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Payments for environmental services: an alternative to traditional conservation approaches

Implementing effective conservation policies has proved difficult in many developing countries. Traditional projects that link conservation and development have not always been successful, with both long-term funding and mixed objectives being common problems. Making people pay for environmental services is an alternative that can be more cost-effective. However, designing these payments is not always straightforward.

Research from the Center for International Forestry Research (CIFOR) examines Payments for Environmental Services (PES) as a way to achieve conservation objectives in developing countries. PES schemes are designed to promote environmentally friendly land uses. For example, a ‘buyer’ could be a water company who pay a ‘seller’, such as upland land users, to protect a watershed, ensuring they receive a reliable supply of clean water. Other examples include carbon sequestration (planting trees to capture carbon dioxide), maintaining landscape beauty for tourism and protecting biodiversity.

Conservationists are debating what kind of arrangements should count as PES. CIFOR’s research suggests four criteria for a PES scheme:

arrangements should be voluntary
they should be linked to a well-defined environmental service
there must be at least one buyer and at least one provider
there should be 'conditionality', meaning that the service should be monitored and, if it is not provided, then payments should stop.

In many developing countries, it is still difficult to find schemes that meet all these conditions. Many existing schemes are only PES in part; for example, the arrangements may not be voluntary or conditional. For schemes to appeal to buyers, a project must show ‘additionality’, meaning the activity must produce more environmental services than would have happened without the scheme. However, with a lack of data on many environmental processes, it may be difficult to fully document these improvements.

Poor smallholders will normally benefit from PES schemes. However, poor landless people could suffer from PES, for example, if schemes protect forest cover that poor people otherwise would have cleared for agriculture or charcoal making. While PES schemes are more direct than traditional projects, they can sometimes have high transaction costs, linked to defining buyers, sellers and payment modes.

PES is only one among many conservation tools. It is suitable for some situations, but cannot be applied everywhere. In fact, PES may be most effective supporting traditional conservation projects or compulsory laws to protect the environment. Policymakers and PES implementers must consider the following issues when deciding where to introduce PES schemes:

Pro-poor schemes can be designed to benefit smallholders, for example, by including people with informal rather than legalised land tenure. However, if PES are 'over-designed' to mainly address poverty and other side-objectives, instead of focusing on conservation, they may not attract private-sector buyers and will eventually fail.
For schemes to be successful there must be trust between buyers and sellers. Intermediaries can play an important role in building this trust.
It is important to avoid creating ‘perverse’ incentives. For example, communities might decide suddenly to threaten ecologically harmful activities in order to capture environmental service payments (‘environmental blackmail’).
A major challenge is persuading buyers of the need to pay for benefits such as clean water that they previously received for free.

Source(s):
'Payments for environmental services: some nuts and bolts', Center for International Forestry Research, Occasional Paper No. 42, by Sven Wunder, 2005
'Payments for environmental services: some nuts and bolts' Center for International Forestry Research, Infobrief No. 9, by Sven Wunder, May 2005

Funded by: Swiss Agency for Development and Cooperation

id21 Research Highlight: 11 November 2005

Further Information:
Sven Wunder
Center for International Forestry Research (CIFOR)
Embrapa Amazônia Oriental - Convênio CIFOR
Trav. Dr. Enéas Pinheiro s/n
CEP 66.095-100 Belém -PA
Brazil

Tel: +55 (91) 4009 2680 or +55 (91) 4009 2650
Fax: +55 (91) 4009 2671
Contact the contributor: s.wunder@cgiar.org

Center for International Forestry Research (CIFOR)

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