The role of measurement problems and monitoring in PES schemes

Abstract

Payment for environmental services (PES) is seen as a mechanism that can achieve two goals, providing poor resource managers with an additional source of income and maintaining environmental services. Although some reservations have been made on the effectiveness of PES of reaching the poor, similar reservations can be made about achieving the second goal. Because many environmental services are intangible, developing simple and straightforward indicators to measure and monitor the environmental service provided and linking these to the efforts supplied by the resource managers is difficult and costly. But establishing this link is crucial to those who are paying and ultimately for the success of the PES concept. By reviewing the literature on this topic and analysing in a systematic way what types of measurement problems there are, we will show that the type of monitoring that is required within a PES has consequences for the institutional arrangement needed for a successful PES. We find that the institutional arrangements for monitoring vary according to (i) the type of environmental service and its underlying production process; (ii) the extent to which the environmental service can be freely observed or measured; (iii) the extent to which activities of the resource managers who provide the environmental service can be freely observed; and finally (iv) the deterministic or stochastic nature of production processes