Christopher Bonasia
The Advocate

Payment for Ecosystem Services programs can be a good tool to support farmers adopting sustainable practices, but the programs must be carefully crafted to make sure they also helps keep farmers in business.

PES programs work by determining a value for the services ecosystems offer for humans, such as clean water, erosion control or carbon storage. This value is used to pay people like farmers, who are actively engaged in an ecosystem’s function by managing land, for cultivating those services.

For farms, a PES program offers farmers another stream of income through ‘growing’ ecosystem services, and at the same time offsets the emphasis of production yields as the main metric of profitability. Many farmers already recognize that such practices contribute to a farm’s resilience and productivity, to be sure. But a PES program still offers a nice income boost.

New York offers great example

PES programs offer benefits on both side of the equation, like when soil ecosystems are valuable to a town by preventing nutrient or chemical runoff into waterways. This was recognized by New York City in the 1990s, when updated water quality regulations required that the city invest in building a $6-billion facility to treat waters in its reservoirs upstate. The city instead paid farmers to adjust their management to emphasize watershed protection. Water quality improved enough to avoid building the treatment plan.

The NYC water quality program is a classic example cited by PES advocates, but others abound. A carbon-offset program that pays landowners for ‘credits’ of carbon stored in soil or trees is another instance of PES, though it may not be called the same thing.

Farmers need to benefit

But a couple years ago, a farmer-led working group in Vermont found that catering a PES program to effectively meet farmers’ needs can be tricky to do. (In full disclosure, I was contracted by two organizations to conduct research to inform the Vermont Payment for Ecosystem Services and Soil Health Working Group working group.)

For one thing, PES programs are broadly categorized as paying for either practices or performance. Practice-based programs pay farmers to adopt a new practice and assume it will provide an ecosystem benefit. These programs are easier to administer and provide more certainty to the farmer, but there is also less opportunity to refine a practice to produce even better results. And often, programs end up needing some kind of measurement to justify their continuation, anyway.

Different approaches

Performance-based programs instead measure and quantify benefits, and farmers are paid per unit. There is greater opportunity for farmers to maximize the value of their work, but practice-based programs are also difficult to administer, require expensive tools and analysis to measure outcomes, and do not provide certainty of payment to the farmer.

Though the VT Working Group initially pursued a performance-based approach, over time the members changed to favour paying for practices. The change was caused by preferences for the lower costs of running the program and to overcome challenges of settling on what exactly would be measured. Some farmers also became uncomfortable with the idea of monetizing nature.

Furthermore, developing PES programs need to take care to ensure that farmers remain the prioritized funding recipients. While the aim is to pay for improving ecosystems, costs for administration, field work and testing are likely to take up a substantial part of a program’s resources.

The NYC water program is a good example of this; only a minority of funding for the NYC water program went to farmers, with the rest was spent on lawyers, land purchases and other administrative tasks. There is also no analysis of how much that program actually benefited farmers, despite the clear benefits for the city.

There are some program designs that can channel more funding to farmers, like by hiring farmers to conduct testing and fieldwork themselves, or by paying farming groups for administration. However, as farmers are unlikely to have laboratories and other expensive measuring devices, this approach can limit the scope a program can hope to achieve.