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