1.1 The need for incremental cost assessment

1.2 The strategic approach to incremental cost assessment

1.3 Aim of the paper

1.4 Clarifications and caveats

Table 1: Paradigm cases to demonstrate incremental cost assessment for the Biodiversity focal area

Figure 1: Strategic Approach to Project Design

Figure 2: Strategic Approach to Project Design: Applied to Insula Piscatoriae

2.1 Background of each paradigm case

2.2 Main features and issues addressed through the paradigm cases.

Table 2: Summary matrix of the main features and issues addressed

1. INSULAE PISCATORIAE: Provision of Fish Aggregation Devices to Protect a Threatened and Unique Fish Family, the Piscus unicus
2. BOVINIA: Moderating the Impact of Veterinary Fences to the Wildlife and Ecosystem of the Bos Delta
3. PORTICUS: Creation and Management of Biological Corridors between Protected Areas to Facilitate Biodiversity Conservation between Continental Land-masses
4. ARBORIA: Incorporating Comprehensive/’Indicator’ Biodiversity Inventorying into Existing Commercial Inventorying
5. SYLVANIA: Reducing Forest Disturbance to Protect the Biodiversity of the Peat Swamp Forest
6. PERU AND BOLIVIA: Biodiversity Conservation of the Titicaca-Desaguadero-Poopo-Salar De Coipasa (TDPS) Waterbasin

The underlying rationale for support of all GEF projects is that some global environmental benefit is at stake, and the project seeks to address the threat(s) or need(s) to ensure that the global environmental benefit is conserved, or sustainably used and managed.

GEF financing is based on incremental costs. Paragraph 2 of the Instrument states that, the GEF shall operate, on the basis of collaboration and partnership among the Implementing Agencies, as a mechanism for international cooperation for the purpose of providing new and additional grant and concessional funding to meet the agreed incremental costs of measures to achieve agreed global environmental benefits in the following focal areas: climate change, biological diversity, international waters, and ozone layer depletion. The GEF policy on estimating agreed incremental costs is presented in document GEF/C.7/Inf. 5.

The original motivation for undertaking incremental cost assessment was to meet formal financing requirements. The assessment of incremental costs, however, is not only important as the basis for GEF funding but also as a way of structuring a genuinely strategic approach to proposed interventions to remove threats of biodiversity loss. Conversely, the analytical and strategic approach behind a project design leads to incremental cost-assessment. The rationale for supporting a project through GEF funding is not different from the rationale used for the estimation of these incremental costs. In fact, the arguments are parallel. There is a strong and definite link between good project design and incremental cost assessment.

Figure 1 provides a strategic approach to incremental cost assessment (as applied to biodiversity, in this instance). The first question which needs to be addressed is if there is any unique biodiversity in the project site which is of global importance and/or priority. If yes, then is it threatened? What are the causes of threat? What is the trend of these threats? The threats emerge from the analysis of the baseline situation. This analysis will help to determine if the baseline is sustainable, and how it relates to the broad development goals of the country.

The next set of relevant questions relates to what course(s) of action can be taken which could remove these threats to ensure that the biodiversity of importance could be conserved or rehabilitated to sustainable levels of use and management. This should help to define the alternative strategy or the GEF intervention. The main cause and effects of adopting the alternative strategy should help define the scope of the analysis (or "system boundary") in physical, spatial and economic terms. Figure 2 demonstrates the application of this strategic approach to one of the paradigm cases, Insulae Piscatoriae. Just as the baseline identifies the threats to biodiversity or the actual causes of current loss, so the alternative should address the threats and remove the causes. One of the main benefits of this strategic approach to incremental cost assessment is that it requires this link to be made explicit.

It is increasingly apparent that a well-prepared project that shows how the activity (or activities) will "make a difference" to the global environment is relatively easy to cast in incremental terms, whereas poorly conceived projects are not too easily costed. A highly erroneous practice is to conduct the incremental cost assessment at the tail-end of the project formulation, undertaken simply to satisfy the formal GEF requirement. In this later case, the incremental cost matrix becomes the focus of the analysis, and filling up the cells the target. This is most counter-effective and cumbersome, to say the least.

The strategic approach and vision to incremental cost assessment affirms the incremental cost reasoning to be part of the "mainstream" thinking of good project design, and not an add-on activity. Despite the logic behind this strategic approach it has seldom been articulated or made explicit. This gap needs urgently to be rectified.

The application of the incremental cost assessment to biodiversity has always been uncertain. This paper seeks to demonstrate that the concept is a workable one in biodiversity. This paper has a twofold aim:

1. to make explicit the strategic and logical approach to incremental cost assessment
   - to demonstrate that it is replicable and applicable to all GEF projects
1. to apply this strategic and logical approach to specific case examples (or paradigm cases)
   - these paradigms will provide operational guidance at the more practical level

Most GEF projects to date have been conservation type projects, more amenable to rapid incremental cost procedures than to full treatment, and we have not been able to find good project examples where full incremental cost assessment has been demonstrated well. We are still finalizing some case studies for consideration and dissemination. In the meanwhile, we are presenting here some hypothetical paradigms which have been developed out of real cases. The paradigm cases represent different operational programs, and geographical regions and the data source for each could be (i) actual GEF projects; (ii) case studies; or (iii) hypothetical cases, based on experience.

Table 1 provides a summary of the six paradigm cases elaborated in the text. These paradigm cases are to assist in full incremental cost analyses in accordance with the required project format, generally needed for sustainable development activities and for the removal of the causes of biodiversity loss found in the productive sectors of the economy. These activities are modifications of the normal way of doing business, or substitute activities for economic development in a globally environmentally friendly way. There is clearly a baseline of economic activity in these cases, and the costs of these baseline activities are not eligible for GEF support. This more sophisticated assessment is required to separate baseline from incremental costs in these situations.

Ultimately this portfolio of paradigm cases should be used for dissemination and outreach to fill the urgent need for guidelines to Implementing Agency Staff and Task Managers on how incremental cost should be operationalised. The portfolio will be improved over time as we draw useful lessons from experience, and more cases will be developed to address existing gaps in information.

This undertaking is part of the PRINCE initiative. In addition to this there is ancillary material in the form of case studies and paradigm cases that have been prepared by PRINCE, with the help of Implementing Agencies.

The focus and emphasis of the paradigm cases is on the logic of the incremental cost argument, the clarity with which the argument is made, and on addressing issues of special significance associated with each case to demonstrate how these would influence the assessment of costs. Table 2 provides a summary of the issues addressed through each case.

As mentioned, the emphasis is on highlighting the essential incremental cost reasoning in each paradigm case without distracting (the reader) with obviously ecological or operationally unrealistic aspects. So as to achieve this most effectively, the cases have deliberately been kept short, clear and concise. Operational details mentioned are those essential for understanding the incremental cost logic. We mention here some issues which we may have not dealt with in great detail because they go beyond the incremental cost reasoning itself, but interact implicitly with the calculation of the costs. Actual projects would need consider these issues more fully. Finally, so as not to mislead we also set out caveats to the application of these paradigm cases to actual projects.

(a) Global benefits

Each of the paradigm cases makes some difference to global biodiversity conservation. In some cases this may be more explicitly stated (e.g. Insulae Piscatoriae where the alternative strategy seeks to protect a particular fish species), whilst in other cases the biodiversity benefits are at a more aggregate level (e.g. Porticus, Bovinia). We recognize that global environmental benefits are the basis of GEF projects, but do not dwell on this issue. It is assumed here that the project has been accepted conceptually: in which case it satisfies the criterion of achieving globally important biodiversity conservation, and that the rationale of this would be more fully expounded in the Project Document.

