The Borneo orangutan, a beneficiary of well-managed payments for environmental services. Photo by Daniel Murdiyarso
A recent journal volume edited by CIFOR and partners reviewed payments for environmental services (PES) schemes worldwide. It finds large differences between public and private PES. Improvements in PES need to be tailored accordingly, if PES is to become a mainstream conservation tool.
PES schemes are an innovative effort to protect the environment. Their aim is to translate external, traditionally nonmarketed values of the environment into real financial incentives for landowners and land users to provide environmental services.
The environmental services most often covered by PES schemes are those related to carbon, watershed, biodiversity, and landscape beauty protection. These schemes have now been around for a while. Given the global interest in tackling climate change by using financial incentives to reduce emissions from deforestation and degradation (REDD), now is a good time to have a look at how PES schemes are progressing.
According to a special edition looking at PES issues published by the highly regarded journal, Ecological Economics, PES programs now operating around the world can be divided into two broad categories.
Firstly, there are the smaller, more tightly focused, ‘user-financed schemes’ and, secondly, the larger, often more diverse ‘government-financed schemes’. As might be expected, both approaches have their advantages and disadvantages. More surprisingly, the list of these relative pros and cons are quite similar across developed and developing countries.
Typically, user-financed schemes are small in scale and focused on a single service, such as carbon or watershed management. According to one of the special edition’s editors, CIFOR’s Dr. Sven Wunder, these smaller, user-financed schemes are often quite successful in achieving their environmental objectives.
He says this is largely due to their use of more customised measure. For example, Wunder says ‘These schemes tend to target payments to those parts of the landscape that are most at threat. Also, the payments offered per hectare are tailored to the land areas that provide the highest service values and the most competitive conservation costs.’
But Wunder is also quick to point out that ensuring their success requires ‘a lot of time-consuming and costly up-front negotiation, making smaller, single-service schemes more expensive to create.’
By contrast, government-funded, multiservice schemes are less expensive, as their large size allows them to operate in more cost efficient ways. However, they are often less effective in achieving their environmental goals.
Wunder says this is because ‘government-funded PES schemes tend to rely on uniform payments and are limited in their ability to be customised and targeted at specific services. And often they’re burdened with politically motivated side-objectives that blur the focus of the original environmental aims.’
According to the review, which synthesises and extends the findings of an international workshop organised by the Bonn-based Centre for Development Research and CIFOR in Germany in 2005, improving the schemes will require finding ways to make user-financed schemes cheaper to set up and government-financed schemes more focused and efficient.
‘Currently the most advanced PES schemes are operating in Latin America’, says Wunder, ‘but PES mechanisms are increasingly being piloted elsewhere. In fact, PES will be an important on-the-ground mechanism for implementing REDD (reduced emissions from deforestation and forest degradation) schemes.’
‘With so much emphasis now on tackling climate change through REDD’, says Wunder, ‘we’re bound to see an expansion in environmental payment approaches. So maybe other environmental services such as biodiversity protection will ‘hitch a ride’ on climate mitigation.’
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Payments for Environmental Services (PES) in developing and developed countries, Ecological Economics, Vol. 65 (4), May 2008.