What is Payment for Ecosystem Services?

First what are ecosystem services?

The diverse benefits that we derive from the natural environment are sometimes referred to as ecosystem services.

Examples of these services include the supply of food, water and timber (provisioning services); the regulation of air quality, climate and flood risk (regulating services); opportunities for recreation, tourism and education (cultural services); and essential underlying functions such as soil formation and nutrient cycling (supporting services).

In practice, land can often be managed such that a variety of ecosystem services (ie multiple benefits) are delivered simultaneously. However, nature is a complex, interconnected system and ecosystem services are not generated independently of one another.

Therefore, attempts to maximise the supply of one service are likely to influence the production of other services, either positively or negatively. In some cases, ‘win-win’ solutions may be possible, for example where river restoration enhances amenity, biodiversity and fishery benefits.

While in other instances trade-offs between services may be apparent, for example where non-native tree species are planted with the aim of sequestering carbon.

Payment for Ecosystem Services (PES)

The basic idea behind PES is that those who provide ecosystem services – like any service – should be paid for doing so. PES therefore provides an opportunity to put a price on previously un-priced ecosystem services like climate regulation, water quality regulation and the provision of habitat for wildlife and, in doing so, brings them into the wider economy.

Key principles and concepts underpinning PES

A widely quoted definition of PES is:

a voluntary transaction where;
a well-defined ecosystem service (or a land-use likely to secure that service);
is ‘bought’ by a (minimum of one) ecosystem service buyer;
from a (minimum of one) ecosystem service provider; if and only if
the ecosystem service provider secures ecosystem service provision (conditionality).11

Drawing on this definition, there are seven key principles, which should ideally underpin any PES scheme:

Voluntary

Beneficiary Pays

Direct Payment

Additionality

Conditionality

Ensuring Permenance

Avoiding Leakage

Stakeholders enter into PES agreements on a voluntary basis;

Payments are made by the beneficiaries of ecosystem services (individuals, communities and businesses or governments acting on behalf of various parties);

Payments are made directly to ecosystem service providers (in practice, often via an intermediary or broker);

Payments are made for actions over-and-above those which land or resource managers would generally be expected to undertake (note that precisely what constitutes additionality will vary from case-to-case but the actions paid for must at the very least go beyond regulatory compliance);

Payments are dependent on the delivery of ecosystem service benefits. In practice, payments are more often based on the implementation of management practices which the contracting parties agree are likely to give rise to these benefits;

Management interventions paid for by beneficiaries should not be readily reversible, thus providing continued service provision;

PES schemes should be set up to avoid leakage, whereby securing an ecosystem service in one location leads to the loss or degradation of ecosystem services elsewhere.