When are payments for environmental services beneficial to the poor?

Payment for environmental services (PES) can encourage agricultural producers to reduce negative environmental impacts or produce positive outcomes. The impact of payment for environmental services (PES) on the poor varies, however, depending on the circumstances of the poor and the type of programme delivered.

This paper aims to develop a conceptual framework to analyse the conditions under which PES programmes can serve to reduce poverty. The paper models the impact of PES programmes on three categories of the poor – the urban poor, landless, and poor landowners. It considers the impact on these groups of two types of PES programs: programs where lands are diverted from agricultural production to other land uses; and those where lands remain in agriculture but production activities are modified to achieve environmental objectives.

The analysis concludes that there is a wide array of circumstances where PES can both promote environmental quality and reduce poverty. However, the impact on the poor will vary considerably depending on the local circumstances of the poor.