The G20 has put Nature on equal footing as Climate - with Payment for Ecosystem Services (PES) as a core element

Digging into the announcement from the G20 and why now is the time for PES 2.0

On October 3, the G20 Ministers of Environment and Climate approved a groundbreaking declaration, committing to 34 actions aimed at tackling the twin crises of climate and nature. I was very pleasantly surprised to see the recognition that these two crises should receive equal attention and are intertwined. The 34 commitments also highlighted the tools and approaches that need to be scaled in order to address these challenges. I’ll include the full text at the end of this post. 

There were four main sections to the declaration: 

1. Oceans 

2. Payment for Ecosystem Services 

3. Enhance Adaptation Action and Finance in the Context of Climate Change 

4. Waste and Circular Economy 

While I was very excited to see oceans and adaptation highlighted, what caught my attention was the focus on Payment for Ecosystem Services (PES) — an approach that ensures nature’s value is formally recognized within our economic systems. PES allows for direct compensation to those who steward ecosystems, making protecting and restoring nature as economically attractive as other productive uses that are often more destructive. 

What are Payment for Ecosystem Services? 

The International Institute for Environment and Development defines PES as, 

Payments to farmers or landowners who have agreed to take certain actions to manage their land or watersheds to provide an ecological service. 

Google’s GenAI adds that, “PES is a market-based mechanism that aims to encourage the conservation of natural resources.” I’ve had a few conversations with folks who put PES into a tightly constrained bucket and a bucket that only includes market-based mechanisms. This interpretation of PES can sometimes cause practitioners and policymakers to steer away from PES. 

So I asked Google’s GenAI to come up with all of the types of PES and here is the list it came up with: 

• Direct payments: Governments or non-profit organizations pay providers of ecosystem services directly.  

• Tax incentives: Governments indirectly compensate landowners who protect ecosystem services through tax incentives.  

• Cap-and-trade markets: Governments or regulatory bodies set a limit on pollution or environmental degradation in a specific area, and then allow individuals or firms to trade to meet that limit.  

• Certifications: A type of PES program.  

• Ecosystem service markets: A type of PES program.  

• Tradable permit systems: Some PES schemes use tradable permit systems, such as wetland mitigation banking or tradable development rights.  

• Subsidies: A type of PES scheme.  

• Ecolabeling: A type of PES scheme that provides information about the origin of products to reduce market friction. 

Yes, there are some market-based mechanisms in there but there are also many non-market mechanisms. Because in reality, anything that causes a payment to be made or an increase in payment to be made for an ecosystem service is a “payment for ecosystem services.”  

I am willing to bet my favorite bike (if you’re a cyclist you’ll know how much that means to me), that the G20 Ministers were looking at the broad definition of PES that includes all mechanisms where someone or some entity is paying for the benefits they receive or the dependency they rely on from ecosystem services that are produced by a land steward somewhere else. 

Some mechanisms involve direct payments between private actors, while others take the form of markets, taxes, or subsidies. In these cases, the general public benefits and has a vested interest in paying public or private land stewards for the restoration and protection of ecosystems. 

Perhaps the most well-known PES mechanism is a water fund. A classic example is New York City’s decision in the mid-1900s to pay for the protection of the Catskill watershed to secure its drinking water supply. Since then, many water funds have been launched around the world, with water utilities or beverage companies like InBev or PepsiCo paying for watershed restoration and protection to ensure the quality and quantity of their most valued input: water. 

The biggest challenge and the biggest opportunity for PES is that in most landscapes, there are multiple private and public actors that benefit from the delivery of ecosystem services. 

Today, my sense is we are experiencing the evolution to PES 2.0. Where PES 1.0 was direct payments between two individual entities, PES 2.0 involves mechanisms that combine a cohort of payers with a cohort of ecosystem service producers. The exact mechanism (see the list above) will depend on the unique characteristics of the payers and the producers and the nature of the ecosystem service that is present. 

Time to go full steam into PES 2.0 

We’ve been talking for the last decade about how we need to unlock more finance for nature. The problem is, we’ve been trying to convince finance to flow to nature without us actually valuing nature. If we create payment mechanisms where there are new revenue streams flowing toward nature positive projects that provide ecosystem services, finance will follow.  

With the rise of the Taskforce for Nature-related Financial Disclosures, corporates and financial institutions around the world are beginning to understand their extensive dependencies on nature. Over $44 Trillion in our global economy representing over half of the world’s GDP has a moderate or high dependence on nature (source). And I can say with near certainty that the other half has at least a low dependence. 

