rusenski Lom and came up with impressive results, even though the undertaken analysis could have been more detailed and precise. However, the rough economic valuation of ecosystem services from Rusenski Lom (Table : Annual value of ES provided by ecosystems in Rusenski Lom (in euro), Section 2: Design) indicated that the current PCES scheme can logically develop into a bundle of layered ecosystem services to be offered to a variety of different users in order to enable broader funding. This can improve conservation and ensure sustainable environmental benefits and funding.

The table below offers several ideas of ecosystem services that could be further explored and combined with a PES scheme. In all the cases listed below, there should be a manager of the specific scheme, which could be well implemented by the Rusenski Lom Friends' Club. The manager will be also responsible for building the capacity of the parties involved. The Club should also ensure that there is fair participatory and financial distribution among the parties involved and that conflict between different ecosystem services is avoided.

Table 6: Some PES-related ideas to be further explored for Rusenski Lom

40 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Next steps and recommendations

Table 6: Some PES-related ideas to be further explored for Rusenski Lom

Based on the overview of potential ES identified for the area of Rusenski Lom, the Danube PES team set the ground for carbon-related PES schemes. An assessment of the carbon sink capacity of Rusenski Lom forests and grasslands was conducted in 2012, and this issue should be further explored. Two potential carbon schemes were investigated:

Voluntary offsetting of carbon from the transportation of goods by a local carrier (Ekont Express – a locally-established company with a well development supply chain, incl. abroad). The volume of carbon emitted should be calculated by shipment (container), taking into account the distance of travel and the quantity of fuel used. The total volume could then be distributed among shipments based on their weight. The price per tonne could be calculated based on the area of forest lands to be restored (afforested and maintained with native species) or based on the official price on the EU market. This should be defined and agreed in advance between the Directorate of Rusenski Lom Nature Park and the company in a contract. The company can choose to offset the emissions itself or offer this opportunity to its customers.

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 41 Next steps and recommendations

“Zero interest – zero emissions" is a WWF-developed concept, in which the team calculated the carbon emissions generated with the construction of a standard apartment of 80 sq m, which was the average property size set in mortgages of a Bulgarian private bank. According to our calculations using a specialized carbon construction calculator, the construction of an apartment of 80 sq m generates around 15 tonnes of carbon on the average. The bank expected to provide mortgages for 400 apartments or 6,000 tonnes of carbons to be offset. To offset this carbon, it is necessary to afforest 1,8 hectares with local tree species and maintain these over a 30- year period. The team offered an option to the bank of shortening the offsetting period, which would require larger areas to afforest and would generate higher costs for the buyers. In this particular scheme, the value of forestry measures was nearly 13,000 euro.

These are two ready concepts explored by Danube PES team, which can be used by the Directorate.

RECOMMENDATIONS

PES is not a one-off action but a process which should be managed and maintained. In the same time PES is just one of the tools that can restore and bring environmental benefits to the society. The Danube PES team believes that PES could be used to manage Rusenski Lom Nature Park together with other market and policy-based instruments, which will all contribute to each other. This requires dedication and of course capacity, which if not existing should be assessed and accumulated.

Based on previous experience with ecosystem services and PES in particular, the Danube PES team believes that:

• it is necessary to integrate the ecosystem services approach into the Management Plan of Rusenski Lom and the larger Natura 2000 site, Lomovete. This will help to better assess the economic values and potentials of Rusenski Lom, as well as local needs and future development trends;

• it is important to improve the assessment of ecosystem services by mapping them. Currently, the mapping of ecosystems is carried out based on their functionality, which is a good first step but it is necessary to go further and map the ecosystem services as well. This will enable the management of the area from a sustainable local development perspective. Moreover, it will strengthen the position of conservation needs among local communities. This will contribute to the better integration of conservation needs into local development plans – a process which is either not happening at the moment or is being poorly implemented. The assessment should be updated every 3 years and adapted accordingly;

• it is crucial to re-assess the natural carrying capacity of ecosystems in Rusenski Lom. It is also important to re-define norms and regimes for economic activities within the protected area to reflect current socio-economic developments and

42 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Results and lessons learned

• related environmental issues. The use of computer-based modelling tools to estimate these for a 10-year future period will help the better management of Rusenski Lom with the active involvement of the locals;

• it is recommended to work (at a pilot level) with selected businesses in order for them to account for their water, biodiversity and carbon impact and possibly provide payments for these;

• it is recommendable to strengthen the bottom-up communication and coordination to ensure a good understanding of ecosystem services and the needs for their prioritization (financial, administrative and technical), which will require an adaptive approach. The Danube PES team believes that using the results from this project will benefit this communication and the related discussions;

• it is essential to ensure the capacity of Rusenski Lom Nature Park Directorate for a better management of the area through the use of satellite monitoring and mapping tools for management, such as InVest or TESSA. The Directorate has a GIS expert but should be also supported by experts from the Regional Forestry Directorate-Ruse, the Regional Inspectorate of Environment and Waters-Ruse and local government in this process.

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 43 6. ANNEXES

I Ecosystems, biodiversity, and their services in Rusenski Lom Nature Park II Stakeholder analysis III The process of developing PES under the Danube PES project IV Financial analysis of the PCES scheme in Rusenski Lom

ANNEX I. ECOSYSTEMS, BIODIVERSITY, AND THEIR SERVICES IN RUSENSKI LOM NATURE PARK

1. CURRENT STATUS OF ECOSYSTEMS 1.1. FORESTS AND GRASSLANDS

On the territory of Rusenski Lom Nature Park there are 29 habitat types as defined by CORINE. 17 of them fall in the group in need strict protection. The next table presents all the habitat types grouped by ecosystem.

Table 1: Main ecosystem types Ecosystem Ecosystem type Habitat Area (ha) Area (%) category for mapping and assessment

Terrestrial Woodland and Forest monocultures 68,16 2% forest Mixed forests 34,08 1%

Deciduous forests 2317,44 68%

Shrub formations 136,32 4%

Grassland Wet meadows 68,16 2%

Dry grasslands 477,12 14%

Cropland Other arable land 34,08 1%

Sparsely Rocks and rock 204,48 6% vegetated land formations, talus

Fresh water Rivers Water courses 68,16 2%

Total cover 3408

Source: Adapted from Typology of ecosystems, EEA, 2012, work in progress

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The total area of woodlands (forests and lands) in the Park is 2,808 ha. 2,281 ha of the woodlands (81.3 %) are afforested. There are 27 tree species. Oriental hornbeam occupies the largest area – 573.1 ha (25% of the afforested areas), followed by black locust (Robinia pseudoacacia L.) – 508.9 ha (22.3%) and Turkey oak (Quercus cerris) – 443 ha (19.4%). The main part of the pilot site is occupied by local species. Forests are mainly deciduous, occupying 265.5 including oak, and ash among others. Coniferous forests occupy about 66 ha, represented by pine trees and mixed coniferous-deciduous cultures.

Farmlands (grasslands) are the second most represented land cover on the territory of the park. They are of different types and occupy nearly 20%. The farmlands of high nature value in Rusenski Lom region include:

• Semi-natural vegetation, including

Meadows of the canyon floors - over the years many, if not most, of these have lost their floristic diversity because of manure and nutrient inputs from floods. Some important semi-natural grasslands have remained, e.g. along Cherni Lom and Malki Lom rivers, falling into the Habitats Directive Lowland Hay Meadows biotope. From a conservation point of view, the main interest in these areas are fauna species - butterflies and birds, like Corncrake (Crex crex).

The main threat to these areas comes from the abandonment of the mowing practices, as well as overgrazing. While the lack of mowing is becoming a widespread issue in Rusenski Lom, the overgrazing of meadows is quite localized. However, where it occurs it is seriously destructive.

Semi-natural grasslands are distributed mainly on the canyon sides and margins. Most widespread are dry semi-natural grasslands on loess heights and uplands, but there are also significant rocky steppes, and surviving grasslands on the black-earth soils of the flat lands above the canyons. Lastly, there are significant areas of transitional habitats – bushy grasslands or open woodlands, depending on the point of view – on the canyon margins. They are recognized as the most valuable farmlands with occurrence of several endemic plant species. Significant fauna of the semi-natural grasslands include Spur-thighed and Hermann's Tortoises (Testudo graeca iberia and T. hermanni) and the European Souslik (Spermophilus citellus).

Overgrazing of pastures and some of the rocky steppes is a serious issue. In the same time, there are pastures located a day's walk away from the villages for the movement of the animals, which are becoming more and more overgrown with bushes and other vegetation. This leads to a decrease in the Souslik population. A moderate grazing density of 0.6-0.7 LU/ha is recommended for the Park territory. The decline of small scale grazing practices and the concentration of animals in larger farms leads to the formation of woody and bush vegetation and to an overall decrease of the grazing area.

