Designing payments for environmental services in theory and practice: an overview of the issues
Engel, S., Pagiola, S., & Wunder, S. 2008.
Ecological Economics 65 (4): 663-674.
Payments for environmental services (PES) have attracted increasing interest as
a mechanism to translate external, non-market values of the environment into
real financial incentives for local actors to provide environmental services
(ES). In this introductory paper, we set the stage for the rest of this Special
Issue of Ecological Economics by reviewing the main issues arising in PES design
and implementation and discussing these in the light of environmental economics.
We start with a discussion of PES definition and scope. We proceed to review
some of the principal dimensions and design characteristics of PES programs and
then analyze how PES compares to alternative policy instruments. Finally, we
examine in detail two important aspects of PES programs: their effectiveness and
their distributional implications.
PES is not a silver bullet that can be used to address any environmental
problem, but a tool tailored to address a specific set of problems: those in
which ecosystems are mismanaged because many of their benefits are externalities
from the perspective of ecosystem managers. PES is based on the beneficiary-pays
rather than the polluter-pays principle, and as such is attractive in settings
where ES providers are poor, marginalized landholders or powerful groups of
actors. An important distinction within PES is between user-financed PES in
which the buyers are the users of the ES, and government-financed PES in which
the buyers are others (typically the government) acting on behalf of ES users.
In practice, PES programs differ in the type and scale of ES demand, the payment
source, the type of activity paid for, the performance measure used, as well as
the payment mode and amount. The effectiveness and efficiency of PES depends
crucially on program design.
Keywords: payments for environmental services, incentive mechanisms,
conservation, ecosystem services
Note: For further information about this publications, please contact
the corresponding author, Dr. Sven Wunder (firstname.lastname@example.org)