ADB VNFF VISION VNFF strives to become - by 2020 - a pioneer state nancial institution in Vietnam and in the Southeast Asia with an aim to eectively support forestry sector development through the mobilization of social resources for forest protection and development, sustainable forest management, mitigation and adaptation to climate change, livelihood improvement for local people who engage in forestry activities and biodiversity conservation. STUDY REPORT VIETNAM FOREST PROTECTION AND DEVELOPMENT FUND (VNFF) November 2015 Building A5, No.10, Nguyen Cong Hoan street, Ba Dinh district, Hanoi, Vietnam (84) 4 37246771/ 37247559 (84) 4 37246770 vnff.vn ECONOMIC VALUATION OF ECOSYSTEM SERVICES TO DEVELOP PAYMENT FOR FOREST ENVIRONMENTAL SERVICES MECHANISM ON INDUSTRIAL PRODUCTION ADB AND TOURISM IN LAO CAI AND THUA THIEN HUE PROVINCE This publication is designed and printed with the nancial support of ADB/CDTA-8592: Improving Payment for Forest Environmental Services (PFES) Implementation Project funded by Japan Fund for Poverty Reduction entrusted through the Asian Development Bank (ADB). INTRODUCTION DB/TA-8592: Improvement Payment for Forest Ecosystem services Implementation in Viet Nam was conducted from September 2014 till December 2016. As one of its key tasks, the TA planned Aand carried out six (6) case studies on economic valuation of ecosystem services in several private sectors, such as aquaculture, tourism and industrial water in the TA target provinces, Lao Cai, T.T.Hue and Ca Mau. The study also proposed mechanisms to implement PFES pilot in those target sectors. This booklet presents three study reports on economic valuation of ecosystem services, one report of industrial water in Lao Cai and two reports of tourism in Lao Cai and T.T.Hue. Three studies took approaches based on the same scientific discipline of environmental economics and conducted in the same period from third quarter of 2015 until first quarter of 2016. However, their out- puts and implications are largely different in terms of designing and conducting the pilot in the target sector. While industrial water sector could start their pilot smoothly in Lao Cai in July 2016, the proposed design of pilot in tourism in Lao Cai is still under consulting process among the local stakeholders as of Decem- ber 2016. The focus of consultation is how to identify the service users (PFES payers) in the whole tourism sector of the province. Study results in tourism in T.T.Hue are still under the discussion as of December 2016 to upscale economic valuation and pilot design by covering more tourism sites in the province so that the Provincial Fund can apply PFES scheme in wider target and get higher revenue. Therefore, PFES pilot in tourism has not been started yet by the end of 2016 in both Lao Cai and T.T.Hue province. Under the circumstances above, I hope this booklet will be a helpful learning module for the policy makes, experts, consultants and stakeholders at all levels in the country to understand what kind of economic evaluation and consultation among the stakeholders should be conducted in designing and conducting PFES pilot in industrial water and tourism sector at the provincial level. Chief Technical Advisor and Team Leader Consultant Team for ADB/TA-8592: iPFES Dr. Yasu Hiromi Photos source: VNFF, Le Van Dung, consultants of IPFES project STUDY REPORT ECONOMIC VALUATION OF ECOSYSTEM SERVICES TO DEVELOP PAYMENT FOR FOREST ENVIRONMENTAL SERVICES MECHANISM ON INDUSTRIAL PRODUCTION IN LAO CAI PROVINCE Dr. Nguyen Hoang Nam/Independent consultant of Environmental Economics, [email protected] TABLE OF CONTENTS EXECUTIVE SUMMARY ............................................................................................................................1 1 . Introduction .................................................................................................................................8 2. Objectives, Contents and Scope ..................................................................................................9 2.1. Objectives ..........................................................................................................................................................................9 2.2. Contents .............................................................................................................................................................................9 2.3. Scope and research subjects .......................................................................................................................................9 3. Methods .......................................................................................................................................11 3.1. Secondary documment collection and review ................................................................................................. 11 3.2. Consultation on PFES in industrial production in Lao Cai province .......................................................... 11 3.3. Survey on the industrial production companies exploiting surface water from forest in Lao Cai province ........................................................................................................................................................................... 11 3.3.1. Questionaire design ....................................................................................................................................................12 3.3.2. Sample size ....................................................................................................................................................................13 3.3.3. Data analysis ................................................................................................................................................................13 3.4. Study on the environmental service providers ................................................................................................. 13 4. Results ..........................................................................................................................................14 4.1. Overview of industrial production in Lao Cai Province .................................................................................. 14 4.1.1. Industrial production and water usages for industrial production .................................................................14 4.1.2. Orientation of industrial development and water demand for industrial production ...............................15 4.2. R esult of feild survey on industrial production exploiting surfact water from forest in Lao Cai prov- ince .................................................................................................................................................................................... 17 4.2.1. General information ...................................................................................................................................................17 4.2.2. Estimation of the forest value in providing water for industrial production .................................................20 4.3. Developing PFES mechanism in industrial production in Lao Cai province ........................................... 23 4.3.1. Bases for developing PFES mechanism ..................................................................................................................23 4.3.2. The WTP of surveyed industrial companies...........................................................................................................26 4.3.3. Options for payment levels and payment forms .................................................................................................28 4.3.4. Concession of PFES in industrial production .........................................................................................................32 4.3.5. Suggestions to enhance the implementation of PFES in industrial production ...........................................33 5. Conclusions ..................................................................................................................................35 References ..............................................................................................................................................37 Annex 1: Questionaire ............................................................................................................................................................. 39 Annex 2: Costs of water exploitation and water substitution of industrial companies ................................... 42 LIST OF TABLE Table 1: The situation of surface water exploitation works for industrial production ...................................... 15 Table 2: Water demand for industrial production in 2015 and prediction in 2020, 2030 ............................... 16 Table 3: General information of the surveyed industrial companies ...................................................................... 17 Table 4: Information on the water usages and water exploitation in 2014 .......................................................... 19 Table 5: Average costs of water exploitation ................................................................................................................... 21 Table 6: The value of forest in regulating and maintaining water sources for industrial production ......... 23 Table 7: WTP for surveyed industrial companies ..........................................................................................................