Payments for ecosystem services (PES) are transfers that are mainly used for either regulating services, such as watershed protection, flood control, or shoreline defence, or cultural services, such as landscape beauty. Under a PES scheme, payments of cash or other resources are made by those who benefit from ecosystem services, such as downstream water consumers, cities, and hydropower companies, to ecosystem service providers, such as farmers’ land trusts and stewards of protected areas. PES operationalize a “beneficiary pays principle” approach to ecosystem services and create an opportunity for providers to generate income and funding. Payments by beneficiaries to the provider are directly linked to the successful protection/provision of contractually stipulated ecosystem services (outcome-based payment) or the execution of certain activities that enable/improve the provision of ecosystem services (input-based payment approach). The latter approach is more appropriate if it is too difficult to assess a precise ecosystem service and how a landowner can provide this service or if there is a tendency for a long time lag for monitoring and verification.
Payments serve to remunerate providers of certain activities and required resources. These payments also help compensate the providers for reduced or loss of income because certain economic activities or economic rights are not used in order to provide the ecosystem services. There is a range of payment models depending on who is defined as the (direct or indirect) beneficiary and who is chosen to finally pay.
Many climate change-related PES schemes focus on mitigation. These schemes may offer an opportunity for also providing adaptation benefits, such as flood abatement resulting from afforestation. Addressing adaptation needs requires tailored PES schemes that address the local context, particularly for the stewards of the protected area, as well as flexible contracts with suppliers.
Several developing countries have implemented PES initiatives, including Brazil, Costa Rica, Peru, the Philippines, Tanzania, Uganda, and Vietnam. These efforts provide a depth of experience internationally in their application.
Current or potential adaptation-relevant sector applications:
- crop and food production – including agroforestry; livestock production; fisheries (marine, freshwater, and aquaculture); irrigation;
- ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement; and
- water supply (infrastructure) – water storage; water harvesting; water management.
Additional insights:
- This is a mature instrument. PES have been used as a conservation and resource management tool since the early 1990s and have been implemented on all continents. In 2018, there were over 550 active programs around the world.
Considerations for using a PES initiative:
- PES leverage strong public institutions and private property rights that allow beneficiaries to internalize the benefits and pay for them. Subsidy schemes can be employed to support owners with limited financial means.
- Public authorities should have technical knowledge of the initiative creating the ecosystem services as well as the ability to monitor usage (if necessary) and legally enforce payment.
- PES initiatives in developing countries have often been supported by public funds, including payments issued by governments and grant funds received from development partners and international conservation organizations. Some schemes have secured investments from private entities.
Adapted from the following sources:
Kuhfuss, L., Rivington, M., & Roberts, M. (2018). The ‘Payment for Ecosystems Services’ approach – Relevance to climate change. ClimateXchange. https://www.climatexchange.org.uk/media/3271/payment-for-ecosystem-services.pdf
Salzman, J., Bennett, G., Carroll, N., Goldstein, A., & Jenkins, M. (2018). The global status and trends of Payments for Ecosystem Services. Nature Sustainability, 1, 136–144. https://www.nature.com/articles/s41893-018-0033-0
Smith, S., Rowcroft, P., Everard, M., Couldrick, L., Reed, M., Rogers, H., Quick, T., Eves, C., & White, C. (2013). Payments for ecosystem services: A best practice guide. Department for Environment, Food & Rural Affairs. Defra. https://www.cbd.int/financial/pes/unitedkingdom-bestpractice.pdf