The global South is home to some of the most valuable natural resources on earth. It is therefore key to addressing the pressing environmental challenges of our time. Payments for ecosystem services (PES) have recently become more important in environmental policy. PES is an environmental economic tool to incentivize the continued provision of ecosystem services.
Blockchain for wildlife conservation in Namibia
For example, climate change can be mitigated through carbon offset payments. Payments are designed to halt biodiversity loss and conserve wildlife. However, such payment systems face many challenges in the Global South. Can blockchain help locals in Africa better protect wildlife? Questions like these have been explored in a study by Daniel Oberhauser of the School of Geography and the Environment at Oxford University. The following text is an abridged version of his excellent work.
The scientist uses a proof-of-concept (POC) of a blockchain-based system for his study. Namely, for wildlife conservation payments in Namibia. This involves assessing the habitat integrity of an elephant corridor using remote sensing algorithms. These, in turn, trigger notional blockchain smart contract payments to surrounding communities. The application allows for a practical discussion of the potential of blockchain technology in relation to three key aspects of eco-payments:
- Effectiveness (conditionality) of environmental monitoring.
- Efficiency and transaction costs.
- Equity and benefit distribution.
Linking blockchain to the real environment
The case presented by Oberhauser is an example of linking the digital blockchain sphere with practical challenges of natural resource management in the real world. As such, it illustrates some of the technology’s potential. However, it also shows that blockchain technology is unlikely to provide transformative solutions in areas with complex environmental governance.
Human-induced climate change and biodiversity loss present unprecedented challenges to humanity. In both areas, environmental governance based on conventional command-and-control approaches is losing its grip. As a result, much hope is pinned on market-based governance tools such as payments for ecosystem services (PES). The underlying ecosystem services framework, a utilitarian view of nature as a service provider to humanity, is gaining traction in economic and political decision-making, as Roberto Costanza also reported. Under PES, landowners receive financial incentives to adopt land use practices that provide desired ecosystem services.
- Arguably the most influential environmental economics perspective is rooted in market-based neoclassical economics. Stakeholders negotiate optimal outcomes for society without government intervention when transaction costs are low and property rights are clear. PES are defined here as a voluntary, conditional transaction in exchange for a well-defined ecosystem service between a buyer and a provider.
- The ecological-economic perspective on PES places greater emphasis on social and environmental equity. It arose from the observation that the market-oriented environmental economic ideal type of PES is rarely encountered in practice, as noted by Aril Vatn and colleagues. Theoretically based on institutional economics and political economy, it addresses distributional issues and argues for the inclusion of intermediaries such as the state in PES systems.
- Political ecology critiques of PES reject the concept as a whole and condemn it as “selling nature to save it,” as Kathleen McAfee notes in a survey. The commercialization of isolated aspects of ecosystems in the form of PES is seen as a commodification of nature that denies “the diversity” of values associated with it, inevitably reduces human-nature interactions, and reinforces unjust power constellations.
Avoiding corruption in eco-payments with blockchain
There is remarkable overlap between the problems cited in the PSE literature and the promises of blockchain enthusiasts. Guillaum Chapron and colleagues believes that “the environment needs cryptogovernance.” He sees potential in at least three aspects. First, distributed ledgers could be used to register land titles immutably and secure property rights. This is one of the key institutional requirements for PES (mentioned in both the environmental-economic approach and the ecological-economic approach).
In addition, blockchain could increase transparency in transactions of various kinds, ensuring that “funds are used as intended” and minimizing corruption. Ultimately, blockchains could revolutionize governance by decentralizing power. In doing so, they enable the reconfiguration of power structures called for by political ecology critics of PES.
Performance payment system to protect wildlife
The PES program that is the focus of this case study is a performance payment system for wildlife conservation. It is embedded in the framework of community-based natural resource management (CBNRM) in Namibia. In southern Africa, nature conservation has evolved from centralized government management to decentralized multi-actor governance including CBNRM, as Muchapondwa and Stage report. As of 2018, there are 83 registered protected areas. They cover 163,017 km2 or about 20% of the country and are home to about 190,000 people or about 8% of Namibia’s population. The Namibian CBNRM framework was designed as a biodiversity PES system in which protected areas protect the provision of ecosystem services through conservation and receive benefits in return. For example, protected areas provide natural environmental and wildlife resources and receive payments from safari tourism and trophy hunting in return.
