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Re: Payments for environmental services (PES) in theory and practice: Lessons learned and way forward


1. What are the lessons learned from PES in developed and developing countries?

Lessons (read along with Sec. 1b for overlaps)

  • PES needs flexibility; Many programs may not strictly meet PES concept principles (see Wunder, S[1]. 2005 PES definition). It is advisable for hybridized principles PES to work for buyers and sellers (make PES concept simple; realistic, voluntary,” conditional”, pro-poor)
  • PES should be transparent effective, efficient and equitable for sustainability-TEES
  • PES  tend to succeed if it focuses on socio-ecological nexus i.e ecosystem & societal outcomes- balancing community livelihoods  and conservation
  • Poor environmental service sellers are keen on positive externalities. PES design that delivers on services especially provisioning for food security, poverty reduction; regulating/supporting for soil fertility to improve productivity-in-situ benefits tends to succeed
  • Engagement of PES stakeholders including government agencies at all levels is paramount in success of PES projects and is sustained if and only if there’s constant Willingness to pay and to accept payment for environmental services
  • Good governance through well organized legal groups of buyers/sellers will guarantee PES sustainability
  • Need to encourage innovativeness; incorporating other PES like side enterprises in the scheme to add value
  • Threshold number of PES farmers is important to realize impact; the more they are the higher/stronger expected impact realized
  • Initial feasibility studies (i.e livelihoods and legal, hydrological cost benefit analysis) are important to inform and designing long term PES planning
  • Most PES projects lack policy dimension and it is essential to Institutionalize PES for policy recognition and  harmonized national PES strategic plan
  • Contracts between buyers and sellers should be legally binding and contract terms and conditions executed by all parties involved and in good faith.

a. What are the main challenges and opportunities with regard to PES projects in your particular country?


  • Complex Land Tenure system; continuous land subdivision amongst family members can be a challenge to implementation of PES conservation interventions. The land ownership as PES requirement is undermined. New owners (the sons)of parcelled land may not understand PES process and mostly it takes time to own their land title deeds
  • Absentee landlords/land ladies: degraded land whose owners are away (may be in formal employment) may lease it to other farmers. The lessee  may not be motivated to conserve it given his/her temporary ownership status
  • Common pool resources (public goods) like roads in PES projects; Public degraded land and or infrastructure not covered under PES is source of further sedimentation i.e soil erosion leading to further silt load in water sources irrespective of good conservation on PES farms
  • Lack of PES policy; though being considered under Water Act 2002 in Kenya, lack of PES policy weakens PES legal recognition as conservation-livelihoods tool
  • Low buyers; low “buyers-in” for PES concept, it takes substantial time and resources for  possible buyers to realize business potential to invest in PES
  • Unpredicted weather; fluctuation in weather affects some of the PES interventions. For instance unpredicted drought and frost affected establishment of agro-forestry and grass strips structures during initial stage of PES project in Naivasha


  • Legally established government recognized Water Resources Users Associations managing PES on behalf of both individual buyers and sellers
  • Natural Resource related policies in which PES can be integrated; Several Acts; Water, Land Agriculture, Forest and other relevant legal national legal documents; National Climate Change Response Strategy, National Environmental Management Act, Vision 2030 development plan, Environmental Management and Coordination Act among others
  • Private Public Partnership concept; Opportunity to link smallholder poor producer managing ecosystem to niche markets-buyers benefiting from natural ecosystem services for instance commercial horticulture companies in Naivasha-Kenya. PES offers market opportunity for ecosystem goods and services (assumed public goods) that lack direct market
  • Stakeholders desire to sustain macro-economic variables; employment opportunity, investment that contributes to local and national GDP

b. Do you know of highly successful PES cases in your particular field of expertise (watershed management, biodiversity/wildlife conservation, carbon sequestration,…)? If so, what were the main factors that contributed to the success of the PES scheme?

