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Lessons in the design of payments for environmental services: Theory and experience

Authors:
Sven Wunder at European Forest Institute
Sven Wunder
H. Nelson
H. Nelson
H. Nelson
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William Nikolakis at University of British Columbia
William Nikolakis
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Figures

World population growth 1950-2050 (WPP, 2012)
World population growth 1950-2050 (WPP, 2012)
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World population and cumulative deforestation 1800-2010 (FAO, 2012)
World population and cumulative deforestation 1800-2010 (FAO, 2012)
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Pathways for invasive and pathogen species Haack, 2006). This material includes wood used in crating, pallets, spools and dunnage. With the acceleration of post-World War II industrial trade, massive amounts of SWPM have moved around the world. Due to its low cost, low quality wood, including slab wood and other pieces retaining patches of bark, are used as SWPM but such wood often contains particularly large numbers of insects and pathogens. Associated with increasing worldwide movement of SWPM from the 1960s to the present has been a surge of invasions by bark and wood-boring insects (Aukema et al., 2010). Recognizing the dangers of SWPM as a pathway for insect and disease invasions worldwide, the International Plant Protection Convention (IPPC) developed standards regulating the movement of SWPM in trade. This measure, International Standards for Phytosanitary Measures Number 15 (ISPM-15), prescribes heat treatment or fumigation of all SWPM used for export (IPPC, 2011). Recent results indicate that ISPM-15 is helpful in reducing movement of insects and pathogens, but it does not stop it; inspection data shows only a ca. 40 percent decrease in rates of SWPM contamination since implementation of ISPM-15 (Haack et al., in review). While it is disappointing that ISPM-15 has not generated a larger decrease in arrival rates, the reasons for continued contamination of treated SWPM are non-compliance by exporters, infestation of SWPM post-treatment and failure of the treatments to kill 100 percent of all organisms present in SWPM. Revisions to ISPM-15 are being developed to address these issues. Importation of live plants represents the most serious threat to insect and disease invasions worldwide (Liebhold et al., 2012); Figure 4.1 shows that it has historically been the most frequent invasion pathway for insects and pathogens. Live plants are the "perfect" medium for transplanting plant pests since the pests are essentially provided a meal to consume during their trip.
Pathways for invasive and pathogen species Haack, 2006). This material includes wood used in crating, pallets, spools and dunnage. With the acceleration of post-World War II industrial trade, massive amounts of SWPM have moved around the world. Due to its low cost, low quality wood, including slab wood and other pieces retaining patches of bark, are used as SWPM but such wood often contains particularly large numbers of insects and pathogens. Associated with increasing worldwide movement of SWPM from the 1960s to the present has been a surge of invasions by bark and wood-boring insects (Aukema et al., 2010). Recognizing the dangers of SWPM as a pathway for insect and disease invasions worldwide, the International Plant Protection Convention (IPPC) developed standards regulating the movement of SWPM in trade. This measure, International Standards for Phytosanitary Measures Number 15 (ISPM-15), prescribes heat treatment or fumigation of all SWPM used for export (IPPC, 2011). Recent results indicate that ISPM-15 is helpful in reducing movement of insects and pathogens, but it does not stop it; inspection data shows only a ca. 40 percent decrease in rates of SWPM contamination since implementation of ISPM-15 (Haack et al., in review). While it is disappointing that ISPM-15 has not generated a larger decrease in arrival rates, the reasons for continued contamination of treated SWPM are non-compliance by exporters, infestation of SWPM post-treatment and failure of the treatments to kill 100 percent of all organisms present in SWPM. Revisions to ISPM-15 are being developed to address these issues. Importation of live plants represents the most serious threat to insect and disease invasions worldwide (Liebhold et al., 2012); Figure 4.1 shows that it has historically been the most frequent invasion pathway for insects and pathogens. Live plants are the "perfect" medium for transplanting plant pests since the pests are essentially provided a meal to consume during their trip.