(b) Ecological realism

Issues of ecology are fundamental to biodiversity projects, and need to be discussed during project formulation by ecologists, biologists, wildlife managers, and other stakeholders; and all of this should be detailed in the Project Document. So as not to distract the reader from the aim of illustrating the incremental costs assessment, we do not go to great lengths to discuss the ecology of the protected area and/or the species (for e.g., what the effect of wildlife-friendly corridors in the Bovinia case would have on the carrying capacity of the cattle in the long term) or ecological designs (such as the size or mix of the biological corridors in the case of the Porticus). We have kept the ecological descriptions of the sites to a minimum, but without sacrificing ecological realism or fact.

(c) Discount rate

The discount rate used in all the paradigm cases is 10% throughout. This is an arbitrary rate chosen for the purpose of analysis (although it falls within the average rate used in most developing countries). The specific discount rate chosen in any project would reflect the opportunity cost of capital in that country, and may often also be tied to another project (if the GEF project is a component of a larger project).

(d) Funding modalities

The paradigm cases illustrated here do not promote any particular funding modality, but simply seek to demonstrate how good project design, and funding modalities are integrally linked to the project site and national system of governance. For example, in the case of Porticus it is recommended that the recurrent cost of compensating land-owners for opportunity costs foregone in shifting from the de-facto land use to the GEF alternative be managed through a trust fund. This funding modality is simply to demonstrate the use of an innovative form of fund disbursement to ensure that the land-owners comply with the rules of the ‘game’ throughout the project period: it does not imply a GEF policy recommendation. The learning value of the exercise is to demonstrate that funding modalities in a project should emerge from the unique features of the project, the socio-economic and political situation in the country. In real projects this would be guided by any special GEF policies on funding modalities.

(e) Temporal dimension: project duration

The project duration is generally defined by the Implementing Agency in conjunction with the government. But for good project design it would seem that the project should see itself to either environmental and/or financial sustainability. This is important otherwise GEF projects could see themselves running into ‘second phase’ funding, or if the project aims are not achieved, the previous GEF investment could be a waste! In the paradigm cases here no claim is made of the fact that the project duration would ensure either environmental or financial sustainability. This issue would need to be addressed closely in actual projects.

(f) "Cookie cutter"

The primary intention here is to use these paradigm cases as teaching cum demonstration tools. These paradigms should not be used in the "cookie cutter" approach, because each project is unique and will have to be presented on its own merits. Any attempt to apply these paradigm cases in toto, is likely to lead to confusion and pitfalls.

(e) Application to larger, complex projects

Projects vary in their size, complexity and especially in relation to the national governance structure, and of necessity the incremental cost assessment is likely to be more elaborate than presented here. But we maintain that the rationale and approach remains the same. The incorporation of this thinking from the early stages of concept formulation and the preparation of projects through PDFs A, B or C through to work programs will be eased if one maintains this logical and strategic thinking process.

This section provides a brief background of each of the paradigm cases, and highlights the interesting features of the project with respect to incremental cost assessment (see also Table 1). The details are provided in the paradigm case itself.

1. This case study is based on part of a larger project in the Comoros Islands. The aim of the project is to conserve a unique and threatened family of fish, by promoting the use of a modernized version of hooks and lines (referred to here as fish aggregation devices) as an alternative fishing strategy to the prevalent traditional hook and lines.
2. The risk associated with any potential over-harvest through excessive use of FADs is countered by the inclusion of a second alternative which combines the use of FADs with the facilitation of eco-tourism to ensure that baseline domestic benefits are not undermined.
3. The results reveal that although the least-cost option may be favored in economic terms, the long term sustainability of the project and natural resources may favor the second alternative scenario. The GEF grant should cover the full incremental costs of the project.

1. This case study is broadly based on a proposal for PDF Block B funding, although the scope and details have been modified to provide for additional features to be included in the development of the paradigm case. The study site is located in Botswana’s Okavango delta ecosystem. Background details are provided in the preliminary draft document .
2. The case study explores two alternative strategies to moderating the impact of the baseline situation which employs veterinary fences to contain the spread of the "lung disease", as well as ensuring that the unique wildlife of the delta ecosystem is able to migrate from core wetlands to the outer dispersal areas.
3. Alternative 1 which involves the use of annual vaccinations to contain the disease, and does away with the need for fences represents a cheaper option than Alternative 2 which employs the construction and maintenance of ‘wildllife-friendly’ fences. Both of these would provide the global benefit of ensuring long-term wildlife survival, as well as ensure that the same physical stock of cattle are available for export.
4. An advantage of investigating more than one alternative is that it makes the causal linkages more explicit The interesting result of the investigation here is that although Alternative 1 represents the least-cost option, it does not make the best economic sense for the country. This is because of the restrictions placed by importing countries: there is a ban on the import of cattle which has been vaccinated, for up to a period of two years. This raises interesting questions on the export scenario. Currently herdsmen who have free ranging cattle are excluded from this lucrative export market.
5. The potential cost-savings that may accrue from the use of bushmeat for subsistence use is currently not monetised and has not been included in the analysis. The use of bushmeat has often been mentioned as an important alternative source of meat (also healthier and less contaminated.) The higher population of wild animals which could be achieved under the alternative situation would ensure a more steady supply of bushmeat for local, subsistence consumption. This would then imply a cost savings in terms meat purchased from cattle ranches, which tends to be more expensive. Because of the lack of empirical information available we have not quantified any cost savings, but this could potentially by the end of the project period provide reasonable ‘costs-avoided’ and contribute towards the financial sustainability for the project.
6. It is requested that the capital costs be granted in full, whilst the annual recurrent costs be systematically disbursed on an annual basis to ensure that the wildlife corridors are properly constructed and well maintained.

1. This case study is based on a project proposal from Guatemala, although the details for the incremental cost assessment were not included in the original project document.
2. The case explores the incremental costs for an alternative strategy which builds upon the national strategy of improving the management of Protected Areas within the country (the baseline). The alternative calls for activities to complement the baseline through the creation, establishment and management of biological corridors between the Protected Areas to enhance global biodiversity conservation within the country and between the continental land masses to its north and south. In such a case there is a need for re-acquisition of lands and/or negotiations which ensure that the de-facto development of the potential biological corridors (the baseline) be conducted in a controlled manner, compatible with the concept of biological corridors.
3. The case for incremental costs is made interesting by the need for the design, implementation and management of incentives if the alternative is to be successful, otherwise the stakeholders may continue their ‘business as usual’ scenario.
4. The GEF funds would be disbursed as a full grant for the capital costs, and as a trust fund for the recurrent cum development expenses in the subsequent years. As mentioned in the text, the suggestion of a trust fund does not reflect current GEF policy, but is used to demonstrate that funding modalities should be innovative towards achieving the desired objectives.

1. This case study is based on a hypothetical but realistic situation that is being explored in Malaysia. It is proposed here that the existing system of inventorying which takes place both prior to and after commercial felling, be extended to include ‘indicator’ bio-inventories. The commercial inventories are confined to commercial timber species, and rattan and bamboo. Augmenting these with bio-inventories would provide global biodiversity information on one of the megadiversity ‘hot-spot’ countries, and provide the basis for the design of conservation measures in the medium and long term.
2. The alternative proposed here is additional to the baseline. It demonstrates how cost savings are factored into the analysis.
3. The incremental cost, which are estimated at $ 0.53 million could be financed through the medium-sized grant facility.
4. Biodiversity inventory protocols have specific sampling needs (such as capturing and sampling methods, frequency of visits etc.), which would to a large extent depend on the number and type of taxa chose. In practice, it is important that the biodiversity inventory protocol should be designed as far as possible to complement the commercial inventories, and to keep the incremental costs moderate.

