Pro-poor rewards for environmental services (RES) link global priorities on poverty reduction and environmental sustainability. Emerging approaches to payment for environmental services vary in mechanism and form of payment. Rural poverty is multidimensional and the poverty syndromes vary with the intensity of landscape use and management, with the solution to lack of access to markets, education and healthcare associated with loss of natural capital. RES mechanisms have to balance effectiveness and efficiency with fairness and pro-poor characteristics, with transaction costs as obstacles to both. The economic perspective on financial transfers needs to be balanced with the social and environmental paradigms of fairness. Our first hypothesis is that only under specific circumstances, actual cash incentive to individual participants of RES will contribute substantially to poverty alleviation of ES providers. The second hypothesis is that non-financial incentive to ES providers will contribute to reducing poverty by linking the community (participants and non-participants) to access to capital types (human, social/political, natural, infrastructure and financial, such as microcredit). Review of key ratios of relative number and wealth of service providers and beneficiaries supports the first hypothesis and rejects the notion of widespread potential for reducing upstream rural poverty through individual cash payments. Results of community focus group discussions support the second hypothesis through context-specific preferences for the mechanisms by which RES can trigger conditions for sustainable development.
