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Payment for Ecosystem Services

Aviram Sharma ( teaches at the School of Ecology and Environment Studies, Nalanda University, Rajgir, Bihar and is also a visiting scholar at the Institute for Technology Assessment and Systems Analysis, Karlsruhe Institute of Technology, Karlsruhe, Germany.

The proposal of advocating payment for ecosystem services for Indian farmers (“Payment for Ecosystem Services: Guaranteed Farm Income and Sustainable Agriculture,” EPW, 29 April 2017) needs closer scrutiny to understand its nuances.

On the face of it, the proposal presented in the article titled “Payment for Ecosystem Services: Guaranteed Farm Income and Sustainable Agriculture” (EPW, 29 April 2017) by P Indira Devi, Lalit Kumar, D Suresh Kumar, Manjula M, Pranab Mukhopadhyay, P Raghu, Devinder Sharma, R Sridhar and L Venkatachalam seems like a wonderful idea for Indian farmers and a win–win situation for government agencies, who “wish” to raise farmers’ income. It attempts to give an economic value to the ecosystem services that farmers generate by cultivating crops.

However, the proposal needs closer scrutiny to understand its nuances. Increasing farm income is definitely the need of the hour, as agrarian communities are under immense distress. What are the mechanisms and alternatives available to achieve this objective and how does the payment for ecosystem services (PES) fit as a “solution”?

The authors rightly identified that out of the four major ecosystem services—provisional, regulatory, support and cultural—only one is directly traded in the market, that is, provisional services. How the other services will be traded in the market is a major question. More importantly, it is also a difficult task to assign an economic value to those services.

While framing such solutions, we need to be extra attentive in certain matters. Will the farmers play a role in valuing those services or will it be done by experts on their behalf for trading in “market?” Will the poor, marginalised and mostly illiterate small farmers have a say in deciding the economic value? How efficiently will they be able to function in these markets? How is the proposed system different from the existing scenario? Will the farmers have a say in deciding the price of their produce (in this case, including ecosystem services)?

An estimation of the monetary values of ecosystem services so far has been done mostly at the global level (Costanza, D’arge et al 1997; Boumans et al 2002; Costanza, de Groot et al 2014) and there are limited studies available on sectoral, national and local estimates of ecosystem services in academic literature. The literature on developing countries is still scarcely available. It is important to note that ecosystem services and ecological functions that supply them are context-dependent and universal rules do not apply (Zhang et al 2007; Simpson 2017). Simpson (2017: 96) has strongly argued that

the fundamental principle of economic valuation is simple, but powerful value is determined on the margin. This means that context is crucial in estimating ecosystem service values, and therefore, “benefit transfer” exercises that fail to account for location and relative abundance are, at best, meaningless, and at worst, counterproductive.

Here, we need to ponder over this question of “context.” We will see how appropriate the economic valuations proposed by the authors are.

Ecosystem Services

Another fundamental question is, where are the markets for trading ecosystem services? Who are the stakeholders in the market? Are there players other than the government who are interested in this “business” opportunity? The calculation of ecosystem services generated in cultivated agroecology at the 2007 rate in another national context and appropriation of such a valuation mechanism for India in 2017 seems nothing more than a well-intentioned academic exercise. The ecological, economic and political landscape have significantly transformed in the last decade. Why will the policymakers be interested in paying “₹14,570 (approximately) per hectare per month” to farmers, when we know that the economic calculations are contingent in nature? Is it an appropriate price? How frequently can it be modified? What kind of market mechanism will affect the prices? Is this not overdependence on state machinery?

The authors themselves have reported that the most sought-after policy intervention, that is, the minimum support price (MSP) “has not kept pace with the rise in farms cost and only 6% of the farmers get the benefit of MSP.” How will the PES model keep pace with the changing dynamics in this economy and environment? We need to reflect over these questions to come up with a more nuanced response for increasing farmers’ income through an alternate mechanism.

Monetary Value

The authors argue that “providing a monetary value for the ecosystem services is an important method to raise awareness and convey the importance of ecosystem services to policymakers.” The valuation of ecosystem services is being done by scholars since the last five decades (Hein et al 2006). Several scholars (Egoh et al 2007; Korsgaard and Schou 2010) argue that it helps bring in the attention of policymakers on protecting ecosystem services. Another group of scholars has argued in recent years that advocating policies based on valuation claims may discredit conservation efforts if people later find the valuation false or overstated (Simpson 2016).