Better compensation for protected areas
Against a backdrop of growing wildlife populations and increasing human-wildlife conflict, protected areas need better compensation. Namibian CBNRM support organizations have therefore developed the Wildlife Credits system. Wildlife Credits is a payment system that offers protected areas direct payments for wildlife sightings in their area and for habitat conservation, mainly in the form of migration corridors. Wildlife Credits is currently being prototyped in four Namibian conservation areas. The POC presented here is hypothetically applied to Sobbe Conservancy in the Zambezi region of northeastern Namibia.
Sobbe Wildlife Reserve in Namibia
Established in 2006, Sobbe is home to approximately 1,085 people living in an area of 404 km2. The reserve stretches along the B8 national road and borders Mudumu National Park to the south and the Zambezi State Forest Reserve to the north. Sobbe has designated a wildlife corridor that crosses two roads and connects the two protected areas. This link is critical for transboundary wildlife migrations as it forms the heart of the Kavango-Zambezi Transboundary Conservation Area between Angola, Botswana, Namibia, Zambia and Zimbabwe.
Wildlife credits for the reserve
The conservancy wants to preserve the corridor because members believe it would reduce human-wildlife conflicts. However, agricultural activities are increasingly developing along the roads, slowly encroaching on the corridor. As a result, the Preserve’s management has requested wildlife credit payments to internally offset the opportunity cost of maintaining the corridor. The payments are in recognition of the important service the Preserve provides to protect large-scale wildlife migrations in the region. The incentive payments for maintaining the corridor are the subject of this study.
Blockchain technology could help
The blockchain-based PES-POC is available on GitHub3. It consists of three components. First, an Ethereum backbone consisting of an Ethereum smart contract and two Ethereum accounts. Second, a land cover classification algorithm running on Google Earth Engine (GEE) and accessed via the GEE Python API. Third, a link based on the Oraclize web service that connects the above components. The backbone of the application is an Ethereum smart contract. The Ethereum blockchain is used because it allows the implementation of arbitrarily complex programs in its blocks.
Radar and Google Earth to inspect the ground
Google Earth Engine is used for land cover classification. GEE is an open-access, cloud-based remote sensing service from Google. The smart contract queries GEE using its Python API. The requests to the API were written in a Python script. The script first specifies relevant geometric objects, including a bounding box of the study area, the outline of an elephant corridor, and a training region for land cover classification.
Second, the script procures remote sensing imagery. Sentinel-1 synthetic aperture radar imagery of the study area is used. Spaceborne synthetic aperture radar provides high-resolution imagery that is independent of daylight, cloud cover, and weather conditions. The C-band (4-8 GHz), as provided by Sentinel, is commonly used for remote sensing in agriculture. Bare ground reflects radar waves, while woody vegetation scatters the signal, resulting in a reduced radar echo. Classification included both cross-polarized (C-VH) and single-polarized (C-VV) modes with a spatial resolution of 10 m.
Payments are not made to households
To illustrate the potential and limitations of the POC, it is hypothetically applied to wildlife credit payments for an elephant corridor in the Sobbe Conservancy. The institutional set-up of the payment system in the Conservancy is very simple.
- There is only one PES vendor, namely the Conservancy, represented by the Management Committee.
- Payments are not made to households, as is the case in some other conservancies in Namibia.
- The distribution of benefits within the reserve is subject to internal management and is not part of the PES agreement.
- The reserve decides how the money is used, for example, to pay game rangers for corridor management, to compensate farmers for human-wildlife conflicts, or for community infrastructure.
- The purchaser of the PES is the Namibian Association of CBNRM-Support Organizations (NACSO).
Currently, an annual payment is made after the PES buyer manually evaluates satellite imagery of the elephant corridor at the end of the calendar year. If an increase in agricultural activities in the corridor is detected, payments are reduced or discontinued. The following sections address three key challenges that interviewees said exist under the Wildlife Credits Program and the CBNRM program in general:
- equitable distribution of benefits
- efficient environmental monitoring
- financial efficiency and sustainability.
