Payment for Environmental Services

Payment for Environmental Services (PES), created by Ronald Coase, is a valuation concept scheme that grew out of concern about deforestation and led to wide-scale adoption of the Integrated Conservation and Development Projects (ICDPs). The idea of these was that upfront payments to cease and desist damaging activities would improve forest conservation. PES relies on the concept of two involved parties negotiating an efficient solution to account for externalities when translation costs are negligible. With more polluters and people involved, regulations and fines are created in what are called "command and control tactics." For PES to work, the agreement must be voluntary between a would-be buyer and would-be seller of ecosystem services and there must be a conditionality clause, which says that PES should only be adopted if and only if there is demonstrable improvement in the ecosystem services provided from the situation beforehand.

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