Nature provides numerous life-supporting services whose true economic value is not always fully recognized. Some think that bringing nature’s services into the mainstream economy—where commodities and services are traded using cash—could help more people appreciate the value of the natural environment and the need to care for it.  

‘Payments for environmental services’ is the practice of compensating individuals or communities in cash or in kind, to encourage them to maintain or adopt practices that favour the environment. The practice started in Europe and North America in the 1980s and, linked to the first United Nations Conference on Environment and Development (the Earth Summit) in Rio de Janeiro in 1992, gained momentum in the early 1990s. In Rio, global thinkers grappled with the question of how to support development without ruining the planet, and payments for nature were seen as an attractive proposition. Scientists, communities and governments have since been experimenting with ways to make this important avenue to environmental care work effectively in different circumstances.

In practice, payments for environmental services can take many forms. For instance, a person who benefits from the shade of a neighbour’s tree could pay them to keep it alive. An industry could offset its carbon footprint by paying a far-flung tree-rich community to preserve these natural carbon sinks.  Or a water company could pay upstream communities to control erosion and pollution so downstream users also get clean water. Various schemes for making payments for environmental services have been attempted, and a large body of literature now exists on these, and the closely related ‘payments for ecosystems services’ concept (a system that considers environmental services, as well as the provisioning roles ecosystems play in agriculture, fisheries and forestry).

A new review by Dr. Meine van Noordwijk, chief science advisor and soil biologist with the World Agroforestry Centre, and co-authors says that in most developing countries, a fresh way of thinking is needed if environmental-services-payments schemes are to succeed and bring benefits to all, including the rural poor. The authors state that economic recognition of environmental services is closely associated with prevalent local socioeconomic and cultural realities. These include, among other factors:

• Property rights, i.e. who owns what and who has the right to sell: Oftentimes property ownership, especially in areas with high environmental-services value, is communal, unclear, or contested;
• Existing laws and how they relate to planned payment schemes: For instance, if it is already illegal to cut down trees in particular localities but law enforcement is weak, should communities there receive payments to preserve this ecosystem?
• Quantifying ‘units’ of environmental services that can be traded uniformly in commodity markets: This is never a straightforward task.

The authors conclude that a system of ‘co-investment in stewardship’ might be a more realistic entry point in developing countries. Under this paradigm governments, communities and businesses work together to care for the services that nature provides, for the benefit of all.  Rather than direct payments to individuals, some kind of collective reward to communities—which may be applied towards social development—becomes the benefit. Later on, commodification of environmental services and full market functionality might evolve, leading to a market-based, negotiated and performance-based payment system; this shift needs strong government participation.

Incentives to maintain environmental services in multifunctional landscapes will continue to be important for the conservation and rehabilitation of a beleaguered nature. However, markets on their own might not provide the simple answer. Clarity of concepts and work on the ground can help support a paradigm shift towards systems that work for communities.

^{More information:}

• ^{This article is based on a presentation made by Meine van Noordwijk and co-authors at the 5th Ecosystem Service Partnership Conference in Portland, Oregon, 31 July–4 August 2012.}
• ^{The full scientific article reviewing ten years of research on PES is published in the Agricultural and Resource Economics Review : Payments for Environmental Services: Evolution Toward Efficient and Fair Incentives for Multifunctional Landscapes.}
• ^{Now in its second phase, a ten-year-long research project called ‘Rewards for, Use of, and Shared Investment in Pro-poor Environmental Services’ is a partnership coordinated by the World Agroforestry Centre that is dedicated to developing practical environmental services schemes that can be adapted to work in different countries with different circumstances. More: http://rupes.worldagroforestry.org/  The PRESA (Pro poor Rewards for Environmental Services in Africa) initiative in Africa is applying a similar paradigm}
• ^{Right investment in environmental services can lead to poverty reduction}
• ^{For trees as carbon sinks, see the African Wood Density Database (http://www.worldagroforestry.org/treesandmarkets/wood/index.php).}