ABSTRACT
This chapter discusses the potential and limitations of Payments for Environmental Services (PES) in a Green Economy. It focuses on whether (and how) PES schemes can mobilize funding from the private sector for biodiversity conservation, and especially with regard to private sector involvement as a service buyer. The chapter reviews different definitions and types of PES as well as their theoretical foundations and what they imply for private sector involvement in PES. It highlights approaches for increasing the environmental effectiveness and cost-efficiency of PES schemes as potentially important steps for attracting private sector demand into PES. Governments can create private demand for ecosystem service (ES) through regulation. Regulating demand for ES through an international cap on carbon emissions as part of a post-Kyoto agreement combined with a provision to allow REDD+ activities could also create a substantial private demand for forest-based carbon credits. Demonstrating cost-effectiveness can help foster private sector investments in biodiversity PES.
