‘Complementary financing for Environment in the context of Accession - Innovative sources’

National-level analysis

Country : Former Yugoslav Republic of Macedonia

Author: Vlatko Andonovski

August 2007

Citation and disclaimer

This report should be quoted as follows:

Andonovski, V. 2007. Complementary Financing for Environment in the Context of Accession – Innovative Resources: National Report Former Yugoslav Republic of Macedonia. A project for the European Commission (contract 070201/2006/ 443879/MAR/E3). Balkan Foundation for Sustainable Development. 20 pp + Annexes.

The contents and views contained in this report are those of the authors, and do not necessarily represent those of the European Commission.

The Balkan Foundation for Sustainable Development was established in 2005. Its founding was based on a bold vision to create a vibrant, inter-regional foundation in the Balkan region to support citizen initiatives through local governments and NGOs. The impetus to develop this type of Foundation in South-Eastern Europe emerged from the belief that supporting democracy, sustainable development, cross-border and inter-ethnic cooperation at the local and regional levels is a cornerstone of a stable and democratic Europe .

2 TABLE OF CONTENTS

1 CHARACTERISTICS OF THE CASE STUDY AREA...... 4

2 SWOT ANALYSIS...... 14

3 DEVELOPMENTS AND PRESSURES...... 14

4 VALUE OF BIODIVERSITY ...... 16

5 SELECTION OF STUDY SITES ...... 16

6 OPPORTUNITY COSTS OF MAINTAINING BIODIVERSITY...... 16

7 PAYMENT FOR ENVIRONMENTAL SERVICES ...... 17

8 INTERPRETATION OF RESULTS...... 17

9 SUMMARY AND RECOMMENDATIONS ...... 17

3 1 CHARACTERISTICS OF THE CASE STUDY AREA

Pilot Project Region in the Former Yugoslav Republic of Macedonia: Prespa region

The Prespa region is situated in the Southwestern part of the former Yugoslav Republic of Macedonia. It consists of both land (562km 2) and water (177km 2). The total population is 17,681 in one town (Resen) and 40 villages. The average population density is 31 people/km 2. People live up to an elevation of 1100 – 1200 meters above sea level. The flat part, the average elevation of which is 860m, is significantly more populated because of the favorable natural and geographic conditions for the development of orchards. There are a total of 43 populated areas in the municipality plus the town of Resen.

Map 1. Map of Prespa region in the southwestern part of the Former Yugoslav Republic of Macedonia

Map of Prespa region

4 Socio-Economic features

The inhabitants of Prespa are mainly occupied in the primary sector of production, with agriculture as the main source of income; stock raising and fishing also contribute to the agricultural produce of the area. There are 3,000 families directly engaged in agriculture. The secondary sector is fairly developed only in the Resen area, while the tertiary sector is largely confined to tourism, which represents an important economic activity. In addition to its natural values, the Prespa region is considered to be of great cultural and historic importance with a high potential for tourism development. The region has been inhabited for several centuries. Numerous archaeological sites prove that in ancient times an important trade route of the western Roman Empire – the Via Egnatia – passed close to the region. The Byzantine and meta-Byzantine monuments of the Prespa basin are numerous and evidence of the rich cultural and historic heritage of the whole area.

Table 1. Main land use types in the Prespa region

Total surface Forests Pastures Arable land Unproductive surfaces 73,884 ha 23,625 ha 8,195 ha 11,932 ha 30,132 ha

Agricultural areas in the Prespa region cover 20,148 ha, of which 11,715 ha are currently under cultivation.

Table 2. Structure of agricultural land in Prespa region Category of use Hectares (ha) % of agric. land % of arable land Agricultural land 20,148 100 Pastures 8,433 41.9 Arable land 11,715 58.1 100 Plow fields and 7,373 62.9 gardens Orchards 2,771 23.7 Vineyards 262 2.2 Meadows 1,309 11.2

The most important agricultural activity is apple growing and its importance is increasing continuously. Presently, more than 80% of the total apple production in the Former Yugoslav Republic of Macedonia is produced in the Prespa region. Regarding ownership structure, 91% of the agricultural land is privately owned and only 9% belongs to the state.