… 
Principle picture of diverging material fl ow in lumber grades and by-products from a saw mill operation. Two log batches with different properties are sawn and the lumber distributes over a quality parameter falls out in A) one wide and B) one narrow distribution. The IKEA minimum requirement on that quality parameter is depicted as the dashed vertical line (q). The other vertical solid line depicts the market pays more for a superior quality (p). The window in between the lines is the volume suitable for IKEA furniture
Principle picture of diverging material fl ow in lumber grades and by-products from a saw mill operation. Two log batches with different properties are sawn and the lumber distributes over a quality parameter falls out in A) one wide and B) one narrow distribution. The IKEA minimum requirement on that quality parameter is depicted as the dashed vertical line (q). The other vertical solid line depicts the market pays more for a superior quality (p). The window in between the lines is the volume suitable for IKEA furniture
… 
Global change in statutory forest land tenure, 2002-2013 in percentage most-forested countries (by area), 4 governments retain legal administrative control and ownership over at least 90 percent of their respective forest estates. The Russian Federation alone encompasses nearly 20 percent of the global forest estate and, by law, all of its forests remain "administered by government." The Democratic Republic of the Congo also has 100 percent of its forests under government administration. Indonesia and Canada retain 96 percent and nearly 92 percent of their respective forests under government control. Together, these four countries contain over a third of the world's forests and nearly 57 percent of the area under government administration. This means that the absence of large-scale tenure reforms in these countries presents major impediments to global progress in the recognition of local rights to forest land. Even in the absence of major shifts in four countries with sizable forest areas, the total forest area under the legal ownership or control of Indigenous Peoples and local communities increased from 383 Mha (just over 11 percent of global forest area) in 2002 to over 511 Mha (15.5 percent) in 2013. Over the same period, the proportion of the forests owned by individuals and fi rms increased less than 1 percent. By 2013, 31 countries out of the 40 had some form of recognition of community rights. Of these 31 countries, 27 recorded increases in the forest area under legal community ownership or control. Nine of these countries 5 had not implemented any form of recognition of community rights to forest lands in 2002, meaning that some reforms were implemented for the fi rst time during this period, though these reforms were overwhelmingly in the "designated for Indigenous Peoples and local communities" category. Therefore, most of the communities benefi ting from these reforms in these countries still lacked the full ability to secure their rights.
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Global change in statutory forest land tenure, 2002-2013 in percentage most-forested countries (by area), 4 governments retain legal administrative control and ownership over at least 90 percent of their respective forest estates. The Russian Federation alone encompasses nearly 20 percent of the global forest estate and, by law, all of its forests remain "administered by government." The Democratic Republic of the Congo also has 100 percent of its forests under government administration. Indonesia and Canada retain 96 percent and nearly 92 percent of their respective forests under government control. Together, these four countries contain over a third of the world's forests and nearly 57 percent of the area under government administration. This means that the absence of large-scale tenure reforms in these countries presents major impediments to global progress in the recognition of local rights to forest land. Even in the absence of major shifts in four countries with sizable forest areas, the total forest area under the legal ownership or control of Indigenous Peoples and local communities increased from 383 Mha (just over 11 percent of global forest area) in 2002 to over 511 Mha (15.5 percent) in 2013. Over the same period, the proportion of the forests owned by individuals and fi rms increased less than 1 percent. By 2013, 31 countries out of the 40 had some form of recognition of community rights. Of these 31 countries, 27 recorded increases in the forest area under legal community ownership or control. Nine of these countries 5 had not implemented any form of recognition of community rights to forest lands in 2002, meaning that some reforms were implemented for the fi rst time during this period, though these reforms were overwhelmingly in the "designated for Indigenous Peoples and local communities" category. Therefore, most of the communities benefi ting from these reforms in these countries still lacked the full ability to secure their rights.
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... REDD might usefully focus on secondary and agroforests, but so far most carbon offsets have emphasized standing old growth forests with conservation support, such as Noel Kempff Mercado National Park in Bolivia and the Juma Reserve in Amazonas [53,55,56,57,58]. Brazil's "Bolsa Florestal" program and Ecuador's "Socio-Bosque" program provide a modest subsidy to forest dwellers to conserve forests and alleviate poverty. ...