The private sector is starting to recognize where they depend on ecosystem services to sustain their bottom-line. We must begin translating these location-specific dependencies into payments. Link the producers, the providers, the stewards of ecosystem services with the dependents and the beneficiaries to get new revenue streams flowing to protect and restore ecosystems. 

For years, I struggled to make financial models work for nature protection and conservation projects relying solely on carbon revenues. But the real opportunity lies in bringing payments into these projects for what we often call 'co-benefits,' the essential ecosystem services that are core to nature’s value. Both private and public entities have clear financial incentives to invest in these services, ensuring their ongoing provision. 

Now is the time to identify everywhere on the planet where we have private or public sector entities that have significant nature dependencies but aren’t paying for those dependencies to stay intact. It’s crucial to offer dependent entities the option to combine their resources within specific geographies, and collectively pay to ensure they collectively continue to receive those ecosystem services (PES 2.0). To mitigate their risk and ensure that ecosystem service that they jointly depend on will continue in perpetuity.  

To oversimplify a bit, climate is global and nature is local. Yes there may be some transboundary PES mechanisms for large watersheds like the Amazon and the Congo, but most ecosystem service dependencies and benefits are at a local or regional level. We must focus the design and implementation of PES not at the global level as a theoretical exercise (how many PES mechanisms can we think up), but get boots on the ground and design PES mechanisms that are fit for purpose with the regional and local actors at the table. 

With the endorsement of the G20, this is the moment to pinpoint where private or public sector entities rely on ecosystem services and get payment mechanisms up and running to ensure the provision of those ecosystem services in perpetuity. And perhaps as importantly, make the unit economics work for nature protection and restoration to outcompete the unit economics of destructive and extractive land use.  

Ultimately, I see PES as a crucial tool for balancing economic incentives.  

The goal is to align these incentives so that economic actors naturally find an equilibrium in land use – where the production of goods and services to sustain human life is balanced with the provisioning of ecosystem services that sustain both human and non-human life. 

In other words, it’s about making the unit economics work for nature protection and restoration. 

There’s much more to explore on this topic, but I hope this gives you a glimpse into the potential of PES 2.0 and some ideas on how we can bring that potential to life. 

- Eric 

---

1. We, G20 Ministers of Environment and Climate, met in Rio de Janeiro, Brazil, to address environmental and climate challenges. The G20 represents over 80% of the world's Gross Domestic Product (GDP), 80% of the world population, as well as approximately 80% of global greenhouse gas emissions, material and energy use, and of 75% of waste generation, noting the varying contributions and circumstances among countries in the context of their respective efforts to promote sustainable development and eradicate poverty. In light of that, we reaffirm our respective commitments to scale up urgent action to address the crises and challenges posed by climate change, biodiversity loss, desertification, ocean and land degradation, drought and pollution.

2. We are increasingly committed to addressing the crises and challenges above, given the irrefutable fact that climate change impacts are already being felt across the world, affecting vulnerable regions and countries more severely, with unprecedented floods, extreme droughts, above-average heat waves, and other events for which we are not yet fully prepared to deal with. We express deep solidarity for Brazil, as well as for other countries that have been affected by extreme weather events, including floods, severe droughts and wildfires. Human and environmental losses worldwide make it clear the urgent need to take greater action to respond to the new global reality.

3. We acknowledge the cross-cutting nature of addressing climate change and the need for urgent actions to scale up, prioritize and mainstream mitigation and adaptation efforts by our governments, businesses, and society, in the wake of the widespread, significant and growing impacts of climate change. In this regard, we welcome the Brazilian Presidency’s initiative of the G20’s Task Force for the Global Mobilization Against Climate Change.

4. We recall the 1992 Rio Earth Summit and note the related Rio Conventions: the Convention on Biological Diversity (CBD), the United Nations Framework Convention on Climate Change (UNFCCC), and the United Nations Convention to Combat Desertification (UNCCD). We further note the decisions of UNEA-6 and the recent "Rio Trio" initiative to foster collaboration among the Presidencies of the upcoming Conferences of the Parties to the CBD; the UNFCCC and the Paris Agreement; and the UNCCD. We are determined to ramp up our actions and engage actively in upcoming multilateral environmental meetings, such as the sessions of the Conferences of the Parties to the CBD in Cali, Colombia; the UNFCCC and the Paris Agreement in Baku, Azerbaijan; and the UNCCD in Riyadh, Saudi Arabia. We are also committed to engaging actively at the 5th session of the Intergovernmental Negotiating Committee (INC) to develop an international legally binding instrument on plastic pollution, including in the marine environment, in Busan, Republic of Korea, and in the 3rd United Nations Ocean Conference in Nice, France.

