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Policy instruments to ensure the provision of ecosystem services are often categories according to a trilogy that includes “sticks” (i.e. top-down policies, such as laws, regulations, restrictions, etc.), “carrots” (i.e. incentives) and “sermons” (i.e. best practices and guidance). Carrots, and in particular market-based instruments (MBIs) for the promotion and enhancement of ecosystem services have gained momentum in recent times. Among them, Payments for Ecosystem Services (PES) play a central role.
Different PES definitions have been proposed in the last ten to twelve years: an overview of these definitions is available (among others) in Derissen and Latacz-Lohmann (2013) and in Wunder (2015). A largely adopted definition is the one developed by Wunder (2005), according to which a PES is:
- a voluntary transaction where;
- a well-defined ecosystem service (or a land-use likely to secure that service);
- is ‘bought’ by a (minimum of one) ecosystem service buyer;
- from a (minimum of one) ecosystem service provider; if and only if
- the ecosystem service provider secures ecosystem service provision (conditionality).
For example a water supply company (3. the buyer) negotiates and signs a contractual agreement (1. voluntary transaction) with up-stream farmers and forest managers (4. the providers) to pay them for the adoption of appropriate management practices (e.g. shift to organic agriculture, set-aside of river buffers, less intensive harvesting operations, etc.) (5. conditionality) that have positive effects on quality of water (2. well-defined ecosystem service) provided to downstream users.
The number of pure PES, i.e. PES meeting all five requirements included within Wunder’s 2005 definition, implemented is still limited, while quasi-PES (or PES-like), i.e. initiatives lacking one or more of these requirements, are much more common. Quite often, for example, quasi-PES initiatives are developed within an existing normative or policy framework that require their implementation, i.e. the agreement is not fully voluntary. Statistics and data on global markets for ecosystem services, including PES initiatives and other MBIs are developed by several entities, a prominent example being Ecosystem Marketplace. Outlook studies on European markets for ecosystem services have been developed within the framework of Erasmus+ Ecostar Project.