ABSTRACT
This chapter synthesizes the status of payment for ecosystem services (PES) schemes implemented in developing countries in recent years. It provides an overview on PES schemes for watershed services, biodiversity conservation and forest carbon. It uses a conceptual framework that recognizes the roles of socio-economic, environmental and institutional factors in determining outcomes of PES schemes, in particular PES providers’ participation in the schemes. It also reviews key impacts of PES programs at the participant household level and presents main challenges for PES in the future. It provides the following main lessons learned from PES practiced in developing countries: (1) the transaction costs of PES programs are often high, and this can affect the cost-effectiveness of the programs; (2) local communities’ social capital and their ability to enforce contracts are critical for PES programs to successfully generate ecosystem services (ES), improve social welfare and facilitate equity; (3) the complexity of PES programs with multiple objectives could easily doom the program to failure.