Distribution of funds: Corruption not uncommon
Lack of capacity in financial management is a major challenge for institutional development of the CBNRM program, as indicated by several interviewees. The policy guidelines for protected area management state that developing accountability and good governance in protected areas is one of the most important aspects of protected area development and operation. This requires that “finances are well managed and there is no corruption.”
It is therefore the responsibility of a conservancy committee to ensure “fair and equitable distribution of benefits” and sound management of conservancy funds. In practice, however, several interviewees indicated that elite capture of funds and corruption are not uncommon. While most conservancies hold annual general meetings, plans to distribute profits are rarely rigorously enforced. Administrative costs are often inflated, or profits are raked in by the conservation committee and do not reach members. This has two effects:
- First, resentment of CBNRM grows as people bear the cost of living with wildlife, for example, without receiving any tangible benefit.
- Second, the lack of tangible benefits undermines democratic accountability within the system: conservancy members who have never received any benefits are unlikely to actively participate in the conservancy’s democratic governance processes.
1. Smart contracts are safe from manipulation
The POC presented here has three features that are relevant to benefit distribution. First, smart contracts can make benefit distribution technically tamper-proof. In the example smart contract, the EOA of the recipient of the PES payment is defined in a constant state variable in the contract code. Once the contract is implemented on the Ethereum blockchain, this address cannot be changed. Therefore, any transaction executed by the remittance function will transfer the predefined amount of Ether only to the specified recipient. While the smart contract contains only one recipient EOA, which here represents the Sobbe Conservancy, it could theoretically contain any number of recipient addresses. These could be different entities within the Conservancy’s administration, different villages within the Conservancy, or even individual households.
In addition, the transfer function could specify how the payment is distributed among these recipients. For example, it would be possible to divide the payment according to a distribution plan agreed upon by the democratic institutions of the Conservancy. The smart contract could then serve as an immutable mechanism for distributing benefits, guaranteeing that payments reach their rightful recipients.
2. Blockchain stores payments for protected areas
The Ethereum blockchain records executed transactions as new blocks on the blockchain. Therefore, there is a perfect record of how benefits were distributed in the past. Since Ethereum is a public blockchain, this record is technically accessible to everyone. Thus, in theory, there is full transparency about the distribution of benefits. Even if the smart contract were to be abused, for example, if incorrect information about recipient addresses were provided during contract development, there is at least a public record of this that can be used to hold those responsible accountable.
3. Accurate timing of transactions
Third, the contract allows for detailed transaction timing. In the proof-of-concept, this is a random time for the execution of a single transaction. Transactions can be scheduled to recur at predefined intervals or to end after a specified period of time. In this case, the satellite used provides new images of the corridor at bi-weekly intervals, and payments can be adjusted accordingly. More frequent payments could increase the subjective tangibility and thus the effectiveness of the PES payments. Overall, the precise timing of PES payments is an improvement in benefit distribution because payments cannot be withheld by individuals, and recipients can therefore rely on the payments being delivered on time.
Study shows there are obstacles, too
While this is tempting in theory, the case study shows that there are several obstacles in practice. Most importantly, using smart contracts requires technological knowledge. To reap the benefits of immutability and transparency, stakeholders must be able to understand the technology. If they do not, a trusted intermediary is required, which undermines the core concept of blockchain. In the case study presented here, none of the local stakeholders involved had the necessary technological knowledge to verify the code of smart contracts or remote sensing algorithms. Namely, neither the conservation committee nor individual households, supporting NGOs, or government agencies. About a quarter of the population in the study region is illiterate.
Not sure who the payees are
Furthermore, the governance of benefit distribution will not change just because a new technology is available. The smart contract presented could, in theory, safely distribute benefits to the rightful recipients. But it cannot determine who those recipients should be. What is a fair way to distribute benefits is arbitrary and depends on power relations in the local context. If an NGO or the government were to insist on using smart contracts to enforce its idea of fair benefit distribution, the existing power relations could be disrupted. That being said, authorities in Namibia are constantly trying to improve compliance with CBNRM legislation, which calls for equitable benefit distribution in the abstract.
