The Efficiency of Payments for Environmental Services in Tropical Conservation

Payments for environmental services (PES) represent a new, more direct way to promote conserva-
tion. They explicitly recognize the need to address difficult trade-offs by bridging the interests of landowners
and external actors through compensations. Theoretical assessments praise the advantages of PES over indirect
approaches, but in the tropics PES application has remained incipient. Here I aim to demystify PES and clarify
its scope for application as a tool for tropical conservation. I focus on the supply side of PES (i.e., how to convert
PES funding into effective conservation on the ground), which until now has been widely neglected. I reviewed
the PES literature for developing countries and combined these findings with observations from my own field
studies in Latin America and Asia. A PES scheme, simply stated, is a voluntary, conditional agreement between
at least one “seller” and one “buyer” over a well-defined environmental service—or a land use presumed to
produce that service. Major obstacles to effective PES include demand-side limitations and a lack of supply-side
know-how regarding implementation. The design of PES programs can be improved by explicitly outlining
baselines, calculating conservation opportunity costs, customizing payment modalities, and targeting agents
with credible land claims and threats to conservation. Expansion of PES can occur if schemes can demonstrate
clear additionality (i.e., incremental conservation effects vis-` -vis predefined baselines), if PES recipients’ liveli-a
hood dynamics are better understood, and if efficiency goals are balanced with considerations of fairness.
PES are arguably best suited to scenarios of moderate conservation opportunity costs on marginal lands and
in settings with emerging, not-yet realized threats. Actors who represent credible threats to the environment
will more likely receive PES than those already living in harmony with nature. A PES scheme can thus benefit
both buyers and sellers while improving the resource base, but it is unlikely to fully replace other conservation
instruments.