Institutional dimensions of Payments for Ecosystem Services: An analysis of Mexico's carbon forestry programme

This article proposes a multi-dimensional framework for understanding the development and effectiveness of Payments for Ecosystem Services (PES) schemes, framed around the notions of institutional design, performance and inter-play. The framework is applied in the context of Mexico's Programme of Payments for Carbon, Biodiversity and Agro-forestry Services (PSA-CABSA), with an emphasis on its carbon component. The analysis shows that PSA-CABSA was promoted by civil society and its rules have been subject to continuous modifications over time. In the case of the carbon component, changes have been due to an original misunderstanding of how carbon projects should be designed, implemented, and carbon traded in actual markets. From a performance point of view, the paper shows that the programme has been well received by rural communities, and carbon payments have contributed to increase household income and to enhance forest management practices and organisational skills. The paper also highlights sources of institutional interplay with local institutions and international climate policy, and it reveals the importance of capacity and scale issues in securing an effective and fair implementation of PES. The conclusion provides some policy recommendations for the future development of PES initiatives in Mexico and elsewhere. (C) 2008 Elsevier B.V. All rights reserved.