Biodiversity

The Prespa region is characterized by a very rich biodiversity, taking into account all its aspects – ecosystems, communities and species. A very important feature of the region is the presence of a very old lake (about 3 million years old) and presence of

5 several distinct biomes as a consequence of the large vertical gradient. The shore of the lake is rich in muddy terrains including a wide belt of reeds (at some places over 1000 m) as well as rich forest vegetation. Morover, Prespa has a site proclaimed an ornithological reserve in for protection of birds and wetlands according to the Ramsar Convention, ratified by Decree for Ratification on 28 July 1977.

Flora

There is high habitat diversity in the Prespa basin, with more than 1,500 species of flora. On the European and global scale, the Prespa region is represented with 33 globally significant plant species and 13 habitat types of European importance. From the phytogeographical perspective, the Prespa region can be classified in the Balkan sub-zone of the Sub-Mediterranean vegetation zone. The regions with aquatic vegetation have special conservation importance. The plant formations of the land area exhibit a variety of forms. The successive zones from the lake shore to the basin line in the mountains are forest formations (lowland woodland vegetation, deciduous oak forests, deciduous beech forests, and mixed beech – fir tree stands), sub-alpine vegetation of dwarf shrubs and alpine meadows. The following habitats of European importance are present in and around Prespa Lake: 22412 Frogbits rafts , 22415 Salvinia covers , 22416 Aldrovanda communities and 44 Temperate riparian and swamp forest and brush .

Fauna Invertebrates: 16 endemic species have been registered. Fish fauna: A total of 23 fish species have been recorded, out of which 5 are endemic to Prespa and 2 are endemic to the Balkans. Amphibians: 11 amphibian species have been recorded. Two species and four subspecies are considered Balkan endemics. None of the amphibian species is directly threatened. Reptiles: 22 reptile species have been recorded. Birds: The avifauna of Prespa has both national and international importance, due to its richness, but also due to the presence of significant populations of rare species of international importance. The area is especially important for water birds, notably the largest breeding colony of Dalmatian pelicans ( Pelecanus crispus ) in the world, listed by IUCN and BirdLife International as Vulnerable), as well as a substantial number of White pelicans ( P. onocrotalus ) and Pygmy cormorants ( Phalacrocorax pygmeus ). Among the 261 bird species observed in the Prespa region, 183 are important, according to official catalogues, national or EC legislation and international conventions. No detailed study to gather qualitative data has been undertaken in the Former Yugoslav Republic of Macedonia in regard to this region. Mammals: The endangered mammals include the Brown bear (Ursos arctos ), the Grey wolf (Canis lupus ), Chamois (Rupicapra rupicapra balcanica ) and European otter (Lutra lutra ).

6 Threats to biodiversity The agricultural and economic choices of the villages have a direct effect on the ecological prosperity of the Prespa region. The practices that are part of the region’s long history are not always sustainable at a large scale, and the various technological changes to the traditional way of life have altered the effect that local practices have on the environment. For instance, irrigation technology has helped improve agricultural production, but the poor methods and technology that are employed has led to the degradation of the soil and over-abstraction of water from the lakes. People are unaware of the damage their actions can cause and that there are better ways of executing their activities. This results in these unsustainable patterns of exploiting natural resources, and inappropriate policies for land use that has been eroding the unique attributes of the Prespa region’s unique ecosystem. Agriculture has a strong negative impact on biodiversity in the lowland ecosystems in the Prespa region, including:  habitat loss (wet meadows) and destruction through agriculture expansion (new orchards)  toxic effect through pollution of the soil – pesticides, fertilizers  toxic effect through pollution of the lake – pesticides, heavy metals  loss of species/disturbance of communities through eutrophication of the lake through fertilizers (phosphorus, nitrogen) Large parts of the ecosystems of the Prespa Lakes region have been converted or transformed into agricultural systems of various kinds, or have been replaced by towns, villages and other man-made infrastructures. More specifically, water abstraction from the lakes for irrigation purposes, use of fertiliser and pesticides (1,500 tones annually), disposal of urban wastewater, and of solid household wastes increase eutrophication, enhance vegetation growth at the littoral zone, and increase growth of organic substances in shallow waters, leading to a reduction of the spawning grounds of endemic fish species and feeding grounds of rare water birds. Farmers currently have no access to agriculture extension support services or to information on sustainable agricultural techniques, including the appropriate choice of pesticides and fertilizers, the correct timing of applications, and the optimal concentration that should be used. The link between agro-chemicals and the environment is not well understood as there are no educational outreach programmes on this topic.

