Nature with a Price Tag: How Payments for Ecosystem Services Work

“Economists are sounding the alarm […] bee death is wiping out up to 300 billion euro” (Die Welt, 2013). Cries of despair like this, which illustrate the interdependency of humans and nature, are commonplace nowadays. The awareness that pollination by bees and other insects is important not just for agriculture and fruit-growing as economic activities, but also for our food security, has long been part of public debate. Diminishing bee populations threaten the very basis of our existence. And beyond pollination, our dependence on nature extends to other processes and conditions in the natural environment, such as climate regulation, soil regeneration and water purification, but also aesthetic and recreational functions. In recognition of the vital contribution they make to our lives, scientists refer to all of these functions as ecosystem services.

In this line of thinking, nature provides a service that is worth paying for. Economists have therefore sought ways to calculate the financial value of such ecosystem services in order to integrate them into business practice. The idea is that those who own or cultivate land will use natural resources in a more environmentally friendly way if they are properly paid for it. Ordinary citizens are not the only ones to benefit from better environmental quality: state actors and business people also have a lot to gain, since they would otherwise be responsible for dealing with the consequences of environmental pollution.

Here’s an example: Farmers are paid to adapt their farming practices along a river so that fewer nitrates are leached into the water, thus improving the water quality. For water supply companies, paying for this change of habit in advance would seem to make eminent sense, since the filter systems required for subsequent water treatment are many times more expensive.

So the idea of payments for ecosystem services appears to hold the promise of many different benefits, creating new opportunities for environmental protection and nature conservation while also generating new sources of income, or rather a new economic sector where environmental goods are traded on markets.

A world where nature is always at our service? Not surprisingly, this vision faced considerable opposition. As the practice of payments for ecosystem services became more established, critical voices questioned, among other things, the basic idea of putting a value on nature, the methods by which that value was established, the definition of a win-win situation, and the gap between the concept and its implementation. While the different critical positions found their niches in academic discourse, they were hardly reflected at all in political debates.

It was this state of affairs that prompted me to delve more deeply into the issue of payments for ecosystem services and try to understand not only their evolution and theoretical foundations but also how they work in practice.

Unlike studies that are primarily shaped by the economic debate, my focus lay on communication and opportunities for participating in the genesis of payments for ecosystem services. These were the questions I was interested in: Who organises that kind of thing? Who else do they bring on board? How does the development process unfold in each particular case? In my search for answers, I took a close look at 18 different development processes in Germany and the UK.

The study shows that a purely economic view focussed on the (rather crudely put) logic of buyer and seller cannot adequately account for the practice of payments for ecosystem services in all its variations. There are many reasons for this. For one thing, unless they come from well-filled coffers foreseen for the longer term, such payments only partly contribute to the livelihoods of those who provide ecosystem services. Indeed, they are sometimes regarded as “small tokens of appreciation” rather than a significant source of income.

Secondly – and this is even more important – making the valorisation of nature part and parcel of what one does is a learning process. Particularly for farmers, who have contributed to increased yields and food security through greater mechanisation in agriculture, providing ecosystem services is a challenge. Especially if the changes that it entails mark a clear break with the doctrine of yield maximisation. For some farmers, payments for ecosystem services seem at first glance to hark back to the times of their great-grandfathers. Thus, despite the financial incentive, convincing arguments are needed to encourage as many people as possible to provide ecosystem services.

But, of course, not everything is negotiated with everyone and then agreed by mutual consent. In addition to other factors, the precise nature of payment mechanisms depends largely on the interests of those who initiate them. For example, if the development process is guided solely by environmental and nature conservation objectives, both the objectives and the measures to be taken are predefined. This is the case when an environmental organisation wishes to use the payment for ecosystem services mechanism to preserve the habitats of rare animal and plant species in a bog area –increasing the bog’s capacity to store CO2 in the process – through sustainable management practices. In this context, other ideas for dealing with local resources are seen to work against the achievement of the initiator’s objectives. So consultation with other actors is usually only envisaged if the implementation process meets with criticism, or if the organisation has made a point of involving third parties in its operational principles.

If, however, economic motives are a key factor in the initiation of a payment mechanism, because they are compatible with conservation goals, then interactions between the various actors are characterised to a far greater extent by mutual dependencies. In the partnerships that arise in this context, partners are respectful of each other but may not always be willing to abandon their own interests for the sake of others. Wherever one partner is willing to change their own perspective and be convinced by others, there is usually a common imaginary superstructure, i.e. everybody is prepared to pull together to achieve a shared objective.

In conversation with the initiators on how their respective payment mechanism arose, one thing was nearly always highlighted as vital: mutual trust. In this way, established local structures and previous experience of working together have a major influence on the success of the implementation of payments for ecosystem services.

The comparison between development processes in Germany and Great Britain shows that the respective political style determines to a large extent who becomes involved in the development of payment mechanisms and how they do so. Where cooperation between state and non-state actors is concerned, significant differences emerged between the two countries with regard to the local political level. In Germany, civil society is quite keen to involve representatives of this level as partners or at least consult with them to gain further backing for its own plans. In the UK, on the other hand, local government tends not to be consulted at all or is even denied competences in some areas. Unlike in Germany, where local government has long been embedded in a hierarchically structured political system and has its own areas of responsibility, due to many far-reaching reforms, its British counterpart has far less influence on regional development planning, especially in rural areas. It would therefore be a mistake to reduce payments for ecosystem services to a universally valid formula in the international debate. On the whole, that debate should integrate a variety of disciplinary perspectives on payments for ecosystem services in order to reflect the full picture and avoid misinterpreting how they function in practice.

The Book “Zahlungen für Ökosystemdienstleistungen – Zwischen Marktprinzipien und Kommunikation” is published by Springer VS and can be viewed at: https://www.springer.com/us/book/9783658223380.