Payments for environmental services: Environment strategy notes

The valuable environmental services provided by natural ecosystems are too often lost as a result of mismanagement and lack of incentives to preserve them. Helping countries find innovative solutions to such problems — which intersect with livelihood, vulnerability, and health issues — is key. This article presents the World Bank's work on payment for environmental services (PES) as a possible solution.

The central principles of PES are that those who provide environmental services should be compensated for doing so and that those who receive the services should pay for their provision. This approach, the authors assert, has the further advantage of providing additional income sources for poor land users, helping to improve their livelihoods.

However, for PES programmes to survive, they need secure sources of financing and this is especially important if the payments have to be long term and open ended as is usually necessary if land users are to have a continuing incentive to maintain the environmental services. This entails identifying not only the beneficiaries but also the specific services they receive. Similarly, PES programmes, the authors argue, will have the desired effect only if they reach the land users in ways that influence their decisions on how to use the land. Several general principles which should be followed are identified as:

• make payments continuous and open ended;
• target payments;
• avoid perverse incentives.

The authors also highlight that PES programmes require a supporting institutional and market infrastructure, which is not easy and rarely cheap. Similarly, it is important to ensure that special efforts are made to enable the poor (most often the potential suppliers of environmental services) to have access to the new opportunities created by PES programmes.   The authors conclude that the PES concept ties in with many of the themes of the Bank's Environment Strategy. Ensuring that the services provided by many ecosystems are not lost is critical.