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Payment for Ecosystem Services Definition, Examples, and Criticism

By David Okul

The natural environment provides a series of benefits to people. According to WWF, the services provided by the ecosystem can be categorized as:

  • Support services- they provide conditions that allow the provision of other services. For instance, photosynthesis support primary production
  • Provision services- these include the goods and services that we directly get from the environment. For instance, food and fiber.
  • Regulation services- The capacity of ecosystems to regulate some processes such as air and water quality
  • Cultural services- Ecosystems are part of the culture and heritage of the people.

However, many of the ecosystem services are seen as market externalities because of their public good character and open-access nature. As such, Neoclassical economics rarely factor in the decision-making of economic actors. Environmental economists champion commodification and valuation to internalize the externalities. Payment for Ecosystem (or Environmental) Services is one of the tools that is commonly used to commodify environmental services.  

PES in Conservation as Tool (Definition)

Government regulation can help maintain some ecosystem services. But that is not always the case. Community members living around vital ecosystems often need the financial incentives to conserve.

In simple terms, PES refers to the various situations where users of an ecosystem service make payments to the providers/protectors of the service. In return, the payments guarantee the flow of these ecosystem services. As such, PES would support the conservation and expansion of ecosystems.

A widely used definition of PES is by Sven Wunder, in which he explains, “A payment for environmental services scheme is a voluntary transaction in which a well-defined environmental service (ES), or a form of land use likely to secure that service is bought by at least one ES buyer from a minimum of one ES provider if and only if the provider continues to supply that service“

Form definition, payments are made on condition of the evidence of provision of an ecosystem service.

The monies accrued from PES support the funding for natural resources management.

In theory, PES schemes could assist in reducing poverty and enhance the conservation of natural systems. They also assist in reducing conflicts between conservationists and landowners that could arise from competing land uses. In short, PES in conservation is gaining traction as a leading strategy.

Examples of PES

There are various types of PES in conservation projects but they could be categorized into four groups:

  • Carbon sequestration and storage- an organization emitting GHGs pays projects that have verified carbon credits.
  • Biodiversity conservation- for instance the establishment of conservancies where communities are paid to maintain land for biodiversity.
  • Watershed protection- downstream water users pay upstream communities for conserving water and ensuring the flow.
  • Landscape beauty- for instance, ecotourism where a tourism operator would pay the local community to maintain wildlife and habitats intact

In practice, many PES projects would offer a variety of services. For instance, a forest conserved for carbon credits may still promote biodiversity conservation, water quality, and landscape integrity.

Many of the active, and successful, PES are funded through the UN REDD+ projects. In Kenya, there have been a considerable number of successful PES projects under this framework.

Comparisons with Polluter Pay Principle

The polluter-pay principle postulates that practices that produce pollution should bear the brunt of managing the resulting environmental and human health impacts. PES is similar to the polluter-pays principle in the sense that it creates positive incentives for environmental conservation and protection.

PES in conservation favors ‘provider gets’ instead of the polluter pay principle. The decision to move towards PES has been influenced by the drawbacks of polluter pay principles. For instance, the direct influence of polluters and the absence of polluters in the areas most affected by pollution are some of the common shortcomings of PPP.

The Criticisms of PES

Granted, PES in conservation has proven as an effective tool especially in developing countries. It has assisted in correcting market failures by pricing conservation efforts. It has also improved the accessibility of cash in rural areas. Regardless, PES as a concept has some drawbacks including:

  • Economic valuation of environmental services is difficult and a costly process. The measurement and valuation of ecosystem services are difficult because of incomplete information and scientific uncertainties in ecosystem functioning.
  • It could lead to ‘commodity fetishism’ where some ecological functions (such as carbon sequestration) are valued over others (like biodiversity conservation).
  • Leakage (or substitution effect, or slippage) can occur where the provision of economic services in one area leads to the increased pressure for conversion in another area.
  • Some PES schemes are vulnerable to corruption.
  • Failure to effectively monitor the schemes
  • Perhaps, the most common criticism of PES emerges from the school of thought that nature value is impossible to quantify. They argue that nature should be conserved for nature’s sake and not monetary returns. The argument is that if the payment stop, then people would stop conserving the environment.
  • REDD+ is an example of PES that has been criticized for its neo-colonialism. The criticism claims that rich countries have exploited their natural capital and are paying poor countries a small fee for their environmental sins.

Concluding remarks

Despite the various criticisms of PES, Silvica finds that the programs are vital for the conservation of the environment. Communities offering ecological services should be rightfully paid for the services they offer. From my experience, the following pointers are vital for an effective PES project:

  • Programs initiated and funded by users tend to be more successful as compared to those run by donors.
  • Blind replication is not advised. A PES project working in one area may not work in another area. There is a need to design projects to the local contexts
  • A clear, and fair, distribution of income is vital for the success of a PES project.
  • Managers of PES projects should work to ensure that they get the best price for their environmental services. Landowners need to view conservation as the most viable land-use option.

Honestly, I also question the sustainability of PES schemes especially in the event where the payments stop for some reason or the other. Additionally, I don’t think by themselves (at least for now) PES can effectively promote the conservation of natural resources. The big question is ‘what are the alternatives?’ I find that telling people to conserve for the sake of conservation is selfish. Why should communities languishing in poverty conserve forests instead of practicing agriculture? It is fairer if they are paid for their conservation efforts. Going forward, PES in conservation should work with other tools to further promote effective environmental management.  

David Okul is an environmental management professional with over 10 years experience on donor projects, conservation, forestry, ecotourism, and community-based natural resources management. When not working on  environmental projects, I spend my time writing for Silvica on a variety of topics. The view in this blog are personal and do not represent the organizations that he is associated with.