Payments for environmental services have been popularly used in environmental management and an increasing number of studies assesses their contribution to local livelihoods. This study employs propensity score matching with a dataset of 404 indigenous households in the Central Highlands of Vietnam to evaluate the effect of payments for forest environmental services (PFES) on their livelihoods. Participating in PFES increased households' employment and income from activities related to natural forests. Income from PFES allowed households to enhance productive investment and promote income from cultivation activities. All of this, in turn, increased their annual income, job satisfaction, living expenditures, and reduced the amount of any loan. Additionally, PFES enhanced opportunities to participate in training courses and traditional community activities. This confirms that PFES is not only a good initiative for forest management but also a livelihood policy for communities.

Groundwater is a largely unseen common pool resource. Yet, driven by strong economic incentives, whether or not encouraged by existing policies, and the difficulty to exclude others, groundwater users are competing with each other to extract as much as possible, with devastating consequences for its sustainability. The challenges faced for sustainably managing such common pool resources, on which people have established de facto individual rights, are manifold. However, creating a market for trades of some kind in ecosystem services associated with groundwater could actually enhance the protection of this critical resource on the basis that protection can benefit individual groundwater users economically as well as provide a broader public good. This article uses Elinor Ostrom's design principles as an analytical tool to examine how market-based approaches such as payments for ecosystem services (PES) fit with some of the governance models that could be used to protect and enhance groundwater as a common pool resource. It argues that while there are specific design challenges to be overcome, PES as an institutional tool can align with Ostrom's ideas for the governance of groundwater.

There has been a rapid expansion in the use of payments for environmental services (PES) as a key conservation finance policy. However, there is insufficient understanding of how gender can affect PES implementation and outcomes. We present results from a case study in Viet Nam, where a national PES programme has been in place for a decade. Through panel household survey data, focus groups and interviews, we examined how women have been involved in PES policies, what the impacts have been on decision-making by men and women, participation rates and use of PES income over time, and the potential conservation outcomes. Our research confirms that resource use varies between men and women, and changes in access rights can fall disproportionately on women. Participation in PES has been lower for female-headed households and for women within male-headed households, although gradually more equitable participation has evolved within households. Female-headed households reported expending more yearly effort on PES activities despite protecting less land, and also increased their conservation activities over time as they presumably became more familiar with PES. Use of income from PES also showed differences between male and female-led households, with men more likely to spend funds on non-essential goods. Within households, although men initially decided how to spend PES money, decision-making has become more equitable over time. We conclude with some recommendations on how to increase attention to gender in PES projects and future research to improve outcomes.

Perennial energy crops like switchgrass that are used for biofuel production have the potential to generate various water quality benefits such as reduced nitrogen runoff. Yet the current expected returns to switchgrass are not profitable enough for these crops to be widely adopted by U.S. farmers due to relatively unstable yields, volatile revenues, and high costs of crop establishment. This study uses a dynamic economic model to investigate the uncertainties in the yields and costs of switchgrass production, in comparison with those of corn-soybeans in the Chesapeake Bay Watershed in Pennsylvania. Results indicate that farmers would be willing to convert corn-soybeans to switchgrass land use with the provision of payments for ecosystem services (PES). A targeted PES policy based on the environmental effectiveness of the crop land is found to be slightly more effective in providing nitrogen reductions than a uniform PES policy with cost savings of 8–19%. Moreover, switchgrass has the potential of providing energy supply while reducing greenhouse gases emissions.

Financial incentives may aid in conservation if they broaden the numbers and types of landowners who engage in protection and conservation management on private land. We examined the hypotheses that financial incentives (1) encourage participation of people with lower autonomous motivation towards conservation and lower self-transcendence (i.e. benevolence and universalism) values compared to participants in similar programmes without such incentives; (2) enable more on-ground works and activities; and (3) enhance feelings of competence and autonomy with respect to conservation actions. We surveyed 193 landowners in private land conservation programmes in Tasmania, only some of whom had received financial incentives. All of these landowners had high self-transcendence values, and autonomous motivation towards the environment. Owners of large properties and participants with higher self-enhancement values, lower self-transcendence values and lower autonomous motivation towards the environment were slightly more likely to engage in incentive programmes. However, people who received funding did not report more conservation actions than people in programmes without incentives. Owners of larger properties receiving incentives reported fewer conservation actions. Thus financial incentives probably recruited a few into nature conservation who may not have otherwise engaged, but did not result in a more intensive level of conservation management. Our results caution against the blanket-use of incentives amongst landowners who may already have values and motivations consistent with environmental action, and point to the need for further research on the socio-psychological characteristics of landowners, to examine the contextual factors that influence the effects of conservation payments.

