There is a great deal of discussion in conservation about the possibility of quantifying and paying for the services to societies that nature performs. Functions such as carbon sequestration and water provision can be valued and payments made for them. Advocates argue that payments for ecological/environmental services (PES) will generate substantial sums, render environmental values legible to politicians and make protecting nature common sense to rational people.

The concept of ecosystem services (ES), the benefits humans derive from ecosystems, is increasingly applied to environmental conservation, human well-being and poverty alleviation, and to inform the development of interventions. Payments for ecosystem services (PES) implicitly recognize the unequal distribution of the costs and benefits of maintaining ES, through monetary compensation from ‘winners’ to ‘losers’. Some research into PES has examined how such schemes affect poverty, while other literature addresses trade-offs between different ES. However, much evolving ES literature adopts an aggregated perspective of humans and their well-being, which can disregard critical issues for poverty alleviation. This paper identifies four issues with examples from coastal ES in developing countries. First, different groups derive well-being benefits from different ES, creating winners and losers as ES, change. Second, dynamic mechanisms of access determine who can benefit. Third, individuals' contexts and needs determine how ES contribute to well-being. Fourth, aggregated analyses may neglect crucial poverty alleviation mechanisms such as cash-based livelihoods. To inform the development of ES interventions that contribute to poverty alleviation, disaggregated analysis is needed that focuses on who derives which benefits from ecosystems, and how such benefits contribute to the well-being of the poor. These issues present challenges in data availability and selection of how and at which scales to disaggregate. Disaggregation can be applied spatially, but should also include social groupings, such as gender, age and ethnicity, and is most important where inequality is greatest. Existing tools, such as stakeholder analysis and equity weights, can improve the relevance of ES research to poverty alleviation.

Payments for ecosystem services (PES) are a relatively new economic policy instrument, and the factors that drive and explain their environmental performance are poorly understood. Here a meta-analysis of causal relationships between the institutional design and environmental performance of 47 payments for watershed services (PWS) schemes worldwide showed a significant effect on environmental achievement of the terms and conditions of scheme participation, including the selection of service providers, community participation, the existence and monitoring of quantifiable objectives, and the number of intermediaries between service providers and buyers. Direct payments by downstream hydropower companies to upstream land owners for reduced sediment loads were identified as a successful PWS example. No other significant explanatory factors, such as specific type of watershed service, age or scale of implementation of the PWS scheme were detected. The results are highly dependent on the reliability of the input variables, in particular the measurement of the environmental performance variable. Despite efforts to find quantitative information on the environmental performance of existing PWS schemes, such empirical evidence is lacking in many of the schemes studied. International monitoring guidelines are needed to facilitate comparisons, identify success factors and support the future design of cost-effective PWS schemes.

Ecosystem services programmes have been advocated for their potential to join conservation and poverty alleviation efforts, integrate working landscapes, and provide a flow of ecosystem services upon which populations rely. Ecuadorian páramo grasslands have rapidly become the focus of compensation for ecosystem services (CES) programmes intended to conserve hydrologic services, carbon sequestration and biodiversity. This paper reviews CES programmes in Ecuadorian páramos using a combination of semi-structured interviews with project personnel, policy makers and community leaders involved in CES programme development, document analysis, and archival research. Findings indicate that, in some cases, CES schemes can support local development, with potential to contribute to poverty alleviation; however, measures of programme effects on poverty were lacking. The programmes fell across the spectrum of activity-reducing to activity-enhancing, with some functioning as protected areas and others integrating working landscapes; however, designation of land as protected did not necessarily imply more restrictive use. Finally, these cases all reflect scenarios in which limited information is available linking land use with ecosystem services production and underscore the idea that adequate understanding of ecosystem production functions continues to be a barrier to development of effective programmes, particularly where the provision of multiple ecosystem services is anticipated.

Payments for environmental services (PES) have been recognized as a promising mechanism for conservation, with the potential to contribute to social objectives such as poverty reduction. This paper outlines a simple framework for assessing the potential for synergies in the implementation of PES programmes, used to analyse the new watershed conservation funding (WCF) channelled through Costa Rica's national PES programme, Pago por Servicios Ambientales (PSA). The WCF financing can only be used in a limited number of watersheds. Given this constraint, the paper examines the mechanisms by which the WCF may potentially contribute to biodiversity conservation and to reducing social development gaps. Although there is significant spatial correlation among the priority areas targeted for the objectives of watershed conservation, biodiversity conservation and social development, the availability of the WCF per unit of land in most watersheds is limited compared to the PSA programme's prevailing payment rate of US$ 64 ha−1, potentially hindering the impact of the WCF on conservation and social development. The analysis helps guide the allocation of the PSA budget in a way that complements the WCF and improves the cost-effectiveness of the PSA budget.

