Payments for ecosystem services (PES), also known as payments for environmental services (or benefits), are incentives offered to farmers or landowners in exchange for managing their land to provide some sort of ecological service. They have been defined as "a transparent system for the additional provision of environmental services through conditional payments to voluntary providers". These programmes promote the conservation of natural resources in the marketplace.
Concept overview Ecosystem services have no standardized definition but might broadly be called "the benefits of nature to households, communities, and economies" or, more simply, "the good things nature does". Twenty-four specific ecosystem services were identified and assessed by the Millennium Ecosystem Assessment, a 2005 UN-sponsored report designed to assess the state of the world's ecosystems. The report defined the broad categories of ecosystem services as food production (in the form of crops, livestock, capture fisheries, aquaculture, and wild foods), fiber (in the form of timber, cotton, hemp, and silk), genetic resources (biochemicals, natural medicines, and pharmaceuticals), fresh water, air quality regulation, climate regulation, water regulation, erosion regulation, water purification and waste treatment, disease regulation, pest regulation, pollination, natural hazard regulation, and cultural services (including spiritual, religious, and aesthetic values, recreation and ecotourism). Notably, however, there is a "big three" among these 24 services which are currently receiving the most money and interest worldwide. These are climate change mitigation, watershed services and biodiversity conservation, and demand for these services in particular is predicted to continue to grow as time goes on. One seminal 1997 Nature magazine article estimated the annual value of global ecological benefits at $33 trillion, a number nearly twice the gross global product at the time. In 2014, the author of this 1997 research (Robert Costanza) and a qualified group of co-authors re-took this assessment – using only a slightly modified methodology but with more detailed 2011 data – and increased the aggregate global ecosystem services provisioning estimate to $125–145 trillion a year. The same research project also estimated between $4.3 and 20.2 trillion a year of losses to ecosystem services, due to land use change. PES has also been touted as a tool for rural development. In 2007, the World Bank released a document outlining the place of PES in development. But the link between the environment and development had been officially recognized long before with the 1972 Stockholm Conference on the Human Environment and later reaffirmed by the Rio Conference on Environment and Development. However, PES programs are usually not designed to be primarily poverty alleviation schemes, although they may incorporate development mechanisms. Some PES programs involve contracts between consumers of ecosystem services and the suppliers of these services. However, the majority of the PES programs are funded by governments and involve intermediaries, such as non-government organisations. The party supplying the environmental services normally holds the property rights over an environmental good that provides a flow of benefits to the demanding party in return for compensation. In the case of private contracts, the beneficiaries of the ecosystem services are willing to pay a price that can be expected to be lower than their welfare gain due to the services. The providers of the ecosystem services can be expected to be willing to accept a payment that is greater than the cost of providing the services. The monetization of soil is also progressively recognised as essential for sustainable land-use planning and policy-making. Payments for Agrobiodiversity Conservation Services (PACS) A related concept aims to adapt Payments for Ecosystem Services to support agrobiodiversity conservation by smallholder farmers.
Theoretical perspectives There are three main theoretical perspectives concerning PES. The first is that of environmental economics, the second of ecological economics, and the third of those who reject the very idea of ecosystem services.
Environmental economics The basic conceptualization of nature from the perspective of environmental economics is that manufactured capital can be used as a substitute for natural capital. The definition of PES provided by environmental economics is the most popular: a voluntary transaction between a service buyer and service seller that takes place on the condition that either a specific ecosystem service is provided or land is used in a way to secure that service. This definition is directly related to the Coase theorem, upon which PES is strongly based from the environmental economics perspective, which states that in a competitive market, in the absence of transaction costs and the presence of clear property rights, direct negotiation between private parties can lead to efficient outcomes. With this logic, a climate coalition can "buy coal" for conservation. However, in reality, transaction costs are virtually always present and the parties cannot always reach agreements on their own. One reason is that promising future payments are not time consistent. Another reason is the lack of sustained financing, which often leads governments to provide some type of funding assistance. The environmental economics theorists acknowledge that PES systems can resemble an environmental subsidy, complicating the strict Coasian backing.
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