1. This case is based on a PRINCE case study undertaken collaboratively with Wetlands International to apply the concept of incremental cost to biodiversity conservation in wetland areas in the Asia and Pacific region. The study site is located in the peat forests of Malaysia and the full details of the study are provided in Kumari, 1996.
2. The case explores the incremental costs of shifting from a less environmentally benign method (the baseline) of logging to a more benign one (the alternative), in order to help conserve an endangered species of rhino that uses the forests as part of their home range. This paradigm case use the rhinos as an indicator of the most extreme case of biodiversity loss in the global context.
3. The boundary of the study (and hence the ‘Scope of the Analysis’) is defined not by the forest itself but by all significant changes brought about by the shift in logging method. In this study there are two other significant changes that affect the incremental costs incurred by the country, these are the forest rehabilitation costs and the costs of water treatment incurred by the authorities down stream. Hence the incremental cost analysis will go beyond the comparison of logging costs for the baseline and alternative to include these issues.
4. The result indicate that the incremental costs are negative which means that it is in the interest of the country to shift to the alternative.
5. Besides the aggregate incremental costs, the incremental cost assessment sheds light on the costs (and cost savings) borne by the different stakeholders (the private logger, the Government and society). In this case the incremental costs to the private logger is positive, and that to society negative.
6. The study highlights special insights which can be made into a prevalent situation through the application of the incremental cost framework. This information could provide a powerful rational for the reallocation of the budget at the baseline position, and investigation into the needs for barrier removals. These are discussed in the case study.

1. This case is based on a joint proposal from Peru and Bolivia to help save and conserve the unique and threatened freshwater and montane biodiversity at the Titicaca-Desaguadero-Poopo-Salar de Coipasa (TDPS) waterbasin. The conservation measures in the alternative are actions which are "additional" to the baseline.
2. This case study provides an excellent example of a situation which demonstrates that a well constructed root cause analysis helps towards good project design and subsequently the assessment of incremental costs. The need for the removal of these threats to achieve defined biodiversity benefits then allows a corresponding identification of those actions which would be conducted through the baseline (i.e. in national/domestic interests, and in line with the broad development goals) and those which are additional (would benefit the global community). This information would feed into the incremental cost matrix and allow for an assessment of the costs.
3. The case study also demonstrates a good example of the complementarity of the actions in the baseline and the alternative. Although the actions recommended under the proposed alternative are ‘additional’ to the baseline, the root cause analysis demonstrates that achievement of the baseline as critical towards achieving the objectives of the proposed alternative (e.g. the limit on the abstraction of water from the lake). Specifically, this requires a phasing of the actions
4. This study also distinguishes between biological diversity and biological resources. That is it illustrates the need to modify the baseline development activities that would strive only towards the sustainability in terms of the biological resource of economic importance, that is of the exotic fish.., to ensure that the unique and threatened fish biodiversity and its components which may be of less economic importance are also managed sustainably.

Table 2 provides a summary of the main features and issues addressed through the paradigm cases. These issues in themselves may not be exhaustive, but rather illustrative. The aim is to demonstrate how the incremental cost methodology deals with these range of issues, and in turn how the incremental costs estimated would be influenced by the comprehensive treatment of issues involved.

1. INSULAE PISCATORIAE: Provision of Fish Aggregation Devices to Protect a Threatened and Unique Fish Family, the Piscus unicus
2. BOVINIA: Moderating the Impact of Veterinary Fences to the Wildlife and Ecosystem of the Bos Delta
3. PORTICUS: Creation and Management of Biological Corridors between Protected Areas to Facilitate Biodiversity Conservation between Continental Land-masses
4. ARBORIA: Incorporating Comprehensive/’Indicator’ Biodiversity Inventorying into Existing Commercial Inventorying
5. SYLVANIA: Reducing Forest Disturbance to Protect the Biodiversity of the Peat Swamp Forest
6. PERU AND BOLIVIA: Biodiversity Conservation of the Titicaca-Desaguadero-Poopo-Salar De Coipasa (TDPS) Waterbasin

The aim of this project is conserve a globally unique and threatened family of fish, the Piscus unicus, by promoting the use of modernized hooks and lines (referred to here as fish aggregation devices) as an alternative fishing strategy to the prevalent traditional hooks and lines, in the coastal waters of Insulae Piscatoriae.

The GEF grant for this project is $ 4.5 million.

1.1 The archipelago of Insulae Piscatoriae is located in the Maritime Ocean and consists of four islands of volcanic origin. The country has endorsed its National Environmental Action Plan at the highest level of government, which calls for, among other things, a concerted, rational management of the national heritage. It is also a signatory of several international conventions, including the Convention on Biological Diversity, Ramsar Convention, and CITES.

1.2 The Government is committed to biodiversity conservation, but with limited financial resources, a rapidly increasing population, and recent currency devaluation, the country is not able to fully finance the biodiversity conservation activities it wishes to undertake. Endemic species and their habitats are facing severe unprecedented threats due to human population pressure and unsustainable resource exploitation.

2.1 The Insulae Piscatoriae biogeographical region is of global significance in view of its outstanding biodiversity and high degree of endemism. In the marine environment, of global, ecological and scientific interest is the threatened Piscus unicus, known only from fossil records until rediscovered about 10 years ago, and subsequent sightings have been sporadic and process arduous. This fish first appeared in the fossil records in the Silurian era, some 400 million years ago, long before there were any land animals.

2.2 A fairly recent expedition with new and sophisticated submarines established that the fish spend the day in small groups deep inside caves on the side of a volcano which constitutes part of Insulae Piscatoriae islands. The caves, located some 200 meters deep, are at the shallow end of the range of the Piscus unicus. In fact by night these fish make expeditions to depths greater than 800 meters. There is strong evidence also from these expeditions that the number of these fish have in the last 10 years been reduced by almost half, to a few hundred fish. The only known reason for this decline is ‘fishing pressure’. The Piscus unicus gets caught accidentally in the conventional hooks and lines when the fishermen fish in waters of depth greater than 100 meters. Continued use of this method of fishing is putting tremendous pressure on the already dwindling numbers of the Piscus unicus.

2.3 Because of the urgency of the situation the project here is confined to the conservation of the Piscus unicus fish although Insulae Piscatoriae supports other significant and important marine (and also terrestrial) biological diversity.

3.1 Fishing is an important livelihood strategy for the rural community that lives along the coastal waters. With regards to the fishery sector the broad development goal is to continue to procure sustainable harvest of edible and commercially attractive fish. The current laws in the country require sustainable harvest of fish, although ‘sustained yield harvest’ has never been determined scientifically. To ensure that good practices are maintained, and that its goal is potentially achieved, there is a regulation that prohibits the harvest and sale of fish below a certain minimum size.

3.2 The fishermen have to purchase annual fishing permits, and these permits could be revoked if they are found to contravene the size regulation more than three times. The enforcement of these measures is not entirely satisfactory, although they do act as deterrents. The fishermen are free to adopt and adapt their fishing methods.

3.3 The most prevalent method is the traditional hook and line, which represents a fairly conservative and rudimentary method. This is the "baseline". Presently the fishermen confine their activities to the near shore of the islands since they do not have the means (they operate small paddle boats) or skills to fish further offshore. These waters have been increasingly harvested, and the fishermen have had to resort to fish deeper and deeper into the waters. The problems posed by the baseline are anticipated to become worse over time. Other traditional fishing techniques such as poison and dynamite are also becoming popular along the coast. Although both these techniques are rudimentary they are at the same time destructive, and overused, can result in overfishing and overkilling.

3.4 The baseline, as it is operating currently (in deeper and deeper waters), cannot protect the Piscus unicus which gets accidentally caught in the hooks. Because the Piscus unicus has no commercial value and is not eaten, it is simply discarded by the fishermen upon being caught. The population of Insulae Piscatoriae is growing rapidly and more fishing permits are being issued each year. This in turn is putting more pressure on the endangered fish.