Table 2: Recommended grazing density in the park Areas in Nature Park Cattle (1) Sheep (2) Mixed grazing (1+2)

121,1 ha 80 484 40 + 242

495,1 ha 330 1980 165 + 990

Source: WWF studies, 2008

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• Small-scale mosaics of arable lands and orchards On the canyon floors in the Nature Park, the small vegetable cultivation and tree crop mosaics next to the villages, while floristically poor, are significant for species, such as Redbacked Shrike (Lanius collurio) and Nightingale (Luscinia megarhynchos).

The arable lands on the flat, fertile land on the plateaus form large, intensively managed fields of little nature value. Farming practices applied on these lands creates a pressure on neighbouring HNV grasslands. One of unsustainable farming practices is the burning of stubble fields. Despite the harsh legal measure to stop the burning practices, they persist and lead to the destruction of the humus and loss of biodiversity.

The management plan of the Rusenski Lom Nature Park (2006) recommends the following practices on farmlands:

- Mowing of meadows, including the removal of overgrown bushes and forest vegetation should be carried out after June 15;

- Collection of hay should be from the centre to the periphery of the field, to protect bird species;

- Restoration of converted meadows should be made through re-seeding, harrowing and regular mowing, taking into account the pace of grass growth;

- Sustainable farming practices on arable lands is recommended, including crop- rotation, limited application of fertilizers, mechanical and biological removal of weeds, disease, use of animal traction.

The table below summarizes the norms and regimes for using grasslands based on the Management plan of the protected area, Natura 2000 restrictions and national standards.

Table 3: Norms for using grasslands in the pilot area Grassland type Use Management plan Natura 2000 National standards for of Rusenski Lom restrictions15 farmland management

Dry grasslands Grazing 1 ha/cattle Removal 4.1. grazing at rate 0,15 LU/ ha17 0,2 ha/SFA16 of landscape or mowing once a year characteristics Regulated grazing during the use of farmlands 4.2. it is obliged to remove the unwanted bush vegetation, Restoration and amelioration: especially agressive sustainable removal of shrub and tree Conversion species, such as Pteridium formations, of stones and of grasslands aquilinum, Veratrum spp., re-seeding with local species into arable lands Ailanthus altissima, Amorpha fruticosa and Rubus fruticosus. Wet grasslands Mowing Regulated grazing Application of fertilizers From centre to the periphery and pesticides For HNVF and Natura 2000 on grasslands farmalnds, bush and tree formations should be left Restoration: reseeding with mosaically up to 25% 10 kg/ 0,1 ha, dragging, of the grassland. removal of ruderal and weed vegetation

Grasslands Camping on wet meadows n.a. n.a. is forbidden Tourism Hay meadows max 12 persons/ ha for max n.a. n.a. of 200 man-days/year

15 Restrictions under the Bird Directive 16 SFA small farm animal 17 LU = 0,85 cattle animal, 10 SFA

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In addition to the above, the following norms of grasslands carrying capacity for tourism are provided in the Management plan (by settlements): • Nissovo - 21 ha total area, 8 persons/ ha or 168 people single capacity • Koshov - 74,7 ha total area, 6 persons/ha or 448 people single capacity • Svalenik - 18,7 ha total area,8 persons/ ha or 150 people single capacity • Pisanetz - 70,0 ha total area, 6 persons/ ha or 420 people single capacity

1.2. FRESHWATER ECOSYSTEMS

The information presented in this part is based on a desk research of existing official documents published by national and regional authorities responsible for/ linked to the management and protection of the Rusenski Lom pilot site. The research focuses on surface water bodies. Upon need assessment, additional information on underground water resources can be further provided.

Rusenski Lom river basin (in purple on the map below) is located in the eastern part of the Danube river basin. It is bordered by the Yantra watershed to the west, by Yantra and Kamchia watersheds to the south, by the watershed of Dobrudzha rivers to the east, and by the Danube to the north. Rusenski Lom river springs from the relatively low, flat part of the Danube valley. It flows northwards and empties into the Danube. Map 1: Rusenski Lom river basin (in purple)

R u s e n s k i k L a o l

m r i

B eli C L h om e r n i L o a m r Lomtsi t Baniska n Beli Lom

Y Kavatsite Boyka

L еfa ja

Source: Danube River Basin Management Plan According to the DRBMP Bulgaria, the total area of Rusenski Lom river basin is 2985,335 sq km (298 533,5 ha). The basin includes 14 water bodies, among which: • 9 rivers with a total length of 601,35 km, 7 of them, accounting for 364,650 km are natural, the rest 2 are classified highly modified; • 5 lakes with a total surface of 6,890 sq km, also highly modified Rusenski Lom river is the last major right tributary of the Danube before it spills into the Black Sea. It is formed by the merger of Beli Lom and Cherni Lom rivers, near the village of Ivanovo. Beli Lom river begins south of the city of Razgrad, and Cerni Lom - south-east of Popovo town. Before merging, the two rivers have a drainage basin of 1,549 km² and 1,276 km², respectively.

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Beli Lom river is the major surface water body in the project pilot site. Several small tributaries, south of Razgrad, give the beginning of Beli Lom river. All those creeks are semi-mountainous, with their springs located at 300-400 m height altitude. They have slight slope and riverbed of 3-4 m width on average. Their bed is covered with sand and dust. Banks are low and of rock origin, which is a reason for flooding in periods of long and intensive rainfalls. To protect the area from flooding the section between the villages of Ushintzi and Drenovetz has been modified. In this area the river valley is low with gentle slopes. After this section until it empties into the Danube, Rusenski Lom river has a very light slope because of the flat relief. The features of the river valley are not very different - the slopes are shorter. The riverbed is covered with gravel and sand, and the banks are modified.

Main features of the watershed are as follows:

• inclination – the river valley of Rusenski Lom river has a plain relief with an average altitude of 272 m and slope of 1,7 0/00 for Rusenski Lom river.

Rusenski Lom has the lowest incline among all Bulgarian rivers. The average flow speed barely reaches 30 сm s-1, forming many meanders.

• river network density – Rusenski Lom river has a low density of the river network. The average density of all rivers in the valley is below a unit- around 0,3 km/sq km.

• level of afforestation– the valley is sparsely afforested, presented by low-stand forest, occupying 770 sq.km or 26% of the total watershed area. Forests occupy only 20% of the watershed of Beli Lom river, in contrast with the watershed of Cherni Lom river, where the forest cover reaches 29%. Larger forests along Beli Lom are located in the lower section of the river; the largest one, located in the Rusenski Lom river valley lies between the villages of Krivnya and Pisanetz. Unlike Beli Lom, forests are distributed evenly all along the Cherni Lom watershed. Forests are sparsely distributed along the Rusenski Lom until it empties into the Danube - there are just a few small broadleaf forests.

• natural outflow - the average annual outflow of Rusenski Lom river, according to hydrological stations varies between 0.861m3/s (27,15.106 m3) for Beli Lom near Razgrad and 5.851 m3/s (184,52. 106 m3) near Bozhichen.

The average monthly outflow minimum is in the period July-September and often in August. It changes from0.106 m3/s to 0.732 m3/s for Rusenski Lom.

The valley of Rusenski Lom river is featured by a typical moderate continental climate with a moderate autumn and winter rainfalls. Because of the flat terrain, the loess and karst cover, the flows formed by winter snow melting do not result in high water runoff.

During the winter (Jan-Mar) the runoff increases slightly, mainly in the mid and lower section of the basin. The water level reaches its pick in March.

The water level is lowest in the summer-autumn period, mainly in August- November.

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The official information published on the water quality of rivers in the Rusenski Lom basin is different. According to the Management plan of Rusenski Lom Nature Park (2006) and the Integrated Management Plan of Lomovete Natura 2000 site (2011), the water quality of Rusenski Lom, Beli Lom, Cherni Lom and Mali Lom is third category 18. The same sources state that before 1997, the quality of water was second category. However, due to intensive agricultural, industrial development and the lack of wastewater treatment facilities in the settlements, located in the valley, the water quality of the rivers was outranked to the lowest possible category. They also provide detailed data on the chemical status of the water of these rivers. According to it, the Rusenski Lom basin showed that the water is of hydro carbonate type, with neutral to light alkaline active response (between 7 and 8 рН units). It has a distinctive buffer capacity against acidic pollutants due to the high content of ions of alkaline elements and to the relatively low content of sulphates and chlorides. Furthermore, it shows that the oxygen levels are too low, especially in the summer-autumn months. This decreases the possibility for the decomposition of incoming pollutants. Because of the low flow speed, the natural purification capacity of Rusenski, Beli, Mali and Cherni Lom is very low, between 10 and 40%.