Protected areas: Dependent on cryptocurrencies
Finally, the case study points to constraints arising from dependence on cryptocurrencies. An Ethereum smart contract can only transfer its own cryptocurrency, Ether (ETH). Fiat currencies such as USD or Namibia dollars cannot be transferred. Relying on cryptocurrencies as a medium of exchange presents two challenges. First, PES funds available in a fiat currency such as USD would first need to be converted to ETH via crypto exchanges in order to transfer ETH via a smart contract. Similarly, recipients of the payments would need to convert the ETH they receive back to fiat currency, as cryptocurrencies are generally not accepted as a form of payment in rural areas.
Exchanging currencies on crypto exchanges requires a fiat bank account, a smartphone or computer, and compliance with customer identification laws. This further complicates the establishment of a PES program. Interviewees pointed out that this was affordable at the community level in the study area, but not at the household level. This, they said, reduces the scope for benefit distribution. For providing benefits at lower organizational levels, such as to households, an automated exchange solution would be ideal. This would convert cryptocurrencies into mobile money. To the best of our knowledge, no suitable solution existed at the time of writing.
Monitoring the environment as a basis for payments
According to interviewees, there are several environmental monitoring options for wildlife credits in the Sobbe Conservancy. First, satellite imagery is used to assess the integrity of the elephant corridor. Once a year, the PES buyer, NACSO, manually checks to see if there has been a significant change in land cover in the corridor. Based on this, payments are adjusted for the following year. Second, remote sensing alone is not sufficient to measure the success of the corridor. This is because even extensive human activity can deter animals from using the corridor. Even when humans do not cause a change in ground cover. Therefore, camera traps have been set up to track how many animals are using the corridor. This currently involves high transaction costs, as maintaining the cameras, collecting the memory cards, and analyzing the footage requires the attention of a researcher.
Collecting data during tourist game drives
In addition, wildlife is observed during tourist game drives. In the protected areas with tourist lodges, of which Sobbe is not one, guides manually record animal sightings on game drives. The sightings are recorded on paper, the papers are collected and evaluated once a year. Based on this, predefined payments per animal sighting can be made to the respective protected area. As a new form of monitoring, local game wardens are currently being equipped with smartphones that allow the recording of animal tracks. All of these methods have high transaction costs, as a significant amount of the work must be done by humans, which increases the overhead costs of the PES system. Therefore, the scalability of these solutions is low. Furthermore, paper-based records in particular are prone to errors and tampering.
Financial efficiencies important for wildlife credits
Respondents indicated that obtaining sustainable funding is among the most pressing challenges for the wildlife credit program. There are three reasons for this:
- First, public sector contributions are becoming increasingly rare as the Namibian government is currently in an unfortunate financial situation that is resulting in significant budget cuts. As Namibia has become a middle-income country, international donor support for the CBNRM program as a whole is declining. However, the situation is somewhat better for Wildlife Credits, as it is a new program.
- Second, increasing international pressure on trophy hunting threatens what has been a reliable and important source of revenue for protected areas. While this is not directly related to funding for Wildlife Credits, it increases the importance of wildlife conservation payments as an alternative source of income for conservation organizations.
- Third, respondents pointed to the fact that some donors are skeptical about the distribution of benefits and the impact of the Namibian CBNRM program on conservation and are therefore reluctant to donate funds.
Five steps in a transaction
The POC presented addresses funding issues by reducing transaction costs for PES payments. A PES transaction through the POC involves five steps:
- the provision of the smart contract
- the initial payment from the PES buyer, which invokes the initialization function and sets the PES mechanism in motion
- the request to Oraclize and the callback from Oraclize
- the payment to the EOA of the PES seller and
- the transfer of the remaining funds back to the PES buyer.
All of these transactions incur standard Ethereum transaction fees (gas fees) associated with mining the new blocks on the blockchain. The provisioning fees are linearly related to the length of the contract code. The amount of Ether transferred in the transactions does not affect the transaction fees. All fees are paid directly in Ether when the transactions are executed. There are no fees for using the GEE Python API or the IPFS file hosting network.