Internationally, there is political impetus towards providing incentive mechanisms, such as payments for ecosystem services (PES), that motivate land users to conserve that which benefits wider society by creating an exchange value for conservation services. PES may incorporate a number of conservation goals other than just maximizing the area under a certain land use, so as to optimize multiple benefits from environmental conservation. Environmental additionality (conservation services generated relative to no intervention) and social equity aspects (here an equitable distribution of conservation funds) of PES depend on the conservation goals underlying the cost-effective targeting of conservation payments, which remains to be adequately explored in the PES literature. This paper attempts to evaluate whether multiple conservation goals can be optimized, in addition to social equity, when paying for the on-farm conservation of neglected crop varieties (landraces), so as to generate agrobiodiversity conservation services. Case studies based on a conservation auction in the Bolivian and Peruvian Andes (through which community-based groups identified the conservation area and the number of farmers taking part in conservation, as well as the payment required), identified significant cost-effectiveness tradeoffs between alternative agrobiodiversity conservation goals. There appears to be a non-complementary relationship between maximizing conservation area under specific landraces (a proxy for genetic diversity maintenance) and the number of farmers conserving such landraces (a proxy for agricultural knowledge and cultural traditions maintenance). Neither of the two are closely connected with maximizing the number of targeted farming communities (a proxy for informal seed exchange networks and hence geneflow maintenance). Optimizing cost-effectiveness with regard to conservation area or number of farmers would also be associated with a highly unequal distribution of payments. Multi-criteria targeting approaches can reach compromise solutions, but frameworks for these are still to be established and scientifically informed about the underlying link between alternative conservation goals and conservation service provision.

Over the last decade, hundreds of payments for ecosystem services (PES) programmes have been initiated around the world, but evidence of their environmental benefits remains limited. In this study, two PES programmes operating in the municipality of Coatepec (Mexico) were evaluated to assess their effectiveness in protecting the region's endangered upland forests. Landsat satellite data were analysed to assess changes in forest cover before and after programme implementation using a difference-in-differences estimator. Additionally, surveys and interviews were conducted with local residents and a subset of PES programme participants to evaluate the programmes’ social and environmental impacts, particularly the effect of the programmes on landowner behaviour. The remote-sensing data show that deforestation was substantially lower on properties receiving PES payments compared to properties not enrolled in the programmes, but the programmes did not prevent the net loss of forests within Coatepec. Moreover, the on-site interviews suggest that the payments may have had little impact on deforestation rates, and that other factors contributed to the conservation of forests in PES properties. These findings suggest that risk-targeted payments, robust monitoring and enforcement programmes, and additional conservation initiatives should be included in all PES schemes to ensure environmental effectiveness.

Market-based strategies are promoted as neoliberal governance solutions to environmental problems, from local to global scales. Tradable mitigation schemes are proliferating. These include species banking, which enables payments for the purchase of species credits awarded to conserved areas to offset development impacts on protected species elsewhere. An analysis of species banks in the USA through a survey of data from the website www.SpeciesBanking.com (established as a ‘clearing house’ for species banking information) was complemented by questionnaire material from USA bank managers. The number of USA species banks has increased rapidly, bank area ownership and management is consolidated in a small number of organizations, and public information on species credit price is limited. In interrogating the case material, the roles of specific economic policies associated with neoliberalism are considered, focusing on the extension of privatization, de- and re-regulation and marketization into the arena of environmental conservation, and commodification processes as manifested in species banking. Problematic ecological and distributive ‘concealments’ in species banking include the ‘development-led’ nature of conservation banking, tendencies towards net biodiversity loss, and an emphasis on supporting conservation-related wealth accumulation by larger landowners and investors.

Payments for ecosystem services (PES) programmes are widely recognized as novel and innovative mechanisms that seek to promote the conservation of biodiversity while simultaneously improving human livelihoods. A number of national-level PES programmes have made significant contributions to advancing knowledge of these mechanisms. Namibia's community-based natural resources management (CBNRM) programme effectively operates as one such large-scale PES programme, making it one of the world's longest-standing schemes. In this review, Namibia's CBNRM scheme is compared and contrasted with the formal definition of a PES programme, some of the outcomes that the programme has produced illustrated by examples, and the challenges that must still be faced identified. Most of the requirements for a PES programme are present in Namibia's CBNRM programme, and when it does not meet these criteria, it is not exceptional. Notwithstanding the increases in wildlife populations and financial benefits that have been associated with the programme, a major challenge going forward revolves around diversifying the number of services produced. Namibia's CBNRM programme has much to contribute to the design of large-scale PES schemes.

