Natural Resources
     and Environment

Investment in Agriculture Environmental Services

FAO project on Remuneration of Positive Externalities (RPE)/Payments for Environmental Services (PES) in the Agricultural and Food Sectors


Payments for Environmental Services (PES) is one of many market-based  policy instruments that aim at remunerating land users for the positive environmental externalities they generate through the adoption of sustainable agricultural practices.  PES aims to address a presumed market failure by providing financial incentives and other types of rewards (such as capacity development, knowledge sharing, risk alleviation, etc.)  to land users to maintain or improve the provision of valuable environmental services.  In this context, it is argued that the incentives in PES schemes to adopt sustainable agricultural practices may not just contribute to the provision of environmental services but also result in the increase of agricultural productivity. PES is therefore considered to be a tool that also promotes sustainable intensification. However, who defines ‘sustainable agricultural practices,  how conducive are such practices to sustainable intensification in different local contexts and what about farmer-led and private-sector led efforts to make agriculture more sustainable, are they sufficiently taken into account? PES often fails to give convincing answers to such questions. Moreover, there is so far no clear evidence that PES is able to ensure permanence of the environmental improvements beyond the initial funding phase.

The lack of financial sustainability of many PES schemes also helps explain the shift toward more broad approaches to promote sustainable rural development. Such landscape or territorial approaches take into account the positive externalities generated by innovation and entrepreneurship in rural areas. These positive externalities may comprise social benefits such as more increased employment and income in rural areas as well as environmental benefits such as more cost-effective and sustainable ways to manage local natural resources. FAO launched in mid 2012 a project which also looks at Remuneration of Positive Externalities (RPE) in a broad sense, rather than being limited to classic PES schemes. This enables the project to link the debate on ecosystem services with the debate on innovation


Martijn Sonnevelt 
Project coordinator

Bernardete Neves
Technical advisor