Analysis of legal and institutional frameworks

National legislation Currently, the Former Yugoslav Republic of Macedonia is undergoing a process of harmonisation of national legislation with EU acquis communautaire . As outputs of the ‘Capacity Strengthening of MEPP’ Project within the PHARE 1999 Programme, the following legal acts have been prepared: − Law on Environment (proposal, currently in parliamentary procedure for adoption); − Law on Water (proposal, currently in parliamentary procedure for adoption);

7 − Law on Nature Protection ( O.G. of RM 67/2004); − Law on Air Quality ( O.G. of RM 67/2004); and − Law on Waste Management ( O.G. of RM 68/2004 and 71/2004). In the second phase of the above-mentioned project elaboration of sub-laws and ordinances is anticipated, as a result of these laws. The Law on Nature Protection was adopted in 2004, thus superseding the Law on the Protection of Natural Rarities and the Law on the Protection of National Parks. The basic purpose of this new law is comprehensive protection and conservation of nature. Biodiversity protection is the most significant part of the law. The new law stipulates the duties, obligations and responsibilities for nature protection, completely harmonized with European legislation in this area. The legislation provides for the establishment of a network of protected areas with bio-corridors, in accordance with the Natura 2000 network of specially protected sites, the stipulations of the Bern Convention and the Pan-European Biological and Landscape Strategy. The law has special chapters for species conservation, and thus urgently imposes the need for elaboration of a National Red List, as an obligation of this law.

International conventions and agreements

There are several multilateral environmental agreements, including global as well as regional and sub-regional conventions of relevance for the protection of the Prespa region, all of them ratified by the Former Yugoslav Republic of Macedonia, and therefore directly applicable as a part of the legal system:

Convention on Biological Diversity (Rio de Janeiro, 1992) – ratified by law (Official Gazette of RM 54/97) and implemented in 1998;

• Convention on Wetlands of International Importance Particularly as Waterfowl Habitat (Ramsar, 1971) – ratified by decree (Official Gazette of SFRY 9/77). The Former Yugoslav Republic of Macedonia acceded to this convention with an Act of Succession in 1995;

• Convention on the Protection of the World’s Cultural and Natural Heritage (Paris, 1972) – ratified by law (Official Gazette of SFRY 56/74);

• Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) (Washington, 1973) – ratified by law (Official Gazette of RM 82/99). The Former Yugoslav Republic of Macedonia has been a member of this convention since 2 October 2000;

• Convention on the Conservation of Migratory Species of Wild Animals (Bonn, 1979) – ratified by law (Official Gazette of RM 38/99) and implemented in November 1999;

• Convention on the Conservation of European Wildlife and Natural Habitats (Bern, 1982) – ratified by law (Official Gazette of RM 49/97) and implemented in April 1999;

8 • Agreement on the Conservation of Bats in Europe (London, 1991) – ratified by special law (May 1999) and implemented on 15 October 1999;

• Agreement on the Conservation of African-Eurasian Migratory Water-Birds (Hague, 1995) – ratified by special law (June 1999) and implemented 1 November 1999.

