Due to the interconnected nature of environmental change processes, the impacts of climate change in one locality are often linked — through an aggregation effect — to regional and global dynamics. Ecosystems, ecological processes, and environmental services do not respect national borders. Therefore, the challenge of managing common or collectively used natural resources is recurrent across different territories and demands urgent, coordinated global action.
In this context, negative environmental externalities disproportionately affect territories across various spatial, temporal, and political scales, with global consequences. Conversely, the aggregated role of forests in providing ecosystem services, especially carbon sequestration and storage, is essential for regulating the global atmosphere. This makes forests fluid ecological assets, common in nature, whose effective governance is crucial to addressing climate change.
Although governance strategies based on state-led command-and-control or market-based mechanisms have been widely applied, there is still no consensus on how to effectively manage these commons. However, several studies — most notably those by Elinor Ostrom — have demonstrated that collective and community-based governance arrangements can be more sustainable and efficient for the protection of shared natural resources.
Indeed, recent evidence, including from the UN, highlights the crucial role of Indigenous peoples and local communities in managing and protecting ecologically significant areas, thereby generating ecosystem services with global benefits. These actors often engage — voluntarily and routinely — in activities that support the provision of ecosystem services, such as safeguarding springs, practicing sustainable agriculture, preserving biodiversity, managing forests, and protecting natural areas.
However, the socioecological costs of these practices are borne solely by these groups, who generally receive no financial compensation for the benefits they generate for the broader society. In this context, economic instruments for environmental governance, such as Payments for Ecosystem Services (PES), become particularly relevant.
PES schemes involve voluntary incentives paid to farmers, landowners, Indigenous peoples, and local communities in exchange for the provision of clearly defined ecosystem services — including carbon sequestration, water conservation, and biodiversity protection. By financially recognizing these contributions, PES can play a vital role in advancing climate and socioecological justice, enabling cross-border financial flows toward those who maintain ecological processes essential to life — and thereby promoting tangible recognition and valuation of positive environmental action.
Similar to the UNFCCC, the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services is an intergovernmental organization established to improve communication between science and policy on issues of biodiversity and ecosystem services. As a policy body it influences groups like the UN’s Biodiversity Credit Alliance and PES programs like the Bolsa Floresta program of Brazil. As of 2019 there were an estimated 550 PES programs around the world facilitating approximately $36 to $42 billion in annual transactions.
As effective as PES programs are, they, together with biodiversity financing budgets, fall short by an estimated $700 billion if we are to reverse biodiversity decline by 2030.
| Global Payment for Ecosystem Services (PES) schemes targeting specific Reducing Emissions from Deforestation and Forest Degradation (REDD+) activities have enabled direct efforts to combat deforestation through financial incentives to local actors. These mechanisms have also supported the development of initiatives led by community groups, Indigenous Peoples, and traditional communities, serving as a strategy to redistribute environmental benefits based on the “provider-gets” principle. In doing so, they help compensate those who preserve forests and generate positive externalities for society as a whole. Notable examples include projects supported by the Green Climate Fund (GCF) and the REDD Early Movers (REM) program in the Brazilian Amazon. |