An analytical framework for assessing the potential of intermediaries to improve the performance of payments for ecosystem services

The use of payments for ecosystem services (PES) to steer land use practices has increased considerably at an international level over past years. An efficient and effective PES implementation strategy often relies on active support from intermediaries. This paper provides an analytical framework for assessing the potential of intermediaries to improve the environmental effectiveness and cost-effectiveness of PES. Cost-effectiveness refers to transaction costs, whereas environmental effectiveness refers to ecological benefits provided. The framework assists in assessing how and for what activities of PES implementation intermediaries can improve performance based on the intermediaries' institutional design. The analytical framework is based on institutional economics and applies mainly the theoretical underpinnings of transaction cost economics (TCE). This paper illustrates an example of the practical application of the framework by assessing the potential of German Landcare Associations (LCAs) to improve the performance of public PES programs. It is emphasized how key institutional design characteristics of LCAs can potentially influence (1) public and (2) private transaction costs as well as (3) participation in and (4) spatial targeting of governmental agri-environmental programs and schemes in Germany. The analytical framework is, however, not restricted to assessing the potential of intermediaries in the large public PES programs of industrialized countries. This paper discusses how the framework can be transferred to smaller private or larger supra-national PES programs and to the contexts of developing countries.