Table 3. Information on (agricultural/forestry) sites of highest biodiversity value in the area TOP HIGH BIODIVERSITY VALUE AREAS Name (1) Biodiversity Approximate Where is it Interaction between Description (2) land cover in biodiversity and study area (ha. farming practices and percentage) and/or other land use interactions 1. Ezerani Strict Nature Reserve; 2,080 ha At the locality - Habitat loss and Emerald Site, IPA Ezerani destruction through Site, IBA Site, Corine agriculture Site, Ramsar Site, expansion; locality with globally - Soil pollution due significant and to pesticides and threatened plant fertilizers used in species and agriculture; communities. 8 fish, 3 - Water pollution amphibian, 2 reptile, due to pesticides and 26 bird and mammal heavy metals species, or total - Illegal sand number of 41 excavation from the Globally Significant lake shore is leading Faunal Species are to destruction of continuously or habitat for some temporarily present birds ( Charadrius within the site. dubius , Arctitis hypoleucos etc.); - Loss of species/disturbance of communities through eutrophication of the lake caused by use of fertilizers (phosphorus, nitrogen). 2. Stenjsko Marsh communities; Situated All endangered by Blato They have an between the desiccation irreplaceable role in villages of connected with the maintenance of the , decreasing water basic genetic fund of level of the lake and many temporary and in land transformation water invertebrates the locality of for agricultural and amphibians. Zverinec. practices. The marshes in general are important absorption pools for phosphorus, thus improving the water quality and limiting eutrophication.

9 3. Reed beds Well preserved belt Situated Massive cutting of on the Scripeto- between the reeds to create Phargmitetum villages of beaches by the lake community, very Oteshevo, shore (especially important for overall Carina, , around Pretor). ecological relations in Pretor and the lake ecosystem. Dolno Dupeni. The reed beds are basic breeding habitat for the wild population of the Globally Threatened (Critically Endangered) fish species – the Carp (Cyprinus carpio ) and basic nesting habitat for numerous Globally Threatened waterfowl species. 4. Meadows Threatened plant Situated near - Land abandonment communities the villages of and conversion into Grncari and fruit orchards Podmocani. 5. Oak Stands Well preserved stands Near the Present of Quercetum villages of overexploitation of frainetto-cerris Oteshevo and forests and illegal macedonicum Oberd. Leskoec. logging are direct 1948 em. Ht. 1959 cause for community and degradation or loss Quercetum trojanae of habitat. Illegal macedonicum Em. et. logging is becoming Ht. (1950) 1959. widespread and Presence of habitat currently accounts type from Bern for ca. one-third of Convention – the total harvest. Resolution No. 4 – Sustainable forest 41.7. Thermofilious resource use is and supra- necessary in order to Mediterranean oak maintain the habitat woods . quality for large carnivores. 6. Beech Stands Well preserved stands Volko Legalo Present of Abieti-Fagetum overexploitation of macedonicum Em. forests and illegal (1962) 1985 logging are direct a association. Presence cause of degradation of habitat type from or habitat loss. Bern Convention – Illegal logging is Resolution No. 4 – becoming 41.7. Beech forests. widespread and currently accounts for ca. one-third of total harvest. Sustainable forest resource use is necessary in order to maintain the habitat quality for large carnivores.

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Table 4. Information on most important land-uses (agricultural/forestry) by area (including the identified biodiversity friendly farming practises)

TOP LAND USES IN STUDY AREA Name Description (1) Approximate Biodiversity Interaction between Indica land cover in existing/affected farming practice tor of study area (ha. by the land-use and biodiversity intera and percentage) ction (2) 1. Cattle breeding 8,433 ha/42% Water pollution, - Potential grazing Agricultu does not reed beds and in the reed beds re – represent a forest - The poultry farms pastoral significant ecosystems. use feed farming economic (concentrate) activity and containing covers only phosphorous and needs of the later the manure local population also contains this in the Prespa compound which is region. Poultry used in agriculture. farming and its

future

development threatens the lake with substantial pollution.