According to the annual reports on the status of the environment (2008, 2009, 2010 and 2011), prepared by the Ruse Regional Inspectorate for Environment and Water, the water quality of these rivers is of the second category. However, some indicators deviated from the norms during the year. For example, the sample

analysis for orthophosphate, as PO 4 , collected in several points along the Rusenski Lom river (near Pisanetz, Ostrica, Beli Lom and Cherven) showed 0,2 mg/cub dm content above the norm. In 2011, Rusenski Lom was one of the rivers with a higher 3 content of nitrates, such as N-NO3 - above 5 mg/dm . The main reason for this deviation was the lack of wastewater treatment infrastructure in small settlements in the valley.

Obviously, the information in the two sources differs (and it is necessary to request the results from the last sample analyses conducted by the structure of the Ministry of Environment along the Rusenski Lom and its tributaries). One is sure - all rivers in the Bulgarian Danube river basin are sensitive to pollution - in 2003, all water bodies in the Danube river basin were declared sensitive areas by the Minister of Environment. This means that discharge of wastewater, without proper treatment, can lead to lasting adverse effects on their quality. According to the risk assessment at mid-term period of implementation of the DRBMP 2010-2015, there are 6 surface water bodies in bad ecological status in Rusenski Lom river basin, located in the mid and lower part.

18 There are 3 categories of water based on the quality and potential uses: 1 - is potable water, including water used in food processing requiring this quality; 2 - water for watering of animals, aquaculture, cultural uses and water sports; 3 - water for irrigation and industrial uses

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Figure 1: Land use in Rusenski Lom River basin

1% 0% 6% Settlements 17% Transport and infrastructure

Mines, depots and construction sites

Arable lands 24%

51% Perennial crops

Forests

Other land uses 1%

The main problems driving the negative status are organic pollutants, dangerous substances and nitrates pollutions due to discharge of wastewater from households and non-treated industrial wastewater. The sources of pollution:

• point sources19- 41 in total, discharge of household waste water from settlements above 2,000 PE accounts for 50% of these sources. Around 40% of this comes from polluters without an integrated pollution prevention control license (IPPC). The structure of the latter by sectors includes: a mining company, 5 metallurgy and engineering enterprises, 7 food industry enterprises, 4 chemical industry enterprises and 2 textile producers. These are mainly located upstream beyond the boundaries of the pilot site and some lower stream, near Ruse. The next chart gives an overview of levels of loads due to point sources (sewage and wastewater treatment stations under 2,000 PE) based on the DRBMP - data for 2006.

Figure 2: Levels of loads due to point sources

2000 Rusenski Lom

1500 Cherni Lom

Beli Lom 1000

500

0 BOD5 COD TotalN TotalP

19 Point sources include: discharges of wastewater treatment plants from ur ban areas (agglomerations) with over 2000 PE; discharge of sewage in urban areas (agglomerations) with more than 2,000 pe discharging without need to pur ify;discharge of industrial wastewater facilities with IPPC; Discharge without IPPC

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• diffuse sources20, among which arable lands and of missing sewage systems in settlements comprises the highest share. Another source of pollution in particular is quarry ponds of a mining company operating locally.

The analysis of the hydro-morphological status of the river basin of Rusenski Lom, as provided in the DRBMP shows that: overall the conditions of the rivers rate from very bad to moderate. As far as the area of the pilot site is concerned the conditions of the water bodies (Rusenski Lom , Beli Lom and Cherni Lom) is very bad. This is due to the bad regulation of the flow by barrages, dikes and the corrections of the river bed. This has caused morphological changes and impedes the migration of fish.

The Rusenski Lom basin covers the whole territory of the pilot area but is larger than that, including territories of 7 municipalities (Dve Mogili, Razgrad, Tzar Kaloyan, Vetovo, Ivanovo, Ruse and Borovo). In comparison, the territory of the pilot covers only 3 of those, namely Ivanovo, Vetovo and Tzar Kaloyan. The water is of second category, and it can be used for agriculture, aquaculture and water sports purposes. The total water quantity used in 2007 amounted to 10,162 mil cub metres. The table below provides information on the water use by sector.

Table 4: Water use by sector Water user Year 2007 in Share of '000 cub.m total (%)

Total use, excl. water for cooling 10162 30%

Industry without cooling, incl: 3209 30%

- energy production 30

Agriculture, hunting and forestry, incl. 1950 19%

Plant cultivation 1866

Animal breeding 84

Households 4138

Services 864

Total incl. cooling 10162 41%

Source: DRBMP, 2007

According to the information provided by the RIEW in 2011, the water of rivers in the Rusenski Lom basin was mostly used by fish enterprises (aquaculture). 1,6 mil cub m/ annually were used from Rusenski Lom and 250 000 cub m/annually - from Mali Lom river.

20 Diffuse sources of pollution include: settlements with more than 2000 pe without or with par tially constructed sewage systems; municipal landfills in settlements with more than 2000 pe; Diffuse sources of pollution from industr y - discharges of wastewater lagoons, availability of landfills and hazardous waste production, mining and quarrying; Arable lands

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2. EXISTING BENEFITS Main benefits from Rusenski Lom ecosystems were estimated and their monetary value is presented in Table 1 Annual value of ES provided by ecosystems in Rusenski Lom of the Main report. Different methods were used to estimate the services, and it should be noted that the data existing at the moment makes it very difficult to make a comprehensive and correct appraisal. The values are based on information obtained from the Management plan of the protected area (prepared in 2006), the forestry plans of the State Forest Agency for the area (for the planning periods 1990-2000 and 2000-2010), forestry inventory (2011), as well as from personal interviews and questionnaires performed in the period 2010-2011. The tables and descriptions in this section present the use value of ecosystem services in Rusenski Lom, mostly direct and to a lesser extent indirect use values. An assessment of the total economic value of ecosystems (TEV) is recommended therefore, but is not the goal of the work under the Danube PES project. The next section provides an information on the main assumptions, and data used for deriving the values presented in Table 1 of the Main report.

2.1. PROVISIONING SERVICES

The method used to assess provisioning services is market values and takes into considerations different uses in the nature park. These includes the values of wild fruits and herbs, timber and games.

The value of herbs and wild fruits is rather low, as one may notice. The reason is the low unit cost of permits to collect those. According to data collected from local state forestry enterprises in 2011 the quantities were:

Table 5: Wild fruits and herbs collected in Rusenski Lom Nature Park Herb Quantity Value Total (kg) (eur)

Tutson 1000 0,02 20

Oregano 200 0,02 4

Yarrow 200 0,02 4

Hardwood plantain 100 0,01 1

Nettle leaf 10000 0 0

Nettle root 11000 0 0

Nettle stalk 100 0,02 2

Hawthorn blossom 1000 0,025 25

Veronica officinalis stalk 800 0,01 8

Thyme 1000 0,015 15

Ivy leaves 500 0,02 10

Cynodon dactylon 1500 0 0

Total 89 Source: Dunav State Forestry Enterprise

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Additional uses of forest areas in 2010 related to:

• Placement of beehives on woodlands – the user pays a permit; According to official data, 3 beehives were located on woodlands in 2010 and the user did not pay a fee because of the low value; in that year the permit cost 0,64 euro per beehive

• Permits for collection of herbs and wild fruits – in 2010, the state agency issued only one permit for collection of 200 kg of rose hip fruits; the fee per kg was 0,03 euro

The value of game was derived based on the assumption that all game was to be hunt, e.g. without stocks. Therefore, the values below are rather one-off market values. However, to accurately assess this value in the longer term it is necessary to take into consideration existing practices of maintaining and preserving game animals. There is one state game breeding enterprise in the area which takes care and monitors the population of these species. Its personnel ensures that there is a balanced used of the game, ensuring the natural reproduction capacity of animals.

Table 6: Game number in 2010 Game Number Price of the trophy/ meat in euro

Deer 310 600

Roe 100 150

Wild boar 82 300

Rabbit 150 30

Pheasant 80 10

Partridge 35 20

Jackal 20 6

Fox 11 6

Being mostly woodlands, the Rusenski Lom pilot site provides timber, which is used for processing or as a fuel. According to 2010 data 4006,86 cub.m. of timber were extracted in the area. The income accumulated for this amount of timber is approximately 10366 euro. The timber extracted comprised of the following types:

Table 7: Timber production by type in 2010 Type Price per cubic meter

Wood for fuel 20 euro

Timber for processing (for production of paper and 21- 22 euro wooden particle boards)

Timber for sawing (for furniture and construction) 24 - 26 euro

Timber used for crafting (not used in all the above) 19 euro

Source: Ruse Regional Forest Directorate

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Most of the timber was sold to processors (furnishing companies). A smaller share was sold as firewoods and another share for decoration. Their market value was assessed according to market prices at the moment. So, the value below shows the total annual value (2011).

Another material biomass is the fodder, which is freely available to local farmers. The assessment is based on the areas eligible for support under the Agri- environmental payments. They are calculated based on the costs of measures to maintain grasslands of high nature value, respecting a certain livestock unit per ha. Also, for the value - a comparison was made to a study done by the WWF in North Bulgaria, in the Danube plain, using the costs of measures to maintain the same habitats.

