Healthy ecosystems provide society with many benefits. These benefits are commonly referred to as ecosystem services and can include things like wetlands that filter and purify water, grasslands which act as carbon sinks, and forests that clean the air and provide habitat for healthy wildlife populations. Everyone on earth relies on these services — for raw material inputs, cultural purposes, leisure activity, and climate stability.

Ecosystem services are often grouped into four categories which were established by the Millennium Ecosystem Assessment in 2005: provisioning services, supporting services, regulating services, and cultural services. Explore the graphic below to learn about each category.

However, due to an increased world population, and an increased demand for food, fresh water, timber, and other natural commodities, humans have changed these ecosystems more rapidly and extensively in the past 50 years than in any other period of history. The Millennium Ecosystem Assessment from 2005 found that approximately 60% of ecosystem services were being degraded or used unsustainably. This is why it is important to work to conserve and protect the natural values of the land.

There are many types of conservation models aiming to address this issue in a variety of ways. Below are a few types of models:

• Environmental Taxes and Subsidies use financial incentives to indirectly change production and resource-use patterns. An example of this is BC’s Clean Building Tax Credit, which incentivized owners of large residential buildings to invest in clean energy retrofits.
• Certification models are generally voluntary and use financial incentives or other rewards to increase participation. An example of this model is the Environmental Farm Plan (EFP) After producers complete their EFP, they become eligible to access funding for beneficial management practices (BMP) projects.
• Land Acquisitions for conservation are generally one-off solutions which change land use. Land is purchased or donated and then managed by an organization. This type of conservation could include BC’s provincial parks system. Organizations such as Ducks Unlimited also work in this field (Land Trust Alliance BC 2015).
• Command and Control models are involuntary, and aimed directly at protecting the resource, without economic incentives. An example of this type is the Canada Environmental Protection Act, which governs a variety of environmental matters such as air and water pollution, waste management and toxic substances.

The Payment for Ecosystem Services (PES) model is voluntary and uses a market-based system to directly protect specific ecosystem services. The basic concept of PES is what the name would suggest, one individual or group pays another individual or group for maintaining or enhancing a particular ecosystem service. Establishing a value for these services can entice investment in restoration and maintenance of those services, which benefit all of society (UNEP, 2008).

The PES model is grounded in early environmental economics which suggested that PES were a cost-effective way to conserve forests, manage watersheds, and protect biodiversity (James & Sills, 2015).

The earliest definition of a PES program was put forth by Sven Wunder in 2005. Wunder defined the PES model as “a voluntary transaction in which a well-defined environmental service (ES), or a form of land use likely to secure that service, is bought by at least one ES buyer from a minimum of one ES provider, if and only if, the provider continues to supply that service (conditionality).”

Let’s break down the five criteria for PES models highlighted in Wunder’s definition:

1. Voluntary: Unlike command-and-control style conservation, which uses regulations and laws to influence environmental actions, PES are voluntary and use a negotiated framework or contract to define the scope and obligations.
2. Well-defined Ecosystem Services: Wunder’s work demanded that ecosystem services must be well-defined, meaning directly measurable. However, as the PES term has gained popularity, it has been recognized that the degree to which an ecosystem service can be directly measured varies on a spectrum. For instance, it may be easy to measure the improvements to water quality with testing, or fish habitat by spawning numbers, but measuring things such as cultural significance or aesthetic value is much more complex. To adapt, PES models account for ecosystem services being measured in more ways that are not only quantifiable. This view places less emphasis on the ecosystem service as a commodity, and more focus on co-investment in land uses that generate multiple services, both quantifiable and not (James & Sills, 2015).
3. A Buyer: At least one entity who wants to ‘purchase’ ecosystem services must be present. This can be a government entity, a charity, or an individual or company. Often there is also an intermediary involved, who ‘brokers’ the deal, or does the administrative work.
4. A Provider: At least one entity willing to ‘sell’ ecosystem services must be present. In many examples of PES programs, this is the farmer or landowner.
5. Conditionality: Payments must be contingent on the contracted work being completed. In many programs, including FLA, there is some sort of auditing system to ensure the service is still being provided as defined in the contract.

PES programs are happening around the world, and are employed on international, national, and local scales. Some countries that have PES programs include Mexico, Colombia, Costa Rica, France, UK, USA, Norway, Australia, and more.

A well-known example of an open-trading PES model is the international carbon market, established by the Kyoto Protocol. In this market, private entities or governments create supply by developing carbon projects which reduce emissions.  The ‘buyers’ tend to be corporations or private individuals looking to offset their own carbon footprint. Forestry activities which sequester carbon by promoting forest establishment and growth are one mechanism for reducing emissions within these markets (UNEP, 2008; UNDP, 2022).

In the United States, an example is the Watershed Protection Program, which is funded by the New York City Department for Environmental Protection. This program aims to provide high quality drinking water for nine million water consumers in New York City, whose water comes from upstate watersheds such as the Catskills. Landowners in the Catskills are paid to implement various beneficial management practices which help maintain the health of the watershed (Isakson, 2001).

Farmland Advantage is the first PES program in BC. The program began as a community-led initiative in 2008 with the goal of implementing the PES program model in BC. Farmland Advantage is not a passive income stream for landowners or farmers. Funding under the program is conditional on the farmer or landowner taking action to improve ecological services on their land. Specifically, the program targets the increase of public goods that are otherwise under-delivered or not delivered at all. The program intends to mitigate compounding landscape problems such as flooding, loss of habitat and increased water filtration requirements.

Let’s look at how Farmland Advantage fits into those five PES criteria from before:

1. Voluntary: Farmland Advantage is completely voluntary. After FLA completes mapping and site selection work, farmers are given a choice to participate in the program.
2. Well-defined Ecosystem Services: Farmland Advantage uses a network of experts and specific site selection methodology to define and target ecosystem services. To learn more about Farmland Advantage’s methodology, please visit our approach page.
3. A Buyer: The ‘buyers’ in the FLA program would be FLA and the program funders. The program also has an intermediary, the Investment Agriculture Foundation, which administrates the program.
4. A Provider: Farmland Advantage’s ‘providers’ would be the farmers, ranchers, land-owners, and Indigenous groups the program partners with.
5. Conditionality: Each year, Farmland Advantage advisors conduct site visits to determine whether the work has been maintained. Only after the audit are payments issued.

In conclusion, Farmland Advantage stands as a pioneer in the Payment for Ecosystem Services (PES) model in British Columbia. As the first of its kind in the region, Farmland Advantage sets a promising precedent for the application of PES programs in safeguarding and valuing the contributions of nature to society. Through the collective efforts of farmers, communities, and stakeholders, programs like Farmland Advantage pave the way for a sustainable and resilient future, where the protection of ecosystem services becomes an integral part of our societal fabric.