5. Mindful of our leadership role, we reaffirm our steadfast commitments, in pursuit of the objective of UNFCCC, to tackle climate change by strengthening the full and effective implementation of the Paris Agreement and its temperature goal, reflecting equity and the principle of common but differentiated responsibilities and respective capabilities, in light of different national circumstances. We highlight the importance of ambitious action on all pillars of the Paris Agreement taking into account the best available science.

6. We welcome and fully subscribe to the ambitious and balanced outcome at the UNClimate Change Conference in Dubai (COP28), the UAE Consensus and the outcomes of the First Global Stocktake under the Paris Agreement (GST-1). We highlight our support to the Presidencies of COP28, COP29 and COP30 in launching a set of activities (“Roadmap to Mission 1.5”) to significantly enhance international cooperation and the international enabling environment to stimulate ambition in the next round of nationally determined contributions, with a view to strengthening action and implementation over this critical decade. We pledge our support to the COP29 Presidency and commit to successful negotiations in Baku. We also pledge our support to the COP30 Presidency, in 2025.

7. We reaffirm the commitment to the swift, full, and effective implementation of the Kunming- Montreal Global Biodiversity Framework (KM-GBF) adopted at the 15th Conference of the Parties to the Convention on Biological Diversity. We stress the importance of Parties to the CBD updating or revising national biodiversity strategies and action plans in alignment with the KM-GBF and its goals and targets by CBD COP-16 and we call for enhanced financial resources from all sources.

8. We emphasize the need for a coordinated and effective response to environmental crises and challenges. We welcome the Brazilian Presidency's priority issues, recognizing the various interlinkages among Adaptation to climate change, Oceans, Payment for Ecosystem Services, Waste and Circular Economy. We highlight the multiple and significant environmental and climate benefits that can result from our decisive and collective action in each of these areas, such as scaling up actions in such a manner that bridges the ambition and the implementation gaps identified by the First Global Stocktake, consistent with our national policies and circumstances. We thank the Brazilian Presidency for their technical papers on the four selected priority issues.

9. United in our commitment to sustainable development and the 2030 Agenda and its Sustainable Development Goals, reaffirming the 1992 Rio Declaration on Environment and Development, as well as declarations adopted and initiatives established in previous years, and building upon the discussions in the G20 Environment and Climate Sustainability Working Group (ECSWG) meetings, and the priorities set by Brazil as G20 Presidency, we share the following views:

OCEANS

10. Fully aware of the critical importance of the oceans for sustainable development and recognizing the fundamental role oceans play in ensuring climate stability and in addressing the adverse effects of climate change, we recognize that adequate financing and our increased efforts and appropriate planning and management are essential to ensure the protection of the marine environment and the conservation and sustainable use of marine resources and biodiversity.

11. Determined to achieve SDG14, we are dedicated to conserving, restoring and sustainably using marine and coastal ecosystems to ensure safe, clean, healthy, and productive ocean and marine ecosystems. Our goal is to advance a just and sustainable blue/ocean-based economy, while supporting the resilience of communities and enhancing our understanding of the cumulative impacts of human activities on marine ecosystems. We aim to anticipate the consequences of planned activities, and mitigate or eliminate negative effects on sustainable development. Recognizing that marine pollution, including plastic pollution, adversely affects marine biological diversity and, as a consequence of this, the productivity of the marine economy, we are committed to unlocking the social, environmental, and economic benefits of ocean sustainability. To this end, we will work together to strengthen multilateral research on ocean protection, support ongoing processes, and promote innovative financing for the conservation and sustainable use of the oceans, seas and marine resources, and resolve to further strengthen multilateral cooperation.

12. We acknowledge the importance of including ocean and coastal-related actions, as appropriate, in the preparation and implementation of our national climate and biodiversity plans and policies, including in our Nationally Determined Contributions (NDC) and National Biodiversity Strategies and Action Plans (NBSAPs), in line with national circumstances and relevant mandates and recalling the nationally determined nature of NDCs and NBSAPs. We also acknowledge the importance of implementing, integrating and monitoring these actions in pursuance of their effectiveness.

13. We recognize the importance of comprehensive Marine Spatial Planning (MSP) and Integrated Coastal Zone Management (ICZM), among others, through bilateral and multilateral collaboration, and taking into account the interests of coastal States, to ensure a fair and equitable allocation of maritime activities. Aiming at balancing these interests and evaluating trade-offs in the face of growing demands for marine resources and the need to protect and restore biodiversity and coastal and marine ecosystems, we aim to promote such policies and tools, and to support others that wish to adopt similar approaches.

