1. Payment for Ecosystem Services (PES)
Jeremy Potter M

2. An intro to PES
A market based mechanism to encourage the conservation of natural resources
An environmental policy instrument that facilitates the exchange of value for land management practices intended to provide or ensure ecosystem services
550 active programs around the globe with an estimated $42 billion in annual transactions
Central component of China’s nationwide environmental protection strategy
“making trees worth more standing than cut down”
1.) similar to taxes or subsidies
2.) Transaction between farmers/ land owners and whoever benefits from the conservation
3.) central

3. Watershed Market
The watershed PES sector is the most mature and largest in terms of transaction value
There are currently 387 watershed PES programs
Threat from poor land management upstream to the water quality and flooding downstream makes it easier to gain support from beneficiaries to providers
Institutions for transactions already exist
Market dominated by China

4. Biodiversity and Habitat Market
Least developed in terms of geographical scope and most challenging for countries to put into place
More diffused benefits from preserved biodiversity than watersheds
No institutions to collect payments
The practice of offsets is controversial in conservation circles
Mitigation banks

5. Forest and Land-Use Carbon Market
A policy instrument to combat climate change, this market receives the most attention
Since 2009, $2.8 billion dollars have been spent on forestry and land use practices that sequester carbon
A variety of funding options have emerged throughout the globe
Voluntary exchanges
International treaty mechanisms
International funding mechanisms
State mandates

6. How are carbon emissions offset by responsible land use?
Reforestation and afforestation
Improved forest management
Sustainable agricultural land management
Reduced emissions from land use and forest degradation (REDD)
California has the most successful program with 65% of carbon offsets coming from forestation and land use

7. Who finances the markets?
User-financed PES
Users of ecosystem services agree to compensate landholders for activities that maintain or enhance the delivery of ecosystem services
Users may be individuals, companies, or NGOs that are direct beneficiaries of ecosystem services
Government-financed PES
Third parties acting on behalf of users compensate landholders
Buyer is a public entity that does not directly use the ecosystem service

8. Who finances the market?
Compliance PES
Parties facing regulatory obligations compensate other parties for activities that maintain or enhance comparable ecosystem services
Includes water quality trading, wetlands mitigation banking, and the European Union’s emissions trading scheme for greenhouse gases
Discussion: Currently there is a greater supply of carbon offsets from forestation than there is demand. Meaning there are not enough buyers. Do you think that demand for environmental quality could ever be high enough that people would pay out of their own pocket to reduce/offset carbon emissions?
-people will eventually care enough to spend money when their families are effected
-free rider problem, are people smart enough?
-hunting licenses are paying out of your own pocket for that good
-rich people could help but they aren’t

9. Critiques of PES System
Supply far exceeding demand for voluntary forest carbon
Limited impact of compliance carbon markets
Conservationists argue that it “greatly” undervalues environmental goods
PES does not capture existence values, option values and other public good benefits
Transfers to much power to corporations and the very rich
Global Enforcement

10. Discussion
Lets say you’re an environmentally friendly US Senator. A freshwater source in your district is being polluted by unsustainable farming practices. You are trying to decide between a policy that would spend 20 million on river cleanup and a policy that would institute a government funded PES market (20 million) that would pay farmers in your district to use sustainable farming techniques. Which policy would you choose?
As a policy maker, would you be concerned about a PES system giving to much control to corporations?
Probably PES system because its more long term
If I was maximizing for voters then I might pick the other one
Don’t like the idea of paying farmers for something they should do anyways, *will they though?
The best solution is probably some collection of both