... Such REDD+ programs have raised many questions about tenurial arrangements (who owns and who has rights to occupy and use the land and other resources), distribution of economic benefits, inclusion, competition among governance strategies and institutions, and compliance and monitoring. All of these questions have significant climate justice implications [58,59,60]. While many actors are trying to build flexibility into the programs, REDD runs the risk of being excessively overarching and falling prey to the vice of becoming a "development fad," abandoned and reviled a few years later. ...
... Global policies may be unable to deal with resistance on the ground; in part, this results from the importance of forest goods in people's livelihoods and to their wellbeing. Article Five of the Paris Accords helped draw global attention to forests, but most of the language revolves around "wildlands," rather than working landscapes, and many complexities remain [58,61,62]. Such working woodland areas are crucial for livelihoods and livelihood supplements in rural and urban economies throughout the world, where an estimated billion people are forest-dependent to some degree [33,63,64,65,66]. ...
Chapter 10. Trees have Already been Invented: Carbon in Woodlands
Article
Full-text available
  • Dec 2016
In the developed world, discussions of climate change mitigation and adaptation tend to focus on technological solutions such as decarbonizing electric grids and regulating emissions of methane, black carbon, and so on. However, an often overlooked strategy for reaching greenhouse gas reduction targets in much of the developing world is rooted, not in new technologies, but in vegetation management. Trees and other vegetation absorb carbon as they grow and release carbon when they are burnt, so landscapes function as carbon sinks and carbon storage sites when forests are growing, on one hand, and as carbon sources when forests are cleared, on the other. Since greenhouse gas emissions from such land use changes rival emissions from the entire transport sector, trees and vegetation are essential to efforts to slow and adapt to climate change. Under the right circumstances, vegetation recovery and its carbon uptake occur quickly. Moreover, carbon uptake can be strongly affected by human management of forests; the right kinds of management can improve rates of recovery and carbon sequestration substantially. This chapter reviews carbon dynamics in mature forests, secondary forests, agroforests and tree landscapes in urban areas to point out the variability of these systems and the potential for enhancing carbon uptake and storage. Furthermore, vegetation systems have many additional benefits in the form of other environmental services, such as improving livelihoods, subsistence insurance habitat, microclimates, and water systems. Finally, by managing forests better, we can also make significant contributions to climate justice because most global forests and forested landscapes are under the stewardship of small holders.
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... The choice of payment by actions or results, together with the optimal level of conditionality and monitoring, will depend on the context: the strength of the connection between actions and results, the ease of monitoring each, and the level of risk aversion of sellers and buyers ( Gibbons et al., 2011). Asset-building PES may therefore require a mixture of results-and actionbased payments over time to cover high initial costs whilst ensuring tree retention ( Wunder et al., 2014). Payments are often frontloaded and gradually decreased once private benefits from planted trees were available to participants, but this is best suited to productive species ( Hegde et al., 2014). ...
Asset-building payments for ecosystem services: Assessing landowner perceptions of reforestation incentives in Lebanon
Article
Full-text available
  • Sep 2017
Aim of study: Incentivising landowners to supply ecosystem services remains challenging, especially when this requires long-term investments such as reforestation. We investigated how landowners perceive, and would respond to, distinct types of incentives for planting diverse native trees on private lands in Lebanon. Our aim was to understand landowners’ attitudes towards hypothetical Payments for Ecosystem Services (PES) contracts options; their likely participation; and the potential additionality they would provide. Area of study: Highland villages situated within eight of Lebanon’s 20 Important Plant Areas Materials and methods: Mixed-methods surveys were conducted with 34 landowners to determine past, present and future land-use strategies. Study participants were presented with three differently structured reforestation contract options (or schemes). The three schemes (results-based loan, action-based grant, and results-based payments) differed in their expected risks and benefits to landowners. Qualitative debriefing questions followed each of the schemes presented. Main results: Although the results-based loan did deter uptake relative to the lower risk action-based grant, results-based payments did not significantly increase uptake or planting area, suggesting asymmetric attitudes to risk. Qualitative probing revealed economic, social (e.g. trust) and institutional factors (e.g. legal implications of planting forest trees on private land) that limited willingness to participate in the results-based contract option. Research highlights: This study demonstrates the importance of combining qualitative and quantitative methods to better understand landowner perceptions of incentives and risks, particularly in challenging socio-political contexts.