4.1 In order to minimize the threat to the Piscus unicus, the accidental killing through the use of the baseline hook and line fishing method must be replaced, or modified, so as to protect this unique fish, but still maintain a sustainable fish harvest. This may be accomplished by providing an alternative to the local population which would dissuade them from fishing below 100 meters. One could conceive of imposing a ban on the use of the hook and line method, but it is likely to impose high opportunity costs on the locals, and is also not likely to be acceptable to the national government; because conservation of the Piscus unicus has little domestic advantage. Although there are potential eco-tourism benefits, these have not been explored at the domestic level. A further alternative would be to put a limit (say of 100 meters) on the depth to which the hook and line could be set, but similar arguments would hold true and it would be difficult to enforce.

4.2 A plausible alternative strategy which would discourage the fishermen from deep fishing is through the use of a ‘Fish Aggregation Device’ (FAD), which is a modified version of the hook and line. This modern equivalent consists of a strong rope anchored offshore in deep water (about 1,000 meters), the top end of which is attached to a buoy on the surface. From a depth of some 40 meters to the surface, long strips of nylon are attached. These FADs, being the only shelter in the open sea, attract small fish, and they in turn attract the big fish. These devices have been known to work, and attract valuable open water fish like tuna and swordfish. The fishermen would work in groups, and normally each FAD could accommodate the needs of 10-15 fishermen.

4.3 The alternative proposed here would be executed in the deeper waters of the high seas, away from the coastal volcanic deep waters which the Piscus unicus use. There is evidence which suggests that the high seas off the shores of Insulae Piscatoriae are largely under-exploited, but local fishermen have not been able to tap these resources because they have neither the means nor the skills and equipment required to do so..

4.4 There are two potential risks in shifting to the alternative: (i) that the optimum number of FADs would be exceeded when fishermen move from baseline hook and line method to the alternative FADs, and (ii) that the optimum number of FADs is not able to accommodate the needs of all the fishermen. To address these risks, it would be necessary for the alternative strategy to supplement the introduction of FADs with some other income generating activity, to meet that shortfall of domestic benefits. The proposed alternative, in this case, addresses these risks by including a component for the development of eco-tourism at the local level, with support provided to the training of guides, production of material and eco-tourism facilities. The provision of a Visitor’s center from which people can look into a Piscus unicus cave via an electronic camera mounted in one of the caves will attract tourists to the villages. By providing these alternative income generating activities which are economically feasible and environmentally friendly, the threat to the species and the ecosystem as a whole will be reduced. Communities will be free to choose from among different livelihood alternatives, and will be further empowered through training and greater economic opportunities.

4.5 The village communities are highly coherent, disciplined groups, accustomed to take and implement collective decisions. Indigenous associations and NGOs currently operational in the locality have successfully carried out numerous environmental initiatives at the grassroots level, and have great potential for further action and co-ordination.

4.6 A caution here is to ensure that with the use of FADs over-fishing of these valuable fish does not occur, and also that the smaller fish do not get harvested or killed in the process. The use of FADs should also guard against the harvest of presently less endangerd marine resource. It is important to establish the optimum number of FADs, through sustained yield indicators for the fish, which should be installed under this alternative strategy to ensure against any over-harvest or unsustainability of resource harvest. In this context, targeted research to answer these specific questions will be conducted as part of the alternative.

4.7 In summary, two alternatives will be investigated here: Alternative 1: shift from traditional hook and line (baseline) to their modern version FADs, and Alternative 2: shift from baseline to FADs plus eco-tourism activity.

5.1 The scope of the analysis includes all the significant changes caused by the decision to undertake the alternative(s) instead of the baseline both within and beyond the project area. In this example, there is at least one other significant change that would affect the incremental costs incurred by the country. The use of the FADs could increase fish yields sufficiently for the local fishermen to go beyond their subsistence level, and enable them to sell these to the urban markets. Although this is an incidental domestic benefit to the fishermen, it would in the larger economy mean a reduced import of alternative sources of protein, or raising of other livestock for urban needs. This is a cost avoided to the country. Because these avoided costs are uncertain, difficult to quantify, and probably small, they have not been included explicitly in the analysis.

5.2 To facilitate eco-tourism which is integral to the second alternative, the country may need to increase basic facilities and utilities, and improve infrastructure, all of which would incur costs. It may be difficult, however, to differentiate what level of these expenses can be attributed solely to the tourism activity, or to determine what costs (if any) are not offset by additional tourism benefits. For these reasons, such additional costs are not included in the analysis.

6.1 The main cost components associated with the baseline and each of the alternative scenarios is presented in Table 1. The analysis is done only for main island, Insula Magna, which is closest to the existing and known population of Piscus unicus, and these results are then extrapolated to the other three islands. The costs are presented as capital costs and recurrent costs. The present value is calculated at a discount rate of 10%, and the project period taken as 10 years.

6.2 There are 50 fishing communities on this main island and each community has about 10 to 15 fishermen, giving a total of 625 fishermen. For the baseline situation the main costs incurred by the fishermen include the paddle boats, hooks and line, and the bait. The first two items are self-constructed and it is only for the purchase of material and bait for which they incur a cost, these are estimated at $15 per annum for the entire project period.

6.3 For Alternative 1, the fishermen are organized to use FADs instead of the traditional hook and line method. Each FAD can accommodate up to 10 to 15 fishermen, suggesting that a total of 50 FADs would be needed for the whole of Insula Magna. This is less than the maximum number of FADs for maintaining the sustainable yield harvest of fish. The main cost components associated with this option include: purchase of FADs, motorized boats to take the fishermen to the deep sea area, boat launching ramps to secure boats at the village sites, and cold-storage facilities since the fishermen would be out for longer, and public education for the villagers (and officials) to keep them informed and involved.

6.4 The capital costs for Alternative 1 are estimated at $ 415,000, compared to $ 9,375 for the baseline. The recurrent costs of maintenance for Alternative 1 are $ 45,000 - about fivefold those for the baseline situation. The present value of the incremental costs of Alternative 1 over the baseline for this island is estimated at $ 205,165.

6.5 There is preliminary evidence that not more than 40 FADs should be deployed in the offshore waters of this main island, although this optimum number should be verified through targeted research. This research would cost about $ 100,000 and will be undertaken in the first year of the project by international researchers as no such specialization exists in the country.

6.6 The preliminary estimate of 40 FADs as the optimum number which should be deployed is used to calculate the incremental costs for the scenario of Alternative 2. These figures may have to be revised if the research results suggest such a need. A limit of 40 FADs would in practical terms provide direct employment for up to 500 fishermen. The remaining 125 fishermen would have to be provided with alternative employment, which is provided for under Alternative 2 through the eco-tourism component. It is envisaged that these fishermen would be invited on a voluntary basis to work in tourism.

6.7 The capital costs for Alternative 2 are estimated at $ 630,000, which is double that of Alternative 1. Additional cost components under this alternative include: Visitor’s center, training of guides and production of information material. The recurrent expenses for these are $ 98,000 for each succeeding year. The present value of the incremental costs of Alternative 2 over the baseline are $ 510,393.

7.1 The results show the present value of the incremental costs for both the alternatives to be positive, and those for Alternative 2 estimated at $ 1.31 million is more than double that for Alternative 1 ($ 0.61 million). These costs are for Insula Magna. The other three islands of Insulae Piscatoriae have fairly similar characteristics to this island, and the costs estimated here are extrapolated to get an indication of the total incremental costs if the alternative strategy was extended nation-wide. The present value of the total incremental costs to Insulae Piscatoriae to shift away from the baseline to Alternative 1 and 2 is $ 2.4 million and $ 4.5 million, respectively.

