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REWARDING BENEFITS THROUGH PAYMENTS AND MARKETS<br />
national governments, as in Costa Rica, Ecuador, Mexico,<br />
China, EU Member States and the US. Others are<br />
established by water companies or water-user associations,<br />
as in the Catskills where PES is used to meet<br />
federal water quality standards for New York City and<br />
in Bolivia, Ecuador and Mexico. PES can also be purely<br />
private arrangements, whereby companies that rely on<br />
specific ecosystem services pay the relevant providers<br />
(e.g. payments to farmers by Perrier-Vittel in France:<br />
see Box 5.4). NGOs can also play an important role in<br />
PES e.g. by collaborating with the municipal water<br />
company in Quito (Wunder et al. 2009).<br />
PES can be applied at different scales, ranging from<br />
the very local (e.g. 496 hectares in an upper watershed<br />
in northern Ecuador) to much larger scales (e.g. 4.9<br />
million hectares of sloping farmland reforested in China<br />
(Bennett 2008; see also Chapter 9).<br />
5.1.2 PRINCIPLES AND ARCHITECTURE<br />
OF PES<br />
RATIONALE FOR INVESTING IN PES<br />
The overarching principle of PES is to ensure that people<br />
who benefit from a particular ecosystem service compensate<br />
those who provide the service, giving the latter<br />
group an incentive to continue doing so (see Figure 5.1).<br />
As noted, policy makers are not the only ones concerned.<br />
Other beneficiaries of ecosystem services – such<br />
as hydroelectric power companies, irrigation authorities,<br />
water companies or aquaculture operations – may also<br />
be willing to pay to secure services that underpin their<br />
businesses. Private beneficiaries who make PES contracts<br />
with providers can thus internalise (some) environmental<br />
externalities on a purely voluntary basis.<br />
PES are intended to change the economics of ecosystem<br />
management and can support biodiversity-friendly<br />
practices that benefit society as a<br />
whole (see Figure 5.2). In a situation where trade-offs<br />
exist between private and societal benefits from land<br />
uses, PES can tip the balance and render conservationfocused<br />
land uses more privately profitable with benefits<br />
for both the private land user and for society. In the<br />
absence of PES, the landowner would not choose the<br />
social optimum – unless other instruments such as regulation<br />
or incentives are in place (e.g. tax concessions,<br />
see Section 5.4) or social and cultural norms, customs<br />
or considerations lead to a social optimum without the<br />
need for payment. Care is needed to ensure that the instrument<br />
is socially compatible.<br />
Care is also needed in their design as not all PES<br />
protect or conserve biodiversity. A focus on maximising<br />
the provision of just one service may have negative impacts<br />
on the provision of other ecosystem services if<br />
trade-offs are involved e.g. PES that promote exotic<br />
species plantations for rapid carbon sequestration at<br />
the expense of more diverse natural grasslands, which<br />
foster higher biodiversity.<br />
Figure 5.1: Funding the provision of ecosystem services<br />
Source: Patrick ten Brink, own representation<br />
<strong>TEEB</strong> FOR NATIONAL AND INTERNATIONAL POLICY MAKERS - CHAPTER 5: PAGE 7