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... Although some recent studies have highlighted the importance of specific aspects of PES design and some common design flaws (Hanley and White, 2013;Kinzig et al., 2011;Naeem et al., 2015;Sattler and Matzdorf, 2013;Wunder et al., 2014), there is to my knowledge no systematic review synthesizing the lessons learned on the complete range of PES design features. The purpose of this paper is to provide such a review in a manner accessible to both academics and practitioners. ...
The Devil in the Detail: A Practical Guide on Designing Payments for Environmental Services
Article
  • Jan 2015
Payments for environmental services (PES) have become a popular approach to address environmental degradation. However, evidence on its effectiveness is scarce and rather mixed. PES is not a panacea, but there are many cases where PES can be a promising tool. Yet, poor PES design translates into poor performance of the instrument. PES design is a complex task; the devil is in the detail of a number of PES design features. The purpose of this paper is to provide guidance in dealing with this complexity through a comprehensive review of PES design that is accessible to both academics and practitioners. Practitioner guidelines on deciding whether PES is the best approach and for selecting among alternative design features are presented. PES design has to start from a careful understanding of the specific ecological and socio-economic context. We now know a lot about which design features are best suited to which context. It is time to put these insights into practice.
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... Although some recent studies have highlighted the importance of specific aspects of PES design and some common design flaws (Hanley and White, 2013;Kinzig et al., 2011;Naeem et al., 2015;Sattler and Matzdorf, 2013;Wunder et al., 2014), there is to my knowledge no systematic review synthesizing the lessons learned on the complete range of PES design features. The purpose of this paper is to provide such a review in a manner accessible to both academics and practitioners. ...
The Devil in the Detail: A Practical Guide on Designing Payments for Environmental Services
Article
Full-text available
  • Jul 2016
Payments for environmental services (PES) have become a popular approach to address environmental degradation. However, evidence on its effectiveness is scarce and rather mixed. PES is not a panacea, but there are many cases where PES can be a promising tool. Yet, poor PES design translates into poor performance of the instrument. PES design is a complex task; the devil is in the detail of a number of PES design features. The purpose of this paper is to provide guidance in dealing with this complexity through a comprehensive review of PES design that is accessible to both academics and practitioners. Practitioner guidelines on deciding whether PES is the best approach and for selecting among alternative design features are presented. PES design has to start from a careful understanding of the specific ecological and socio-economic context. We now know a lot about which design features are best suited to which context. It is time to put these insights into practice.
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... In response, we attempt in this section to answer econometrically a more limited sub-question: What key PES design factors may predict whether a PES scheme achieves at least some environmental additionality? An emerging literature on the principles of environmentally effective PES design points to particularly three critical factors of high potential [44][45][46][47][48]: ...
Global Patterns in the Implementation of Payments for Environmental Services
Article
Full-text available
Assessing global tendencies and impacts of conditional payments for environmental services (PES) programs is challenging because of their heterogeneity, and scarcity of comparative studies. This meta-study systematizes 55 PES schemes worldwide in a quantitative database. Using categorical principal component analysis to highlight clustering patterns, we reconfirm frequently hypothesized differences between public and private PES schemes, but also identify diverging patterns between commercial and non-commercial private PES vis-à-vis their service focus, area size, and market orientation. When do these PES schemes likely achieve significant environmental additionality? Using binary logistical regression, we find additionality to be positively influenced by three theoretically recommended PES ‘best design’ features: spatial targeting, payment differentiation, and strong conditionality, alongside some contextual controls (activity paid for and implementation time elapsed). Our results thus stress the preeminence of customized design over operational characteristics when assessing what determines the outcomes of PES implementation.
