Payment for Environmental Services

Introduction

Services provided by the environment are of great importance to sustain life on the planet. For the last century, humans have deteriorated the environment through economic activities such as agricultural practices, industry and incorrect use of technology.

Regulatory and protected area approaches are now known to be insufficient to ensure the conservation of biodiversity. A main problem is financial, especially for resources that lie outside protected areas. For these to be conserved, they need to be more valuable than the alternative uses of land. The failure of landowners to capture financial benefits from conserving ecosystem benefits can lead to overexploitation of natural resources and undersupply of ecosystem services, for instance.[i]

In the past, governments were the ones responsible of ensuring biodiversity protection of environmental services through government: direct resource ownership and management, regulation of private resource use, technical assistance programs to encourage improved private management, and targeted taxes and subsidies to modify private incentives.[ii] Yet these traditional instruments of command and control have not been successful enough in ensuring provision of environmental services.

There is a growing interest in finding alternative, innovative, and market-based approaches to do so: Payments for Environmental Services (PES). PES uses monetary incentives instead of command and control as policy instruments. According to Pagiola (2003), “the central principles of PES are that those who provide environmental services should be compensated for doing so and that those who receive the services should pay for their provision.”[iii]

References

[i] Jenkins, M. et al. 2004. Markets for Biodiversity Services: Potential Roles and Challenges. Environment 46, No. 6. July. Washington, D.C. p.35

[ii] Ibid. p.33

[iii] Pagiola, S. 2003. Paying for Water Services. World Conservation, No. 1, World Bank, Washington, D.C. p.20.