Payment for Environmental Services: The Concept and its Applications

This paper reviews the concept and applications of payment for environmentals services (PES), which is an increasingly popular policy instrument in the developing countries. The PES is a market-based approach to conservation financing based on the twin principles that those who benefit from environmental services should pay for them, and that those who contribute to generating these services should be compensated for providing them. The PES has helped Costa Rica, once known as having one of the world's highest deforestation rates, to achieve negative net deforestation in the early-2000s. The impact of this program can be seen in terms of increased forest cover, improved water quality, more carbon sequestration, conservation of biodiversity and more employment opportunities for workers. In India, examples of PES can be seen only at the local level in the villages of Himachal Pradesh and Sikkim. A review has been given of studies which aimed to determine the willingness to pay of people for particular environmental services. In order to secure active involvement and support from the government for big projects, more research in both natural and social sciences will have to be undertaken on relevant PES models and strengthening of institutions along with organization of capacity building programs.