This article analyses the opportunities and constraints of payments for environmental services (PES) as an instrument for ecosystem-based adaptation (EBA). It finds that PES is not suitable for all environmental services and country contexts, but can be a promising adaptation policy instrument where certain preconditions are met and synergies prevail.
PES involves external service beneficiaries making direct, contractual and conditional payments to local landholders in return for adopting land use practices that secure environmental conservation and restoration. Four types of environmental services are currently being traded: carbon, watersheds, biodiversity, and scenic beauty. Ecosystem-based adaptation involves using environmental goods and services for societal adaptation.
For PES to function, certain preconditions must be met: economic (willingness to pay exceeds willingness to accept); informational (manageable transaction costs, well-defined baselines and land use links); institutional (secure land tenure, trust between buyers and sellers); and cultural (social acceptance of service payments). Further, selling environmental services jointly rather than singly could increase financial resources and make conservation a more competitive land use option.
To what extent does PES conserve environmental goods and services that are relevant for adaptation?
- Regulating services (e.g. water purification, disease regulation) are potentially highly relevant to adaptation. The scope for PES to affect these services is high if the link between service and ecosystem management is clear.
- Provisioning services (e.g. food, wood and fibre) are potentially significant for adaptation. The scope for PES to affect these services is high if it promotes productive land use.
- Supporting services (e.g. nutrient cycling, soil formation) have high indirect effects on adaptation by increasing the resilience of ecosystems. There are some synergies between PES and these services, but the synergies are low in scale due to limited willingness to pay for supporting services.
What are the effects of PES on the adaptive capacity of sellers of environmental services? Factors determining such capacity include:
- Economic assets and wealth: PES can typically provide small but positive contributions
- Human capital, access to technology and infrastructure: PES is only relevant if accompanied by training or extension
- Cognitive factors and skills: Most PES schemes raise the environmental awareness and engagement of providers
- Empowerment and local governance: Most user-financed PES schemes have empowered service-providing land stewards, and in various cases have helped in consolidating land rights.
PES can also change institutions in ways that affect society’s adaptive capacity. PES could potentially alter the institutional preconditions for adaptation through:
- Local institutions: These can increase people’s ability to cope with climate change. PES can impact local institutions because it has significant positive effects on the organisation of both service users and providers.
- Intra-sectoral links: These help to ensure adaptation policy coherence. Such links are inherent to most PES schemes.
- Cross-scale links: These help to ensure coherence in adaptation decision-making across scales. It is possible for PES to impact these links in government-financed schemes, but less so in user-financed schemes.
PES has the potential to be a cost-effective and equitable instrument for adaptation. Two commonly discussed alternative approaches are environmental taxation and command and control regulation. However, PES can be more effective and equitable than both, because:
- Taxation requires a strong institutional environment to monitor and enforce compliance and, in developing countries, would require payment from often very poor service providers.
- Regulations involve high administration costs and lack flexibility. In developing countries, regulations are further hampered by weak governance and information problems.
Even though PES offers important features for EBA, it is unrealistic to implement PES in isolation. Some environmental policy instruments already exist; other complementary instruments are needed in some regions or moments in time (such as command-and-control regulation where preconditions for PES are not met). In consequence, the fundamental question may often be how to combine PES with other instruments for effective adaptation outcomes. The practical scope for PES-adaptation synergies includes: (i) natural adaptation co-benefits (where the targeted environmental service serves a dual function); (ii) piggy-backing (where adaptation benefits are coincidental outcomes); (iii) adaptation-relevant institutional and sectoral spillovers from PES schemes; and (iv) direct payments for adaptation benefits.
See also the article’s abstract.