In the context of sustainable development, both developed and developing countries are implementing policies that encourage economic growth, environmental protection and social well-being in resource decisions. According to the 2012 Rio+20 Declaration, market-based instruments that complement regulations can offer an economically efficient push to sustainable growth. Market-based instruments, such as payments for ecosystem services (PES) and other market incentives, may play a crucial role in enhancing the livelihoods and wider well-being of poor people. However, for economic tools such as PES to prove valuable in managing natural resources, the decision-making and implementation processes must integrate adequate rights allocation and participatory mechanisms. This article examines forest ecosystem services in the context of the mangrove reserve forest of the Sundarbans in Bangladesh. It is a UNESCO World Heritage site and one of the largest remaining areas of mangroves in the world with an exceptional level of biodiversity. The article argues for a more realistic and equitable approach to PES projects in Bangladesh. It underscores the need for effective participatory tools, third-party monitoring and multi-service PES schemes to improve multiple mangrove ecosystem services in the Sundarbans.

Deforestation is one of the most important conservation problems in tropical developing countries, even though cost–benefit analyses consistently show that forest conservation is economically beneficial. In Madagascar, deforestation continues at alarming rates despite numerous initiatives of international donors to increase incentives for local households to support forest conservation. In this literature review, we contrast cost–benefit analyses for forest conservation with: (1) the actual burdens and (2) the actual gains of forest conservation for rural households, generated mainly in the context of conservation projects. We show that approaches to generating direct benefits deliver less value than expected for rural communities; the benefit transfer mechanisms are insufficient as the majority of benefits are captured by other stakeholders, and increased benefit transfer is limited by structural and institutional limitations in local communities, valuation chains and in terms of governance failure at higher levels.

A controversial issue in the debate on payments for ecosystem services (PESs) is whether distributional goals should be considered in the design of such schemes. We contribute to this debate by analysing the preferences of citizens of Antananarivo (Madagascar) as potential buyers of forest ecosystem services from a developing country. We conducted a choice experiment to investigate citizens’ willingness to pay to conserve the endemic spiny forests in southwest Madagascar and their preferences for including distributional goals in the design of a PES scheme aimed at spiny forest conservation. We found that respondents were willing to pay for forest conservation and preferred a PES scheme in which the poorest households in a community would receive the largest share of payments over a scheme in which every household would receive the same share, which, in turn, they preferred over a PES scheme in which they would have no information about its distributional impact. In comparing these results with those of a similar survey in a developed country (in Cottbus, Germany), we find that the preference ranking regarding distributional impacts is identical. However, citizens in Cottbus attach greater importance to the consideration of distributive goals in PESs than citizens in Antananarivo.

Forest conservation incentives are a popular approach to combatting tropical deforestation. Here we consider a case where direct economic incentives for forest conservation were offered to newly titled smallholders in a buffer zone of a protected area in the northeastern Ecuadorian Amazon. We used quasi-experimental impact evaluation methods to estimate changes in forest cover for 63 smallholders enrolled in Ecuador's Socio Bosque program compared to similar households that did not enroll. Focus group interviews in 15 communities provided insight into why landowners enrolled in the program and how land use is changing. The conservation incentives program reduced average annual deforestation by 0.4–0.5% between 2011 and 2013 for those enrolled, representing as much as a 70% reduction in deforestation attributable to Socio Bosque. Focus group interviews suggested that some landowners chose to ‘invest’ in conservation because the agricultural capacity of their land was limited and economic incentives provided an alternative livelihood strategy. Interviews, however, indicated limits to increasing enrollment rates under current conditions, due to lack of trust and liquidity constraints. Overall, a hybrid public–private governance approach can lead to larger conservation outcomes than restrictions alone.

While multiple studies have identified land managers’ preferences for agri-environmental schemes (AES), few approaches exist for integrating different understandings of landscape stewardship into the design of these measures. We compared and contrasted rural land managers’ attitudes toward AES and their preferences for AES design beyond 2020 across different understandings of landscape stewardship. Forty semi-structured interviews were conducted with similar proportions of small holders, medium holders and large holders in southwest Devon, UK. Overall, respondents most frequently cited concerns related to the reduced amount of funding available for entry-level and higher-level stewardship schemes in the UK since 2008, changing funding priorities, perceived overstrict compliance and lack of support for farm succession and new entrants into farming. However, there were differences in concerns across understandings of landscape stewardship, with production respondents citing that AES do not encourage food production, whereas environmental and holistic farmers citing that AES do not support the development of a local green food culture and associated social infrastructure. These differences also emerged in preferences for AES design beyond 2020. We adapted a collaborative and coordinated approach for designing AES to account for the differing interests of land managers based on their understanding of landscape stewardship. We discuss the implications of this approach for environmental policy design in the European Union and elsewhere.

