Payments for Ecosystem Services through ecotourism and recreation for transformation
towards sustainability
a) Introduction
The challenge of sustainability and conserving biodiversity requires solutions that
address the negative externalities of market transactions. Major threats to biodiversity and
ecosystem services are largely produced through extraction, conversion, transport, and use of
goods and services traded in local or global markets (Wittman et al., 2015). Existing
environmental policy and management tools have encountered obstacles in addressing these
economic drivers. Legislative and regulatory 'command and control' approaches are difficult
to implement, as industries that bear focused costs are often highly effective as government
lobbyists (Kai M.A. Chan a et al., 2017). Ecosystem-based management (EBM) suffers from
these issues and is costly and difficult to implement due to coordination across
sectors/agencies. Environmental impact assessment has often been a rubber-stamping
procedure, approving only the most egregious focused impacts (Wynne-Jones, 2012).
Environmental incentive programs, such as payments for ecosystem services (PES), have the
potential to steer global markets towards sustainability. However, PES programs have faced
controversy due to concerns about the commodification of nature and the ethical implications
of introducing incentive programs into community settings.
Generally, payment for ecosystem services (PES) is a mechanism in which a group of
entities or people is compensated for the activities carried out to protect nature or sustainable
ecosystem services (Kraft, 2023). It aims to achieve conservation goals while simultaneously
addresses other issues such as promoting rural development and eradicates poverty level
(Bremer et al., 2014). PES can be compared with other instruments that function to generate
payment for ecosystem services such as taxes, subsidies and compensatory payments by
private and public entities (Jenkins, 2012). In a nutshell, it is a market-based instrument that
used to finance a nature-based conservation program.
There have been support by international communities to develop the PES mechanism
in many countries (Le et al., 2024). The United Nations through its environmental flagship
program has highlighted PES as one of the strategies for environmental protection (UNEP,
2008). Since them, many countries have been championing for its cause and develop many
projects. It is estimated that globally, there were 550 active PES projects with annual
transaction between USD 36-42 billions (Salzman et al., 2018). The PES projects under the
Global Environment Facility (GEF) has been leveraging around USD 208 million in project
financing (UNDP, 2024). In addition to this, there were many others internationally funded
projects while participation of governments has shown increasing in commitments. Countries
in Europe have been actively participating in PES projects that aims for sustainable forest
management (Sarvašová et al., 2019). Elsewhere around the world, many Asian countries
including China, Malaysia, Cambodia and Thailand (Nabangchang, 2014).
PES initiatives can be divided into several types (but not restricted) which includes
carbon sequestration projects, biodiversity protection, watershed protection as well as
landscape beauty (Fripp, 2014). In the following sub-section, a detail explanation about the
potentials of implementing PES mechanism will be highlighted, especially its contribution
towards sustainability. This will be followed by examples of the projects in Malaysia and
other countries. In Malaysia, example of PES application includes its potential
implementation at the Kenyir Lake area in Terengganu, which is known as the largest man-
made reservoir in Malaysia. Additionally, the article will elaborate on PES mechanism to
support local livelihoods in Bentong, Pahang, Malaysia. Three examples of its
implementation in the neighbouring Southeast Asian countries will be given, namely the case
study of marine tourism in Gili Matra Indonesia, PES services in the Northern Plains of
Cambodia and PES mechanism for Pathio Mangrove conservation in Thailand. In the final
section of the article, a conclusion on the overall highlights of the review will be elaborated
followed by policy recommendations for its improvement in the future.
b) Payment for ecosystem services at Kenyir Lake, Terengganu, Malaysia.
Kenyir lake is one of the of the largest man-made lake in Malaysia (Rouf et al., 2010).
It was built for the purpose of generating electricity and functioned as a hydroelectric dam.
Several ecotourism developments were initiated by the state government for the purpose of
creating awareness on nature preservation. Although some initiatives not fully into the stage
of implementation, certain models that follows the principles of payment for ecosystem
services (PES) has been developed, most notably from the academic studies.
Among the models developed for the PES is the conservation of wildlife particularly
bird population within the Kenyir area. A study by Jaafar et al. (2021) estimated a total value
between RM 2.07 and RM 6.90 millions for the overall birds population in the area. This
study further highlighted conservation and sustainable management initiatives that can be
taken for biodiversity preservation through PES which can be implemented by the state
government. Meanwhile, a study by Mohamad et al.(2022) indicated the tourists are willing
to pay for a visit to the conservation and interesting places within this area, provided that
good services and facilities are available. Proposed conservation methods for the bird
population includes the creation of birds sanctuary, a controlled and minimal natural
disturbances structures for bird watching and continuous scientific studies of the local bird
population (Zahidin et al., 2017).
A sustainable lake basin management also focuses on the conservation of fish
population within the protected areas (Sharip et al., 2016). In this regard, fish conservation
efforts have been implemented systematically within the Kenyir lake. Hundreds of fish
species such as Kelah, Baung, Toman and Lampam can easily found within the area
(Mohamad et al., 2014). As such, the government has created a sanctuary for endangered
species of Kelah. There is a minimal fee as low as RM20 is imposed to the visitors for the
purpose of management of the area that includes conservation activities (KETENGAH,
2024). The park imposes strict regulations to the visitor that includes limited number of
people allows per visit (Yaacob, 2023). These approaches have ensured that conservation of
wildlife in particular the certain fish species to be sustainable in the long term.
