Types of PES schemes

Planning for the sale of an environmental or ecosystem service can start with a local community enterprise such as a water bottling enterprise, an ecotourism venture or a conservation project with an emphasis on sustainable development. Many of the projects have government backing, although it is becoming increasingly more common to see initiatives started by the private sector, which are presented as NGO efforts. Most often a single, specific ecosystem service is subjected to a payment scheme.

The following four types of ecosystem services are most often reported as being subject to Payment for Ecosystem Services (PES) schemes. Examples of how these schemes have been implemented are provided in the recommended readings below.

Watershed services

These refer to a wide array of services such as flood control or water quality control, and are related to specific natural ecosystems such as forests and freshwater systems. The general idea is that downstream users of water compensate upstream communities for activities that influence the quality and quantity of downstream water.

Carbon sequestration

One of the most important providers of carbon sequestration services are forest ecosystems with their capacity to capture and store carbon. Payments for carbon sequestration services from the avoided deforestation are still impeded by high transaction costs and uncertainties with respect to international carbon-trading rules and actual long-term effectiveness. However, carbon trading is emerging as the biggest and most structured market in ecosystem services.

Biodiversity conservation

Biodiversity conservation is provided by all natural ecosystems. It is difficult to place a correct value on biodiversity conservation services due to their intangible nature. The scientific uncertainties concerning this service and the difficulty to identify and quantify beneficiaries imply high transaction costs.

Landscape beauty

The valorisation of landscape beauty services may consist of eco-tourism operators paying for access to areas of high scenic beauty. A major limitation to the internalisation of these services is that so far these services have tended to be undervalued in market terms, partly because they are often managed by governments.