7.2 Alternative 1 represents the least cost option under the current assumptions and would be the favored option to fund. However, the first step would be to do the targeted research to establish the optimum number of FADs which can be deployed for the alternative strategy. These results are critical towards making a decision on how many FADs can be deployed. Based on these results a decision could be made whether the least cost Alternative 1 is feasible, or whether it would be necessary to fund Alternative 2. On the other hand, the decision could be made to fund Alternative 2 even if Alternative 1 is feasible and more cost-effective. The rationale being that it assures a better sense of long-term conservation of the endangered fish (and other biodiversity) in question. Incorporating alternative livelihood through the ecotourism initiative would alleviate the pressure on harvest of natural resources.

7.3 The GEF grant should cover the full incremental costs of the project, both for the capital costs and the recurrent costs. The added advantage of Alternative 2 is that at the end of the project period of 10 years the ecotourism initiative may develop well enough, and the knock-on effect may result in the establishment of several service related industries. Also the sustained harvest of fish could generate significant costs savings through the availability of an assured supply of protein, sufficient to offset any future recurrent costs.

The Government of Bovinia has erected a series of new veterinary fences in the Bos Delta ecosystem in response to an outbreak of Contagious Bovine Pleuropneumonia (commonly known as the "lung disease’). Whilst these fences have been effective in containing the disease, they bisect important wildlife corridors in the Bos Delta ecosystem, which is one of the most biologically rich wetland areas in the arid part of the region. One of the major ecological features of the delta is the migration of wildlife from core wetlands to outside dispersal areas. It is proposed here that these existing veterinary fences be replaced with alternative fence construction methods, which are more "wildlife friendly" and which would allow wildlife to pass through based on differences in physiology, leaping ability, and size between wildlife and cattle. These fence should ensure the long-term, sustainable conservation of the Bos ecosystem and its wildlife.

The GEF grant for a 10 year project period is $ 2.7 million, of which $ 2.1 million are capital costs, and $ 0.6 million recurrent costs.

1.1 Livestock trade is an important part of the revenue of Bovinia. It is one of the few countries in its region that has a livestock export quota into the European market. Hence the country has to comply with the high standards of veterinary hygiene and disease management as prescribed by the European Union, if the country is to continue its trading partnership. These requirements set the tone of the development goals with respect to the livestock industry.

2.1 The Bos Delta is one of the world’s premiere wetland conservation priorities. The delta is embedded in the Bos ecosystem, and the migration of wildlife from core wetlands to outside dispersal areas is one of its major ecological features. This wildlife movement, or transhumance, from the arid lands towards the Bos delta is seasonal and reflects the urgency for food and water. The specific global environmental benefit here refers to the maintenance and conservation of the indigenous biodiversity associated with the unique inland wetland Bos Delta biome situated in an arid setting.

3.1 The primary objective with regard to the raising of livestock in Bovinia is to ensure that the cattle are raised hygienically, and without disease. The Contagious Bovine Pleuropneumonia (CBP or "lung disease") is an endemic virus in this region, and because it is contagious and air-borne, it is easily transmitted between the cattle themselves once there is an outbreak, and can quickly reach epidemic proportions. Hence there is a need to separate the cattle into smaller groups so that the disease does not spread rapidly. CBP is an example of severe livestock disease which so far has not been transmitted naturally or experimentally to wildlife. Wildlife has a natural resistance to the CBP and it is neither a reservoir of infection, nor vector of transmission. The primary concern of the Government is for the health and hygiene of the cattle, wildlife health is much less of a priority.

3.2 The outbreak of CBP some years back saw the Government of Bovinia acting swiftly to contain the disease by erecting a series of new veterinary fences in the Bos Delta ecosystem. These fences were installed without prior environmental impact studies, and although they helped save the greater part of the cattle industry, well over 250,000 head of cattle were still destroyed in northern Bovinia. Thus the "baseline" which ensures that the cattle are not infected or re-infected, and that the livestock industry is ‘disease-free’, would consist of veterinary fences within the cattle rangeland located in the Bos Delta ecosystem.

3.3 The continued presence of fences is necessary to prevent further outbreaks, and potential spread, of the CBP, but their impact on wildlife has been adverse. Several wildlife species were strangulated by these fences (especially those which are fast-moving and gregarious e.g. wildebeest). The Bos Delta sits on the migration path of the wildlife from core wetlands to outside dispersal areas. The veterinary fences obstruct this wildlife movement and bisect dispersal areas surrounding the delta. If nothing is done there may be a permanent deterioration in the wildlife populations of the Bos Delta. Understanding and mitigating the impact of the fences on wildlife is of urgent priority if the globally unique biodiversity of the Bos Delta ecosystem is to be conserved.

4.1 In order to minimize the threat to wildlife movement and dispersal in the Bos Delta ecosystem, the obstacle presented by the veterinary fences must be removed or replaced by another ‘technology’. There are two alternatives to the current baseline of ‘veterinary fences’ to contain the CBP.

4.2 The first is through the application of an annual vaccination which is understood to be very effective. However, the crucial part of the vaccination process is that the vaccine must be kept frozen up to the point of inoculation, otherwise the vaccine will be yielded ineffective by ambient temperatures. The use of any serum which is not from the deep freeze could result in further outbreaks of the disease. Nevertheless, if conducted with great care, this method should alleviate the need for the fences to isolate the population of cattle for CBP.

4.3 The second alternative is that of modifying the design of the existing veterinary fences. The Bovinian Department of Wildlife and National Parks has studied the possible alternative fence construction methods and has issued a report on these technologies. These include "wildlife friendly" fences which allow wildlife to pass through fence sections based on differences in physiology, leaping ability and size between wildlife and cattle. Other technologies allow "one way" passage of wildlife in one direction but inhibit cattle movement, or the inclusion of double-fencing which allows the wildlife to pass through the external passage. Designs incorporating automatic or manual fence controls have also been studied. Testing of different wildlife friendly fences is required to determine the actual effectiveness of different designs in the Bos dispersal ecosystem so that the most effective alternative fence technology is selected. Provision of wildlife friendly fences should ensure the long-term, sustainable conservation of the Bos ecosystem.

4.4 The impact of these alternative treatments on the wildlife populations must be closely monitored against the carrying capacity of the habitat for the cattle and wildlife taken together. This should ensure that the "saved" wildlife through either one of the alternative practices does not suffer mortality anyway because of the seasonal differences in carrying capacity.

4.5 These two potential alternatives, of vaccination and wildlife friendly fences, are compared for their cost-effectiveness.

5.1 The scope of the analysis should include all other significant changes by the decision to undertake the alternative(s) instead of the baseline both inside the boundary of the project area and outside. In this example, there are is one potential change that could affect the incremental costs incurred by the country.

5.5 The shift to either of the two alternatives would have positive effects on the wildlife populations. The importance of bushmeat as a source of food and income has been debated for some time now, but it is understood that controlled hunting of wildlife can be an important source of protein for the local people. This could result in cost savings in terms of additional supply of meat for the local communities.

5.6 A possible impact of the vaccination alternative is that the cattle-carrying capacity on lands where more wildlife is able to graze will be less than on lands where wildlife is minimal. For example, in southwest Zimbabwe, farmers are going out of the cattle business and restocking their lands with big game, as this is potentially more profitable (through tourism). If the latter is the case, then it would be a baseline shift and not a GEF project anyway. If, however, the reduction in cattle carrying capacity meant a loss of income from the baseline, then it would need to be addressed through the alternative to ensure that the farmers are not worse off. This issue is not part of the analysis, but would need to be included if there was sufficient evidence that the latter was the case.

