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Payments for ecosystem services (PES): a flexible, participatory, and integrated approach for improved conservation and equity outcomes

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Abstract

Over the past 20 years, payments for ecosystem services (PES) has become increasingly popular as a mechanism to promote environmentally sustainable land-use practices, and a burgeoning literature has been produced on this policy approach. The goal of this paper is to offer a comprehensive review of this literature, and to focus on four major aspects of PES: (1) its efficiency in delivering environmental conservation, (2) its impacts on the well-being of local land users, (3) its interaction with local norms of distributive justice and environmental stewardship, and (4) its interplay with broader national policies and socio-economic trends. Two major insights are drawn from this review of the literature. First, the conceptualisation of PES according to the neoclassical economic theory of efficient market transactions and utilitarian human behaviour may be unrealistic and counterproductive. In terms of efficient financial transactions, the physical properties of public ecosystem services obstruct the voluntary establishment of PES schemes by direct beneficiaries, practical constraints exist on the enforcement of outcome-based conditionality, and efficiency goals may need to be partly sacrificed to prevent the exacerbation of social inequalities. In terms of human behaviour, land users’ actions are shaped not only by personal utility calculations, but also by intrinsic norms of distributive justice and environmental stewardship; the interaction of PES with these intrinsic norms can negatively impact on its local legitimacy and even ‘crowd out’ existing motivations for the conservation of nature. The second insight is that land users’ capacity to shift to sustainable land practices, while influenced by the direct payments, remains strongly determined by broader socio-economic trends and by national strategies for rural development and institutional reform. On the basis of these insights, a flexible, participatory, and integrated conceptualisation of PES that can better account for this range of physical, socio-economic, and normative factors is proposed here as more capable of delivering efficient, equitable, and resilient conservation outcomes.

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Notes

  1. In their broad definition, incentives are the positive and negative changes in outcomes that individuals perceive as likely to result from particular actions (Gatzweiler 2006). With direct instruments like subsidies, taxes, and state-administered PES the incentive is provided directly by the state to those who generate the externality. Under cap-and-trade permit systems, habitat mitigation schemes and state-mandated PES the state creates indirect incentives by establishing a maximum overall level of externality (the cap), and then giving actors the possibility of trading permits among each other or of offsetting their impacts on ecosystem services at a certain location by financing the conservation of ecosystem services elsewhere. With indirect instruments like certification, eco-labelling, and voluntary firm-administered PES the state creates legal frameworks whereby the generator of the externality is put in a position to receive economic incentives from consumers and ecosystem service beneficiaries for the adoption of sustainable production practices, through a price premium, a share increase in existing markets, or access to new environmental markets.

  2. However, some authors refer to projects that promote wildlife-based recreational enterprises as a form of PES projects (e.g. Ingram et al. 2014).

  3. This explains why the majority of PES initiatives cited in this paper, and in the literature in general, are from developing countries. Nonetheless, many of the insights and conclusions reached in this study apply to PES programmes in both developing and developed countries.

  4. The opportunity cost of a choice is the cost of forgoing the best alternative use of a resource (Arrow 1969). In the case of PES, opportunity costs can be incurred from offsetting natural resources from alternative potential uses, and from adopting sustainable but less profitable land-use practices.

  5. Additionality refers to the amount of ecosystem services generated under a PES scheme that is additional to what would be generated if the scheme was not implemented. In most cases, the level of additionality can only be postulated, because its scientific measurement is strongly limited by the difficulty of obtaining context-specific information on the causal relationship between land-use practices and ecosystem service provision (Corbera et al. 2007).

  6. Transaction costs are the costs of carrying out market negotiations (Arrow 1969). In the case of PES, transaction costs are related to the definition of the ecosystem service to be maintained, the identification of potential sellers and buyers, the development of mutual trust between them, the bargaining over the service’s price, the transfer of payments, the monitoring of contractual obligations and conservation outcomes, and the enforcement of contracts (Vatn 2010).