To  my view  I find watershed management PES or PES like Naivasha-Kenya a successful project;

Success contributing factors (read section along with lessons):

  • Strong partnership of key stakeholders working towards focused common goal; Conservation and livelihood improvement nexus (private, public- including government line ministries)
  • Well organized legal governance structure of buyers and sellers
  • Common shared hydrological problem; upstream faced with soil erosion problem lowering productivity/return on investment due to loss of soil fertility (degradation diminishing livelihood opportunities) and the downstream investors facing poor water quality problem resulting from unsustainable land use practices upstream. Poor water quality threaten long-term investment downstream
  • Multiple benefits; quick gains from in-situ benefits realized by farmers motivates them to continue implementing PES project
  • Flexibility; Hybridized PES principle approach, making PES a simple concept for buyer’s and seller’s understanding and acceptance while  considering PES principles; realistic, voluntary,” conditional” and pro-poor PES  and/or paradigms for compensation or reward for environmental services (CRES); commoditized environmental service-CES, compensation for opportunity skipped-COS and co-investment in stewardship-CIS (van Noordwijk, M and Leimona B. 2010)[2]
  • Build confidence and trust between buyers and sellers strengthened by participatory prepared   business agreement
  • Involvement of stakeholders at all PES process levels-build project ownership
  • Strong support from intermediary organizations; WWF-Care Kenya

c. Do you know of PES projects that have failed to deliver despite substantial donor support? If so, what were the reasons that caused the failure?

Generally failure could result from varied factors including failure for buyers/sellers to see business opportunity investing in conservation, design which fails to consider and focus on community livelihood needs… In Naivasha it took some time to mobilize and sensitize stakeholder on PES concept

However, Sasumua sub catchment in Upper Tana catchment area-Kenya is one of intended PES project which has taken long to take-off despite support from donors; Sasumua dam is a source of approximately 20% of water supplied to Nairobi city. Degradation in the catchment due to poor agricultural practices leads to massive siltation in the dam, making Nairobi Water Company to incur heavy water treatment costs especially during the rainy season. ICRAF verified the business case and suggested suitable intervention strategies, but the water company is not willing to invest in this probably due to lack of supporting policy framework and claim that they pay water use fees which should be used to support such initiative (not considering huge water treatment cost which could be reduced by investing in PES).

2. PES can be conceived as a diverse set of policies, institutions and processes that mobilize funding from direct beneficiaries, taxpayers, consumers and other interested parties to reward/remunerate/pay providers of environmental services. Which type of PES-related policy instruments would you recommend for your own particular country and why?

Policies (read with 1a: opportunities bullet two above). They all relevant to PES as they contain sections focusing on conservation of natural resources and socio-economic development. However, framing of policies should legislate PES in away to seal any chances of possible laissez-faire kind of community behaviour (free riders)  in PES project

a. Are PES-related policy tools applied in affluent countries with lots of off-farm employment opportunities and low population growth rates also adequate for least developed countries where farm sizes often tend to get smaller due to lack of opportunities outside agriculture?

I view PES as a tool to address common socio-economic-conservation problem, specifically internalizing externalities. That is why flexibility when designing PES is imperative, (focus on what need to be internalized through PES and figure out how it can fit into “market-place” for acceptance by sellers and buyers). PES approach may not be the same and applicable everywhere due to Variations in socio-economic/cultural/geographic/ kind of problem to be solved etc. For instance how to design PES where environmental sellers (polluters)are rich land managers and buyers are poor

Least developed countries with decreasing land sizes; Innovativeness in PES implementation needed. Through PRA identify other income generating opportunities that can be integrated within PES. Small medium enterprises supplements PES incentives and ensure smooth household production and consumption over time

b. What should be the role of the public sector in creating a regulatory/enabling environment for PES to deliver? Where public sector assistance is most needed (knowledge transfer, communal/private land rights, infrastructure, measurement of environmental quality changes, etc.)?

Legalizing PES is important; the relevant policy in which PES can be instituted/integrated will recognise and foresee PES implementation as part of its mandate leading to promotion of PES in most hot-spot land/sea scapes. Policy change is the main role public sector can play along with other listed themes for public sector assistance. For instance infrastructure which most PES buyers may not address can be fixed through government direct involvement in PES as stakeholder. However, skills and knowledge transfer can be facilitated collectively through development/conservation organization taking lead as it is in Naivasha PES project

c. To what extent is it justified to abandon the ‘polluter pays’ principle of PES to increase agricultural productivity and reduce poverty in developing countries? Or should we use other tools to tackle these objectives separately?