2.2. REGULATING SERVICES

Three main types of regulating services by forests and grasslands were estimated. They include water purification, carbon deposit and sequestration, and flood control.

• Water purification was based on studies conducted for the Lomovete Natura 2000 site, under the EC-funded project "Recognizing Natura 2000 benefits and demonstrating economic benefits of conservation measures", implemented by EFTEC, ECNC and Arcadis. The value of the service is based on the average EU costs of water treatment to remove nitrogen was taken into account. The respective amount according to studies was €225.4/ha (with a low confidence due to uncertainties over water treatment costs).

• The assessment of flood control regulation was based on the cost avoidance method. The value is derived from a pilot restoration of a small floodplain area along one section of Rusenski Lom rivers. Before the restoration of the floodplain, the high level of the Rusenski Lom river flooded the only one way to access main sightseeing spots in the area – Ivanovo Rock Churches. The value is derived by calculating the loss of income to the Churches based on the periods and duration of floods. For comparison the restoration work to restore the floodplain amounted to nearly 3500 euro.

An important information on the loss history in the nature park showed that, in 2007-2009 it was necessary to ensure 1 200 000 euro for restoration and compensation for damages along the rivers due to floods. This information can be used to better assess the flood regulating services by riparian habitats in the nature park.

• The carbon sink of forests and grasslands in Rusenski Lom was assessed in 2012, in a study commissioned by the WWF under the Danube PES project. Data on the forest plantations from the forest management projects in the period 1990-2012 has been used in the calculation of the organic carbon stocks from Rusenki Lom Nature Park. The required data relate to biomass stock, area of plantations, density and age of tree species by type. Other necessary data include timber thickness and the proportion between the above-ground and underground mass of the trees.

The study and results can be found on the internet section of the Danube PES project: http://awsassets.panda.org/downloads/wwf_rusenski_lom_report_english.pdf

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2.3. CULTURAL SERVICES

The Rusenski Lom Nature Park together with its adjoining areas has the capacity for developing alternative forms of tourism. The combination of the wildlife and the cultural and historical sites gives the area its attractiveness and uniqueness. There are 3 important historical and cultural sites – the Medieval town of Cherven, the Ivanovo Rock Churches (included in UNESCO List of the World Heritage) and Basarbovo Rock Monastery – making the area attractive to visitors and tourists having interest in historical and cultural heritage.

The landscape is featured by the canyon-like valley of the Rusenski Lom and its tributaries, giving shelter to various bird and bat species, as well as opportunities for cave explorations and rock-climbing. The rivers crossing the valley give opportunities for canoeing, fishing and bird-watching.

There are several eco-trails in the nature park along the rivers, among which one dendro-trail and two ecosystem-trails.

The assessment of cultural services is based on market values (market method), obtained through targeted interviews with local entrepreneurs, municipalities and other stakeholders. The pilot site is extremely attractive for tourism development due to the variety of conditions it provides – cultural and historical heritage, rich biological diversity and typical landscape (mosaics of grasslands and forests, and canyons) as well as the rural lifestyle. The value of cultural ecosystem services is rather pessimistic because there is no certainty for the number of tourists visiting the area.

SUMMARY OF THREATS TO ECOSYSTEMS AND POTENTIALS FOR DEVELOPMENT Forest ecosystems: the main threat relates to the replacement of native with foreign, intensive tree species, which can also affect the biological diversity. If all foreign and invasive species are replaced with native, local species this will lead to an improvement of the carbon sink capacity of the forest ecosystems by 67 492 t carbon emissions equivalent for 40 year period (16 873 t for 10 year period 21 ).

Since timber extraction is the main use of forests in the area, it is necessary to develop trade-off analysis to compare how forestry activities and revenues will be affected by other forest services. Capacity building and awareness raising activities also need to take place to ensure the proper understanding and implementation.

One potential here is the FSC certification of forests in the area which will improve the capacity of forests to deliver a variety of ecosystem services and, in the same time, will ensure socio-economic values. The costs of FSC management, especially related to restoration and afforestation with local species could be covered by attracting carbon financing. Of course, there are limitations related to the protected area status of the pilot area, which is why such a scheme should be totally

21 The result for the 10-year period is calculated in the same way as for the 40-year period, and it is divided by 4. This is made with the aim to facilitate the comparison with other services and products, for which 40-year period is not relevant. Actually the tree does not grow uniformly during its entire life cycle. The different tree species have different growth trend. There are fast growing trees, which have intensive growth during the first 10-30 years (poplarsand willows), but withslow growing trees (oaks) the growth trend is characterized by its smoothness. The calculation of intensity of accumulation of organic carbon in the tree species is not included in this projec t.

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voluntary, out of the obligatory activities that some sectors/ industries should undertake to offset their emissions. Potential buyers of carbon offsets could be super markets, insurance companies and banks, postal services. They can all offset the amount of carbon related to the transportation of goods as well as to trips of their staff, and/ or paper consumption.

FSC contributes to improving the CO2 absorption capacity of forests because there are special management regimes. More precisely, this is related to the requirement of not logging at least 5% of the area under certification; this 5%-set aside-area usually includes old trees, which are the biggest depots of CO2. Other management practices related to the management of dead wood, locking CO2 into the forests. According to some general calculations dead wood left in FSC forest amounts to around 10 cub/ha.

There is a question about the influence of FSC on the timber logged. Currently, in Bulgaria the introduction of FSC has not affected negatively the volumes of timber produced because every state forestry enterprise has been obliged to leave 10% of the managed areas without logging (in FSC this is min 5%).

The price of FSC products depends on the supply and demand. If there is shortage and high demand, the price increases. However, suppliers try to sell within the market price of non-FSC products so they remain competitive. In Bulgaria, FSC producers comprise a share of 3% but it is expected that their share will increase up to 30% in 2012 after the certification of several state forestry enterprises.

The FSC certification includes the following types of costs/ activities:

• Preparation for introduction of the certification including training, field researches of forests and the other main resources, high conservation value forests (HCVF) and development of management procedures over the ones required in the legislation;

• Implementation of the certification process – this is for all forest holders and include preliminary and on-going audit

The cost of certification is variable depending on the size of forests and activities to be undertaken. Generally, the cost of conversion from conventional to FSC management practices is about 5 euro/ ha for forests up to 1000 ha; 0,5 euro/ ha for forests above 1000-30000 ha.

In most cases it is necessary to secure additional funding for adaptation measures including training, purchase of special equipment.

Farmlands/ Grasslands: the main threats to grasslands refer to the mis- management, being over or under-used. This leads to a degradation of the habitats and loss of the benefits associated. Grasslands have also role in the carbon stock, especially wet meadows. In this area, they are the main provider of natural fodder and a habitat of species subject to tourists' interests. Rusenski Lom is one of the top places for nesting birds in Bulgaria, and 122 (of a total of174) bird species breed in the Park.

The main sources of pressure to grasslands are: • Agriculture through farming practices The main threat to riparian meadows comes from the abandonment of the mowing practices, as well as overgrazing. While the lack of mowing is becoming a wide-spread issue in Rusenski Lom, the overgrazing of meadows is quite localized. However, where it happens it is seriously destructive.

56 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Annex I.

Another problem originating from farming is the conversion of grasslands into arable lands. Even that this is forbidden by the Law, farmers continue these practices. In particular, wet meadows are under threat because farmers develop gardens or water- demanding intensive monoculture fields of corns.

• Tourism through intensification of outdoor activities in the pilot area

The impact of tourism is the lack of control of outdoor activities such as camping, picnics, fire setting, walking in groups above the carrying capacity, driving inside the park, incl. high-passable vehicles (even that it is forbidden). This leads to a degradation of highly sensitive areas, especially wet meadows. There are regimes and norms set in the management plan of Rusenski Lom Nature Park. However, no one respects them and indeed, it is very difficult to control. Partially, the problem comes from the relatively flat terrain and easy access to almost all areas of the nature park. Partially, it is because of the increased number of accommodation places and tourists in the area leading to increasing the load on these habitats.

Taking a notion of the above, several opportunities have been identified linked to economic instruments:

• promote existing Agri-environmental payments - some of the grasslands in the nature park are included in the list of High-nature value farmlands. Restoration and management of these lands are eligible for financial support under the National Rural Development Programme 2007-2013, measure Agri-environmental payments.

• Compensation payments for farmlands within Natura 2000 sites, designated under the Bird Directive 79/409/ ЕЕС- this is also effective since 2011, despite the numerous difficulties in implementation because of low capacity of local institutions and way of mapping the areas

• involve accommodation places and businesses/ NGOs developing tourism in decreasing the impact of the sector on these habitats through the introduction of payment scheme for cultural services

• introduction of a certification system for farmers, tourism developers complying with the carrying capacity to be promoted to markets as a nature- friendly one.

