Redefining payments for environmental services

The Environmental Economics and the Ecological Economics perspectives on payments for environmental services (PES) propose rather different views on how to define PES, its key elements, and on the role of PES in ecosystem conservation and rural development. This paper compares these two perspectives and addresses the following questions: what is an appropriate definition of PES, grounded in the theory and practice underlying it? What are the key design elements of PES? What should the scope of PES be given the possible trade-offs between efficiency and equity? It is found that PES schemes should focus on cost-effectiveness and best practice for positive livelihood impacts. PES schemes should be transparent, and provide additional services with conditional payments to voluntary providers.

►The environmental economics and the ecological economics perspectives on PES are compared. ►Few true Coasian PES schemes will emerge and might not lead to efficient outcomes. ►PES schemes should focus on cost-effectiveness and best practice for positive livelihood impacts. ►PES should be transparent, provide additional services with conditional payments to voluntary providers.