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KeywordsMarket-based policy tools; payments for ecosystem services; enviromental governace; integrated conservation and development projects; ecosystem services. Correspondence AbstractIn this commentary we critically discuss the suitability of payments for ecosystem services and the most important challenges they face. While such instruments can play a role in improving environmental governance, we argue that over-reliance on payments as win-win solutions might lead to ineffective outcomes, similar to earlier experience with integrated conservation and development projects. Our objective is to raise awareness, particularly among policy makers and practitioners, about the limitations of such instruments and to encourage a dialogue about the policy contexts in which they might be appropriate.

We have compared two cases of payments for environmental (hydrological) services (PES) in Central America, in terms of socioeconomic background, opportunity costs of forest conservation and stakeholders' perceptions on the conditions of water resources and other water-related issues. We found that, in general, the forgone benefits from land uses alternative to forest cover are larger that the amount of the payment, which contradicts the economic foundation of PES schemes. A number of possible explanations are explored. The results suggest that trade-offs between different environmental and social goals are likely to emerge in PES schemes, which poses some doubts on their ability to be multipurpose instruments for environmental improvement and rural development. We also found that PES schemes may work as a conflict-resolution instrument, facilitating the interaction between downstream and upstream stakeholders.

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