Freshwater ecosystems: the pressure on freshwater ecosystems is present even now. According to future scenarios of water quality of Rusenski Lom and its tributaries (DRBMP), there is a risk that the water will not reach the desired ecological status, set by the Water Framework Directive. Reasons for this is mainly the low speed of constructing waste water treatment plants. It should not be forgotten that up and mid streams there is a number of polluters of the chemistry, mining and engineering industries with even greater impact on water quality. Currently the water of local rivers is not suitable for drinking and food processing. Its quality is even getting worse in some periods of the year. In addition, some water uses are not charged at the moment - for aquaculture, for example - because of the lower category of the water quality. Another source of threat is the intensive agriculture in the area.

Rivers are also linked to two other main socio-economic aspects: floods and tourism. Floods happen to occur often in the pilot area. Among reasons are the conversion of formerly existing grasslands and forests in intensive arable lands, the corrugation of river beds and removal of meanders, the inappropriate conventional flood- prevention-engineering measures (further river bed and banks modifications).

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 57 Annex I.

Several heavy floods took place in the last 20 years (period 1990-2011). They caused serious damages to local agricultural enterprises, as well as to households. Because of the relatively lower standard of living many of those were not insured. The state had to ensure funds to indemnify the parties affected. Since late 90's the Bulgarian insurance sector is planning the establishment of a national insurance pool to address the natural hazards risk (including earthquakes). The generation of the fund is planned to be through mandatory property insurance. However, this is still a plan and no real action has taken place.

An opportunity here will be the involvement of the financial sector and even the State to fund a restoration of natural floodplains as a physical preventive measure against floods. However, hydrological and cost-benefit analyses should precede these. Another potential to fund this exists within the National Rural Development Programme, under Axis 2, measure 214 giving the opportunity to agricultural measures to improve erosion and flood control – grasslands restoration is among the measures funded. Given this, it is the role of regional agricultural extension services to provide technical support to farmers to implement these measures.

Tourism can also play a role in improving the quality and connectivity of rivers. Water tourism is well developed in the area – there are 3 specialised local NGOs that are interested to clean the rivers from solid wastes. This should be allowed against clearly written rules on the carrying capacity of rivers in the area for water sports, respecting the norms related to the biodiversity, against clearly stated conditions, responsibilities and person engaged to ensure this.

LITERATURE USED:

Danube River Basin Directorate, Pleven, Bulgaria, Danube River Basin Management Plan 2010-2015, Bulgarian Language Regional Inspectorate for Environment and Water Ruse, 2008, Report on the environment status, Bulgarian language Regional Inspectorate for Environment and Water Ruse, 2009, Report on the environment status, Bulgarian language Regional Inspectorate for Environment and Water Ruse, 2010, Report on the environment status, Bulgarian language Regional Inspectorate for Environment and Water Ruse, 2011, Report on the environment status, Bulgarian language Rusenski Lom Nature Park Directorate, 2006, Management plan for Rusenski Lom Nature Park, Bulgarian language Rusenski Lom Nature Park Directorate, 2011, Integrated Management Plan of Lomovete Natura 2000 site, Bulgarian language Rashid R. and Seizov P., Todorova M. (Ed.), 2012. Assessment of the carbon stock ecosystem service in Rusenski Lom Nature park, WWF, Sofia, in Bulgarian and English language Varty N., 2012, Mid-term review report of the project for UNEP GEF, in English language Todorova M. Lomovete case study, 2011. Part B Case studies, Development of a Tool for Valuing Conservation Measures, 214-228, in English language Todorova M., Yotkova S., Grigorova Y. and Kazakova Y., 2009. Problems of small and medium-sized milk producers in Bulgaria, WWF DCP, Sofia, in Bulgarian language De Rijck K., Kazakova Y. and Todorova M., 2008. High Nature Value farmlands: Recognising the importance of South East European landscapes CASE STUDY REPORT. Rusenski Lom (Bulgaria). WWF DCP, Vienna and EFNCP, in English language Todorova, M., Grigorova, Y. and Kazakova, Y., August 2007. Complementary financing for Environment in the context of Accession - Innovative sources', national level analysis: Bulgaria, WWF DCP, Vienna/Sofia, in English language

58 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 ANNEX II. STAKEHOLDER ANALYSIS

The following stakeholder groups have been identified relevant for this pilot:

Hotels and Guest Houses owners: based in the Rusenski Lom Nature Park area. They have direct contact with the tourists and provide services to them. In most of the cases this activity is their main source of income.

Tourist Operator and Tourist Agencies: based outside the Rusenski Lom Nature Park area, they provide all around tourist services. The visit to the Park is usually part of a larger tourist package. They provide link to the hotels and guest houses.

Directorate of Rusenski Lom Nature Park: decentralized government organization responsible for the overall management of the RLNP. The management plan of the Rusenski Lom Nature Park exists, including the tourism development measures. The lack of enough human resources in the Directorate predetermines the lack of tourist management and control mechanisms and capacity.

Ivanovo Municipality (and other municipalities): the two most visited sites of the Rusenski Lom Nature Park are located within the municipality. Currently the municipality administration is making an attempt to take over the entire responsibility for the management of the Ivanovo Rock Churches and the Medieval Town of Cherven.

Regional Historical Museum: currently managing Ivanovo Rock Churches and the Medieval Town of Cherven.

Friends of RLNP club – this is the NGO of the Rusenski Lom Nature Park Directorate. It participates in many environmental projects and awareness raising activities. The Club will manage the implementation of the PES scheme.

Other local NGOs – based in the RLNP area or in the near towns.

New stakeholders are likely to appear with the development of the tourism in the NPLR area such as artisans and local food producers which can sell their products to the tourist.

Full description of stakeholders and tourism activities is presented in annex XXX.

The next table provides information on stakeholders indentified and their role before and after the start of the scheme. Partners involved already in the implementation of the scheme a marked with green.

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 59 - - - - How does the stakeholder regard others in the list? In need of a coordination with them but with low level of knowledge of natural processes Enterprises which should comply to tax and revenue legislation - Subordinants (Directorate of RLNP) - Colleagues and potential customers (tourism developers) ------Develop own accommodation places in areas where other partners already work - - - - - What other interests does the stakeholder have which may conflict with the project? f, public f but not ------What resources will the stakeholder wish to commit (or avoid committing) to the project? Staf co-funding, capacity Staf specially for the scheme - Within annual budgets - - As - - est feasibility - - Promotion of activities of PES in Pas additional non- restricted funding for management of P Non-state financial resources Improved dialogue with local stakeholders Decrease the impact of tourism - Better absorption of funds reached environmental goals T - What benefits are there likely to be for the stakeholders A - - - - What are the stakeholder's expectations of the project Improve the level of involvement of local farmers in AEP/ Natura 2000 payments Pilot testing of PES in a P - Information exchange Generate private funding for conservation activities managed by the Directorate, independently of the state - m o Role in the scheme Chair the Steering committee, monitoring the implementation Advices on the financial set up and book-keeping Financial monitoring of the scheme Sthrengthen the cooperation with regional structures - Agricultural extension services - to improve the implementaion of existing agri- environmental measures in the pilot Monitor the scheme Monitoring Protect and manage the game in the territory i L k s n e s u n R S i E C Current role/ impact/ involvement Agri-environmental payments provided to farmers Funding for business development, incl. tourism, in rural areas Improves annual workplans and budgets of the Directorate Monitoring Protect and manage the game in the territory Manager of the protected area none e P h f t Agri s o i s y l a n A ype r T Governmental Institution – main stakeholder Governmental Institution Governmental Institution Governmental Institution, under Ministry of Regional Government Institution Regional Government Institution e d l o h e k a t Agency S

: e 8 l b Executive Forestry board Regional Forestry Directorate Ruse State Game Enterprise “Dunav” Name Directorate of Rusenski Lom Nature Park Ministry of Finance, National Payment Ministry of Agriculture and Food a T

60 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 - - How does the stakeholder regard others in the list? Obliged to inform and coordinate with the RIEW - Partners Partners Partners Partners Managing auhtority of the scheme, Partner , none , none ------What other interests does the stakeholder have which may conflict with the project? - - Might be appropriation of the scheme; Development of projects on tourism not coordinated with the Directorate - For now For now Develop own accommodation places in areas where other partners already work , none , none f to attend the - - What resources will the stakeholder wish to commit (or avoid committing) to the project? - Part time of one staf Steering committee For now For now 3 FTE, co-funding esting of PES T Nature-friendly image of the area attracting more tourists and income for the municipality Income to maintain trails, protect the biodiversity Reduce the footprint on the nature Improved CSR External non- restricted funding in support to running conservation project What benefits are there likely to be for the stakeholders , only What are the stakeholder's expectations of the project Information exchange Information exchange For now Information exchange Improve the funding for conservation activities for the area Responsible to collect and allocate funds - major role to manage! information exchange m o Role in the scheme Monitoring Partner Supporter Manages the scheme - financially and operationally Monitoring but can secure additional funding i L k s n e s u n R S i E C Current role/ impact/ involvement Manage Natura 2000 sites and monitoring of activities on the territory of the pilot Manages historical sites, develops eco-tourism Use the nature park and bring groups of tourists in the area Generates fees on income from tourism in the municipality; Approve annual budgets and workplans, incl. nature-tourism lines, if any Seat in the Steering committee of the PES NGO of the Directorate of Rusenski Lom Nature Park e P h f t s o i s y l a n A ype r T Regional Government Institution Local government Local government Local government Under the management of the municipality NGO (national) NGO (local) e d l o h e k a t S