2. - The greatest 11,715 ha/ - habitat loss and Agricultu part of this 58.1% destruction through re – agricultural area agriculture pastoral belongs to expansion; arable orchards (ca. - pollution of the 3,300 ha), with soil through ca. 60,000 tonnes pesticides and produced per fertilizers used in year. Apples are agriculture; the main source of livelihood for - pollution of the some 2,600 water through households in the pesticides and Prespa region. heavy metals - Cereals (wheat, - loss of 1,300 ha; corn, species/disturbance 60 ha; rye, 50 ha; of communities and barley, 50 through ha) and industrial eutrophication of cultures the lake caused by (tobacco, 10 ha) the use of are grown at the fertilizers ploughed fields (phosphorus, in Prespa region. nitrogen).

- Vegetable production is most developed around villages, where it serves

11 mostly home needs, with potatos (100 ha), tomatoes (50 ha), peppers (50 ha) and other vegetables (110 ha). 3. Prespa region Urban/ro has a relatively ad densely developed road traffic infrastructure, where the main and the regional roads contribute only 24 km on every 100 km. 4. Forests are Forest Present Forestry mainly managed management is overexploitation of by the PE focused forests and illegal „Macedonian primarily on logging are a direct Forests” and its sustainable cause for the branch „Prespa supply of timber degradation or loss Drvo”. There are and firewood for habitat. Illegal 494 ha evergreen the region, while logging is forest, ca 13,000 habitat values, becoming ha of high forests watershed widespread and and ca 7,000 ha management, currently accounts of low forest, all and biodiversity for a third of total distributed at enhancement are harvest. elevations from not management Sustainable forest 1,000 to 1,500 objectives. There management is meters above sea is an emerging necessary to level. awareness of maintain the ecosystem- habitat quality for oriented forest large carnivores. management and the importance of adopting related practices, but there is no institutional capacity to develop and apply it. 5. Waste Collection, - Loss and Solid waste is managem transportation degradation of considered the ent and disposal of habitats; most serious household waste problem in the - Toxic effect at the regional Prespa region. So through pollution waste dump is called “wild” dump carried out by sites occupy the Communal important habitats, Enterprise causing habitat loss “Proleter”. and producing However, there pollution from are so called seepage water and

12 “wild” dumping atmospheric sites. pollution by burning. A high proportion of the waste in Prespa is agricultural waste, which contains dangerous or potentially dangerous waste (chemicals, organic matter, unsold apples etc.). 6. Prespa region is - Loss and The impact of Tourism a tourist degradation of tourism on the destination. habitats biodiversity of the lake and adjacent - Toxic effect habitats can be through pollution separated into 2 main activities/conseque nces: 1) direct destruction of species and habitats, such as reed destruction for beaches; and 2) pollution of the lake by untreated waste water from hotels and other facilities. Large areas of reed and wet meadows are being cut or filled in to create beaches.

13 2 SWOT ANALYSIS

Table 5. Synthesis of the SWOT analysis Strengths Weaknesses Protection: Prespa area includes 2 National Gradual degradation of ecological values; Parks (Galicica and Pelister National Parks), Unsustainable patterns of exploiting natural Prespa Lake Nature Monument and one resources Strict Natural Reserve and Ramsar Site – Ezerani; No local environmental action plan; The main relative advantages that the area Insufficient collaboration between the local as a whole possesses are the combination of government and citizens in the field of its rich natural and cultural heritage and environmental protection; natural resources; Farmers currently have no access to The great variety of biotopes and the agricultural extension support services or to functions of the ecosystems; information on sustainable agricultural techniques, including the appropriate choice Non-existence of heavy polluting industry; of pesticides and fertilizers; Signed declaration for establishment of No plans for solid waste management or Prespa Park; wastewater management and industrial

waste; the existing legislation regarding the waste and wastewater treatment is not respected; No regular monitoring system for the pollution of soil and water; Inappropriate policies for land use

Opportunities Threats Awareness rising among citizens for the Strong negative impact on biodiversity in the issues related to biodiversity protection and lowland ecosystems nature conservation; Pollution caused by the use of agrochemicals Development of business related recycling and pesticides; of plastic and paper; Disrespect of urban planning guidelines Promotion of sustainable agriculture; (uncontrolled building); Modernization of the stockbreeding sector Water abstraction from the lakes for with an emphasis on the use of local races. irrigation purposes