Another issue is regarding the values that are given to different ecosystem services. The values ascribed by economists are extremely dynamic and depend on the number of issues, and are context-specific (Bockstael et al 2000). Further, what about those services that are essential for maintaining the ecosystem, but have relatively less monetary value? What kind of values will get prominence in such situations? An economic value, or other values such as ecological, cultural, and social values?

There is also an issue regarding giving enough attention to ecosystem disservices (Dunn 2010), such as competition for water from other ecosystems, habitat loss, nutrient run-off, etc (Zhang et al 2007), in the case of agriculture. It is important to think about this at the local level. How are we going to deal with these issues? In South Asia, in the same area, often farmers do organic farming and chemical-based farming, and the farming practices of these groups affect other farmland and the local environment. How would the ecosystem services and disservices be calculated at the local level? Or, to put it in other words, what would be the appropriate unit for calculating the valuation of ecosystem services and disservices? How is one to pay for the ecosystem services?

Until we do not reflect over these questions and come up with a clear understanding, we will not be able to come up with a robust alternative model for increasing farmers’ income in India.


Bockstael, N E, A M Freeman III, R J Kopp, P R Portney and V K Smith (2000): “Measuring Economic Values for Nature,” Environmental Science & Technology, Vol 34, No 8, pp 1384–89.

Boumans, R, R Costanza, J Farley, M A Wilson, R Portela and J Rotmans (2002): “Modeling the Dynamics of the Integrated Earth System and the Value of Global Ecosystem Services Using the GUMBO Model,” Ecological Economics, Vol 41, No 3, pp 529–60.

Costanza, Robert, Ralph D’arge, Rudolf  De Groot, Stephen Farber, Monica Grasso, Bruce Hannon, Karin Limburg, Shahid Naeem, Robert V O’ Neill, Jose Paruelo, Robert G Raskin, Paul Sutton and Marjan Van Den Belt (1997): “The Value of the World’s Ecosystem Services and Natural Capital,” Nature, Vol 387, No 6630, pp 253–60.

Costanza, Robert, Rudolf de Groot, Paul Sutton, Sander van der Ploeg, Sharolyn J Anderson, Ida Kubiszewski, Stephen Farber and R Kerry Turner (2014): “Changes in the Global Value of Ecosystem Services,” Global Environmental Change, Vol 26, pp 152–58.

Devi, Indira P, Lalit Kumar, D Suresh Kumar, M Manjula, Pranab Mukhopadhyay, P Raghu, Devinder Sharma, R Sridhar and L Venkatachalam (2017): “Payment for Ecosystem Services: Guaranteed Farm Income and Sustainable Agriculture,” Economic & Political Weekly, Vol 52, No 17, pp 12–14.

Dunn, R R (2010): “Global Mapping of Ecosystem Disservices: The Unspoken Reality That Nature Sometimes Kills Us,” Biotropica, Vol 42, No 5, pp 555–57.

Egoh, B, M Rouget, B Reyers, A T Knight, R M Cowling, A S van Jaarsveld and Adam Welz (2007): “Integrating Ecosystem Services into Conservation Assessments: A Review,” Ecological Economics, Vol 63, No 4, pp 714–21.

Hein, L and K van Koppen, R S De Groot and E C Van Ierland (2006): “Spatial Scales, Stakeholders and the Valuation of Ecosystem Services,” Ecological Economics, Vol 57, No 2, pp 209–28.

Korsgaard, L and J S Schou (2010): “Economic Valuation of Aquatic Ecosystem Services in Developing Countries,” Water Policy, Vol 12, No 1, pp 20–31.

Simpson, R D (2016): “Putting a Price on Ecosystem Services,” Issues in Science and Technology, Vol 32, No 4.

— (2017): “The Simple but Not-too-Simple Valuation of Ecosystem Services: Basic Principles and an Illustrative Example,” Journal of Environmental Economics and Policy, Vol 6, No 1, pp 96–106.

Zhang, W, T H Ricketts, C Kremen, K Carney and S M Swinton (2007): “Ecosystem Services and Dis-services to Agriculture,” Ecological Economics, Vol 64, No 2, pp 253–60.

Updated On : 13th Sep, 2017


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