Payments for Environmental services in German Financial Cooperation

This paper from Germany's KfW Bankengruppe looks at how to design and fund financial mechanisms that encourage landowners to manage their resources in a manner that benefits society. The paper reflects on the experiences of KfW in supporting such mechanisms in Latin America, a continent that has been particularly active in developing innovative approaches to conservation. It identifies three major challenges – the institutional requirements of setting up such mechanisms, the sustainability of impacts on the farm level, and the potential to expand environmental impacts by improving cost effectiveness.