3 DEVELOPMENTS AND PRESSURES

The risk of biodiversity loss faced by the case study area

The current agricultural activities and the use of agrochemical preparations, monocultures and irrigation with water from the Prespa Lake have been applying increasing pressure on the lake’s ecosystem through increased soil erosion, decreasing water level, uncontrolled pollution and eutrophication. The disappearance of the wet meadows and the expansion of the reed belts have had an impact on the habitats of

14 fish, amphibians, reptiles and birds due e.g. to reduced fish spawning grounds as well as bird feeding areas. Increasing pollution of the lake from agricultural run-off is changing the composition of fish species and bentho-fauna in the lake. The decrease in the water level of the Lake has caused reed belts to dry, a situation inhibiting their regulatory role. The current forest management consisting of clear cutting is leading to habitat degradation and erosion. Excessive grazing is aggravating the problem of soil erosion and degrading both the vegetation and the natural habitats. Intensive agricultural practices are also disrupting the nutrient balance of the soil. Uncontrolled fishing in the Lake has resulted in a decrease in the fish populations as well as their diversity. Additional pressures on the area’s ecosystems come from construction of houses, the creation of artificial beaches and sand collection in ecologically sensitive areas.

Past trends in land-use (value and coverage) and biodiversity protection

Most of the land in the Prespa region is used for agriculture (20,148 ha). Almost all of the agricultural land (91%) is privately owned and the use of fertilizers and pesticides is rather intensive. The most important agricultural sector is fruit growing (with apple production dominating) and cereals. The old marketing system of apples has broken down. The intense use of pesticides and fertilizers contributes to habitat destruction.

Expected changes in high value biodiversity areas and in land-use

Development of more sustainable agricultural practices would lead to changes in land use and benefit high value biodiversity areas. The capacity of apple growers to monitor agrochemical use and more rationally and effectively use water resources would benefit areas of high biodiversity value.

Table 6. Information on significant trends in land-use in the study area SIGNIFICANT TRENDS IN LAND-USE IN THE STUDY AREA Past Trends Future Trends Name Description Insights Socio- Description Insights Socio- of the trend – on costs, economic of the trend – on costs, economic crop type, profits, drivers crop type, profits, drivers behind farming land behind the farming land the trend practice and value trend practice and value measures measures Prespa Apple Breakdown The link region production of the between with intensive common agrochemicals use of market of and the pesticides and Former environment is fertilizers Yugoslavia. well Future understood; trend for The old the apple marketing production system of is estimated apples has to be less broken down. intensive

15 Prespa Agricultural Alternative Knowledge of region production methods of the impact of and use of the irrigation for agriculture on Lake water improving the local for irrigation efficiency of environment water use

4 VALUE OF BIODIVERSITY

Unfortunately, no data is available that would help quantify the socioeconomic value of the myriad environmental services provided in the Prespa area. The biological diversity of the Prespa Lake area is of national and international importance. At the same time, t he ecosystems around the lake also play an important role in supporting the supply of clean fresh water, in regulating the water level of the lake, filtration and controlling soil erosion. In addition, the Prespa region is considered to be of great cultural and historic importance with high potential for tourism, including ecotourism.

5 SELECTION OF STUDY SITES

The whole Prespa region is treated as one case study region.

6 OPPORTUNITY COSTS OF MAINTAINING BIODIVERSITY

In identifying the opportunity costs for the apple producers in the Prespa region we have used available data from the Macedonian Ministry of Agriculture, Forestry and Water Economy (MAFWE) as well as from a questionnaire designed according to the methodology template. The costs and incomes figures provided by the interviewees were compared to the regional average as provided by the MAFWE. Apple production is the most common farming (agricultural) practice for the Prespa region for which data is currently available. Apples are produced with intensive use of pesticides and fertilizers as well as lake water for irrigation. There is no organic apple producer in the area. Each case investigates 2 other options beside the current one (intensive), less intensive and organic apple production. The analysis suggests that moving from the current intensive practice to less intense or to organic farming yields benefits not only in environmental but also economic terms. Given the higher market price for organic/less intensive products, the gross margin from these options is higher than the current one. Thus, in both cases the opportunity costs are negative. Apparently, the increased profit is much higher in the case of less intensive production, where the opportunity cost is €-1,005/ha. Organic farming still lead to high profits, although the negative opportunity costs at €-195/ha is less than in the previous case of less intensive production given the lower gross margin that results from less production for organic apples.

