International Review of Environmental and Resource Economics > Vol 9 > Issue 1–2

The Devil in the Detail: A Practical Guide on Designing Payments for Environmental Services

Stefanie Engel, University of Osnabruck, Germany,
Suggested Citation
Stefanie Engel (2016), "The Devil in the Detail: A Practical Guide on Designing Payments for Environmental Services", International Review of Environmental and Resource Economics: Vol. 9: No. 1–2, pp 131-177.

Publication Date: 13 Jul 2016
© 2016 S. Engel
Environmental Economics,  Environmental Economics:Climate Change,  Environmental Economics:Endangered Species,  Environmental Economics:Market-based Policy Instruments,  Public Economics,  Public Economics:Public Goods,  Bureaucracy:Regulation,  Public policy,  Climate Change,  Water,  Forestry
JEL Codes: H23Q20Q50Q57Q58
Payments for Environmental ServicesEcosystem ServicesPESPolicy Design


Open Access

This is published under the terms of CC-BY.

In this article:
1. Introduction 
2. PES Basics 
3. PES Design 
4. Open Questions in PES Design 
5. Concluding Remarks 


Payments for environmental services (PES) have become a popular approach to address environmental degradation. However, evidence on its effectiveness is scarce and rather mixed. PES is not a panacea, but there are many cases where PES can be a promising tool. Yet, poor PES design translates into poor performance of the instrument. PES design is a complex task; the devil is in the detail of a number of PES design features. The purpose of this paper is to provide guidance in dealing with this complexity through a comprehensive review of PES design that is accessible to both academics and practitioners. Practitioner guidelines on deciding whether PES is the best approach and for selecting among alternative design features are presented. PES design has to start from a careful understanding of the specific ecological and socio-economic context. We now know a lot about which design features are best suited to which context. It is time to put these insights into practice.