Payments for ecosystem services: Piecing together the puzzle to stop ‘Nature’s Dangerous Decline’

EFIMED's Sven Wunder reflects on the conclusions of the recent IPBES report, and to what extent the economic value of environmental benefits may become one piece in the puzzle towards a transformative global solution.

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Photo: IPBES

The key conclusions of the recent IPBES (Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services) Global Assessment provoked urgent newspaper headlines: “nature’s dangerous decline unprecedented”; “one million species at risk of extinction”; “human society under urgent threat from loss of Earth’s natural life”. This urgency is not only for journalistic effect – the assessment, which is the most comprehensive research of its kind, overwhelmingly reports that the current response to global change is insufficient to protect ecosystems and species. Staggeringly, over one million species were found to be threatened with extinction: this number is higher than at any previous period in human history.

The report highlights increased demand for, and use of, concrete resources that the Earth can provide to human populations. Over one-third of global land resources and 75% of freshwater resources are devoted to agriculture. Agricultural production has increased by 300% in the past 50 years, and raw timber harvest by 45%. Of global marine fish stocks, 33% are harvested at unsustainable levels. These massive-scale changes in resource use result from massive-scale changes in human population and consumption. The number of people on Earth is closing in on eight billion, and the per capita GDP is four times higher than it was in 1970. Both the global population and its demand for products are distributed unevenly across countries and regions. Urban populations have more than doubled since the early nineties, and people are increasingly divided from the environmental impacts of their own consumption.

These global shifts have exacerbated the impacts of resource use, wreaking havoc on ecosystems and leaving the world’s species increasingly vulnerable, especially in the face of climate change. Fundamental changes require transformational solutions, according to the report’s authors. The report defines transformation as a “system-wide reorganisation across technological, economic, and social factors, including paradigms, goals, and values.” In light of the threats and complex resource dynamics unearthed by IPBES’ Global Assessment, this is a tall task.

As more people, with more money, require more products and services, how can the world provide these resources without devastating natural systems? In a summary of the IPBES report designed for policymakers, co-chairs Sandra Díaz, Josef Settele, and Eduardo Brondízio argue that “achieving a sustainable economy involves making fundamental reforms to economic and financial systems”, and offer that one such reform could come in the form of “[governments] promoting diverse instruments such as payments linked to social and environmental metrics”. For decades now, environmental scientists have been looking at how we define resources, with the ecosystem services concept popularised in the early 2000s in the Millennium Ecosystem Assessment (MEA). Rather than seeing the forest only for its commercial values, forest ecosystems services consider the multiple goods and services provided by forests which benefit people: materially, health-wise, emotionally, or socially.

Photo: Pxhere

Many of them – like improvements to air and water quality, cultural and spiritual importance, and even human health and wellbeing – are unlike traditional agricultural or forest products, as they are not sold in the marketplace, but typically consumed free of charge. Since the economic impacts of environmental harm (or conversely, of environmental benefits) are not marketed, they are also often ignored in landowners’ decision-making: these impacts are called “externalities”.

Sven Wunder, Principal Scientist at the European Forest Institute’s Mediterranean Facility (EFIMED), warns that “moving to a ‘full world’ scenario also means multiplying these externalities” and their influence on global ecosystems. The SINCERE project, coordinated by EFI and in which Wunder is a research partner, focuses on developing innovative mechanisms to better take into account such externalities, including novel policies and business models, to enhance forest ecosystem services in ways that benefit forest owners, as well as serving broad societal needs. “Putting a generic value on these services, however, is not enough”, Wunder argues. “For many years now, we have had economic valuation exercises to demonstrate to decision-makers that these services are valuable. But we also need innovative mechanisms so that money actually comes to change hands, providing tangible incentives to landowners to manage their resources in environmentally more benign ways”.

One of these innovative mechanisms, the concept of payments for ecosystem services (PES), lays at least part of the foundation for the kind of large-scale, transformational change invoked by the IPBES report. PES target key services provided by ecosystems that are not currently sold in the marketplace and introduce transactions that provide financial compensation for the supply of these services. For Wunder, this mechanism represents one potential means of addressing the dangers of increasing global demand, pointing out that “payments for ecosystem services have mushroomed in many regions of the world because they are specifically designed to deal with these externalities.” The challenge, however, is to make people pay for global environmental services and assets, such as biodiversity conservation, when instead they may try to free-ride on the payment of others. “For lower-scale services, such as watershed protection, we have seen a much more dynamic expansion in PES: it is usually easier to agree among water users than biodiversity users that everyone benefitting should pay”, concludes Wunder.     

Díaz, Settele, and Brondízio agree, stating in their summary that “the widespread internalisation of environmental impacts, including externalities associated with long-distance trade, is considered both an outcome and a constituent of global and national sustainable economies”. While growing populations and economies result in complicated demands on the Earth’s resources, multifunctional ecosystems can be managed to provide a wide variety of ecological, social and economic benefits. SINCERE works at the juncture of these global changes, pushing a new paradigm that proposes concrete, transformative solutions, which can be pieces in the puzzle of how to better protect the Earth’s resources.