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... PES initiatives in Latin America have already accumulated considerable experience on the ground (Pagiola, 2008;Kosoy et al., 2008;Corbera et al., 2009;Alix-Garcia et al., 2012;Arriagada et al., 2012;Porras et al., 2013;Costedoat et al., 2015). Much scholarly work on PES has focused on identifying criteria for efficient PES design (Jack et al. 2008;Armsworth Paul et al., 2012;Wunder et al. 2014); case-study literature also increasingly features conditions under which PES schemes may fail to fully achieve their objectives. However, we know surprisingly little about the motivations and contextual constraints Contents lists available at ScienceDirect journal homepage: www.elsevier.com/locate/ecoser ...
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... For example, modelling additional PES transaction cost components, such as contract negotiation and other administrative costs, would further reduce the cost-effectiveness of a C&C with PES policy mix. On the other hand, PES could be modelled as a more cost-effective policy component by accounting for critical design factors, such as (1) Spatial targeting of contracts (excluding areas with low deforestation pressure and environmental service values) or (2) Differentiated payments (according to varying levels of opportunity costs), and (3) equity effects [34][35][36]. Modelling these dimensions of environmental policy instruments at sub-district spatial scales requires more detailed information about the spatial distribution of property rights and welfare levels that is only slowly emerging in our study area [37,38]. On the other hand, having to pay in reality also for some non-additional (i.e. ...
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... For example, modelling additional PES transaction cost components, such as contract negotiation and other administrative costs, would further reduce the cost-effectiveness of a C&C with PES policy mix. On the other hand, PES could be modelled as a more cost-effective policy component by accounting for critical design factors, such as (1) Spatial targeting of contracts (excluding areas with low deforestation pressure and environmental service values) or (2) Differentiated payments (according to varying levels of opportunity costs), and (3) equity effects [34][35][36]. Modelling these dimensions of environmental policy instruments at sub-district spatial scales requires more detailed information about the spatial distribution of property rights and welfare levels that is only slowly emerging in our study area [37,38]. On the other hand, having to pay in reality also for some non-additional (i.e. ...
Mixing Carrots and Sticks to Conserve Forests in the Brazilian Amazon: A Spatial Probabilistic Modeling Approach
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Full-text available
Annual forest loss in the Brazilian Amazon had in 2012 declined to less than 5,000 sqkm, from over 27,000 in 2004. Mounting empirical evidence suggests that changes in Brazilian law enforcement strategy and the related governance system may account for a large share of the overall success in curbing deforestation rates. At the same time, Brazil is experimenting with alternative approaches to compensate farmers for conservation actions through economic incentives, such as payments for environmental services, at various administrative levels. We develop a spatially explicit simulation model for deforestation decisions in response to policy incentives and disincentives. The model builds on elements of optimal enforcement theory and introduces the notion of imperfect payment contract enforcement in the context of avoided deforestation. We implement the simulations using official deforestation statistics and data collected from field-based forest law enforcement operations in the Amazon region. We show that a large-scale integration of payments with the existing regulatory enforcement strategy involves a tradeoff between the cost-effectiveness of forest conservation and landholder incomes. Introducing payments as a complementary policy measure increases policy implementation cost, reduces income losses for those hit hardest by law enforcement, and can provide additional income to some land users. The magnitude of the tradeoff varies in space, depending on deforestation patterns, conservation opportunity and enforcement costs. Enforcement effectiveness becomes a key determinant of efficiency in the overall policy mix.