Payments for ecosystem services schemes are viewed as having the potential to achieve positive biodiversity and ecosystem service outcomes and social outcomes, and they have been widely studied since their development in the 1990s. We describe the state of payments for ecosystem services in Indonesia, where nine schemes were identified, four involving water and five involving carbon. We also assess the perceptions of stakeholders (donors, government, and non-government agencies) regarding the status of such schemes in Indonesia, and their views on what factors support or constrain their development. The main factors perceived to support payments for ecosystem services schemes were easily identifiable ecosystem services and service users, and the long-term support provided by individuals or institutions that facilitate the schemes, building on existing relationships between communities and these facilitating agencies. Stakeholders identified problems relating to regulation: the lack of regulation specifically in relation to payments for ecosystem services, but also overlap and uncertainties regarding regulations. Other constraining factors identified were the lack of recognition of environmental problems amongst potential buyers, and issues of rights and tenure for local communities. With so few operational programmes to date, covering a relatively small land area, and such constraints to further development, payments for ecosystem services schemes appear to have limited scope to supply ecosystem services successfully and sustainably at scale.

Markets in ecosystem services have the potential to provide financial incentives to protect the environment either in lieu of or in addition to more traditional regulatory programmes. If these markets function properly, they can provide enhanced levels of environmental quality or more efficient mechanisms for protecting natural resources that provide vital services to humans. The theoretical benefits of ecosystem services markets may be undercut, however, if care is not taken in creating the legal infrastructure that supports trading to ensure that trades actually provide the promised environmental benefits. This article identifies five essential pillars of an ecosystem services market regime that are necessary to provide operational accountability safeguards. These include financial safeguards, verifiable performance standards, transparency and public participation standards, regulatory oversight mechanisms, and rule of law safeguards. The article assesses whether the laws of the United States (US) and European Union (EU) are well designed to provide such accountability. It concludes that despite recognition of the risk of market manipulation and outright fraud, regulators in the US and the EU to date have responded to these risks largely in an ad hoc and incomplete fashion, rather than embedding the mechanisms for operational accountability discussed in this article into the regulatory framework that governs ecosystem services trading markets.

A key question in the literature on payments for ecosystem services (PES) is how payments incentivize conservation action and, in particular, how they interact with other motivations, including motivations for environmental stewardship. Related to this question are concerns about the temporal sustainability of PES: what happens when payments cease and whether a ‘no pay, no care’ environmental ethic is fostered. I present empirical research from a case study in western Uganda, where forest-adjacent communities are paid in exchange for planting trees on private lands, for carbon sequestration. The study demonstrates the range of values people have for trees in the landscape and the range of motivations for participating in PES schemes. However, the analysis shows that payments are clearly the main motivation for involvement, except in one area where people are more motivated by aesthetic and existence values for trees. Given the widespread importance of money in motivating involvement, I investigate the profitability of participation over time. This profitability analysis, in combination with qualitative data on perceptions of, and plans for, the future, contributes to understanding the temporal sustainability of PES. I draw on various strands of evidence to argue that the way participants prioritize payments may constitute a threat to the long-term maintenance of PES activities, particularly in situations such as in this case study, in which there is a mismatch between payments and contract length.

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.

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.

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.

The institutional arrangements governing forests will be a critical factor in reducing emissions from deforestation and forest degradation (REDD) as part of the global effort to mitigate climate change. A growing body of empirical research demonstrates how local forest governance can be as, if not more, effective than centralized state-based regimes. Local forest governance can secure improvements in multiple forest outcomes such as biomass and carbon storage and livelihoods contributions for the poor, and it can do so at lower cost than is possible through centralized governance. Many national governments have implicitly recognized these findings in their pursuit of decentralized forest governance and in strengthening local rights and capacities to use and manage forests. However, such reforms are often politically resisted, particularly where the value of forest resources is high and central government bodies are able to capture the majority of benefits. Ongoing negotiations related to the design and delivery of REDD policy and practice must take into account both the importance of local forest governance arrangements and the political–economic barriers to devolving secure rights over forests to local communities. These political dimensions of forest tenure and policy create a paradox for REDD: increasing the value of forest resources through global carbon markets without attending to local governance and rights will create political incentives towards centralized governance, which could lead to greater forest loss and lower forest-related benefits for the poor.