: aters e 8 l etovo b ourism Name Municipality Regional Environment and W Inspectorate Ruse Ruse Municipality Ivanovo Municipality V Regional Historical Museum Ruse Bulgarian Association for Alternative T Club Friends of Rusenski Lom Nature Park a T

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 61 forts How does the stakeholder regard others in the list? with to sustain local nature benefits Competitor but necessary partners needing to unit and coordinate ef - - What other interests does the stakeholder have which may conflict with the project? - f f but not willing f, promotion f, promotion f, promotion f, promotion f, promotion f, promotion f, promotion What resources will the stakeholder wish to commit (or avoid committing) to the project? Staf Staf to pay before witnessing the benefits Staf and collection of PES Staf and collection of PES Staf and collection of PES Staf and collection of PES Staf and collection of PES Staf and collection of PES Donation Staf and collection of PES rained local What benefits are there likely to be for the stakeholders Enhanced biodiversity and aesthetic value of the area Improved tourism infrastructure and trails T guides Improved coordination and dialogue with Directorate of RLNP Improved image of the area because of the scheme New niche markets - responsible tourists rained local What are the stakeholder's expectations of the project Enhanced biodiversity and aesthetic value of the area Improved tourism infrastructure and trails T guides Improved coordination and dialogue with Directorate of RLNP Improved image of the area because of the scheme New niche markets - responsible tourists m o Role in the scheme Potential parter Partners, Signatorees of the Partnership Agreement i L k s n e s u n R S i E ourism C Current role/ impact/ involvement T business developers e P h f t s o i s y l a n A ype ourist ourist ourist r NGO (local) T organization T organization T organization Hotel/guest house Hotel/guest house Hotel/guest house Hotel/guest house Hotel/guest house T e d l o h e k a t S

: Angel, e 8 l illa illa Slanchevo, ourst b Associacion "Prista" Koshov Pisanetz Association Oporta, Ruse Club for adventurous tourism Biala zvezda, Ruse Sport and nature protection association Akademic - Ruse T Black stork hotel, Nissovo V V Hotel Kladenetza, Ivanovo Rusenski Lom hotel, Koshov Name a T

62 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 forts How does the stakeholder regard others in the list? Competitor but necessary partners needing to unit and coordinate ef with to sustain local nature benefits - - What other interests does the stakeholder have which may conflict with the project? - f, promotion f, promotion - - - - What resources will the stakeholder wish to commit (or avoid committing) to the project? Staf and collection of PES Staf and collection of PES - - rained local What benefits are there likely to be for the stakeholders Enhanced biodiversity and aesthetic value of the area Improved tourism infrastructure and trails T guides Improved coordination and dialogue with Directorate of RLNP Improved image of the area because of the scheme New niche markets - responsible tourists rained local What are the stakeholder's expectations of the project Enhanced biodiversity and aesthetic value of the area Improved tourism infrastructure and trails T guides Improved coordination and dialogue with Directorate of RLNP Improved image of the area because of the scheme New niche markets - responsible tourists m o Role in the scheme Partners, Signatorees of the Partnership Agreement Potential parter Potential parter i L k s n e s u n R S i E ourism C Current role/ impact/ involvement T business developers e P h f t s o i s y l a n A - ype - r Hotel/guest house - Hotel/guest house Hotel/guest house T e d l o h e , k a t S

Agency : e 8 l utrakan ourist b T and Operator Guest house Edelvais, Dve Mogili Kami Gold T Park centre Bozhenia, Bozhichen Orehite complex, Bozhichen Name a T

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 63 ANNEX III. THE PES PROCESS DIAGRAM OR YES AND MONIT

EXIT OR, ellow box - action Green arrow - Red arrow - NO Y Green box - exit place Blue dashed arrow - conditional sequence COLOR CODING: PES SCHEME A

LAUNCH, MONIT ADJUST IDENTIFY Define PES Establish necessary legal framework -> not necessarily leading to a PES scheme methodologies Review/ define Are there potential risks to the ecosystem from human activities? with stakeholders the threat source? Promote and engage Can legislation address ES protective measures? Can we identify and quantify Enforce legislation Do we know the threat source? Start from from the threat? the beginning Can we assess the loss Has the demand side an threat from human activities? interest in stopping the threat? Is the ecosystem currently under Do we know the supply and Are there existing funds IDENTIFY to address threats/ risks? demand side of ecosystem services? Is there a business case/stated public objective for the demand side to engage in addressing the threat? fectively AND EXIT , grasslands) defined? forts of ES providers? Are funds ef PROMOTE Are targeted ecosystems IDENTIFY awarding ef (forest, water

64 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 ANNEX IV. FINANCIAL ANALYSIS OF THE PAYMENTS SCHEME FOR CULTURAL ECOSYSTEM SERVICES (PCES) IN RUSENSKI LOM

1. OBJECTIVE OF THE ANALYSIS The objective of this analysis is to assess the financial sustainability of the payments for cultural ecosystem services scheme under several development scenarios.

2. PERIOD OF THE ANALYSIS The analysis was conducted in 2012 but some final price adjustments were made before the start of the Rusenski Lom PCES, in 2013.

3. METHODOLOGY The analysis uses standard cost and benefit analysis (CBA). The CBA is applied for several income-generating scenarios to identify the most viable one. Ranking of financial scenarios is based upon the net present value (NPV). The scenarios presented here are calculated based on estimated cash flows related to the implementation of the scheme over a 10 year period. A discount rate of 6% is used to calculate net cash flows and the NPV.

A section of the analysis is dedicated to the level of the payment for the ecosystem service. An estimate of the level was obtained through testing willingness to pay. However, the level of payment takes also into consideration the value of costs of measures to provide the targeted ecosystem service.

4. BASELINE DATA The analysis required substantial data sets. Some of these are data on tourism in Rusenski Lom. Official data existing with the regional office of the National Statistics Institute of Bulgaria are not disaggregated to allow for using specific information at the site-level. The Nature Park Administration itself does not have a system to count and monitor the number of tourists or revenues for local entrepreneurs. This is also to be taken in consideration during the revision of the management plan for Rusenski Lom, especially in the part describing the natural carrying capacity of the area for tourism, in combination with all other economic activities exercised here.

The next table provides an information of the data used, collection method/ technique (if applied), source of information and purpose of the data collected.

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 65 Annex IV.

Table 9: Data used and collection technique

Data Type Time Source/ Technique Note Relevance series (if applied) to the analysis

Number 2005-2012 Ruse Regional Museum of History Details about number by Calculation of of tourists nationality, age, type of tourism incomes (individual/ organised) Adjustment to the level of PES after 2007-2012 Accommodation places Details about number in Rusenski Lom through interviews by nationality estimating WTP

2012 Ruse Tourist Information Centre, interview

2011-2012 Ivanovo Information Centre, interview

2011-2012 Ruse District governor, survey in Details about number the whole district developed by WWF by nationality and conducted by the Ruse District Governor in municipalities of Ruse, Ivanovo and Vetovo

Income from 2007-2012 Accommodation places in Rusenski Details about revenue Calculation of tourism Lom, telephone and personal interviews type of the service incomes Adjustment to the 2011-2012 Ruse District governor, survey in Information related to taxes the whole district developed by WWF and fees per bed paid annually level of PES after and conducted by the Ruse District estimating WTP Governor in municipalities of Ruse, Ivanovo and Vetovo

2012 Regional statistics, desk research and review of local media

2005-2012 Ruse Regional Museum of History Differentiation of income based on their age and type of visit (organised/ individual)

2011-2012 Tourism developers in Ivanovo, Vetovo Information about the and Ruse municipalities, organised income structure interviews

Number and 2007-2012 Direct observations of WWF, interviews Bed capacity Level of payment size of tourism Income developers 2005-2007 District strategy for the development Data is general of tourism Municipality development plans 2007-2013

2011-2012 Ministry of economy, energy and Registered operators in tourism, Registers the tourism branch

State 2010-2012 Rusenski Lom Nature Park Directorate, Information about distribution Existing income funding to the interviews of the state budget Rusenski Lom Nature Park Directorate

Public funding 2010-2013 Rusenski Lom Nature Park Directorate, Budget per activity Existing income to for tourism- Register of active projects (EU-funded, implement PES- related OP Environment) related measures activities 2007-2013 National Rural Development Programme, Level of public payments Costs Measure 214 Agri-environmental for grassland management, payments, sub-measure Payments for type and amount of annual high-nature value farmlands payment Measure 213 Payments for farmlands within Nature 2000 sites of the Bird Directive

66 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Annex IV.

