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Payment for Ecosystem Services (PES)
Jeremy Potter
An intro to PES
A market based mechanism to encourage the conservation of natural resourcesAn environmental policy instrument that facilitates the exchange of value for land management practices intended to provide or ensure ecosystem services550 active programs around the globe with an estimated $42 billion in annual transactionsCentral component of China’s nationwide environmental protection strategy“making trees worth more standing than cut down”
Watershed Market
The watershed PES sector is the most mature and largest in terms of transaction valueThere are currently 387 watershed PES programsThreat from poor land management upstream to the water quality and flooding downstream makes it easier to gain support from beneficiaries to providersInstitutions for transactions already existMarket dominated by China
Biodiversity and Habitat Market
Least developed in terms of geographical scope and most challenging for countries to put into placeMore diffused benefits from preserved biodiversity than watershedsNo institutions to collect paymentsThe practice of offsets is controversial in conservation circlesMitigation banks
Forest and Land-Use Carbon Market
A policy instrument to combat climate change, this market receives the most attentionSince 2009, $2.8 billion dollars have been spent on forestry and land use practices that sequester carbonA variety of funding options have emerged throughout the globeVoluntary exchangesInternational treaty mechanismsInternational funding mechanismsState mandates
How are carbon emissions offset by responsible land use?
Reforestation and afforestationImproved forest managementSustainable agricultural land managementReduced 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
Who finances the markets?
User-financed PESUsers of ecosystem services agree to compensate landholders for activities that maintain or enhance the delivery of ecosystem servicesUsers may be individuals, companies, or NGOs that are direct beneficiaries of ecosystem servicesGovernment-financed PESThird parties acting on behalf of users compensate landholdersBuyer is a public entity that does not directly use the ecosystem service
Who finances the market?
Compliance PESParties facing regulatory obligations compensate other parties for activities that maintain or enhance comparable ecosystem servicesIncludes water quality trading, wetlands mitigation banking, and the European Union’s emissions trading scheme for greenhouse gasesDiscussion: 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?
Critiques of PES System
Supply far exceeding demand for voluntary forest carbonLimited impact of compliance carbon marketsConservationists argue that it “greatly” undervalues environmental goodsPES does not capture existence values, option values and other public good benefitsTransfers to much power to corporations and the very richGlobal Enforcement
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?

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