Sri Lanka holds great potential for developing payment for environmental services (PES) and environmental service markets. It is however a relative new concept and improving awareness and building institutional capacity remains a top priority and challenge. Therefore, site specific assessments in support of PES should be developed with the purpose of: identifying, assessing and prioritizing ecosystem services; and supporting the development of equitable institutional arrangements that ensure access to benefits by potential buyers.
Environmental issues and considerations have to a high extent become an integrated part of most laws and regulations in Sri Lanka, and a growing number of decision makers and planners are promoting sustainable management approaches and conservation efforts. Enforcement and state management is however still weak and experiences with implementing sustainable financing mechanisms in an effort to improve local livelihoods and secure environmental integrity are limited. The decentralization of resource management authority in Sri Lanka does however have a beneficial impact on the potentials of establishing PES and environmental services markets. Decentralization can namely potentially reduce transaction costs and improve transparency – elements important to the sustainability of developing service rewards. Also a number of development and conservation projects and initiatives offer some lessons learnt, even though they are not specifically dealing with markets for ecosystem services.
Community participation in resource management and conservation activities is an approach adopted by quite a number of projects where property rights are seen as an important element facilitating sustainable management and the provision of environmental goods and services. In some cases tenure and land use rights are given to local communities thereby providing incentives to engage in watershed conservation efforts.
In Sri Lanka, a large number of community based organizations have added further value to creating the institutional setup needed for implementing PES, and pooling service providers together in one organization makes the monitoring of service provision easier, as well as facilitating the redistribution of rewards. However, often it is difficult to clearly identify which services ecosystems provide, what the value is and who the beneficiaries are.
When considering the sustainability of PES and other financing mechanisms for ecosystem conservation, the distributional aspects of costs and benefits are also very important elements. Payments for environmental services are often based on voluntary transfers between buyers and sellers and hence creating a win-win situation is a prerequisite for success. The buyer must feel confident that the service is actually being provided and that its continued provision is facilitated by the payment. Equally, the seller must have some kind of guaranty that rewards will be provided thereby offsetting the opportunity costs of providing the environmental service.