Blockchain needs technical understanding on the ground
The main limitation of the presented POC, but also of blockchain technology in general, is its lack of accessibility. The case study shows that the implementation of Blockchain-based solutions requires a high level of technological expertise among stakeholders. Otherwise, intermediaries with the appropriate skills are needed. Blockchain applications then lose what sets them apart: their decentralized and empowering nature. While progress has been made in recent years, blockchain applications other than cryptocurrencies will only scale if their end-user experience improves. Today’s social media, for example, shapes reality and has even played a role in political revolutions because it is so easily accessible, not because laypeople understand the complex technology behind it.
Cryptos are barely usable in Africa
A similar barrier to the widespread adoption of blockchain products is the limited adoption of cryptocurrencies and their recent instability. The case study shows that while cryptocurrencies have the potential to transfer value globally at a comparatively low cost. However, this is of little use if the value transferred cannot be practically used in the daily lives of recipients, which is the case in rural sub-Saharan Africa. In addition, the recent fluctuations of Bitcoin and Ether have been widely reported in the mainstream media, diminishing confidence that they can be used beyond speculation.
Conclusion and results of the study
This paper has asked whether and to what extent blockchain technology can address the challenges that PES programs often face. To avoid abstract considerations, a proof-of-concept for a blockchain-based PES mechanism was presented. The application links Ethereum smart contracts with land cover classification on Google Earth Engine using a blockchain oracle.
The paper comes to three conclusions:
- It is unlikely that one can use decentralized and immutable blockchain smart contracts to solve issues of equity and benefit distribution. Especially in complex constellations of communal natural resource management, such as those found in many PES environments. This is mainly due to the inaccessibility of blockchain technology to relevant stakeholders. This leads to a heavy reliance on trusted intermediaries. This largely nullifies the characteristic features of blockchain and precludes a truly participatory approach.
- The presented proof-of-concept shows how environmental monitoring with open-access remote sensing algorithms can be linked to smart contracts on the Ethereum blockchain. This is an interesting application for PES as it provides a mechanism to enforce environmental regulations with a high degree of automation. This can be used to reduce transaction costs and potentially increase the efficiency of PES. Such applications could be useful in settings where the institutional configuration is more conducive to PES than to CBNRM. For example, when land is privately owned.
- Finally, in a departure from the political ecology critique of PES, the potential of blockchain technology was briefly discussed. Namely, to create direct connections between people in the Global South who seek to conserve charismatic megafauna and those in the rest of the world.
Eco-payments are intervention in existing systems
The final thought of this paper is a reminder that PES are always interventions in already existing configurations of environmental policy. In sub-Saharan Africa, community-based natural resource management is widespread. Therefore, such configurations are a delicate product of surviving customary law elements as well as repeated and sometimes violent external interventions.
Thus, according to scholars Taylor & Murphree, there are two forms of community-based natural resource management: “One customary, which generally has high internal legitimacy but low external legitimacy. The other formally with high external legitimacy but low internal legitimacy. They coexist, but the new forms need the internal legitimacy of the old, and the old need external legitimacy, especially in the eyes of the state.”
Scholars and practitioners should always ask themselves carefully how proposed policies will affect this process-especially if they advocate technologies that originated in the Global North for natural resource management in the Global South. After all, some of the planet’s most valuable natural resources have not lasted as long in the North as they have in the South.
Source referenceThis text is based on the original study "Blockchain for Environmental Governance: Can Smart Contracts Reinforce Payments for Ecosystem Services in Namibia?" by Daniel Oberhauser (School of Geography and the Environment, University of Oxford). The original-length study can be read here >
FAQ – Frequently Asked Questions
Yes, blockchain could make the distribution of aid money for wildlife and conservation more secure. Africa lacks capacity in financial management. The Ethereum blockchain could stop widespread corruption. This is because it records executed aid payments as new blocks. Therefore, there is a perfect record of what payments were made, when they were made, and to whom. Since Ethereum is a public blockchain, this record is technically accessible to everyone.
Limited only. The cheap crypto transfer is of little use if the recipients cannot make practical use of the transferred value. Cryptocurrencies have limited acceptance, especially in rural areas in sub-Saharan Africa. People lack the technical understanding to handle wallets and cryptos. An automated exchange solution in fiat currencies would be beneficial – but this does not yet exist.