Food and Agriculture Organization of the United Nations- FAO
Payments for Environmental Services (PES) from Agricultural Landscapes
PES and the poor
Obstacles
Unfortunately, many aspects that might prevent or limit participation in a PES programme are likely to be correlated with poverty: risk, insecure land tenure, small farm size, lack of access to credit and technical assistance, high transaction costs.
Many of the obstacles preventing the poor from rising out of poverty are the same ones that inhibit their participation in PES programmes and the realization of investments for sustainable land management. Access to the productive assets needed to generate environmental services is essential for participating in PES programmes. Lack of access to productive resources (land, water, financial and human capital), together with lack of information and property rights could inhibit the poor from adopting more productive and sustainable land management practices and prevent them from rising out of poverty. At the same time, these factors represent major barriers to the participation of many poor in PES programmes.
Ownership of resources is a prerequisite for entering into contracts for the provision of environmental services. Tenure issues are critical as it may not be possible to undertake a PES programme if tenure is insecure, especially if PES programmes require long-term investments. Also, the rights over the resources often take the form of common property rights, with implications for the implementation of PES programmes.
High investment outlays - with returns occurring only later in the future - are frequently needed in order to satisfy the requirements of the programme. But poor land users may be unable to finance the necessary investment. They may also lack the means to cope with a possible, albeit temporary, reduction in production resulting from the adoption of changes in agricultural production systems required by the programme. In many parts of the developing world, rural financial markets function poorly, resulting in lack of access to external finance. Poor households may be unable to finance the necessary changes from their own assets, which wealthier PES programme participants could do.
When PES programmes promote a change in resource management, farmers may face increased risk in learning about and possibly adopting these new practices. For reasons of their poverty, poor farmers generally cannot afford to take risks and may be less inclined to participate in a PES programme than the better-off producers. Also, the implementation of PES schemes implies technical difficulties. Poor farmers are less likely to have access to extension than better-off households and may lack education or access to information and expertise needed to engage in markets for environmental services. There is also lack of information regarding the implementation and of the benefits of more environment-friendly production practices, representing one of the most common obstacles that poor farmers face in adopting these measures.
Transaction costs may represent a serious barrier to the participation of poor households in PES programmes. Working with many small, dispersed farmers imposes high transaction costs, i.e. costs to the PES programme of contracting with each participant. Thus, it is often more attractive for PES programmes to focus on large and better-off households. Most transaction costs are fixed ones, such as the costs of developing a project proposal, setting a baseline and identifying a buyer. Transaction costs could be reduced through increasing project size by fostering collective action among suppliers, reducing contracting costs by utilizing existing management structures and reducing information costs through guidelines and free data provision.