14. Recognizing the urgent need to address the conservation and sustainable use of marine biological diversity in areas beyond national jurisdiction and building upon our Leaders’ consensus as reflected in the G20 New Delhi Leaders’ Declaration, we call on all countries for the early entry into force, and implementation by the Parties, of the Agreement under the United Nations Convention on the Law of the Sea on the Conservation and Sustainable Use of Marine Biological Diversity of Areas beyond National Jurisdiction (BBNJ Agreement), emphasizing the necessity for enhanced international cooperation, capacity-building, technical assistance, and financial support, particularly to developing countries.

15. We commit to raise awareness, build capacity, and facilitate and encourage the meaningful participation of Indigenous Peoples, local communities, coastal communities, women and youth, in ocean and coastal conservation and restoration, decision-making and management efforts. To this end, we will endeavor to strengthen their involvement in marine issues, enhance ocean literacy and support ocean education initiatives to empower communities to respect the marine environment and preserve ocean cultures around the world.

PAYMENT FOR ECOSYSTEM SERVICES (PES)

16. We highlight the urgent need to step up efforts to conserve our biomes, halt and reverse biodiversity loss and restore ecosystems and their services. We stress the importance of enhanced efforts towards halting and reversing deforestation and forest degradation by 2030. We reaffirm the commitment to the swift, full and effective implementation of the Kunming- Montreal Global Biodiversity Framework (KM-GBF) adopted at the fifteenth Conference of the Parties to the Convention on Biological Diversity and encourage incorporating the value of the wide range of ecosystem services, opportunity costs and negative externalities into decision- making, as appropriate. We will consider efforts to mainstream natural capital accounting in our national accounts, where feasible and taking into account different national circumstances.

17. To achieve these objectives, we will consider innovative economic tools, such as payments for ecosystem services, to support our efforts to conserve, restore and sustainably use natural resources, noting the important contributions of ecosystem services to the achievement of sustainable development and poverty eradication, including, but not limited to, soil fertility, erosion control, pollination and water supply.

18. We recognize the importance of promoting payments for ecosystem services schemes and programs at a large scale, at all levels, in line with existing multilateral and other international commitments including on trade, and national policies and circumstances, and providing fair and equitable benefits to the individuals and communities that contribute to the provision of these services, including local communities and Indigenous Peoples, as applicable.

19. We recognize that payments for ecosystem services schemes and programs should be developed in an inclusive and transparent manner, with the full and effective participation of relevant partners and stakeholders in their design and implementation, including of people in vulnerable situations, and taking into account the recognition of land tenure rights, where relevant and appropriate, and in accordance with national circumstances.

20. We further stress the importance of increasing reliable long-term funding and promoting capacity building and technical cooperation to advance innovative financial mechanisms for nature.

21. We encourage innovative mechanisms that seek to mobilize new and diverse sources of funding to pay for ecosystem services. As such, we take note of the plans to establish the Tropical Forest Forever Facility (TFFF) as presented by Brazil to the ECSWG and acknowledge the Facility as an innovative tool for forest conservation.

ENHANCE ADAPTATION ACTION AND FINANCE IN THE CONTEXT OF CLIMATE CHANGE

22. We are increasingly aware that climate change impacts are already being felt in every G20 country and across the world, especially among the segments of the population that are already in vulnerable situations. We acknowledge the need for urgent action to scale up, prioritize and mainstream whole-of society and whole-of-economy adaptation in the wake of the widespread, significant, and growing impacts of climate change.23. We recognize the asymmetries within and among countries in adapting to the adverse impacts of climate change and promoting climate resilience. In this regard, we note the work of the G20 Task Force for the Global Mobilization Against Climate Change (TF-CLIMA) and of the Sustainable Finance Working Group (SFWG). We commit to scaling up all types of adaptation action. We also recognize that the costs of inaction are far greater than the costs of mitigation and adaptation, and that human and financial implications of climate change will increasingly impact everyone, with greater intensity the poorest and most vulnerable segments of the population. We acknowledge that adaptation action contributes to sustainable development and poverty eradication.

24. We recognize the fundamental importance of mainstreaming adaptation at the highest level and into economic and development strategies and of addressing gaps, including finance, to implement adaptation measures at the required scale to manage and avoid the most threatening impacts from climate change. We emphasize, in particular, that public finance remains a key enabler for mobilizing other sources of climate finance, for adaptation actions.

25. We commit to progressing the formulation and implementation of our own adaptation policies, whilst cooperating with other countries in building resilience and enhancing adaptive capacity to climate change, from the global to the local levels. We are committed to identifying mechanisms to expedite the implementation of measures that contribute to reducing climate vulnerabilities, enhancing adaptive capacities and strengthening the resilience of all societies, economies and ecosystems with special attention to the most vulnerable segments of the population, leaving no one behind.

