Payments for environmental services (also known as payments for ecosystem services or PES), are payments to farmers or landowners who have agreed to take certain actions to manage their land or watersheds to provide an ecological service. As the payments provide incentives to land owners and managers, PES is a market-based mechanism, similar to subsidies and taxes, to encourage the conservation of natural resources.
This approach recognises the important role that the environment plays in contributing to our wellbeing and economic prosperity, and the potential of market-based approaches to promote conservation and address environment-related market failures.
In PES schemes, people managing and using natural resources, typically forest owners or farmers, are paid to manage their resources to protect watersheds, conserve biodiversity or capture carbon dioxide (carbon sequestration) through, for example, replanting trees, keeping living trees standing or by using different agricultural techniques.
In some cases payments are made by the beneficiaries of the environmental services, such as, for example, water users and hydropower companies. In other cases, national or local governments pay on behalf of their citizens, who are indirect beneficiaries. The role of the private sector is typically growing among PES schemes at both international and local levels. While the scheme is widely used on land, it is only just gaining momentum in coastal and marine ecosystems.
PES is an increasingly popular conservation and resource management tool in developing countries. IIED works with Southern country partners, particularly in Costa Rica, Brazil, Vietnam and Uganda, to explore the extent to which PES can help reduce poverty, and satisfy economic and environmental objectives.
But the insecure land and resource tenure of many poor people remains a key obstacle to them participating in and benefiting from PES schemes. Other obstacles many PES schemes face are the complex and often bureaucratic project procedures and high project transaction costs.
IIED’s research findings are targeted at developing country governments, private firms, donor agencies and other organisations working in the field of PES so they can learn from the knowledge we have gained through our hands-on action research approach with poor and marginalised groups in the south.