Agricultural crops and pasturelands cover 24–38% of the global land area, and thus the ecological services that agricultural systems provide are of utmost societal importance. An important determinant of ecosystem services provision from European farmland is the amount and spatial arrangement of trees, shrubs and woodlands that are integrated into the respective land-use systems. This paper uses an institutional economics framework for the analysis of payment schemes for ecosystem services (PES schemes) that enhance the establishment, conservation and management of farm trees and woodlands, elaborating on the reasons for the often very reluctant participation of farmers in these schemes. PES schemes in Saxony (Germany) were selected as a typical example. Obstacles identified included high production costs and opportunity costs for land use, contractual uncertainties, land-tenure implications and heterogeneous societal preferences for ecosystem services of farm trees. Further, since scheme adoption has been relatively low compared with the total area covered by the respective farm tree types in Saxony, the PES schemes alone could not explain the substantial increase in number and size of some farm-tree types, in particular hedgerows. Regionalized premiums, result-oriented remuneration and cooperative approaches are options to improve participation in PES schemes for farm trees. The example of PES schemes for farm trees highlights one of the major challenges for the protection and preservation of cultural landscapes: they are man-made and thus need to be preserved, managed and maintained continuously.

The current rapid decline in biodiversity in human-dominated agricultural landscapes, both in Europe and worldwide, impacts on the provision of environmental services essential to human well-being. There is, therefore, a pressing need to develop and implement incentive-based conservation policies to counteract the ongoing loss of biodiversity. This paper presents results of a regionally-scaled conservation procurement auction, a type of incentive-based payments for environmental services (PES), targeted at the conservation of arable plant diversity. By matching arable fields that were participating in the PES scheme to control fields that were not enrolled in the PES scheme, two critical key characteristics were addressed, namely additionality and bid prices. Additionality was addressed by evaluating whether fields for which PES were issued had significantly higher arable plant diversity than the matched control fields. The cost-effectiveness of a conservation auction increases if payments compensate just farmers’ opportunity costs (in terms of forgone production); bid prices of participating farmers were thus also evaluated to determine whether they were related to their individual opportunity costs. The PES scheme proved to be highly effective in ensuring environmental services delivery through enhanced arable plant diversity on participating fields. In contrast, the potential of the proposed conservation auction design to raise cost-effectiveness has to be questioned, because bid prices submitted in this scheme substantially exceeded individual farmers’ opportunity costs. Therefore, bid prices were most likely influenced by socioeconomic factors other than opportunity costs. This case study illustrates potentials and pitfalls associated with the implementation of a PES scheme and, by evaluating the effectiveness of the scheme, contributes to an improved understanding of incentive-based mechanisms for both policymakers and practitioners involved in PES scheme design and implementation.

The operation and longevity of hydropower dams are often negatively impacted by sedimentation. Forest conservation can reduce soil erosion, and therefore efforts to maintain upstream forest cover within a watershed contribute to the economic life span of a hydropower facility. The cost of forest conservation can be viewed as an investment in hydropower and be financed via a payment for ecosystem services (PES) scheme. A novel modelling framework is used to estimate payments for forest conservation consisting of: (1) land-use change projection; (2) watershed erosion modelling; (3) reservoir sedimentation estimation; (4) power generation loss calculation; and (5) PES scheme design. The framework was applied to a proposed dam in Cambodia (Pursat 1). The estimated net present value of forest conservation was US$ 4.7 million when using average annual climate values over 100 years, or US$ 6.4 million when considering droughts every eight years. This can be remunerated with annual payments of US$ 4.26 ha−1 or US$ 5.78 ha−1, respectively, covering forest protection costs estimated at US$ 0.9 ha−1 yr−1. The application of this type of PES represents a rational option that allows for conservation and development of hydropower watersheds susceptible to erosion and sedimentation.

Mangroves are an imperilled biome whose protection and restoration through payments for ecosystem services (PES) can contribute to improved livelihoods, climate mitigation and adaptation. Interviews with resource users in three Solomon Islands villages suggest a strong reliance upon mangrove goods for subsistence and cash, particularly for firewood, food and building materials. Village-derived economic data indicates a minimum annual subsistence value from mangroves of US$ 345–1501 per household. Fish and nursery habitat and storm protection were widely recognized and highly valued mangrove ecosystem services. All villagers agreed that mangroves were under threat, with firewood overharvesting considered the primary cause. Multivariate analyses revealed village affiliation and religious denomination as the most important factors determining the use and importance of mangrove goods. These factors, together with gender, affected users’ awareness of ecosystem services. The importance placed on mangrove services did not differ significantly by village, religious denomination, gender, age, income, education or occupation. Mangrove ecosystem surveys are useful as tools for raising community awareness and input prior to design of PES systems. Land tenure and marine property rights, and how this complexity may both complicate and facilitate potential carbon credit programmes in the Pacific, are discussed.