Payment for ecosystem services:emerging lessons

Market based initiatives for management of degrading ecosystems and their services have received the added attention as one of the innovative responses in the reent years. Those initiatives such as direct and indirect payment for ecosystem services like premium for rain forest honey, payment by the people at the lower reach to those at the upper reach for the watershed services etc. have drawn the attention of the decision makers as they have proved to be far more cost effective.This paper wynthesizes the key messages from some of the paper are carbon, watershed services and biodiversity, We find that while credible valuation of ecosystem services for all services remain a critical concern behind setting up the payment mechanism, absent of necessary institutional framework may seriously undermine this innovative response for management of ecosystems. In the paper, necessary institutional mechanisms enabling the market for those services have been sketched out, Key messages from those cases have been synthesized.

Contracts in the payments for ecosystem services: the case of bio-prospecting

We examine the economics of royalties in bioprospecting contracts between a pharmaceutical and genetic resource supplier （local）, with an eve to understanding the relative advantages of indexing royalty, payments to gross revenue or net revenue. We show a risk-averse firm facing only production or only cost risks will index royalties to net revenue. When facing both types of risk the choice of royalty type depends on the relative magnitudes of the production and cost risk. In each case, the risk-averse firm chooses the royalty-type that shifts as much risk as possible to the local. Wheat the local is risk neutral the pharmaceutical＇s and local＇s preferences are compatible.If the local is risk averse and there is only one type of risk, it will prefer a gross revenue royalty, and shift as much risk as possible to the firm： here the local and firm preferences are compatible only ifthe firm is risk-neutral. Lastly we show if the firm sets the terms of the contract and both agents are risk averse, the.firm will not likely volunteer to implement the socially optimal royalty arrangement as it prefers to shift as much risk to the loeal, who now also prefers a more certain return, This last outcome is at the heart of the benefit sharing discussionand suggests if risk sharing and equity are a concern in benefit sharing, then the choice of rcyalty type can be an important part of negotiations between pharmaceuticals and locals for the phytochemical from nature for new drug discovery.

Regulating services in poverty ecosystems dynamics: evidences from South Asia

Valuation of ecosystem services has been sought as effective tools that enable the decision makers in designing the cost effective response policies for management of ecosystems towards alleviating the poverty especially in economically poor regions like South Asia. Various directions and linkages between poverty and degradation of ecosystem and reduced flow of ecosystem services can better be understood if the regulating services like hydrological flow and carbon sequestration by forest, and nutrient cycling and bioremediation： by wetlandv can be captured in monetary unit. South Asian Countries including India. Nepal, Pakistan and Bangladesh are the hotspots of poverty where poor depend upon various ecosystem services for their livelihoods and allocation of resource for conservation of ecosystems would have additional merit if regulating services are captured and internalized into the pubtic policy.The paperfirst raises problematic issues in valuation of regulatig ecosystem services, and attempts to link it withthe dependence of poor. Second, complexities of poverty-ecosystem dynamics are discussed. Thirdly, the possible in-tervention to achieve poverty alleviation goal is analyzed with the help of some examples from accounting and valua-tion of regulating services of lndian forest. Finally, the paper suggests that greater attention is needed to do credibleand better valuation of regulating Services so that insight from these ean be used in understanding the impact of degradation of ecosysterns On poor people.