what are payments for ecosystem services?

Payments for Ecosystem Services (PES) in agriculture compensate farmers for actions that contribute to the restoration or functioning of ecosystems, which society benefits from (e.g. preservation of water quality, carbon storage, air purification and biodiversity). These benefits are called "Ecosystem Services". Farmers' actions are called environmental services. PES are therefore economic measures aimed at restoring or maintaining a system of economic signals that steers farmers towards more virtuous behaviour from an environmental point of view. PES involve on the one hand funders, in principle direct beneficiaries of benefits such as companies, individuals, sometimes represented by associations or public actors, and the suppliers of services (e.g. farmers, landowners). Suppliers of an environmental service receive a payment in return for this service conditional on the achievement of service delivery.

In Europe, ecosystem services and their resulting benefits are a major part of agri-environmental schemes since 1980’s (CEC, 1998). These schemes are action-oriented and designed to compensate farmers/landowners for adopting practices on their farmlands or peatlands resulting in promoting carbon sequestration, improved water quality and enhanced biodiversity (DAFM, 2015). Recently, results based agri-environmental payment schemes implemented in Ireland such as the EIP (European Innovation Partnerships) and Ecosystem Services. The EIP-AGRI scheme launched in 2012 for contributing to EU’s 2020 strategy for smart, sustainable, and inclusive growth. Currently, there are numerous EIP-AGRI projects working in Ireland and focussing on results-based payment schemes for farmers and landowners.

Intact or undrained and rewetted peatlands provide many important ecosystem services such as carbon sequestration, water storage, enhanced biodiversity, good water quality and wildlife compared to the drained peatlands. Wetlands also provide numerous human heath benefits. Most notably a cooling of the local climate (Sun et al., 2012; Zhang et al., 2022), and improvement of local air quality (Cong et al., 2018), which can be especially important in an urban setting. Wetlands also provide multiple mental-health benefits including relaxation and recreation (Reeves et al., 2021) as well as help with depression and anxiety (Maund et al., 2019). One way of compensating farmers and landowners for their work to maintain or restore the ability of peatlands to perform these services is through issuing result-based payments. Below we describe the case of the The Freshwater Pearl Mussel Project (PMP) as a results based voluntary payment scheme having the goal of improving water quality of watercourses that sustain the pearl mussel habitat as well as the Peatland code in the UK.

INCENTIVE CONCEPT

The PMP project focuses on eight freshwater pearl mussel catchments located in the Republic of Ireland (Figure 3). This project is rewarding/providing financial incentives to farmers and landowners in Ireland for improving habitat i.e. improving quality of peatlands, grasslands and woodlands. The improved land quality i.e. good quality vegetation of peatlands, grasslands and woodlands is linked to improved water quality of watercourses serving as freshwater pearl mussel habitats. The higher the land quality and improved water quality, the greater the financial incentives for farmers and landowners. 

The financial incentives provided by the PMP project to landowners and farmers are determined based on two parameters: results based payment comprising of habitat quality, floodplain quality and whole farm payment and supporting actions payment. Essentially, each farm is allocated a score of 1-10 based on habitat, floodplain and whole farm payment; with scores less than three (3) receiving no incentives. 

In habitat quality, good quality peatland, grassland and woodlands prevent sediment erosion and nutrient transport into the adjacent watercourses, thus providing good quality habitat for pearl mussel. The farmlands that flood along the freshwater pearl mussel rivers are floodplains, which regulate high flow volumes and provide an ideal habitat for pearl mussel. Other features of the farm, that contribute to water quality within the pearl mussel rivers are drains, farmyard runoff and nutrient management. This is known as the “Whole farm Assessment”. The supporting action payments provided to the landowners/farmers are livestock drinking facilities, fencing, invasive species control, rewetting and drain blocking on peatlands. 

The rate of support is 50 € per ha up to an annual maximum of 1200 €. The supporting actions payments are approved by the PMP team. The results based payment i.e. habitat quality + floodplain payment is multiplied by the whole farm adjustment factor i.e. poor (less than 0.6), inadequate (factor of 0.6-0.9), good (factor of 1) and excellent (factor greater than 1) for obtaining the total payment received by the landowner/farmer. 

EXAMPLE CALCULATION

Let us demonstrate with an example, showing how the PMP results based payments are calculated. A farmer/landowner has a 60 ha of peatland + grassland located adjacent to a pearl mussel habitat, which is a river 100 m long and located adjacent to farmland. The farmer has 25 and 35 ha of peatland and grassland respectively. We will calculate the total results based payment. The brown area is peatland, green is grassland and blue line is the river. The payment rates for peatland across four bands; based on plot score and area shown in table 1 and floodplain payment rates shown in table 2. 

Based on the tables 1 and 2 and areas of peatlands and grasslands, the total payment to the farmer/landowner is 7110 euros.