Table 9: Data used and collection technique

Data Type Time Source/ Technique Note Relevance series (if applied) to the analysis

Scheme-related 2012 Rusenski Lom Nature Park Directorate, Type of Costs operational Friends' Club of Rusenski Lom measures costs Nature Park Interviews Management plan of Rusenski Lom Nature Park

2011-2012 Market research Cost value Costs

Administrative 2012 Rusenski Lom Nature Park Directorate, Type and value Costs costs Friends' Club of Rusenski Lom Nature Park Interviews

Investment 2011-2012 Rusenski Lom Nature Park Directorate, Type and value Costs costs Friends' Club of Rusenski Lom Nature Park Interviews

2012 Internet research Value

5. DESCRIPTION OF THE FRAMEWORK This payments scheme aims at reducing the impact of tourism on the biodiversity of Rusenski Lom Nature Park. Several activities have been identified as key to reducing the biodiversity impact of tourism and they are described in the logical framework of the scheme (please see the main document). These include:

• Monitoring of existing trails, development or/ and maintenance of tourism terrestrial and water trails having low biodiversity impact. The low biodiversity impact means that the trails allow the observation of nature without disturbing it.

• Maintenance of grasslands, which provide a habitat to species of tourists interest, such as the European ground squirrel and the Crex crex. Maintaining the habitats of these species supports also other species and contributes to stopping grasslands succession by shrub formations and to enhancing the regulating and provisioning services provided by well managed grasslands. The regulating ecosystem services include water and carbon cycles, and provisioning services - the nutrition biomass in the form of herbs and fodder, which local people use.

• Protection of the nests of threatened bird species - Black stork and Egyptian vulture. This will be achieved through the development of the trails passing away of the nests, from one hand. On the other hand, it will be achieved by increasing the capacity of the Directorate, through training and involving guards among the local population.

• The maintenance of the population of the Egyptian vulture requires also to feed the birds, in addition to protecting their nests.

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 67 Annex IV.

Monitoring of all these activities by an ornithologist and biologist is also an important activity, part of the scheme framework.

The implementation of this scheme requires to secure funding in the long term to cover the start-up, running and administrative costs, as well as the cost of monitoring.

Box 1. Definitions of costs Start-up costs include all costs necessary to initiate the scheme, namely costs on capital investments (machineries and equipment), restoration activities and salaries at the start of the scheme, when no income has been generated.

Running costs include all costs necessary to maintain the flow of ecosystem services. They include expenses on sub-contractors, administrative costs, office running costs, costs of trip to the field, costs on meetings with business partners or the steering committee of the scheme, communications costs, etc. These costs are accrued after the start of the scheme, when income flows are already generated

Administrative costs are part of the running costs. They include the salaries of the personnel responsible for the management of the scheme, such as manager, accountant and technical assistant.

Monitoring costs are those accrued to monitor the impact of the activities, identified by the parties to ensure the flow of ecosystem services. They include third party fees, travel and subsistence costs to carry out the monitoring.

Currently, the territorial scope of the PCES scheme is Rusenski Lom Nature Park. So, the calculation in this analysis are also based on the existing condition and needs for improvement on the territory of the Nature Park.

6. DESCRIPTION OF THE PARTIES FROM FINANCIAL POINT OF VIEW This PES scheme has 2 parties, bound by a Partnership Agreement. These are:

• the business entrepreneurs, from one side, who are supposed to pay, and • the manager of the scheme, from the other side, who are paid to enhance/ ensure a flow of benefits for the business entrepreneurs.

The benefits ensured are protected and sustainably managed habitats, protection of emblematic species and development and maintenance of terrestrial and water trails of low biodiversity impact.

The interest of business entrepreneurs to engage in the deal is lead by the understanding of the value of a protected nature for their businesses. It is directly linked to the risk of business interruption due to loss of the natural heritage. It can be simply emphasized by the statement: No nature - no tourists - no business.

To get involved in the deal the businesses need a guarantee that the money collected through different means will be spent in a targeted way. This means that the income from business to the scheme will be expended only on activities, which have been preliminary identified and agreed between the parties. In addition these

68 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Annex IV.

activities should lead to generating benefits with a positive impact on the number of customers and revenues. It also means that the costs of participating in the deal should not exceed the benefits. This has in common with trust, to one extend and cannot be addressed by the financial analysis. But it has also a financial aspect, on the side of the buyer of the ecosystem service. At the moment, when the scheme is not yet operational, the financial aspect refers to the willingness and capacity of the businesses to pay for generating the benefits, which, in turn, reflects on the cash inflow to the scheme. The willingness to pay at the start of the scheme is much lower comparing it to the benefits generated. After the first years of implementation, if there are evidences on the ground of the benefits to the business (return on investment), the willingness and capacity to pay are expected to increase to their actual value.

The interest of the manager of the scheme to get into the deal refers to the environmental goals the manager has, namely to support the implementation of the management plan for the Rusenski Lom Nature Park. If we have to use a simple statement to describe the interest it would be: Secured diversity of funding - decrease of the impact on and protection of species and habitats - achieved organisation's goals. It should be noticed that the interest on the side of the manager relates also to the potential future development of the scheme through expansion of the territorial scope, increase in the number of business entrepreneurs who pay, diversification of the provisioning of ecosystem services to other users.

In order to get into the deal the manager needs a funding to cover the start-up, running and administrative costs, as well as the costs of monitoring, which is linked to the operationalization of the scheme.

7. DESCRIPTION OF ACTIVITIES AND RELATED CASH FLOWS 7.1. COSTS-GENERATING ACTIVITIES

The next table provides information on the activities to necessary to support the implementation of the scheme and associated costs by type.

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 69 Table 10: Cost-generating activities of the schemes f f ravel and subsistence Monitoring costs T Third party fees Staf Staf f f f for birds f f f f f f f ravel and ravel ravel ravel ravel and training costs Running costs Third parties, staf Staf Staf Staf Third party T subsistence Foodstuf Design, production, fixing and maintenance of boards Third parties and staf Staf T Staf Staf Staf Steering committee meetings Financial reporting Financial reporting T Maintenance of the equipment T Maintenance of the equipment T Maintenance of the equipment f f f f f Start-up costs Motor cutters, little excavator Third parties Mowing machine Staf Mowing machine Staf Mowing machine Staf Staf - - Staf - - ulture pair Biodiversity indicator - 12 mature individuals per ha 200 ha of pastures 10 ha of grasslands Crex crex population 6 pairs of Black stork 1 Egyptian V - - - - - ha of pastures maintained, habitat of the European Ground squirrel 1 part-time person working with/ supporting farmers to encourage traditional grazing practices 52 km of low impact eco trails maintained At least 2 people hired part-time 200 10 ha of grasslands maintained, habitat of the Crex 1 part-time person working with/ supporting farmers to encourage traditional mowing practices 3 trails away of Black stork nests 1 part-time person working with fishpond managers to prevent damages the population of the Black Stork 1 part-time person to guard the nests and feed the birds during nesting period 12 boards/ 6 entry points to the Park area installed At least 2 people hired part-time At least 8 local guides trained 1 internet page/ profile in a social network 1 person from the NGO responsible for maintaining the site Semi-annual newsletters Supporters database Meetings, conservation programs, budgets, contracts Implementation indicator

raining of local guides Activity Development and/ or maintenance of tourist trails with a minimal impact on the biodiversity Landscape management and protection of species of tourist interest - European ground squirrel Landscape management and protection of species of tourist interest - Crex crex Protection of the Black stork population Protection of the Egyptian vulture population Marking and installation of information boards T Develop and maintain an internet space of the scheme Communications activities Activities of Management and reporting

70 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Annex IV.

The administration of the scheme will be implemented by the Friends' Club of Rusenski Lom Nature Park. The Club will secure the following human resources for the implementation of the scheme: one manager, biologist one finance expert one ornithologist Two options have been proposed by the Club to cover the staff cost: (1) percentage over the amount of PES collected or (2) a fixed monthly amount. The calculations are based on the latter. However, it should be noted that during the discussions with the Club, the manager preferred that the staff cost is covered on a percentage basis, based on the level of PES. This was supposed to prevent a staff costs exceeding the revenues of the scheme. 7.2. INCOME-GENERATING ACTIVITIES

7.2.1. USERS OF ECOSYSTEM SERVICES AND WILLINGNESS TO PAY During the development of the study, the Danube PES team tested the willingness to pay for cultural ecosystem services. A short questionnaire was designed and a telephone interviews were carried out in 2011. The interviews were conducted with the owners of family hotels in Rusenski Lom, which identified that the average willingness to pay for cultural ecosystem services was 3,06 euro. Table 11: Willingness to pay (WTP)

Source: WWF survey, 2011

Further to interviews of WWF with tourists in Rusenski Lom Nature Park, the willingness of tourists to pay for cultural ecosystem services was estimated at 1 euro on the average.

