The potential and limitations of markets and Payments for Ecosystem Services in agricultural landscape restoration: critical reflections inspired by an assessment of the RISEMP program in Matiguás-Río Blanco, Nicaragua

During the last two decades the concept of Payments for Ecosystem Services (PES) has gained ever-increasing attention among a wide public of scholars as well as conservation and development practitioners. The main premises of this innovative conservation approach are appealing: private landowners, which in normal circumstances -i.e. in absence of any direct incentives- are poorly or not motivated to protect nature on their land, will do so if they receive direct payments from environmental service (ES) buyers, which at least cover part of the landowners’ opportunity costs of developing the land. In this paper, however, we warn for an overenthusiastic adoption of the PES approach. Based on an extensive literature review and a field study of the Nicaraguan component of the ‘Regional Integrated Silvopastoral Approaches to Ecosystem Management Project’ (RISEMP), one of the main GEF-World Bank funded pioneering pilot projects of PES in Latin America, we argue that the concept still has to deal with several theoretical and practical lacunae. We argue that the concept of PES rests on loose foundations, mainly because of (i) a simplistic view on ES as discrete, quantifiable and marketable entities; (ii) an abstraction of the required landscape approach to conservation and the corresponding collective action precondition; (iii) a simplistic and arbitrary one-sided approach to the externality problem with important implications on the desirability of different policy instruments; (iv) a simplistic perception of socio-institutional reality and negligence of institutional effects on human behaviour and environmental morale; (v) the problematic character of transaction costs and a misleading justification of the approach based on the efficiency criterion; and (vi) a potential continuation of regressive financing of global commons with important fairness and sustainability implications. As such, we argue that the concept of PES could distract the attention for environmental problems away from the more complex underlying causes, which generally require broader locally embedded political action for their solution and not merely market creation. We think more debate about the desirability and conceptual clarity of the PES conservation tool is necessary.