6.1 The incremental cost matrix for Bovinia is shown in Table 1. The main cost and benefit components associated with the baseline and each of the alternatives are presented. With regard to global benefits, shifting from the baseline to an alternative strategy will provide for improved survival of wildlife and allow for migration to their natural dispersal areas. The stakeholder of these benefits is the global community. The baseline domestic benefits remain the same, in that in each case the disease is contained and the animals can be exported to earn foreign exchange.

6.2 Only costs that are different between the baseline and the alternative(s) are shown. The costs are presented as capital costs and recurrent costs. For the baseline situation, of veterinary fences, the main cost components include construction and maintenance of the veterinary fences, monitoring these for strangulated wildlife and their subsequent removal.

6.3 The main cost activities for the vaccination alternative include: vaccine supply, refrigeration facilities, veterinarians and skilled technicians to undertake the operation, storage facilities, and transportation from rangeland to rangeland. The total cattle numbers in the country is 2.6 million, but of these 0.5 million are on freehold cattle ranches in the area under consideration. Vaccination and overhead costs have been estimated at $2.00 per head of cattle.

6.4 The second alternative of using wildlife friendly fences should incur cost in similar components as the baseline, except that the cost of these alternate fences would be more expensive because of their specialized design to ensure that wildlife movement is neither impaired or threatened. Construction costs of fences was estimated to be approximately $ 900/km for veterinary fences and $ 3,000/km for wildlife-friendly fences. It is estimated that the area for the rangeland described a total of 1,000 km of fencing is envisaged. There is also a research component necessary to ensure that the most effective design of fences are used in each case, which will be undertaken in year 1, and should cost about $50,000.

6.5 The cost of the individual components and incremental costs are presented in Table 1.

7.1 The results show that the capital costs of undertaking Alternative 2 is high (at $ 3million) because of the specialized wildlife-friendly fences, but the recurrent costs associated with these are only about 10% of the capital costs. In contrast, for Alternative 1, the capital costs are in the order of $ 1 million (and fairly similar to the baseline costs of $ 0.9 million), but the recurrent costs associated with the need for annual vaccinations are 40% of its capital costs. The present value of these recurrent costs is $ 2.3 million and $ 1.7 million respectively for Alternative 1 and Alternative 2. Despite these higher recurrent costs, the aggregate incremental cost (over the 10 year project period) for Alternative 1 at $ 1.3 million is lower than the $ 2.7 million for Alternative 2. The present value of both the Alternatives incur incremental costs above the baseline situation (Table 1).

7.2 Thus the results suggest that the most cost effective way to achieve the global biodiversity benefits, whilst maintaining the domestic benefits, would be through the shift to Alternative 1. Generally the least-cost option is the preferred option, but there may be a need to take broader considerations into account. For example, the European Union prohibits the import of vaccinated cattle for up to two years after vaccination, and it insists on fences to contain the disease in endemic areas.

7.3 This brings into discussion an important facet of domestic benefits. In this case undertaking Alternative 1 (vaccinations), the country would have the same number of cattle disease-free (same physical stock of domestic benefits as in the baseline), but it would interfere with the trade of an important export item which brings in valuable foreign exchange (i.e. economic benefits would be less). It would seem that there are two ways of handling this. In the first instance, it could have been omitted entirely from the analysis because it would not provide the same domestic (economic) benefits to the country. Or it can be included, but the loss of foreign exchange would mean that the country incurs an additional cost which must be factored into the analysis. For example, we could check to see what is the differential revenue if the vaccinated cattle were exported to other countries in the region, compared to their export to the European Union. These losses (or cost incurred) should be deducted from the incremental cost of $1.1 million of pursuing this option.

7.4 Approximately 85% of the country’s beef production is exported and both producer and consumer prices reflect the returns from overseas sales. Realisations from the European market tend on average to be 25-30% higher than other markets and as such exert the largest effect on farmgate prices.

7.5 The average national offtake for cattle is about 10%. That means that of the 0.5 million cattle, about 50,000 will be slaughtered annually for export. On average each head of cattle weighs about 250 kg and the price for it is $250 each (i.e. $1/kg). But if it is sold to the European Union it would fetch an equivalent price of at least $ 312. The differential price for the total offtake would be $ 3.1 million for just year 1 (Alternative 1: meat sold to domestic or regional markets giving a total revenue of $ 12.5 million. Alternative 2: meat sold to European markets giving a total revenue of $ 15.6 million.) This in itself would make Alternative 1 an uneconomic option.

7.6 The project illustrates the advantage of analysing more than one alternative and not making a-priori judgements towards the least-cost option. Another major potential advantage of shifting to either of the Alternatives is that they would ensure higher population numbers of wild animals which could provide a steady supply of bushmeat for local, subsistence consumption. Bushmeat has often been mentioned as an important alternative source of meat, which is also healthier and less contaminated. This would then imply a cost savings in terms meat purchased from cattle ranches, which tends to be more expensive. Because of the lack of empirical information available we have not quantified any cost savings, but this could potentially by the end of the project period provide reasonable ‘costs-avoided’ and contribute towards the financial sustainability for the project.

7.7 The GEF grant for a 10 year project period is $ 2.7 million, of which $ 2.1 million are capital costs, and 0.6 million recurrent costs. It is requested that the $ 2.1 million capital costs be granted in full, whilst the annual recurrent costs be systematically disbursed on an annual basis to ensure that the wildlife corridors are well maintained.

As part of it's commitment towards biodiversity conservation and sustainable development the Government of Porticus plans to embark on a series of programs to improve and enhance the management of its Protected Areas which are currently threatened by various threats including insecure status, illegal poaching and encroachment. Although the formulation and management of a Protected Area system in Porticus will meet defined national goals of sustainable development cum biodiversity conservation, the alternative proposed here is one which builds upon this national strategy. Specifically, the alternative advocates the creation, establishment and management of biological corridors between these Protected Areas, to enhance global biodiversity benefits.

The GEF grant for a 5 year project period is $ 47 million. The capital costs of $ 15 million are requested as a full grant, and $ 37 million to be set up as a trust fund to meet the development cum recurrent management costs.

1.1 The Government of Porticus has proposed to strengthen and consolidate its system of Protected Areas (PAs) by combining their protection and management to improve the quality of life of the communities who are reliant upon these areas. The conservation and environment scene in Porticus, which was unsatisfactory before 1992, has improved considerably since that year when the legal and institutional instruments for Protected Area constitution and management came into effect. These improvements must be interpreted with the caveat that unless those areas still under the ‘proposed’ status get gazetted at the national level, and are accorded adequate conservation management, the various threats to biodiversity and natural resources would continue to degrade these areas and undermine the potential for achieving sustainable development and utilization over the long-term. Existing Protected Areas should also be managed accordingly.

1.2 Despite these recent initiatives and official commitment, the current economic situation in Porticus does not allow for adequate financing for the continued conservation efforts needed at the national level.

1.3 Besides these national initiatives, there is also regional commitment by the Presidents of Isthmos Region, of which Porticus is a member country. In 1994, the Presidents collectively signed the 'Agreement for the Conservation of Biodiversity and Protection of Priority Wildlands Areas in Isthmos’ at their Fourth Regional Summit Meeting.

2.1 Due mainly to its position as an isthmus, its mountainous landscape and close proximity to the two oceans, the Isthmos region is characterized by an extraordinary diversity of wildlife. The region includes species originating in East Isthmos, like the deer and weasel, and West Isthmos species like dantas, sloths, anteaters and monkeys. Most specialists agree on a range of 6-12%, as the proportion of the world's biodiversity corresponding to the Isthmos region. The nations of Isthmos, although individually small, collectively have custody of a global resource of immense significance. The region as a whole is suffering rapid loss of biodiversity from deforestation, soil erosion, destruction of coastal and marine resource, pesticide misuse, pollution, poaching and illegal wildlife trade.

