Forests Sourcebook - HCV Resource Network

Figure 2.4
Institutional Elements of a PES Mechanism
Governance structure
Beneficiary
Beneficiary
Beneficiary
Beneficiary
Beneficiary
Beneficiary
Beneficiary
Financing
mechanism
Payment
mechanism
Land user
Land user
Land user
Land user
Land user
Land user
Land user
Environmental services
The main risk is of unintended, perverse consequences,
such as land users clearing forest to qualify for reforestation
payments or moving into previously intact ecosystems to
claim payments for managing them correctly. These problems
can generally be avoided by instituting appropriate eligibility
criteria for participation, setting appropriate conditions
for payments, and instituting effective monitoring
systems (see box 2.14).
LESSONS LEARNED AND RECOMMENDATIONS
FOR PRACTITIONERS
Box 2.14
Contracts under the Regional Silvopastoral Project
specify that land users who switch any of their land
to less environmentally desirable uses (as measured
using the project’s environmental services
index) will not receive payment. Induced perverse
incentives outside project areas may be more subtle.
The Regional Silvopastoral Project had
intended to only pay for improvements over baseline
conditions, but ultimately decided to make
nominal payments for preexisting baseline services
to encourage current nonparticipants to undertake
such improvements even before they were formally
in the PES program.
Source: Pagiola 2006.
Avoiding Perverse Incentives
in PES
PES programs are not a universal answer to all forest conservation
problems. Even when PES approaches are warranted,
the details of their application will differ substantially
from case to case, in light of local technical, economic,
and institutional conditions.
Identifying the services sought is critical, and most
effectively done by focusing on the demand for services
and asking how best to meet it, rather than on the supply.
Beginning from the supply side carries the risk of developing
mechanisms that supply the wrong services, in the
wrong places, or at prices that buyers are unwilling to
pay.
The land uses that can generate the services sought must
then be identified and their impact quantified to the extent
possible.
Monitoring effectiveness is essential to documenting to
buyers that they are getting what they are paying for and to
adjusting the functioning of the mechanism should problems
arise. At the same time, excessively burdensome monitoring
requirements can discourage potential suppliers
without necessarily further reassuring buyers. Finding the
right balance between information and compliance costs is
an ongoing concern, as seen in the case of markets for certified
timber and agricultural products.
PES mechanisms must also be sufficiently flexible to
respond to changing demand and supply conditions and
improvements in knowledge about how forests generate
services.
SELECTED READINGS
Pagiola, S., A. Arcenas, and G. Platais. 2005. “Can Payments
for Environmental Services Help Reduce Poverty? An
Exploration of the Issues and the Evidence to Date from
Latin America.” World Development 33: 237–53.
Pagiola, S., and G. Platais. 2007. Payments for Environmental
Services: From Theory to Practice. Washington, DC: World
Bank.
90 CHAPTER 2: ENGAGING THE PRIVATE SECTOR IN FOREST SECTOR DEVELOPMENT