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What is Payments for Environmental Services?

  1. What are the principles of PES?

1. What problem is PES addressing?

What is PES addressing

  • Land Use A more attractive to Land Users
  • Land Use B better for societies as whole

Different forms of land use can generate a variety of environmental services. Land uses with high levels of tree cover, for example, can help regulate waterflows in a watershed and reduce the risk of catastrophic flooding or landslides. Land users, however, typically do not receive any compensation for such environmental services. As a result, they usually ignore them in making their land use decisions. Often, this can lead to land use decisions that are socially sub-optimal. The response to this problem has often tended to rely either on remedial measures, such as repairing the damage caused by flooding or the construction of civil works aimed at protecting downstream communities from flooding, or on regulationwhich attempt to dictate particular patterns of land use. Neither of these approaches has proved effective. Remedial measures are often imperfect and expensive - often far more expensive than preventive measures. And regulatory approaches are extremely difficult to enforce and may impose high costs on poor land users.


In recent years, recognition of this problem and of the failure of previous approaches to dealing with it has led to efforts to develop systems in which land users are compensated for the environmental services they generate. In this way, land users would have a direct incentive to include these services in their land use decisions, resulting in more socially-optimal land uses.

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 2. How does PES work?

PES works

  • Payment makes Land Use B more attractive to Land User A
  • Land users are better off (payment and local benefits of B> local benefits of A)
  • Downstream populations are better off (payment to Land User < cost would bear if A)

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 3. The Principles of PES

  •   Those who provide environmental services get paid for doing so (‘provider gets’)
  •   Those who benefit from environmental services pay for their provision (‘user pays’ )

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 4. What Makes PES attractive? 

  •  Efficient: 
    • Conserves what is worth conserving
    • Does not conserve what is not worth conserving
  • Potentially very sustainable:
    • Not based on whims of donors, NGOs, but self-interest of service users and providers
    • Need for water won't go away, so it can generate an indefinite payment stream
  • For this to work, it needs:
    • Base payments to providers on payments by users
    • To actually deliver services: getting the science right is critical
    • Taylor mechanism to specific local conditions

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 5. Additional Materials (click below to download the presentations)

Introduction to Payments for Environmental Services  

Introducción al Pago por Servicios Ambientales

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Payment for Environmental Services