16 7 PAYMENT FOR ENVIRONMENTAL SERVICES

Payment schemes for environmental services (PES) are flexible mechanisms which can be adapted to different conditions. They aim to provide payment or direct compensation for the maintenance or provision of a specific environmental service by users to providers of the services. In order to start successfully with PES scheme in the Former Yugoslav Republic of Macedonia there is need for introducing a specific legal framework for PES. The recognition of PES as an instrument in current legislation should facilitate dissemination and implementation of such systems. In the creation of a legal framework for PES, it is important that regulations be based on concrete experiences which have shown to be successful in the region and the country itself. PES systems may act as instruments to raise environmental awareness in the Former Yugoslav Republic of Macedonia, by allocating tangible economic values to services or externalities which generally have no price assigned to them. Sensitization of users of environmental services is essential for these to recognize the cost of producing environmental services and to increase their willingness to pay for these services. As for service providers, education programs may improve the adoption of techniques contributing to the production of environmental services. However, awareness-raising is not always a prerequisite to PES functioning. If the incentives provided by PES are adequate, producers will change their land use practices, with or without education. Besides the central government establishing a legal framework for PES, local government in the Former Yugoslav Republic of Macedonia may also act as agent to facilitate PES schemes. Thus, PES in the Former Yugoslav Republic of Macedonia can be a tool for the consolidation of decentralization processes since these consolidate and strengthen local institutions, among other benefits. Organic apple production represents a kind of PES in which consumers pay a premium price not only for a quality product but also biodiversity-friendly production.

8 INTERPRETATION OF RESULTS

• The pilot site (Prespa region) as a whole has high representativity in the Former Yugoslav Republic of Macedonia. The conclusions and recommendations drawn for this region are applicable throughout the country and they do not represent only a specific case. • It should be noted that the market price of apples produced in the region could rise if grown organic. • Currently, there is no PES scheme established in the Former Yugoslav Republic of Macedonia. This is partly due to the fact that there is no legal framework for it. • PES schemes in the Former Yugoslav Republic of Macedonia should focus on those environmental services for which there is an existing market demand, or for which such demand can emerge under appropriate conditions. • PES schemes in the Former Yugoslav Republic of Macedonia must be sustainable. Using non-sustainable sources of financing to pay for an environmental service during “a project’s life” is not a good solution. PES

