As former coordinator of the FAO-based project on incentives for environmental services, I would like to point at the contributions made to our multistakeholder dialogue on Payments for Environmental Services (PES) (http://www.fao.org/nr/aboutnr/incentives-for-ecosystem-services/case-stu...) as well as our previously organized FSN forum discussion on PES (http://www.fao.org/fsnforum/forum/discussions/pes).

The insights gained from these events and discussions as well as from the field research we conducted in Kenya indicates that environmental improvements achieved in agriculture through PES projects often lack financial sustainability and are therefore exposed to the risk of reversibility. In other words, once the funds from the third party agency that initiated the project stops, farmers often abandon the labor-intensive practices designed to improve environmental services. One reason is that the compensation from presumed buyers of environmental services is often insufficient in view of the opportunity costs.

But the big problem lies in the theory behind PES. PES theory tends to ignore the important role of local entrepreneurship and innovation, the two factors that prove why certain PES projects indeed worked because the local people made something different out of it. The resulting hybrid PES projects contributed to more sustainable landscape management because they generated local business opportunities. For example, some farmers have made a business with tree nurseries in response to the increasing demand for agroforestry. Others have become formal suppliers of premium food products to local businesses in return for the adoption of sustainable agricultural practices.

The creative minds of the local farmers can thus generate welfare effects for the local community and the local environment, but these welfare effects are not captured in PES theory. Why? Because the theory implicitly assumes that the lack of provision of environmental services (understood as a public good) represents market failure. In fact, in many cases it is probably governance failure because private sector investments in the improvement of environmental services are hardly encouraged. The shift from PES to landscape management and ecological intensification is an important step in the right direction, because the interest of local people in business opportunities is usually taken into account. In my book 'The sustainable provision of environmental services: from regulation to innovation' (Springer, 2015) I illustrate how the landscape approach could even be further developed by giving more recognition to the importance of public-private partnerships. Such public-private partnerships have the potential to induce a shift from regulation to innovation in policies designed to improve environmental services in agriculture. The case studies presented in the above-mentioned multistakeholder dialogue illustrate this well.