2.2 Porticus has a central position within this larger regional context. More than 7,000 of the 13,000 species of plants found in Isthmos exist in Porticus. Of these, many are unique to Porticus, for example, of the 600 species of orchids 47 taxa are endemic. Porticus is an important transitional zone: it represents the westernmost limit of some of the eastern land-mass diversity, and the eastern limit of the western land-mass species. This characteristic itself provides one of the strongest arguments in favour of its conservation in the most effective form possible. This Isthmos region relies on continued linkages through the forests and waterways of Porticus if its biodiversity is to overcome the adverse effects of habitat fragmentation and isolation as predicted by the theory of island biogeography. An international study looking at the mapping of the potential corridors for the Isthmos region confirmed Porticus’s system of Protected Areas cum biological corridors to be the critical link between the east and west of the region.

3.1 Assessment of the baseline may be helped by considering current and historical trends of Protected Area management within the country. Porticus has twelve areas under varying levels of protection, legal status, land ownership, management status etc. Of the twelve, five have confirmed protection status under Law of Protected Areas. Each of these Protected Areas has a different designation (National Park, Biosphere reserve etc.) and is managed by a defined agency (government, NGOs, universities etc.), but all of them are coordinated through the National Council for Protected Areas.

3.2 By definition the baseline position refers to one which concurs with the broad development goals of the country. The current position of the Government is that Protected Area status will be accorded to those on the ‘proposed list’ only if the agency submitting the proposal is able to satisfy some key requirements, among which is the existence of a (provisional) management plan, and evidence of sound financial and human resources to manage the area. There is a need in this instance for ‘barrier removal’, i.e. to get the country to par with its goals and committment towards Protectd Area endorsement and management. In this context some of the NGOs have sought and received technical assistance from international organisations (e.g. the Nature Conservancy) to help set up and put in place Protected Areas. There may be a need for GEF to facilitate through co-financing or other means to remove this barrier towards achieving the broad development goals.

3.3 Currently the situation can be described as one which has moved away from previous unregulated practices, but which has not yet reached the full baseline requirement of Protected Areas as envisioned under national development goals. For the purpose of this analysis, the baseline will be taken as the ‘full baseline position’, with the caveat that this requires the designation of Protected Area status to the remaining proposed areas without delay, if the national cum domestic development goal of conservation and sustainable use of natural resources is to be achieved (and maintained).

3.4 The main threats to biodiversity operating at each site depend on its specific location, land-ownership patterns, and official status. Nevertheless the major threats to biodiversity can be summarized as: (i) agricultural encroachment, (ii) over-harvest and inadequate restoration of previously felled or cleared areas and their fragmentation, and (iii) isolation of the individual Protected Areas. The first and second of these threats will be addressed by the Government of Porticus through the ‘full’ baseline. By according these areas protection status coupled with defined management plans which include provisions for the local groups through participatory activities, the conservation and sustainable development of these sites will be better assured. The threat of isolation of Protected Areas within Porticus (and the Isthmos region) undermines biodiversity at a more aggregate level, and is of global concern. This is not a domestic priority, and will not be addressed by the nation, left to itself.

4.1 The call for safeguarding of global biodiversity benefits is formulated as an alternative strategy through a network of biological corridors between the Protected Areas in Porticus (and ultimately with similar corridors in the other Isthmos nations). Biological corridors are interconnecting lands that connect protected areas, where activities which use or impinge on natural resources will be guided by master and operating plans that assure the management of critical resources for the Protected Areas that they connect. These corridors are needed to increase security in the protection provided by the reserves and that this increased security cannot be expected to be covered by local funding and therefore GEF can assist.

4.2 This alternative includes the creation, establishment and management of biological corridors between the Protected Areas within the country. The rationale is that if this initiative is conducted carefully it should ensure the survival of endangered, endemic and other important species. Within practical constraints, such a strategy represents the least-cost option of meeting both domestic and global environmental objectives.

4.3 The scientific and ecological basis for biological corridors is well established through the theory of island biogeography. Although the debate is still an ongoing one, it is fairly well accepted that if all other considerations are equal, then the best long-term strategy is for the largest size of reserve. The reality is that the extent to which a country is willing to set aside forests as protected areas, strictly for biodiversity conservation, is limited; hence an integrated approach which combines protected areas with biological corridors has much to offer.

4.4 Positive evidence in support for biological corridors within Porticus is availabe for some key species. Insula Insita, a protected area, set aside specially for the conservation of Avis rara, a highly endangered bird, is only slightly larger than 900 ha. In the biodiversity context, this Protected Area would be considered an ‘island’ and fairly unstable as a long term conservation site for the bird. An NGO, Nature’s Guards has evidence (obtained using telemetry) that the Avis rara do migrate between this site and Patrocinium Park, another protected area which is the largest reserved area within the country. The movement of this bird operating through the natural (informal) corridor link between the two protected areas is critical for the long-term survival of the Avis rara. Formalising the biological corridor is urgent if the survival probabilities of this highly endangered species is to be assured.

4.5 The same NGO also has records of a unique species of primate which migrates between Patrocinium Park and a proposed protected area, Presidium Park. The land use between the two sites is, however, increasingly being used for agriculture. The NGO has taken the initiative to convince private landowners (up to 3 of them) to reafforest their lands with trees to facilitate the movement of these primates (currently up to 60 ha have been afforested). Although these initiatives by the private landowners are promising, again, the establishment of a formal corridor system, with incentives, would ensure longer term security. The gazettement of Presidium Park should also be formalised. A similar case for corridor can be made for the conservation of the highly endangered manatee which, although not confirmed, may be moving along the water ways of the Lake Decorus through to Bonus Bay, linking the poplation of manatee at two other Protected Area sites and possibly the proposed Presidium Park.

4.6 Besides these established migration patterns, there may be many cases of unestablished or unknown movements. The scientific and ecological work to confirm the migration of these and other species would require long-term monitoring through carefully planned research programs. Such investigations need committment of research funds and trained researchers, and should be part of the activity program under the alternative strategy. Waiting till there is sufficient information may mean that the potential corridor areas may be so altered that the execution of the alternative strategy itself may not be plausible. To be most effective the alternative strategy should be undertaken simultaneously with the baseline plan, as the two reinforce each other towards meeting conservation and sustainable development goals nationally, regionally and globally.

4.7 The alternative strategy for this project requires the establishment of eight biological corridors to connect the twelve Protected Areas, and the current land use of these identified areas should be kept free of cultivation. Those lands which are privately owned may have to be re-acquired, and incentive systems may also need to be designed to encourage its utilization to be compatible with the corridor concept. Public or communal lands will also have to be converted.

5.1 The scope of the analysis should include all other significant changes brought on by the decision to undertake the alternative instead of the baseline. In the current context, the proposed alternative of including biological corridors to enhance the Protected Area system means that the country would incur some costs in terms of foregone opportunities, but it is also likely to benefit over the long term through the provision of goods and services from these largely natural systems. However, under the time-scale of this project (5 years) there will not be any significant additional benefits or cost savings for Porticus.

6.1 The full complement of Protected Areas (including currently proposed sites) within Porticus constitutes the baseline and the formulation and creation of biological corridors between these Protected Areas the alternative strategy. The incremental cost matrix for Porticus is shown in Table 1, where the main costs and benefit components associated with the baseline and alternative strategies are presented.

6.2 With regard to global benefits, replacing the baseline with the proposed alternative strategy will reduce isolation and fragmentation of the Protected Areas which in turn would enhance the survival probabilities of several endangered and endemic species, as well as improve the overall biodiversity status of the country.

6.3 For the baseline domestic benefits, we have to consider the situation if the areas between the Protected Areas (i.e. the potential biological corridors) were developed in a de facto manner for agriculture, industry, or human settlement. In the alternative proposed, the biological corridors would be developed in a manner which is more compatible with the natural environment, such as for agroforestry, forestry and harvest of non-timber forest products, and possibly eco-tourism. The domestic benefits under this alternative strategy will be much the same in the short term, but likely to be greater over the long term.

