Payments for environmental services

Although this is the most generic term, it has a clear monetary association. This can result in ideological resistance (Wunder and Vargas 2005) and cause payments for environmental services (PES) to be seen as conflicting with the realistic alternative of transfer in kind.

Markets for environmental services

This term is widely used by, e.g., the Katoomba Group and the International Institute for Environment and Development. It incorporates the ideas of multiple actors, choices, and some degree of competition. Such markets do exist in some developed countries, but, except for carbon, in developing countries they seem to be far down the line. In addition to the general restrictions on market mechanisms in developing countries, competition on the supply side is often limited by the spatial specificity of eco-services. For instance, urban water users cannot simply choose different upstream neighbors, and one nature reserve cannot be substituted for another when it comes to protecting a targeted endemic species. Single-buyer (monopsonic) schemes such as water companies, breweries, electricity producers, and tourism operators are also quite common. Many existing schemes are consequently bilateral agreements between one buyer and one seller, i.e., not real markets. Markets have a number of desirable features in terms of a society's resource allocation, so in some cases they are desirable long-term goals. However, when the transaction costs of schemes are high, it might not be attractive to strive for multiple buyers and sellers. Our research in Bolivia, Vietnam, and elsewhere showed that markets can be ideologically equated with neoliberalism, creating a political alienation that can be detrimental to the adoption of PES (Wunder and Vargas 2005).

Rewards for environmental services

This terminology has overtones of entitlement and implies that justice for service provides can be secured through a transaction, i.e., that anyone who delivers a benefit should be rewarded. This label has, for example, been used by the RUPES (Rewarding the Upland Poor for the Services They Provide) program in Asia (van Noordwjik et al. 2004). However, this promise of a reward raises excessive expectations, because services that are not highly valuable and/or not threatened are unlikely to find buyers.

Compensation for environmental services

This concept has been used in a comparative framework (Rosa et al. 2003). Its associations are somewhat similar to those of rewards, but it refers to the cost of the conservation opportunity to the supplier of the service and becomes relevant only when there is a threat to that service. The implication is that anyone who does not bear direct or opportunity cost does not need to be compensated. By the same token, those who do bear costs will be compensated for them but receive nothing extra, so they will have no welfare gains from PES, which is hardly desirable.