PES - Setting Up a PES Scheme

Food and Agriculture Organization of the United Nations- FAO

Payments for Environmental Services (PES) from Agricultural Landscapes

Agricultural Development Economics Division (ESA)Español Français

Contingency and accountability

Being a deal that rests on continued voluntary commitments, a PES scheme's long-term survival rests on the rules that make the different parties responsible for the fulfilment of commitments they have taken on, and on which agreed compensations are conditional.

Monitoring

Effective monitoring is essential to prove beneficiaries that their investments are generating land use changes and eventually the expected environmental service they are paying for – thus, reliable scientific basis of the land management options and continuous monitoring of outcomes are crucial.

While rates of carbon sequestration in young fast-growing trees can be easily estimated, changes in water quality and quantity can take several decades to be realised. In addition, relationships between land management and hydrology are complex, site-specific and prone to misunderstandings(22).

Clear options for improvement in water quantity might include removal of alien invasive species that consume very high quantities of water (Working for Water Programme in South Africa(23)), or improvements in water use efficiency for example through improvements in the water supply infrastructure to avoid water losses. Other options could be adapting the varieties used to the biophysical conditions or improving irrigation techniques. Improving water quality by shifting to organic agriculture might also be a more straightforward option - click for example of monitoring indicators.

In some watershed or biodiversity cases, large enough areas may be required for benefits to be realised and the scheme may not be able to cover this right from the start. It is important to be clear about the level of uncertainty, thresholds and time lags so that buyers know what they will be paying for and providers are not asked to deliver what is not in their power.

A contingency plan is sometimes used, especially in carbon projects. For example, as part of the Chicago Climate Exchange (CCX) rules for agricultural and grassland soil carbon offset provision, a 20% share of the offset units traded is placed into a “contingency pool”. This is a risk management option to compensate for eventual carbon storage reversal due to eventual non-compliance with the conservation tillage management options adopted under the contract to supply soil carbon credits.(24)

Table 4.8- Examples of monitoring indicators(25)
Environmental services	Service attributes	State indicator
Wildlife habitat	• Wildlife and nursery habitats	• Resident and endemic species (number) • Surface area per ecosystem type (ha)
Water supply	• Precipitation, infiltration, soil water retention, percolation, streamflow, groundwater flow • Biotic and abiotic effects on water quality	• Water storage capacity (m3/m2) • Pollutant concentrations • Discharge (m3/year)
Regulation of water flows	• Retention of rainfall and release (especially by forests and wetlands) • Water storage by rivers, lakes and wetlands • Groundwater recharge and discharge	• Infiltration capacity (mm/h) • Water storage capacity of soils (m3/m3) • Baseflow volume (m3/year);
Water purification	• Reduced siltation of streams and lakes • Nutrient uptake and release by ecosystems • Removal or breakdown of organic matter, salts and pollutants.	• Nitrogen amount (kg/ha) • Total dissolved solids (kg/m3) • Electric conductivity (μS/cm) • Denitrification (kg/ha/year)
Control of soil erosion and sedimentation	• Protection of soil by vegetation and soil biota	• Infiltration capacity (mm/h) • Slope length (m) • Barren land (%) • Soil loss (kg/ha/year) • Sediment storage (kg/ha/year)
Hydro-electric power	• Flow for energy generation	• Storage capacity of riverbeds and lakes (m3/km2) • Slope (deg), elevation (m)
Carbon sequestration and storage	• climate change mitigation	• on-site biomass (including stemwood, crownwood, foliage and large roots) • off-site biomass (including thinnings and timber products)
Aesthetic and recreational services	• Landscape quality and features	• Stated appreciation • Recreational value (e.g. entrance fees (US$/visit) • Houses on lakeshore (number/km) • Visitors (number/year)

(22) See for example Monitoring Changes in Hydrologic Response Due to Land Management Changes at the Watershed Scale: Time Lag and Other Issues. And Hayward, B. 2005. From the Mountain to the Tap: How Land Use and Water Management Can Work for the Rural Poor.Forestry Research Programme. UK Department for International Development

(23) See Working for Water Programme , South African Department of Water Affairs and Forestry

(24) Soil Carbon Management Offsets, Chicago Climate Exchange

(25) adapted from PAY-Establishing payments for watershed services Smith, M., de Groot, D., Perrot-Maitre, D. and Bergkamp, G.2006. Gland, Switzerland, IUCN - The World Conservation Union.