Payments for environmental services (PES) schemes have been implemented in several developed and developing countries. Bilateral and international donor organizations are interested in them because of their perceived potential to change environmentally harmful behaviour and for the benefits they may bring to rural livelihoods in developing countries
Three perspectives on PES – which have been defined as the Coasian, the Ecological Economics, and ‘against PES’ – have emerged. They propose rather different views on how to define PES and its key elements, as well as on the role of PES in ecosystem conservation and rural development. This paper compares the first two perspectives – and comments on that against PES – and addresses the following questions: what is an appropriate definition of PES, grounded in the theory and practice underlying it? What are the key design elements of PES? What should the scope of PES be given the possible trade-offs between efficiency and equity? It is found that PES schemes should focus on cost-effectiveness and best practice for positive livelihood impacts. PES schemes should be transparent, and provide additional services with conditional payments to voluntary providers.