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Payment for Environmental Services for Waste Pickers: Systematic Literature Mapping
Article
Full-text available
  • Nov 2021
In Payment for Environmental Services (PES) systems, environmental service providers receive compensation for a conservationist action that implies the preservation of natural resources. The objective of this systematic mapping was to identify and discuss scientific articles that address the theme 'Payment for Environmental Services - PES for Waste Pickers Organizations', to understand the state of art of hiring these workers as environmental service providers. The study was developed using the method of systematic mapping of literature, from 2009 to 2019, considering qualitative and quantitative aspects. Results indicated that the countries that most investigate this theme are Brazil, China, India, and Indonesia. The articles portray the informal work of waste pickers, working conditions and the transition from informal systems to waste management in public services. The relationship between payment for environmental services and the work of waste pickers is not yet evident. Furthermore, research on PES and recycling are developed along distinct lines, without interdisciplinarity. However, PES shows itself as an important socio-environmental management tool that has the potential to solve relevant problems of recyclable waste management, because it presents congruent characteristics with the public procurement systems for waste pickers.
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Compensation for Environmental Services and Rural Communities: Lessons from the Americas
Chapter
  • Mar 2007
Introduction The degradation of the world's ecosystems is undermining their capacity to provide environmental services that are vital to humankind. This has fuelled experimentation with compensation schemes that reward people for managing ecosystems to provide environmental services, based on the premise that positive incentives can lead to changes in land-use practices. In the Americas, such experiments have concentrated on watershed management for hydrological services and on conservation of biodiversity and scenic beauty. If and when international negotiations yield a suitable framework for climate change mitigation, carbon dioxide sequestration could be added to the mix. The prevailing approach to compensation has focused on payments, rather than other possible rewards such as greater provision of local public goods or enhanced social status. In many cases, payment for environmental services (PES) schemes have been characterized by designs that seek the lowest cost possible for achieving environmental goals; concentrate on single environmental services (such as carbon sequestration), sometimes at the expense of other ecosystem services; and accord priority to simplified, largescale ecosystems, preferably controlled by a few people, so as to reduce transaction costs. This approach can have adverse — even devastating — impacts on poor and marginalized rural communities. At the same time, it misses opportunities for tapping into the crucial roles that these communities often play in ecosystem stewardship and the provision of environmental services. When poor communities hold secure rights over lands that provide environmental services, they are most likely to benefit from compensation schemes, and the goals of environmental protection and poverty reduction are mutually supporting. More often, however, community rights to natural resources are limited and insecure. © 2007 James K. Boyce, Sunita Narain, and Elizabeth A. Stanton editorial matter and selection and individual contributors.
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Global Capitalism: Its Fall and Rise in the Twentieth Century, and Its Stumbles in the Twenty-First (revised updated edition)
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  • Nov 2020
This is a published book readily available from booksellers, including in electronic formats. Please do not ask me for a free copy. Jeff Frieden
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The Market Makers: How Retailers are Reshaping the Global Economy
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  • Feb 2011
This book describes and analyzes the transformation that occurred in retailing in the last half of the twentieth century and demonstrates that this transformation has substantially changed the global economy. This transformation is both obvious and largely unrecognized. It is obvious, because the transformation is a part of our everyday lives. In the United States, in 1954, there were only 500 shopping centers across the country, most of which were by today's standard very small. At the beginning of the twenty-first century, the shopping centers in the USA alone number over 50,000, many of which are gargantuan. This same expansion is happening throughout the world. In fact, the largest shopping centers are no longer in the USA, but are scattered around the globe. Many of the newest and largest of them are now in Asia. As pervasive and obvious as these changes are, there has been surprisingly little research on the global effects of retailing. This book is among the first books to address this important topic in a systematic and highly readable manner. The authors demonstrate that retailers and merchandisers increasingly organize the global economy by developing two types of markets, consumer markets and supplier markets. Using point-of-sales information, retailers anticipate and try to create consumer markets for the goods they sell. Based on this information, retailers also create and maintain supplier markets for the goods that they buy from manufacturers and that they in turn sell to consumers. Retailers attempt to "make" both types of markets, by setting prices and the terms and conditions of exchange. The extraordinary success that retailers and merchandisers have enjoyed in making both types of markets has had far-reaching consequences on how all national economies perform in an age of global retailing.
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