Natural Resources
     and Environment

About the project

The FAO Project on Remuneration of Positive Externalities (RPE) and Payments for Environmental Services (PES) started with a visits of different PES-related projects in Kenya. We chose Kenya because the country has become an incubator for innovative ways of improving environmental services by making a more effective use of user-friendly new technologies (e.g. ICT) and linking the provision of such services to concrete  business opportunities that create local income and employment.

The projects visited in Kenya illustrate that efforts to simultaneously improve farm productivity, rural livelihood and environmental services tend to be linked to hybrid forms of PES that empower local farmers through in-kind payments, awards for innovative practices, price-premiums for sustainable production, special input discounts in return for complying making agriculture more sustainable and incentives to develop green business opportunities (sale of tree seedlings, conversion of waste products into farm inputs and energy products). These economic activities that surround PES schemes may have become more important as a source of revenues for local participants than the actual transfer payment in the PES scheme.

Kenya is also one of the most innovative countries in Africa when it comes to the effective use of cell-phones and other ICT tools in efforts to lower the high transaction costs involved in PES projects. As a consequence, monitoring, reporting and verification (MRV) is more measureable and enforceable. Nevertheless, the country still faces many challenges and the actual impact of sustainable agricultural practices induced through PES schemes on water quality, biodiversity or carbon sequestration remains elusive.

The field experience in Kenya combined with extensive literature research on RPE/PES as well as the theory of PES enabled us to identify five major criteria that are relevant in the evaluation of the financial sustainability of a PES project. These are: a) Innovative farm incentives schemes, b) negotiation strategies (trust-building mechanisms that reduce transaction costs and increase effectiveness, c) Making use of ICT technologies to reduce costs for MRV, d) institutional ownership mechanisms/policy embeddedness that ensure that the local people remain involved once project funding ends, e) a public-private partnership that does not just improve environmental services but also help the region to develop economically

Based on these selection criteria we identified 30 interesting PES and PES-like projects that illustrate new ways of how to make such projects financially sustainable and thus ensuring a higher degree of permanence of the environmental improvements achieved in initial pilot-phases.

The next step will be to discuss the factsheet findings during a multi-stakeholder dialogue from 12-13 September in Rome. It will give the authors the opportunity to present their work to a wider audience and obtain critical feedback. The insights gained from dialogue will then inform our programme of work for the coming two years and eventually lead to an adaptive toolbox for policy makers on Remuneration of Positive Externalities (RPE)/Payments for Environmental Services (PES) in the Food and Agricultural Sector.

Resources in FAO

InnovationPES NRD reviewPES flyer Rio+20SOFA 2007