Impelementing Payments for Ecosystem Services

Both developed and developing countries have established markets for ecosystem services. These include the Clean Development Mechanism (CDM), as well as multi-million dollar markets in  carbon, wetlands, biodiversity and water regulation.

There are many different forms of payments for ecosystem services. One common example is direct payments, for example to farmers and other landowners, by governments or non-governmental organisations, in an attempt to encourage “conservation-oriented” land-use practices.

A variation on this theme is the purchase or leasing of land or resources from either public or private owners for the purpose of conservation or sustainable use. For example, some NGOs purchase land outright in order to acquire threatened habitat; others purchase only the right to develop the land, or the right to exploit resources on the land.

Voluntary ecolabelling and certification schemes seek to encourage environmentally friendly resource management practices, from organic cotton farming to sustainable timber production to turtle-friendly fishing.

A third form of enabling PES involves the creation of new rights and responsibilities affecting the use of natural resources. For example, polluters may purchase carbon credits from forestry operators and others, in order to meet their obligations to reduce or mitigate emissions of greenhouse gases.

There are many others ways to enable PES, including the emergence of wetland and conservation banking in the USA, tradable forest conservation obligations in Brazil, and an emerging market in groundwater salinity credits in Australia, to name a few.

Governments have a role to play in facilitating and creating these markets, managing transaction costs, and providing institutional structures so that they work efficiently and fair. Multilateral Environmental Agreements (MEAs) can also contribute towards the deployment of market based instruments.

Before implementing strategies for PES, it is important to evaluate possible alternatives and potential impacts of choices. This requires a decision-making process, which can be undertaken in a variety of ways according to the alternative choices, conditions and constraints. Appraisal tools used for decision-making include: cost-benefit analysis, environmental impact assessment, and strategic environmental assessment. For more information on these tools, see:

The Natural Capital Approach: a concept paper