In 2011, WWF also conducted a survey with local municipalities to get information on the number of tourists and income from tourist tax. The results are presented in the next table. Table 12: Income from tourists to local municipalities - results from a WWF survey

* estimated number

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 71 Annex IV.

According to the Ruse Tourism Information Centre (TIC), more than 500,000 people visited the city. The TIC could not provide data on the number of people who had visited the nature park. The representatives of the TIC provided an estimate of the number of visitors to Rusenski Lom Nature Park of 25% of the total number of tourists.

WWF further investigated the number of tourists and obtained data from the Regional Museum of History, which manages the two historical sites in the Nature Park - the Medieval Fortress of Cherven and the Ivanovo Rock Churches. The next table presents the number of people who visited Ivanovo Rock churches and the income from them. Table 13: Number of and income from tourists to Ivanovo Rock Churches

Number of Income from Number of Income from tourists in 2010 tourists 2010 tourists in 2011 tourists 2011

TOTAL 8 920 15 051 9 597 16 072 Source: RIM Ruse The information on the number of and income from tourists is important in order to estimate the revenues and operational incomes of the PES scheme. The calculation of the expected income is based on nearly 17,700 tourists, representing approximately 3% of all tourists visiting the area and 88% of the total number of tourists who visited Ivanovo municipality in 2011.

7.2.2. PES GENERATING INSTRUMENTS There are several instruments that will be used to collect the PES under this scheme. The next table presents these instruments, their value and how the level of value was defined Table 14: PES-generating instruments Instrument Unit value Level of the unit value

Sale of post cards 1,00 euro WTP of tourists Market price of the same type Sale of bio-cotton bag 5,00 euro if product Price premium on tourist From 1 to 5 % WTP of businesses services/products

Donations ------

The production of PES-generating instruments - post cards and bags is associated with some costs. The value of these costs is added to all costs.

The calculation of the expected income is based on 17,700 tourists and the following assumptions:

60% of tourists could purchase a post card 20% of them could purchase a bag 1% add up on annual income generated from accommodation places in 2011.

The table overleaf presents the costs by type over a 10-year period, including the production costs.

72 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 e m e h c S s E e P h g t n i t n e m e l p m f i s o t s o d c e t a m i t s E : 5 e 1 l b a T

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 73 Annex IV.

7.2.3. NET CASH FLOWS Several scenarios were developed to evaluate net cash flows of this PES scheme based on the application of different PES-collection instruments.

The costs on maintaining grasslands are excluded from the calculation of the net cash flow (NCF) - there are agri-environmental payments under the National Rural Development Programme, supporting such measures.

To assess the scenarios Net present value (NPV) was used as an indicator. A positive NPV shows that the present value of the cash flow is higher than the costs of the project/ investment, meaning that the investment is effective.

Four scenarios were tested:

Scenario Income generation option NPV

1 Sale of post cards Negative

2 Sale of post cards and bags Positive

3 Sale of post cards and 1% charge Positive over value of services

4 1% charge over value of services Negative

It should be noted that in Scenario 4, NPV becomes positive when the discounting rate is at least 27%.

It could be noticed that the more PES-collecting instruments are applied the better the NPV.

The next tables present the net cash flows under the four scenarios. All data are shown in Euro. (NCF stands for net cash flow)

74 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013

1 10 10 18 700 18 700 Y Y 16 51 135 21 -1 44 030 151 723 -107 692 - -107 692 - -1 103 473 -4 220 103 473 -15 227

1 367 1 367 1 1 Y9 Y9 15 725 127 092 -1 41 934 142 817 -100 883 - -100 883 99 022 -1 862 - -1 99 022 -12 345

8 8 Y Y 14 976 122 581 -107 605 - -107 605 94 783 -12 822 39 937 137 558 -97 621 - -97 621 94 783 -2 838

15 276 Y7 Y7 -101 013 - -101 013 90 745 -10 268 14 263 1 38 035 129 539 -91 504 - -91 504 90 745 -759

1 133 1 Y6 Y6 - -97 549 86 900 -10 649 -97 549 13 584 1 36 224 124 717 -88 493 - -88 493 86 900 -1 593

17 496 Y5 Y5 83 238 241 - -82 997 -82 997 - -91 622 83 238 -8 383 12 937 104 559 -91 622 34 499 1

4 4 13 077 Y Y 12 321 100 756 -88 435 - -88 435 79 751 -8 684 32 856 1 -80 221 - -80 221 79 751 -470

3 3 1 734 Y Y 1 31 292 106 572 -75 281 - -75 281 76 429 1 149 94 838 -83 104 - -83 104 76 429 -6 674

1 176 Y2 Y2 29 802 102 525 -72 723 - -72 723 73 266 543 73 266 -6 907 91 349 -80 173 - -80 173 1

1 1 Y Y 10 643 86 021 -75 377 - -75 377 70 253 -5 124 28 382 96 664 -68 282 - -68 282 70 253 1 972 Y0 Y0 0 72 453 -72 453 - -72 453 70 253 -2 200 0 72 453 -72 453 - -72 453 70 253 -2 200 . . (cards) (cards and bags) (20%) (20%) o 1 o 2 i i r r a a T T n n axes axes e e Item Item EU Funding NCF EA EU Funding NCF Costs EBIT T EA Income Costs EBIT T Income c c S S

Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 75 1 10 10 Y Y 44 804 135 21 -90 407 - -90 407 103 473 13 066 774 128 607 -127 833 - -127 833 103 473 -24 360 Y9 Y9 42 671 127 092 -84 421 - -84 421 99 022 14 601 737 120 802 -120 065 - -120 065 99 022 -21 043 8 8 15 889 15 889 16 591 Y Y 40 639 122 581 -81 943 - -81 943 94 783 12 840 702 1 -1 - -1 94 783 -21 106 15 276 Y7 Y7 38 704 1 668 109 571 -108 902 - -108 902 90 745 -18 157 -76 573 - -76 573 90 745 14 173

1 133 1 Y6 Y6 36 860 1 637 105 700 -105 063 - -105 063 86 900 -18 163 -74 273 - -74 273 86 900 12 628 Y5 Y5 35 105 104 559 -69 454 - -69 454 83 238 13 785 606 99 384 -98 778 - -98 778 83 238 -15 539

4 4 Y Y 33 434 100 756 -67 322 - -67 322 79 751 12 429 577 95 827 -95 250 - -95 250 79 751 -15 499

3 3 Y Y 31 841 94 838 -62 996 - -62 996 76 429 13 433 550 90 144 -89 594 - -89 594 76 429 -13 165

Y2 Y2 524 86 879 -86 355 - -86 355 73 266 -13 089 30 325 91 349 -61 024 - -61 024 73 266 12 242 1 14 1 01 1 1 Y Y 28 881 86 021 -57 140 - -57 140 70 253 13 1 499 81 763 -81 265 - -81 265 70 253 -1 Y0 Y0 0 72 453 -72 453 - -72 453 70 253 -2 200 0 72 453 -72 453 - -72 453 70 253 -2 200 ) e g r a h t c h g ) i e g r d n a n h s a t c d h r g . . i a c n ( ( o 3 o 4 (20%) (20%) e e i i r r m m a a o o T T n n c c e e axes axes n n c c Item Item I I Costs EBIT T EA EU Funding NCF Costs EBIT T EA EU Funding NCF S S

76 Payment Scheme for Aesthetic and Biodiversity Values of Rusenski Lom Nature Park | 2013 Photo © Alexander Ivanov Essential Danube region “services” RECYCLED P

and benefits A Y M E N 500 million € T S C If 100,000 ha of Danube floodplains H E

are restored at an average cost of M

500,000 €/km², this would cost less E F

than the damages caused by floods O 29 million € R A E S T

Danube River basin forests and grasslands H store carbon with total value E T I

of 29 million € per year C A N D B I O D I V E R S I T Y V A L U E S O F R U S E N S K I L O M N A T U

500 € R E P

1 hectare of functioning Lower Danube floodplain A R

provides benefits worth as much as 500 € per year K (water cleaning, flood mitigation, fish spawning) 1,177,232 tonnes

The territory of Rusenski Lom Nature Park B G provides carbon sequestration for 1, 177, 232 tonnes of CO2 WWF.

Why we are here.

To stop the degradation of the planet’s natural environment and PANDA.ORG/DCPO to build a future in which humans live in harmony with nature.

http://wwf.panda.org/dcpo

This publication presents results from the GEF project “Promoting PES and other related sustainable financing schemes in the Danube river basin” implemented in Bulgaria and Romania. The project is coordinated by the WWF Danube-Carpathian Programme with financing from the Global Environmental Facility (GEF), and implementation support from the United Nations Environment Program (UNEP). The implementation of this project is also financiаlly supported by the European Commission.