Making payments for ecosystem services work

For over 50 years economists have developed instruments to address the market failures behind the collapse of ecosystem services noted by the Millennium Ecosystem Assessment (2005; MA). Such instruments include taxes, subsidies, user charges, access fees, penalties for non-compliance and the like (Tietenberg 2006). More recently, instruments of this kind have been linked explicitly to the provision of specific ecosystem services through the concept of payments for ecosystem services (PES) (Ferraro and Kiss 2002; Hardner and Rice 2002; Niesten and Rice 2004; Scherr et al.2004; Wunder 2007; Arriagada and Perrings 2011; Ferraro 2011; Kinzig et al. 2011). PES schemes differ from earlier approaches to the management of ecosystems such as Integrated Conservation and Development Projects or Community-Based Natural Resource Management in three respects: their focus on ecosystem services (the benefits provided by ecosystems), their use of positive financial incentives to achieve the production of additional services and the conditionality of those incentives on some measure of performance (Sanchez-Azofeifa et al. 2007; Swallow et al. 2007; Pagiola 2008; Wunder et al. 2008).