Payments for Ecosystem Services

What is it?

Payment for Ecosystem Services (PES) programs provide monetary payments to landowners in return for managing their land in a way that protects or enhances the ‘ecosystem services’ that their land provides. These programs are intended to reward landowners who implement environmentally-friendly practices, or incent those who otherwise would not. This in turn provides societal benefits such as clean air and water, flood and drought mitigation, and food security. Payment for Ecosystem Services programs create or access existing markets for ecosystem services. These programs can involve private landowners, businesses, non-for-profit organizations, and/or governments.


It is important to note that there is vast difference between ‘valuing’ ecosystem services and ‘Payment for Ecosystem Services’ programs, with the first being focused on incorporating ecosystem services into economic systems, and the latter being focused on marketing those services and providing direct payments for specific actions.

How can municipalities use it?

Municipalities can use Payment for Ecosystem Services programs to encourage landowners to implement practices that go above and beyond land use regulations to enhance the ecosystem services benefiting the entire municipality. Municipalities can partner with private businesses and non-profits to help fund and/or deliver the programs.

What are the advantages?

The advantages of a Payment for Ecosystem Service programs include:

  • Encourages adoption of environmentally-friendly practices

  • Can improve land management practices in heavily market-driven societies

  • Can help ‘price in economic externalities’, meaning inclusion of actions in market valuations that directly affect the environment, but which might otherwise be ignored (e.g., pollution, habitat loss)

  • Can encourage the development of creative cost-effective solutions

  • Can be more effective than regulations in regulatory-adverse communities

What should you watch out for?

No tool is a silver bullet. An effective Payment for Ecosystem Services program, must address the following:

  • A market requires a seller AND a buyer, so the entity willing to pay must exist, as does a sustainable source of funds

  • Programs require reliable assessments and valuations of both the ecosystem service and the beneficial practice to support determination of payment amounts

  • Payments can only be provided for actions that exceed what is already required in national, provincial, or local legislation or policies

  • Values of ecosystem services must be clearly articulated and defensible

  • Necessary to have a good understanding of the current ecosystem health and land use practices

  • Resources are required for compensation, administration, and monitoring of the program

  • Payment programs can degrade or eliminate a moral sense of duty to protect natural systems

  • Can create an expectation that all ecosystem services are worthy of payment, while only some ecosystem services are suitable for PES programs

  • Monetizing (applying a dollar value) and marketing (actually selling something) can become confused, leading to the belief that a simple economic valuation will lead to a revenue stream

  • Coarse-scale economic assessments can create unrealistic expectations of large-dollar payments

  • Consideration has to be given to circumstances where a payment is given butthe service is not provided

How can it help maintain natural infrastructure?

Payment for Ecosystem Service programs encourage landowners to alter land management practices that can protect or restore natural infrastructure assets, which can improve the functionality, and increase benefits received from the natural infrastructure system.

Resources

Rocky View County, Alberta – Rocky View County partners with ALUS Canada to compensate landowners for projects that improve environmentally sensitive, marginal, or inefficient farmland. Funded projects include restoring wetlands, reforesting, planting windbreaks, installing riparian buffers, creating pollinator habitat


Wheatland County, Alberta – Wheatland County partners with ALUS Canada to compensate land owners for projects that improve the environmental function of marginal farmlands. Projects include riparian protection, reclaiming marginal or saline soils, planting trees, and establishment of pollinator gardens.


ALUS Canada – ALUS is a charitable organization that supports programs to help farmers and ranchers use their land in an alternative way to produce ecosystem services that all Canadians can benefit from.


Natural Infrastructure: Investing in Forested Landscapes for Source Water Protection in the United States – A practical guide, including cases, from the World Resources Institute that lays out the circumstances necessary for a Payment for Ecosystem Services program to work.


Ecosystem Services: A Guide for Decision Makers – A practical manual from the World Resources Institute showing the variety of ways that decision makers can incorporate the ‘ecosystem services’ concept, including payment programs.


TEEB for Local and Regional Policy Makers – The Economics of Ecosystems and Biodiversity (TEEB) initiative works to demystify these interrelationships. In this guide, they explain how ecosystem services apply at the local level, including the role Payment for Ecosystem Programs can play.


Did we miss something?

If you know of a resource that should be on this list - or your municipality has a sample or case that should be here, please let us know!