  7. The terms justice, fairness, and equity all refer to the concept of fair treatment, although the concept of justice is generally defined in terms of conformity (of an action or thing) to a moral right, while the concept of equity is comparative, being concerned with the relative circumstances of particular groups in society (McDermott et al. 2013). The concept of equity is composed of two core dimensions: distributive and procedural (Corbera et al. 2007; McDermott et al. 2013). In this review, I focus only on the economic aspect of distributive equity, this being, until now, the most used in analyses of PES. A comprehensive analysis of distributive equity would focus also on the distribution of the non-economic outcomes of PES, which relate to the psychological, social, political, and cultural dimensions of human well-being (see Sen 1999).

  8. Contrariwise, asset-building PES programmes that promote a shift to sustainable land-use practices may have the effect of increasing demand and wages for local labourers (Adhikari and Boag 2013).

  9. Clear and secure land tenure is necessary for the functioning of PES schemes: on the supplier side, secure land tenure is important considering that participation in such schemes often involves a significant initial investment in the modification of land-use practices (Adhikari and Agrawal 2013) and the ability to de facto prevent third parties from using natural resources without consent; on the buyer side, secure tenure is important because it decreases the risk of non-delivery of the ecosystem service (Richards 2012).

  10. This interpretation of the pro-poor principle of equity in absolute terms is compatible with the Paretian efficiency precept, which requires that welfare increases for at least some without decreasing for others.

  11. In this regard, it is useful to distinguish between waste absorption services, which are rival and excludable and over which property rights may be established, and regulation services, which are non-rival and non-excludable and over which property rights cannot be established. For example, carbon sequestration, as a type of waste absorption service, is rival and excludable: if rights over the carbon sequestration service of a forest are bought by a firm in order to offset its carbon emissions, right over the same forest cannot be bought by another firm as well. On the other hand, climate regulation, as a type of regulation service generated by carbon sequestration, is non-rival and non-excludable: enjoyment of a stable climate by one person does not diminish the enjoyment of the same service by another person, and nobody can be physically excluded from benefitting from such service (Farley and Costanza 2010).

  12. Intrinsic motivations are deontological reasons for doing an activity, such as the feeling of satisfaction that carrying it out may bring, or normative principles. Extrinsic motivations, on the other hand, are instrumental reasons for doing an activity, that is, the attaining of certain outcomes, whether tangible or non-tangible (Ryan and Deci 2000). Intrinsic motivations for environmental conservation can be of two types: pro-social (motivated by relationships with other people or the larger community) and pro-environmental (motivated by values attributed to, or relationships with, nature) (Rode et al. 2015).

  13. Two further psychological mechanisms have been observed to underlie the motivation crowding-out/crowding-in effects of various forms of financial incentives for environmental conservation. Financial incentives may crowd out existing intrinsic motivations for pro-environmental behaviour by undermining the capacity of this behaviour to enhance a person’s self-image or self-esteem, as well as her public reputation, since it will no longer be clear whether such behaviour is being performed for ethical reasons or in response to external interventions (Benabou and Tirole 2006; Lopez et al. 2009; Gneezy et al. 2011). Finally, financial incentives may crowd out intrinsic norms of reciprocity, since other people’s environmentally sustainable behaviour may now be viewed as a response to financial incentives rather than as a manifestation of personal ethics (Frey and Stutzer 2006; Vollan 2008). These two psychological mechanisms are probably less likely to apply in the case of PES.

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Acknowledgments

I owe sincere thanks to Arild Vatn, Krister Andersson, Tom Blomley, and three anonymous reviewers for their sharp remarks and detailed suggestions on how to improve this paper. I am also grateful to Unai Pascual for his guidance and inspiration during the initial conception of this paper. Finally, I thank Paul Johnson, Sean Duffy, and Lia Ferrario for their support with editing and proofreading.

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  1. Wildlife Conservation Research Unit (WildCRU), Department of Zoology, University of Oxford, Tubney House, Abingdon Road, Tubney, Abingdon, OX13 5QL, UK

    Giulia Irene Wegner

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Wegner, G.I. Payments for ecosystem services (PES): a flexible, participatory, and integrated approach for improved conservation and equity outcomes. Environ Dev Sustain 18, 617–644 (2016). https://doi.org/10.1007/s10668-015-9673-7

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