provide economic value. Environmental services that
benefit society include carbon sequestration,
watersheds, maintenance of biodiversity, and
environmental beauty. Payment for environmental
services (PES) is a policy tool that is championed to
provide market incentives for the maintenance of
natural resources by the private sector that provides
environmental services to downstream users.
Payment for Environmental Services is defined as a
voluntary agreement between a buyer and a seller in
which payment is provided depending on the
environmental services provided adequately.
Many advocate the adoption of a Pay-for-
Economy scheme to develop new market-based tools
to combat deforestation and promote forest
conservation in developing countries rather than
alternative policy tools. In the absence of this
Payment for Environmental Services mechanism,
land users will gravitate towards commercial land
uses, often involving deforestation for agricultural
purposes, resulting in the destruction of natural
resources as humans have no way of realizing the
benefits of providing non-marketable services.
Payment for Environmental Services refers to the
principle that with clear property rights and low
transaction costs, bargaining can reach a socially
optimal level (Lee, Andersson & Smith, 2013).
Over the years although interest in Environmental
Services Fees has increased, there has been little
attempt to define the term. In this section, we first
define Environmental Fees and discuss their basic
logic. Fundamentally, Fees for Environmental
Services appear to be used as an umbrella for any type
of market-based mechanism for conservation,
including, for example, mechanisms such as
environmental certification and charging entry fees to
tourists. According to Wunder (2005) in defining
Environmental Service Fees, he explains several
indicators, namely
a. Voluntary transactions
b. A well-defined (or possibly used)
environmental service secures that service)
c. There are service buyers
d. There is a service provider
The basic logic of the Payments for
Environmental Services mechanism explains how
ecosystem managers, whether they are farmers,
loggers, or protected area managers, often receive
little benefit from land uses such as, for example,
forest conservation. These benefits are often less than
the benefits they would receive from alternative land
uses, such as conversion to agriculture or pasture.
However, deforestation can impose costs on
downstream populations, who no longer benefit from
services such as water filtration, and on the global
community, due to biodiversity reduction and carbon
storage (actual impacts will, of course, vary from case
to case).
Payments by service users can help make
conservation a more attractive option for ecosystem
managers, thereby encouraging them to adopt it (or,
in the case of protected area managers, providing
them with the resources to do so). Payment for
Environmental Services thus seeks to internalize what
should be an externality. Consequently, the
Environmental Service Fee program seeks to put into
practice the ultimate solution that the problem of
external effects can, under certain conditions, be
addressed through private negotiations between the
affected parties (Coase, 1960).
It is very important to understand that
Environmental Fees are not intended to be a solution
to any environmental problem. Ecosystems may be
mismanaged for various reasons, not all of which are
suitable for environmental issues and are suitable for
using the Environmental Service Fee as a solution.
Local ecosystem managers may not have the
authority to manage ecosystems, because they do not
belong to anyone or belong to the state (which is the
same number if the state cannot enforce management
rules) and thus tend to ignore even the on-site impacts
of their management decisions. The appropriate
response in this case is to ensure that local ecosystem
managers have appropriate tenure rights.
If ecosystem mismanagement is linked to a lack
of awareness or information about land use practices
that are in the financial interest of private landowners
to adopt, then education and awareness building are
appropriate responses. Similarly, if capital market
imperfections prevent landowners from adapting
personally beneficial technologies or practices that
improve the provision of environmental services, then
providing access to economic benefits is the most
promising approach. The scope of application of
Rewards for Environmental Services is in a series of
problems where ecosystems are mismanaged because
many of the benefits are externalities from the
perspective of ecosystem managers.
If most ecosystem benefits are externalities, other
voluntary approaches are unlikely to yield results.
Giving local managers ownership rights over the
ecosystem may not be enough, as they will only
experience a fraction of the total benefits, and this
may be less than the benefits of alternative land uses.
Likewise, training or awareness-building will not
suffice, for awareness of the benefits to others are
unlikely to outweigh the definite benefits to oneself
for all but the most altruistic actors.