Paying for nature’s services can be more cost-effective

An international team of scientists, including IVM’s Roy Brouwer, researched worldwide the relatively new policy instrument paying for nature’s services and concludes in Nature Sustainability that the intended effect on nature is not met due to taking simplifying shortcuts in design and implementation.

03/16/2018 | 10:41 AM

Mounting threats to the global ecosystem under pressures from population growth and commodity demands make economic incentives a vital component of environmental conservation.

One practice that has emerged over the past 20 years, Payments for Environmental Services (PES), involves assigning value through financial incentives paid to farmers and land owners for managing their land so that it provides an ecological service. Remunerated services typically include carbon sequestration, watershed management, or biodiversity protection.

New research from the Center for International Forestry Research (CIFOR) and partners suggests that due to shortcuts in design and execution, PES programmes may, in practice, work less effectively than they could, lowering their capacity to provide the right incentives and restricting their impact on conservation efforts.

“Naturally enough, due to differences in contexts, priorities and goals, PES programmes vary in design and execution”, said Sven Wunder, principal economist with CIFOR. “While we recognize variations in strategy will always exist, we note that PES designers often take impractical shortcuts, oversimplifying circumstances, leading to deficiencies in execution, and thus probably in impact”.

The researchers. led by CIFOR and Canada’s University of Waterloo, discovered one shortcoming often relates to fears among PES regulation enforcers in applying fines and penalties for not meeting agreed goals.

“Less than a matter of problems with complex biophysical monitoring or prohibitive transaction costs, we believe enforcement is often a politically sensitive question”, said professor Roy Brouwer, co-author, executive director of the University of Waterloo’s Water Institute and professor at IVM. 

To reach their conclusions, the scientists analysed a new global dataset accrued from 70 PES projects over the past 20 years around the world. They coded design and implementation features from the case descriptions and their own field-based observations.

PES programmes assessed included watersheds, forest carbon and biodiversity schemes from North America, South America, Asia, Australia, Africa and Europe.

The authors observed that PES programmes are sometimes perceived by those involved as a silver bullet, leading to potentially misguided implementation when perhaps other policy programmes would be better suited to a given scenario.

Difficulties arise when the environmental service provider offers less compensation than expected from the landholder, when the institutional framework for introducing and administering PES are lacking, when provider control over the environmental service is weak, and when payments are insufficient to incentivize further ecosystem services, the report said.

Globally, pressures are escalating to put conservation finance programmes to more effective use. “If new environmental impact assessments continue to reveal inefficiencies in PES design and implementation, political pressures may eventually mount for more transparent and economically informed policy choices”, said Brouwer. “This may hopefully also set the stage for better realizing the potential of PES to achieve efficient and equitable conservation impacts”.