Payments for ecosystem services

Summary

What are payments for ecosystem services?

Ecosystem services are broadly defined as the benefits provided by ecosystems to households, communities and economies. Often having characteristics typical of ‘public goods’, most ecosystem services have traditionally had little or no commercial value, regarded as essentially ‘free goods’. Lack of market value is viewed by many as a principal driver of ecosystem degradation and destruction.

A range of mechanisms known broadly as ‘payments for ecosystem services’ (PES) attempts to rectify this by providing a framework of incentives covering financing and paying for these services. PES schemes generally involve a financing mechanism, a payment mechanism and an overarching governance structure. Broadly defined, PES systems are diverse, including public and voluntary payment schemes, and offset and cap-and-trade schemes.

Transaction volumes 

Rough estimates suggest that the total volume of transactions in PES schemes worldwide is currently valued in billions of US dollars. Developing rapidly in recent years, estimated growth rates in transactions has typically been double digits.

Relevance to the climate change negotiations

Gaining increasing recognition and developing rapidly across carbon, biodiversity and water markets in the USA and some other economies, PES schemes are also important in international negotiations on climate change. This is particularly true in developing funding mechanisms to reduce tropical deforestation (currently accounting for of the order of one fifth of total global carbon emissions). 

Findings and perceptions from the USA

A research trip to the United States explored experiences and perceptions in the field of PES in order to:

  • Gain a broad understanding of the coverage and workings of PES in the areas of carbon, water and biodiversity in the USA and in California in particular
  • Understand the current role of the Forestry sector in PES and it’s future potential
  • Gauge the performance of PES generally and in particular on cost-effectiveness and environmental standards
  • Ascertain the perceptions of PES as a tool for environmental management
  • Explore the potential for combining PES across the carbon, biodiversity and water markets.

Findings:

  • Report (PDF-1076K)
    Schemes in the United States for water, biodiversity, and carbon, and current developments, highlighting issues relevant to the UK.
  • Policy summary (PDF-910K)
    Collection of policy notes presenting key findings most relevant to the UK.
  • Project summary sheet

Review of approaches to carbon valuation and additionality

A review of approaches to carbon valuation, discounting and risk management, and a review of approaches to carbon additionality have been undertaken to help inform the development of a Code of Good Practice for UK Forestry Carbon projects.

Contact

For further information contact:

Gregory Valatin