Although Polluter Pays Principle is an environmental policy principle to internalize environmental externalities of socio-economic activities; to my view it may not work well for the PES aimed at increasing productivity/reducing poverty. Considering the subsistence nature of agricultural system in most developing countries, there are tendencies to allow positive externalities to enhance food security and reduce poverty while overlooking the negative externalities on same small farms. This makes agriculture at times exempted from environmental controls applicable to other industrial sectors. Therefore the small nature of agricultural production system in developing countries makes the principle difficult to apply thus not feasible. Equally, Market based tradable permit strategy may not work well.

However, in cases of large commercial farming, principle could be applied through command-and-control strategy ensuring zero tolerance to pollution of agro-ecosystems.

What should be the role of innovation and entrepreneurship in making PES work for sustainable development?

Integrating alternative nature based enterprises will add value to PES as conservation and additional alternative source of income contributing to green growth and development. Access to financial capital is a challenge to smallholder farmers and micro-financing PES related enterprises would be helpful to sustain development. In Kenya, most micro-finance institutions including mainstream banks have realized the need to finance small medium agro-based businesses

a. In some cases, PES has become a vehicle for a market for environmental goods (e.g. farmers respond to a growing regional demand for trees by setting up their own tree nurseries). Do you know of other business opportunities for farmers that could arise from the implementation of a PES scheme?

This could be area specific considering demand-supply forces, consumption of household requirements and relevance to PES design at hand; examples include but not limited to; fruit trees for conservation, income and nutrition; water harvesting (storm water) to check soil erosion, enhance infiltration/recharge and use harvested water for drip irrigation (i.e horticulture) during drought season; Aquacultures using harvested water; poultry to reduce dependency on land (cultivation), apiculture among others

One challenge that the poor farmers face is lack of stable markets for their produce as the markets and prices are mainly controlled by middlemen. Small holder farmers may not have the capacity to market their produce directly due to the low volumes they produce. Market linkages with the potential beneficiaries of environmental services would enhance the operationalization of PES schemes. This can be achieved through organizing farmers into marketing groups.

b. According to your practical experience with PES, where do we need innovation to make PES more effective and what type of reward system could create such innovation?

Conservation-livelihood related: Knowledge and skills, integrated small medium enterprises; Reward system should be arrived at through participatory discussion between buyers and sellers. The reward could be in cash, in kind or both. But should address the immediate needs of the beneficiaries. Generally, PES needs dynamism as one intervention may not be enough to propel PES to achieve expected outcomes

c. Innovative landscape approaches focus on the improvement of environmental services on the landscape-level while the PES approach is focused on the remuneration of individual farmers on the field-level. How can the two approaches be reconciled?

In PES, the critical focus is to restore the degraded areas/ farms that contribute greatly to sedimentation on the water bodies (for PES schemes that aims to deliver watershed services). In this regard, only those who adopt the desired land use changes are rewarded and it is expected once all the farms are protected, then the impact will be felt in the entire landscape, but incentives should be considered at the landscape level rather than individual level.

However, reconciling the two can also be done through Ecosystem-wide approach or Integrated Water Resource Management-IWRM principle as a coordinated development and management of water, land and related resources in order to maximize the resultant economic and social welfare in equitable manner without compromising the sustainability of vital ecosystems (approach which can be implemented through sub-basin water resource users association-WRUAs as in Naivasha basin

In Naivasha, Community Forest Associations formed for co-management of forest resources in the upper catchment could be integrated with PES for reconciling landscape/field level to enhance environmental services

[1] Wunder, S. 2005. PES: Some nuts and bolts. CIFOR Occasional paper 42. Centre for International Forestry Research, Bogor, Indonesia

[2] van Noordwijk, M and Leimona B. 2010. CES/COS/CIS paradigms for compensation and rewards to enhance environmental services. ICRAF Working Paper No. 100. World Agroforestry Centre. Bogor, Indonesia.