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REWARDING BENEFITS THROUGH PAYMENTS AND MARKETS<br />
PES schemes face several constraints. They require<br />
significant investments in information and capacity building.<br />
Priorities include mapping the supply and demand<br />
of ecosystem services, understanding current and<br />
expected future use of resources, engaging relevant<br />
stakeholders, supporting certification schemes and<br />
training administrators.<br />
High transaction costs create a barrier to developing<br />
PES and reduce their cost-effectiveness. Depending<br />
on the value of the ecosystems concerned, there may<br />
be a justification for states (or international agencies)<br />
to subsidise start-up or transaction costs to facilitate<br />
progress e.g. by paying for mapping ecosystem services<br />
or for stakeholder participation processes.<br />
PES are not appropriate everywhere. They can be<br />
particularly difficult to implement where resource tenure<br />
or use rights are insufficiently defined or enforced e.g.<br />
in the high seas and some mangroves, coral reefs, flood<br />
plains and forests without clear ownership. Where<br />
institutional capacity and transparency are lacking or<br />
where resource access and ownership are in dispute,<br />
PES ‘buyers’ have little incentive to participate because<br />
they have few guarantees that the activities paid for will<br />
actually be implemented – or even that a legitimate<br />
service provider can be identified.<br />
PES design and implementation can also be compromised<br />
where there is unequal bargaining power between<br />
stakeholders (i.e. imbalance between service<br />
providers and beneficiaries). This can affect who is included<br />
in the scheme, the way the money is shared,<br />
the rate of payment and the conditions set for service<br />
provision and access (see Figure 5.5 below).<br />
In some cases, a PES targeting a single service will not be<br />
sufficient to halt its degradation or loss as the payment will<br />
be less than the opportunity costs of a range of alternative<br />
resource uses. However, PES schemes can be part of a<br />
broader mix of policy instruments that addresses the full<br />
range of ecosystem services from an area.<br />
More generally, the proper sequencing of measures<br />
is important for achieving effective and coherent policies.<br />
Introducing payment schemes without the prior or<br />
simultaneous removal or reform of policies with adverse<br />
consequences on ecosystems and biodiversity will lead<br />
to incoherent and wasteful policy packages. This has<br />
been repeatedly underlined by the Organization for Economic<br />
Development and Co-operation (OECD), in particular<br />
with regard to environmentally harmful subsidies<br />
(see Chapter 6).<br />
The ability to quantify, monetise and communicate<br />
the values of ecosystem services to key stakeholders<br />
– from politicians to industry to local communities<br />
– can help build support (see Box 5.3 above). However,<br />
the lack of a biophysical assessment and economic valuation<br />
of an ecosystem service need not preclude PES<br />
(Wunder 2007). Some of the most valuable services<br />
may be those that are most difficult to measure. In<br />
some cases, precise quantification of the service would<br />
be prohibitive (e.g. for small watershed schemes). In<br />
these cases, arguments based on the precautionary<br />
principle may be enough to justify starting PES, although<br />
economic valuation should be used as and when<br />
new information becomes available to adjust payment<br />
levels, targeting or conditions.<br />
5.1.5 MOVING FORWARD ON PES<br />
DESIGN AND IMPLEMENTATION<br />
Experience to date has underlined the importance of<br />
careful preparation to ensure that PES schemes<br />
are effective and appropriate for local conditions.<br />
Information on the social, economic and ecological<br />
context and the legal and institutional context needs to<br />
be taken into account. Ideally, PES should be targeted,<br />
understandable, fair, cost-effective, accountable, enforceable,<br />
coordinated with other instruments and responsive<br />
to community needs. In practice, the reality can be<br />
very different.<br />
Key steps for PES development include identifying services<br />
and stakeholders, setting the baseline, negotiating<br />
the deal and implementing the scheme (see Figure 5.5)<br />
as well as monitoring and enforcement.<br />
SUPPORTIVE LEGAL AND INSTITUTIONAL<br />
CONTEXT<br />
PES schemes require rules and institutions to function<br />
effectively, including mechanisms to enforce contracts.<br />
<strong>TEEB</strong> FOR NATIONAL AND INTERNATIONAL POLICY MAKERS - CHAPTER 5: PAGE 17