Food and Agriculture Organization of the United Nations- FAO
Payments for Environmental Services (PES) from Agricultural Landscapes
Is PES the right tool?
A first step in assessing the PES feasibility
Payments for Environmental Services (PES) are first and foremost an incentive-based environmental management tool to protect and enhance the provision of environmental services - loading it with other objectives and then achieving none may reduce confidence in the mechanism and prevent it from being applied in situations where it could be effective. Given the appropriate context, well-designed PES schemes can increase both the efficiency and accountability of funds invested in environmental protection:
A Good ground to strike a PES deal
| Supply and demand are in place |
| • Assessment of ecosystem goods and services indicates the potential for providing environmental services which are in demand. |
| • There are feasible land use and/or farming system changes proven to generate environmental services that can be adopted in the ecosystem. |
| • Property/use rights of the ecosystem providing these services are clear or easily clarified. |
| • The amount of funds that the scheme can attract is sufficient to achieve changes on a scale needed to generate the environmental service requirements for all the important landowners and overcome eventual scale effects. |
| • The users' willingness and ability to pay is higher than the providers' opportunity costs. |
| The institutional and regulatory environment is favourable to PES programme development |
| • Beneficiaries and suppliers are numerous but already organized, or few and easily identifiable and organized, preferably through an existing institution. |
| • Regulations are already in place to facilitate the implementation of PES programmes. This includes regulations that support the demand for environmental services (eg environmental, health, food safety regulations) as well as regulations and institutions that support the supply of environmental services such as security of land tenure and contract enforcement. |
PES are only one tool to promote improved environmental management and is generally implemented in conjunction with other complementary policies. Environmental problems that require strict levels of control or where high incentive levels are need to change behaviour may be better managed with other tools. A PES approach can be very useful where relatively little additional incentive can stimulate desired changes.
PES schemes are not a poverty reduction tool but the two objectives may (and often are) linked. Considerable improvements in livelihoods should not be expected from a PES scheme on its own. The extent to which a PES scheme can improve the livelihoods of the rural poor groups depends mainly on how the scheme is made accessible to them and how the land use or farming system changes required affect their livelihoods. However, if this concern is inbuilt in the design, a PES scheme may make a contribution in the form of additional income, stronger land tenure claims and ultimately improved food security.
To address multiple goal complementary policies, tools and specialized funding (e.g. for infrastructure development and improvement of rural living conditions) can multiply the scheme's benefits, while safeguarding its environmental goals and the effective investment of funds contributed by the beneficiaries. This is often the case with national programmes, with multiple objectives and financed by public funds from different sources.
Box 4.1 below illustrates this by describing the eligibility criteria for the Costa Rican National PES programme, one of the best known and long-standing programmes, ongoing since 1997 and continuously growing.
Box 4.1. Eligibility Criteria for the Costa Rican National PES Programme (1)
Priority criteria include location specific requirements and characteristics of the applicants, and vary according to the type of project. All priorities are overlaid on a Geographical Information System (GIS) database which allows the national forestry fund office (FONAFIFO) to identify areas where most priority criteria overlap- see below. Within those priority areas, incoming applications are dealt on a "first-come-first-served" basis.
A) Projects for Protection
- areas located in biological corridors especially those considered of high priority by the ecomarkets project funded by the Global Environmental Facility (GEF);
- areas within the influence area of the Huetar Norte Forestry project (financed by the German Cooperation;
- renovation of previously existing PES contracts with landowners, as long as they are located within the above mentioned priority areas;
- forest areas located in strategic areas for the protection of water resources of interest for rural aqueducts, national or municipal utilities;
- privately owned areas, within the protected areas, that have not been acquired or expropriated by the State;
- Projects located in areas where the Social Development Index is under 40% (a relative index combining educational, health indicators with social indicators e.g.. number of single mother births and electricity consumption, where 0% is the poorest area and 100% the best in Costa Rica (Ortiz et al 2003).
B) Reforestation projects
- Land use aptitude for forest plantations;
- Location in relation to:
i) Conservation District in which the project is located; however, in the case of reforestation with native or endangered species, or natural regeneration, this does not apply, as the entire country is prioritised;
ii) donor target areas (Huetar Norte Forestry Project-KfW);
- renovation of previously existing contracts;
- Projects located in areas where the Social Development Index is under 40% .
C) Agro-forestry
- Projects submitted by organizations or individuals with certified capacity in managing 'forest'/timber trees in agro - forestry regimes;
- land use aptitude for forestry;
- areas of high risk of soil or water degradation and biodiversity loss.
(1) adapted from the case study profile in www.watershedmarkets.org , based on the guidelines in Manual de Procedimientos para el Pago de Servicios Ambientales (MINAE), Ministerio de Ambiente e Energía, Fondo Nacional de Financiamiento Forestal (FONAFIFO) La Gaceta Nº 151 -8 August 2006.
