Chapada dos Veadeiros (Goiás, Brazil) 2020, by Helena Leonel Ferreira

Ecosystem Services (ES) are the benefits offered by nature to humans. In economic terms, many of them are presented as externalities, i.e. as effects of an activity that have a positive or negative impact on subjects who have not had a decision-making role with respect to it. While they have a recognised value, also from an economic point of view, many SEs do not have a price system and thus a market that can create strong motivation for their protection and increase in supply. This, in turn, makes it difficult to estimate their economic value.

For this reason, in decision-making processes for the conservation and enhancement of ecosystems, there has been a growing focus on activating a plurality of policies and economic instruments aimed at increasing the supply of ES. Apart from conventional economic instruments, such as incentives and tax breaks, new instruments are emerging, such as Payments for Ecosystem Services (PES). The objective of PES is thus to stimulate the production of ecosystem services, transforming them into genuine products that can be traded on the market.

There are numerous definitions of PES. One of the most widespread is the one developed by Wunder in 2005, and then revised by him in 2015, which defines them as “voluntary agreements conditioned by certain agreed rules between at least one provider (seller of the service) and at least one buyer (beneficiary of the service) with respect to a defined environmental service”.

To be considered as such, a PES must comply with 5 conditions:

  1. the identification of a well-defined SE to be exchanged,
  2. the presence of at least one buyer of the SE,
  3. the presence of at least one seller of the SE
  4. the voluntarity of the SE trading,
  5. the conditionality of payment, whereby the producer is obliged to act promptly to ensure continuity of the SE over time.

However, these five conditions are not always fulfilled, and it is not uncommon for some PES to be implemented within a mandatory framework. In these cases, lacking the requirement of voluntarity, they can be defined as “quasi-PES”. Quasi-PESs constitute the most frequent typology, while pure PES are rather rare.

Thus, PES bring SEs into a market context and constitute an opportunity for remuneration for public and private actors who maintain and/or improve natural ecosystems, allowing them to deliver useful SEs to the community.

To date, PES schemes have been applied to various types of ecosystem services: from carbon fixation, to the regulation and protection of water quality for drinking or irrigation, from the protection of biodiversity, to tourism-recreational activities, to the protection of soil from erosive phenomena. Here are some examples.

Chapada dos Veadeiros (Goiás, Brazil) 2020, by Helena Leonel Ferreira

At the Italian level, a significant but relatively little implemented quasi-PES is that relating to the norms on the pricing of drinking water consumption established by the now ex-Galli Law (L. 36/1994). These regulations aim to compensate the SE offered by the good management of catchment basins. To do so, these regulations envisages that a portion of the tariff paid by drinking water consumers is paid to the local authorities in whose territory the withdrawal occurs. The aim is to provide local authorities with the necessary resources to carry out environmental protection and recovery interventions. In this case, the rules provide that the beneficiary pays directly for the SE consumed.

In this wake, a form of PES has been developed and tested by Etifor in the context of Parco Fiume Brenta. Parco Fiume Brenta is an initiative that has launched a virtuous procedure to safeguard the water resource and ecosystems connected to the middle course of the Brenta river in Veneto. The aim of the project is to set up an environmental fund for mitigation and compensation of the negative impacts caused by the Integrated Water Service (SII). The fund is financed by users through a small portion of the water tariff. The scheme underlying the environmental fund is the one proposed by the Italian legislation (DM 39/2015 and ARERA Resolution 580/2019/R/idr) implementing the European Union’s Water Framework Directive (WFD, 2000/60/EC). Specifically, article 9 establishes the “polluter/user pays” principle, which provides for the compensation of the negative environmental impacts caused by the consumption of water resources by end users and, at the same time, introduces the issue of the internalisation of Environmental and Resource Costs (ERC). Being easily replicable, the PES developed in the middle Brenta area represents a pioneer case for other basins interested in the development of this mechanism.

Another particular form of PES has been developed by Etifor through WOWnature. WOWnature is a platform that allows citizens, companies and associations to become responsible for the forests and woodlands that surround us and provide us the ecosystem services we enjoy every day. Thanks to the WOWnature platform, companies and citizens have the opportunity to support reforestation projects – by adopting a tree – or the protection of existing forests. In this way, companies and citizens can contribute to the enhancement and preservation of the benefits that these ecosystems naturally provide. The aim is to create a relationship of mutual support and active participation between public administrations, companies and citizens in order to take care of an asset of immense value, especially in light of the environmental issues we are experiencing in this era. All of WOWnature’s projects take into account the rules of good forest management, understood as increasing the naturalness and biodiversity of the areas of intervention and ensuring that forests are managed in compliance with the environmental, social and economic standards certified by the Forest Stewardship Council.

The activation of PES mechanisms requires an adequate involvement of all relevant actors and a careful reflection on the five steps mentioned above, both from a technical and a resource governance perspective. Although this is not an entirely new idea in the context of environmental policies, it has experienced and is experiencing a season of great activity, with numerous theoretical-methodological insights and case studies carried out in recent years. For this reason, today there is a growing confidence on such initiatives, which are seen as instruments of great potential for the remuneration of ecosystem services.

Etifor has extensive experience in this sector and supports public and private entities interested in promoting the value of their natural resources through this type of mechanism. Learn more about our GRAN approach to enhance the resources and natural areas of your territory.