Corrected Bankojanakari Vol 18-1.pmd


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Banko Janakari, Vol. 18, No. 1Banko Janakari
A journal of  forestry information for Nepal

Payment for Environmental Services: an emerging
issue to be addressed

Globally, economic approach to environmental management has been
receiving recognition in all sectors of  the economy. Forests provide
ecosystem services such as pleasant landscapes, carbon sequestration,
biodiversity conservation, watershed protection and so on. Forest
ecosystems provide a wide variety of  environmental services such as
water regulation, biodiversity conservation, carbon storage for climate
change mitigation & so on. Therefore, paramount importance is being
given to forest management issues these days. Environmental goods and
services not only benefit the local communities, it will also provide benefits
to the global communities. However, not all environmental uses generate
financial, returns commensurate with their real economic value.
Environmental services are not traded in the market and have no
observable price, which may be the reason. Implementing Payment for
Environmental Service (PES) mechanisms can be a way for natural
resource conservation, and achieve development goals
and, especially in low-income regions.

The use of  Gross Domestic Product (GDP) or Gross National Product
(GNP) as indicators Of  economic performance, however, has been
critically debated, not only because they do not account for many
environmental values but more importantly because they do not provide
correct measures of  change in well- being. As a result, the Natural resource
and Environmental Accounting (NRA) approach emerged to provide
the operational framework for measuring and evaluating progress towards
sustainable development by including all environmental values missing
from the current Systems of  National Accounts (SNA). It is relatively
easy to assess the value of  tangible commercially exploited natural assets
such as, timber and fuel wood compared to the non-traded and indirect
services of  ecosystems such as regulating climate, water purification,
supporting for nutrient cycling, soil formation and biological diversity.



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Banko Janakari, Vol. 18, No. 1

PES, therefore, develops mechanisms to capture environmental
externalities and bring them into marketplace. The basic principles of
PES are: beneficiaries of  environmental services pay for their provision;
and providers of  environmental services get paid to provide them. It is
important to identify the demand and supply side of  the environmental
services. The demand aspects include the questions such as What are the
specific services? Who benefits from these services’? How much benefit
do they receive? Similarly, some questions related to supply side are how
are these services generated? How much more or less of  these services
would we receive if  land use changed? Who generates these services?

Before understanding and implementing PES, some crucial and pertinent
questions need to be answered such as:

• What is the willingness-to-pay of  the beneficiaries of  environmental
services to help finance conservation (Contingent Valuation)?

• How can their willingness-to-pay be translated into real resource
flows?

• How should the collected funds be used to structure payments to
those who are doing conservation activities?

• How do these questions differ when global and local PES are taken
into consideration?

People in Nepal are not much aware of  the intangible benefits of  the
forestry sector. There are enormous environmental benefits that forests
can provide in a sustainable way. Realizing such environmental values of
forests locally and globally, concerned institutions need to start working
on “Payment for Environmental Services” with a concerted effort.