17 schemes proponents should ensure that the payment mechanism will be in place for a long time. In some cases, fiscal instruments or environmental funds could be good instruments to use. If payments stop after a short period, it is very likely that the provider will stop providing its service especially in the field of biodiversity conservation. • The development of an appropriate financing platform is key to the establishment of a successful PES system in the Former Yugoslav Republic of Macedonia. The source of financing should mostly come from government payments and subsidies. Government payments can be funded through earmarked taxes, user fees or other fiscal instruments. • PES schemes may not constitute a cost-optimal instrument in all circumstances. Indeed, their success depends in great part from pre-existing conditions. PES systems should work best when services are visible and beneficiaries are well organized, and when land user communities are well structured, have clear and secure property rights, strong legal frameworks, and are relatively wealthy or have access to resources. • Even though the Prespa region is already under focus in terms of nature and biodiversity conservation (many biodiversity conservation projects), and the local people are already aware of the problems and threats in the region, awareness raising and capacity building is needed for the population in the Prespa region in order to participate in PES schemes. • Among the emerging best practices that can be identified, the diversification of revenues for communities involved in PES schemes through the creation of new markets for environmental goods and services (non-timber forest products, organic food, ecotourism) appears to be one of the most promising. PES schemes in the Former Yugoslav Republic of Macedonia can play a significant role in supporting such diversification of revenues by including specific support measures for market development and revenue diversification in their compensation packages. • Payments for environmental services are an innovative and relatively young market-based instrument for environmental protection. Consequently, it is still early to assess the overall effectiveness and efficiency of PES schemes and to identify lessons and best practices. However, concerning the Former Yugoslav Republic of Macedonia in general, people would be interested in this measure as farmers would be compensated for their loss and the system would bring tangible results in terms of biodiversity. • The current system for nature protection in the Former Yugoslav Republic of Macedonia should be enriched with the possible development of payment for ecosystem services and this could contribute to the protection and restoration of ecosystems. Agriculture is the main sector that affects biodiversity among others in the Former Yugoslav Republic of Macedonia. So if we can establish a well organized system for PES starting from the agricultural sector, this would present a good opportunity and starting point for similar developments in other sectors (forestry, industry, tourism and energy sector). PES will also provide a good basis for shifting from short-term focused practices to more sustainable ones. As the Former Yugoslav Republic of Macedonia is an EU candidate country and is following a structural approach toward EU integration, with the possible establishment of PES scheme in the Former Yugoslav Republic of Macedonia we should also take into consideration the

18 Natura 2000 and its provisions (the Member State shall take all compensatory measures necessary to ensure that the coherence of Natura 2000).

9 SUMMARY AND RECOMMENDATIONS

Local level PES systems should have a greater impact on meeting short-term objectives than schemes with national scope. Finally, PES must be flexible in order to adapt to different seasonal and spatial, cultural and legal, technical and economic situations in order to meet conservation and development objectives in the Former Yugoslav Republic of Macedonia. PES schemes should not necessarily involve cash payments, but may consist of fiscal incentives, credits, or others. For example, permits for tourism-related activities such as the sale of food and/or handicrafts may be used as compensation for families who work in conservation of grazing lands. Cash payments may become unsustainable if they are not well conceived and managed. Incentives provided by a payment for environmental services system may be individual or collective. In order to encourage a farmer providing services to conserve the natural resources on his or her farm, the incentive offered by the PES scheme must correspond to the profit the farmer can make using conventional means of production on the farm.

Recommendations of the National Expert Meeting on “Complementary financing for Environment in the context of Accession - Innovative sources” , to different groups of actors:

To decision makers on national and local level:

• Establish regulatory frameworks and facilitate processes which include PES as an alternative for financing the sustainable management of natural resources • Include PES as a tool in revisions of current environmental policies • Include a PES perspective in policies related to forestry, energy, water, ecotourism, genetic resources, handicrafts, etc.

To academic Institutions and research centers:

• Further scientific research in order to strengthen and disseminate methodologies to quantify positive and negative externalities created by a change in land use or land cover. • Further the study and validation of hypotheses which justify PES schemes in their contribution to the maintenance/conservation of ecosystems and natural resources as well as the impact of the schemes on rural population. • Integrate social, cultural, legal and institutional policies into research and education on PES. • University and environmental, forestry and agricultural scientific organizations must promote PES options in their programs (fora, meetings, workshops, etc.) • Further research regarding impacts of PES schemes as well as payment mechanisms.

19 To environmental organizations:

• Study PES systems as an option for environmental management and protection, avoiding ideological or political biases and prejudices. • Become involved in PES initiatives as co-executors or through monitoring of environmental processes, ensuring follow-up and transparency. • Forge alliances with local organisations, NGOs, natural resource-related educational centers and companies to promote PES systems.

To international organizations and project implementing agencies

• Place greater emphasis on the creation of local PES skills (training, education, research and technology transfer). • Encourage the creation of local, district, regional and national Environmental Service Funds with conservation funds provided by public companies, large-scale producers and private companies which benefit from the environment and natural resources • Support the creation and implementation of monitoring and certification mechanisms for environmental services. • Organize national or regional PES workshops.

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