Payments for ecosystem services (PES): a flexible, participatory, and integrated approach for improved conservation and equity outcomes

Over the past 20 years, payments for ecosystem services (PES) has become increasingly popular as a mechanism to promote environmentally sustainable land-use practices, and a burgeoning literature has been produced on this policy approach. The goal of this paper is to offer a comprehensive review of this literature, and to focus on four major aspects of PES: (1) its efficiency in delivering environmental conservation, (2) its impacts on the well-being of local land users, (3) its interaction with local norms of distributive justice and environmental stewardship, and (4) its interplay with broader national policies and socio-economic trends. Two major insights are drawn from this review of the literature. First, the conceptualisation of PES according to the neoclassical economic theory of efficient market transactions and utilitarian human behaviour may be unrealistic and counterproductive. In terms of efficient financial transactions, the physical properties of public ecosystem services obstruct the voluntary establishment of PES schemes by direct beneficiaries, practical constraints exist on the enforcement of outcome-based conditionality, and efficiency goals may need to be partly sacrificed to prevent the exacerbation of social inequalities. In terms of human behaviour, land users' actions are shaped not only by personal utility calculations, but also by intrinsic norms of distributive justice and environmental stewardship; the interaction of PES with these intrinsic norms can negatively impact on its local legitimacy and even 'crowd out' existing motivations for the conservation of nature. The second insight is that land users' capacity to shift to sustainable land practices, while influenced by the direct payments, remains strongly determined by broader socio-economic trends and by national strategies for rural development and institutional reform. On the basis of these insights, a flexible, participatory, and integrated conceptualisation of PES that can better account for this range of physical, socio-economic, and normative factors is proposed here as more capable of delivering efficient, equitable, and resilient conservation outcomes.