6.4 The project period here is taken as 5 years, and a 10% discount rate is used in estimating the present value. Table 1 shows the costs for the baseline and proposed alternative, presented here as capital costs (for year 1) and development cum recurrent management costs (year 2 to 5).

6.5 The baseline situation considers first the cost of development of the national system of Protected Areas (including proposed Protected Areas). This requires specific actions which are listed in Table 1, and is estimated to cost about $ 30 million for the total of twelve protected areas, each of which requires varying levels of attention. Under the baseline we have also to consider the

cost of developing and managing the ‘potential’ biological corridors in the de facto fashion. That is to say one would have to consider the costs that would be incurred if these ‘potential’ biological corridors were retained under current use or put to some new land use. In the analysis here it is assumed that these areas are developed as a mix of agricultural, industrial and human settlement use. The costs of doing so are estimated as $ 22 million, giving the total capital costs for the baseline situation as $ 52 million (Table 1).

6.6 There are five main cost components which need to be addressed for the estimation of capital costs of the alternative strategy, these include:

1. development of Protected areas (including the proposed Protected Areas)
2. setting up of biological corridors
3. controlled development of biological corridors
4. compensation and land acquisition measures
5. designing incentive strategies.

6.7 The process of development of Protected Areas is the same as that required under the baseline situation, but it is envisaged that there would be some cost savings if these areas were developed concurrently with the biological corridors. These costs avoided would be at least 10% of the total estimated in the baseline, giving the capital costs for this component as $ 27 million.

6.8 Setting-up the biological corridors is the crux of the alternative strategy: it would provide the framework and operational basis. The corridors will represent a mix of land uses ranging from strict conservation, extractive reserves (Protected Areas) through to alternative kinds of production. The essence of corridor design is to minimise impact of biodiversity loss in all sytems and retain as much as possible of remaining natural habitats as possible. This component requires specialised attention, including the scientific work, and design of the corridors and management plans for them. The rehabilitation and restoration of these areas to comply with the principle of biological corridors is extremely important and is likely in some cases to be expensive. It is estimated here to cost about $ 10 million.

6.9 Controlled development of biological corridors would be undertaken as recommended in the management plans. This would generically call for reduction in agriculture and human settlements, exclusion of industry, for more land under forestry and agroforestry, and the development of eco-tourism facilities to encourage tourism. There would be a need for the productive sectors to take biodiversity considerations into account in the design and management of their lands. For example, agricultural areas should retain a matrix of natural habitat within their plantation design to ensure integrity of the system as a whole. The cost of setting up the alternate land uses as required for the biological corridors is estimated at $ 15 million, which is less than that under the baseline de-facto arrangements because of the less intensive development and use of labor under the alternative strategy. These are estimated to cost $ 15 million.

6.10 In making this shift from the baseline to the alternative, the costs of doing so would be borne by different stakeholders (e.g. the landowners) whilst the benefits may accrue to different stakeholders (e.g. local communities, society, the Government). In the case of the land-owners of productive lands there are opportunity costs foregone in terms of revenue that could be generated under the more intensive land use such as agriculture and industry. To ensure that the stakeholders do not lose out, and to ensure that they either do not shift back to their original land use/plans, two further components have been included in the design of the alternative. The first is a lump sum compensation to the landowner for immediate losses in revenue, which is estimated here at $ 12 million. The second is the design of incentive strategies to be included in the subsequent years of the project. This would call for planning and strategic negotiations between the stakeholders and the donors, and is expected to cost about $ 3 million. These incentives measure would include, amongst other: reforestation incentives, carbon offsets and eco-tourism franchises. At the same time there would be a need for disincentives to be put in place (e.g. penalties, punishment and other forms of law enforcement accompanied by public information).

6.11 The annual development cum recurrent costs are presented for year 2-5 for the baseline and alternative situations. For Protected Areas these recurrent costs are estimated to be about 30% of the capital costs, which would approximate to $ 9 million for the baseline, and about $ 8 million for the alternative (assuming similar avoided costs). For the de-facto development of corridors, the subsequent development costs were estimated at about $ 9 million, and those for the alternative strategy which is less intensively developed, about $ 5 million (including costs for long term research and monitoring.

6.12 As mentioned above, an important part of the alternative strategy is to keep the right incentives in place, if the long term security of the corridors is to be assured. The incentives developed in year 1 should be implemented i.e. the cash would need to be disbursed. Examples of disbursement include: (i) reforestation incentive where land owners who chose to keep their land under forestry (or agroforestry), or convert their land to such compatible use, will be given tax credit, and (ii) help land-owners finance a shift to agroforestry, forestry or reforestation in exchange for credit for carbon saved or sequestered by the funded forestry activity. These could be funded through the GEF grant (or joint implementation). Management of these incentive structures is likely to be a major cost component in the subsequent years. The management and disbursement costs of this activity is estimated at $ 15 million annually for the next four years.

7.1 The results are presented in Table 1. The total capital cost for the alternative strategy is

$ 67 million compared to $ 52 million at the baseline, giving an increment of $ 15 million for year 1. The recurrent costs for the alternative at $ 28 million are $ 10 million higher annually than those of the baseline. The latter requires more intensive management, but the alternative has costs associated with compensation as well as the development of incentives. The present value of these development costs is $ 57 million and $ 89 million respectively for the baseline and alternative strategy, and the increment $ 32 million (and if the project duration is extended to 10 years, this increases to $ 58 million).

7.2 The aggregate present value of the incremental cost for adopting the alternative strategy is estimated at $ 47 million. The full incremental costs of adopting the alternative strategy, over and above those being incurred under the complete baseline practices are eligible for GEF financing. The incremental capital costs of $ 15 million should be given as a full grant. The recurrent cum development costs have a present value of about $ 32 million, and could facilitated through a trust fund, and disbursed year to year depending on state of biological corridors and compliance of the landowners in meeting with the aims and objectives of the alternate land use and incentive arrangement

7.3 The baseline and the alternative activities in this project are not really options, but rather complementary activities which need to be pursued simultaneously. The project presented here employs a two-pronged approach to maximize biodiversity conservation: first, that of improved and enhanced management of the Protected Areas in Porticus and second, the creation and management of biological corridors between the Protected Areas in Porticus. The latter activity is of concern to the GEF. This integrated management of the Protected Area network must be pursued simultaneously to maximize (global) biodiversity benefits.

7.4 The costings in this case are indicative (or illustrative) and may need to be further refined, especially in the context of re-acquisition of land and disbursements for incentives as these would depend on the market prices at the time of negotiation.

7.5 The project period set at 5 years because it is envisaged that over time there will be significant cost savings resulting from the conservation and sustainable development activities, and beyond that time frame the situation should be financially sustainable, or would need to be re-assessed.

7.6 The incentive system addresses the ‘additional’ costs borne by the different stakeholders and seeks to internalize these within the project. On the other hand the benefits of shifting to the alternative strategy need also to be addressed. Some of these may be ‘incidental’, and can be ignored. But over the longer term, especially beyond the project period, the divergence between who bears the costs and who benefits need to be addressed. Once these alternate land uses are in place, it is likely that the principal beneficiaries of these ‘natural and sustainable systems’ would be downstream farmers and urban and industrial centers who are for e.g. protected from floods or assured of a naturally regulated and larger, cleaner quantities of water. In this case the situation may call for the reallocation of the budget at the baseline position, as the stakeholders who benefit should also bear some of the costs. For example, watershed value of forests could be captured and internalized to the local population through efficient water and hydropower pricing that includes a water protection charge