ID 62795
Submitting Entity ETH Zurich
Main Information
Title Designing payments for environmental services in theory and practice: An overview of the issues.
Description Payments for environmental services (PES) have attracted increasing interest as amechanism 
to translate external, non-market values of the environment into real financial incentives for 
local actors to provide environmental services (ES). In this introductory paper, we set the stage 
for the rest of this Special Issue of Ecological Economics by reviewing the main issues arising in 
PES design and implementation and discussing these in the light of environmental economics. 
We start with a discussion of PES definition and scope. We proceed to review some of the 
principal dimensions and design characteristics of PES programs and then analyze how PES 
compares to alternative policy instruments. Finally, we examine in detail two important 
aspects of PES programs: their effectiveness and their distributional implications. 
PES is not a silver bullet that can be used to address any environmental problem, but a tool 
tailored to address a specific set of problems: those in which ecosystems are mismanaged 
because many of their benefits are externalities from the perspective of ecosystem 
managers. PES is based on the beneficiary-pays rather than the polluter-pays principle, 
and as such is attractive in settings where ES providers are poor, marginalized landholders 
or powerful groups of actors. An important distinction within PES is between user-financed 
PES in which the buyers are the users of the ES, and government-financed PES in which the 
buyers are others (typically the government) acting on behalf of ES users. In practice, PES 
programs differ in the type and scale of ES demand, the payment source, the type of activity 
paid for, the performance measure used, as well as the payment mode and amount. The 
effectiveness and efficiency of PES depends crucially on program design.
Additional Information
Authors Engel, S., S. Pagiola, S., S.Wunder, S.
Source Ecological Economics, 65(4), 663-674.
Ecosystems Agricultural Biodiversity
Biodiversity for Development
Dry and Sub-Humid Lands Biodiversity
Forest Biodiversity
Inland Waters Biodiversity
Island Biodiversity
Marine and Coastal Biodiversity
Mountain Biodiversity
Polar Biodiversity
Regions Global
Incentive Measures Positive Incentives (subsidies, tax breaks, ...)
Keywords Agri-environmental payments
Compensation for loss of use
Conservation payments
Support payment
  • United Nations
  • United Nations Environment Programme