Markets working to support sustainable development

Finding solutions for less poverty and better ecosystems

Ina Porras
15 Dec 2015

Policy measures to tackle poverty often overlook environmental impacts, while environmental policies do not always deliver for the poor. The Sustainable Development Goals require both – so how can governments combine efforts?

Policy measures to tackle poverty often overlook environmental impacts, while environmental policies do not always deliver for the poor. The Sustainable Development Goals require both – so how can governments combine efforts?

Villagers dig out a silted up water tank, paid for by India's National Rural Employment Guarantee Act (Photo: Mackay Savage, Creative Commons via Wikimedia)

The newly-agreed Sustainable Development Goals (SDGS) set ambitious targets for governments to tackle multiple agendas. Some of them are linked to the environment – protecting forests, water, and biodiversity – and some are about people, such as reducing poverty and inequality.

This multi-pronged attack on some of the world's biggest problems needs a new approach. Could this be opportunity to transform how we use economic instruments to effectively address both poverty and environment challenges? We are looking for examples to inform our work.

Policymakers are always juggling policy objectives, budgets and votes. Protecting the environment is usually seen as important – but it continually fails to receive widespread political support and is often under-funded. In contrast, social objectives linked to poverty reduction often have more political traction.

The SDGs demand that policymakers combine the social with the environmental – and there are tools that can help them to do that.

As part of an IIED project on Shaping Sustainable Markets, we are exploring how market-based instruments can be used to support this multi-pronged attack. By reviewing the existing research on this topic, and by investigating what happens on the ground through possible case studies in India, Indonesia, Bangladesh, Ethiopia, South Africa, Mexico, Brazil and Costa Rica, we hope to establish which approaches are effective, as well as financially sustainable.

We will be sharing what we find with practitioners, researchers and policymakers at an international workshop, identifying lessons on what works and what does not.

Carrots, not sticks

Market tools can change how markets behave by shaping the responses of different actors. These tools can be used to influence social outcomes or to drive environmental behaviour. For example, by adopting 'carrots' or 'sticks' – e.g. subsidies to promote a switch to cleaner technology or fines for companies dumping wastewater in rivers – governments can motivate behaviour change for better outcomes. 

Payments for Ecosystem Services (PES) and Conditional Social Transfers (CSTs) are two tools that can be used to provide 'carrots' — positive rewards – for better ecosystem management, or social goals, such as improved school attendance.

PES schemes have been around since 2000, and have in places successfully switched behaviour, while also shattering some of the myths that abound about environmental management. Drawing on a better understanding of the science, policymakers have found that investing in land activities can have positive effects on ecosystem services.

But PES schemes are not widely used and often fail to take "equity" issues into consideration. So while they may benefit the environment, local communities pay the cost. Which is where "conditional social transfers" can help. These cash rewards are often popular with policymakers as they have a direct benefit on wellbeing (children are vaccinated, or attend school), but also benefit the wider economy (as families have more money to spend).

Combining the two has an added advantage – money is more often available to finance poverty alleviation schemes. Adding in an environmental aspect can provide a bonus outcome.

Putting this into practice

A number of examples exist of where policymakers have combined environmental and social objectives. The Bolsa Floresta scheme in Brazil (Portuguese language site), for example, targets low income farmers with payments for sustainable management activities. 

In India, the Mahatma Gandhi National Rural Employment Guarantee Act provides at least 100 days of wage employment in a financial year to every household whose adult members volunteer to do unskilled manual work – often related to watershed and other ecological improvements.

And in Bangladesh, a Hilsa fish programme provides incentives in the form of food and some support for alternative income generation to fishers during the fishing ban period, so protecting fish stocks, and precarious livelihoods.

Not always a win-win scenario

Combining environmental and social objectives has a mixed track record in terms of measurable impacts on the poor, and can even be counterproductive. Technical capacities can be heavily challenged, administrative costs increased and impacts weakened: for example trees might be planted in the wrong places or at the wrong time, or unskilled labour used to work on drainage systems might result in the work being poorly implemented and ineffective.

And social and environmental problems are not always found side by side, so providing incentives to poor communities may not have the desired effects.

And even when they are, the communities may not share the same objectives as the policymakers. For example, poor small-scale farmers may desperately need affordable labour on their farms and this may mean they depend on child labour. Sending the children to school can create a problem. 

Rather than adopting a 'one-size-fits-all' approach, we need to recognise that people have different needs – and where they are facing extreme poverty, imposing environmental objectives may not be appropriate.

Share your experience

To get the best possible insight into where these approaches might work, and where they might fail, we are keen to hear about practical examples and case studies, especially for national and sub-national schemes. Please get in touch with me via ina.porras@iied.org or Paul Steele via paul.steele@iied.org, or leave a comment below if you have an example to share.

Ina Porras (ina.porras@iied.org) is a senior researcher in the Sustainable Markets Group at IIED.

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