26. We resolve to work together to: (i) promote, as necessary and appropriate, the existing channels and initiatives aiming to build and to strengthen the scientific base and knowledge about climate in developing countries, as well as technical and institutional capacity for policy and project preparation; (ii) maintain climate adaptation at the highest level of attention in the G20 agenda and shift the present narrative of adaptation being unaffordable and competing with development priorities to one where it is a central ingredient of social and economic development, in synergy with climate, economic and fiscal policies; (iii) explore ways to increase financing, in particular from public sources, for adaptation through existing channels to promote and to support efforts to mainstream climate adaptation at the highest political level, and to consider developing a dedicated framework or a platform for private investment for adaptation; and (iv) we also recognize the need to increase the role of private finance for adaptation, therefore we work with private sector representatives, multilateral and bilateral financing institutions and governments, to identify and to promote innovative financing mechanisms for adaptation, as appropriate, that can support implementation of countries' National Adaptation Plans, Policies and Strategies.

WASTE & CIRCULAR ECONOMY

27. As the world's largest economies, which generate, at different levels, around 75% of global waste and the majority of the global consumption of natural resources, we reaffirm our commitment to significantly reduce the generation of waste, including unmanaged and poorly managed waste, through zero waste and other initiatives. We prioritize the prevention and, where not possible, the reduction, reuse and recycling of waste in support of a circular economy. We are committed to significantly increasing the rates of environmentally sound waste management, considering national circumstances, needs and priorities, and recognize the importance of mobilizing resources and building partnerships that effectively help developing nations in this endeavor.

28. We also recognize the need of continued efforts to tackle pollution at the national, regional and global levels to reduce its impacts on the environment and human health, and will promote sustainable consumption and production patterns to work towards the achievement of the sustainable management and efficient use of natural resources, the reduction of waste generation, including food loss and waste, as laid out in SDG 12, and the promotion of a clean, healthy, and sustainable environment.

29. We intend to invest in and showcase the opportunities brought by the shift to sustainable consumption and production approaches, including through circular economy, resource efficiency, biodiversity-friendly, clean/low-pollution strategies, bioeconomy, product design to facilitate repair, reuse and recycling, and innovative sustainable technologies, including through the sustainable use of biodiversity to generate positive outcomes for nature, the economy and society, in order to keep products in use for as long as possible.

30. Recognizing the significant asymmetries among countries in capacities, resources and technologies for environmentally sound waste management and in the promotion of sustainable consumption and production patterns, including through circular economy, we recognize the need for mobilize new and additional resources from different sources and partnerships at all levels, including relevant and applicable commitments made under multilateral environmental agreements, such as the Basel Convention on Transboundary Movement of Hazardous Wastes, to support developing countries, including least developed countries and small islands developing states, to improve waste management and combat illegal traffic of waste.

31. To respond to the need for a sustainable, inclusive and just transition to sustainable consumption and production approaches, including through circular economy, we will put in place policies that foster the creation of decent work and high-quality jobs, as well as the economic and social empowerment and protection of the workforce in the waste sector, including those in cooperative settings, particularly waste pickers, women, local communities and Indigenous Peoples, throughout value chains. We are committed to fostering the inclusion of the informal sector in policy design and implementation of circular economy measures, where applicable.

32. Informing our policies and actions on the best available science, we highlight the process of establishing a new Intergovernmental Science-Policy Panel to contribute further to the sound management of chemicals and waste and to prevent pollution, and we will engage constructively in its ongoing negotiations.

33. We acknowledge that addressing plastic pollution is critical, and will further engage and cooperate in sharing scientific knowledge, monitoring and measuring marine plastic litter, including microplastics and their impact, acknowledging existing initiatives, such as the G20 Implementation Framework for Actions on Marine Plastic Litter, while recognizing, without prejudice to the ongoing negotiations, the need to support developing countries to address their plastic pollution challenges.

34. Finally, we acknowledge the need to enhance our collective efforts to end plastic pollution and commit to working together with the ambition of concluding by the end of 2024 the negotiations of an ambitious, fair and transparent international legally binding instrument on plastic pollution, including in the marine environment, based on a comprehensive approach in line with the mandate of UNEA resolution 5/14. We will engage actively and constructively in the spirit of collaboration and consensus-building at the INC5 session in the Republic of Korea, building on the work of the previous INC sessions, held in Senegal, Uruguay, France, Kenya, Canada and Thailand. The future instrument should take into account relevant international obligations, including those related to international trade agreements.