Another example of PES model used in Kenyir lake area is the elephant sanctuary
(Yaacob, 2023). This is similar to the program implemented in Thailand in which the elephant
conservation program have used PES model as one of their source for sustainable income
(Jarungrattanapong et al., 2018). Although no academic studies found on the PES model
used for the elephant conservation program, the public archive (web page) highlights Kenyir
Elephant Conservation Village (KECV) as an elephant conservation with gazetted areas of
256 hectares of land (KECV, 2024). A fee of RM 25 was imposed to the visitors to this place
for management and conservation activities.
c) Establishment of Payment for Ecosystem Services (PES) Scheme to support local
livelihoods in Bentong, Pahang, Malaysia.
In the establishment of PES scheme in Bentong, several issues and challenges need to
be faced like lack of awareness among local communities about the importance of ecosystem
services and the potential benefits of participating in PES schemes. Educating and engaging
communities in understanding the value of ecosystem services is crucial for the success of
PES initiatives. Addressing the equitable distribution of benefits from the Payment for
Ecosystem Services (PES) scheme poses a challenge. Disparities in access to information,
resources, and decision-making authority may result in certain groups receiving more benefits
than others. Securing long-term funding for PES initiatives is a significant hurdle. Financial
sustainability is vital to guarantee continuous payments to local communities for ecosystem
services. Identifying reliable funding sources and mechanisms is crucial for the scheme's
longevity.
The Payment for Ecosystem Services (PES) scheme in Bentong, Pahang aims to
balance the demands for forest land use while sustaining the livelihoods of local communities
through several methods such as financial incentives for conservation, community-based
approach, ecotourism development, job creation and income generation, sustainable forest
management and collaboration with authorities. The PES scheme provides financial
incentives to local communities for their involvement in environmental conservation efforts.
By compensating communities for the ecosystem services they protect, the scheme
encourages sustainable land use practices. The PES scheme adopts a community-based
approach, involving local communities in decision-making processes and benefit-sharing
mechanisms. This approach ensures that the benefits of conservation efforts directly support
the well-being of community members. The PES scheme integrates ecotourism activities as
part of the conservation strategy. By promoting sustainable ecotourism practices, the scheme
generates income opportunities for local communities while conserving forest ecosystems.
The PES scheme creates job opportunities for local community members, including roles in
ecotourism management, administration, and fieldwork. This not only provides income but
also enhances the socio-economic conditions of the communities. The PES scheme aims to
support sustainable forest management practices that balance conservation objectives with the
needs of local communities. By valuing ecosystem services, the scheme incentivizes
responsible land use practices. The PES scheme involves collaboration with forestry
departments and local authorities to ensure effective management of forest resources. Joint
management and benefit-sharing mechanisms help in achieving conservation goals while
supporting community livelihoods. Overall, the PES scheme in Bentong, Pahang seeks to
create a win-win situation where conservation efforts are rewarded, local communities benefit
economically, and forest ecosystems are sustained for future generations.
The economic value of environmental services in the study area was estimated using
the Contingent Valuation Method (CVM) including Willingness To Pay (WTP), Logistic and
Bivariate Probit Models, Double-Bounded Dichotomous Choice Format, and Calculation of
Conservation Values. The study employed the CVM to quantify public preferences for the
conservation of natural resources in the study area. WTP was used as an indicator of demand,
reflecting how much individuals were willing to pay for the preservation of environmental
services. The mean and median values of WTP were estimated using Logistic and Bivariate
Probit models. These models helped calculate the average WTP for conservation efforts,
providing insights into the monetary value that individuals placed on environmental services.
The study utilized the double-bounded dichotomous choice format within the CVM. This
format presented respondents with a specific dollar amount offer and asked them to respond
with either "yes" (take it) or "no" (leave it), allowing for the estimation of WTP for
environmental conservation. The study aggregated individual WTP values with the number of
visitors to the study area to calculate the yearly conservation values or benefits. This
approach helped quantify the economic contributions of conservation efforts and the value of
environmental services to stakeholders. By employing the CVM and related models, the
study was able to assess the economic value of environmental services in the study area,
understand public preferences for conservation, and estimate the willingness of individuals to
pay for the preservation of natural resources.
The study conducted addresses the increasing demands for forest land use due to
development, which threatens forest ecosystems. The conversion of forest lands for
agriculture, plantations, and infrastructure poses a risk to biodiversity and ecosystem services.
Balancing conservation efforts with the needs of local communities is a key challenge. The
study aims to address these issues by valuing environmental services and implementing a
PES scheme to sustain forest resources while supporting community livelihoods.
The study also concludes that the PES scheme in Janda Baik is effective in valuing
environmental services, engaging local communities in conservation activities, and
generating economic benefits. The estimated WTP values range from RM 17.00 to RM 30.00
per person per visit, indicating the willingness of visitors to pay for conservation. The study
recommends the promotion of ecotourism, sustainable forest management practices, and
collaboration between stakeholders to ensure the success of the PES scheme. Policy
recommendations include the continued implementation of community-based PES projects,
capacity building for local communities, and the enhancement of ecosystem services
valuation methods.
d) Achieving Sustainable Tourism through Payment for Ecosystem Service (PES)
Program: Case Study of Marine Tourism in Gili Matra Indonesia
The North Lombok Regency in West Nusa Tenggara Province with its strategic
location including the Gili Matra has seen increased tourism leading to more hotels and
infrastructure. The existence of Gili Matra region consist a group of small islands which are
Gili Air, Gili Meno and Gili Trawangan. The tourism growth as economically beneficial but
can negatively impact environmental capacity on both land and sea in Gili Matra. The main
tourist attraction for Gili Matra is its beautiful marine park featuring coral reefs and marine
life while tourism activities focus on maximizing positive economic impacts.
However, the conservation of coral reefs and marine life in Gili Matra is neglected as
well as leading to their deterioration. Marine parks in the Gili Matra region will lose their
attraction, negatively impacting and causing a decline in economic growth dependent due to
this tourism sector. Hence, tourism activities need to be aligned with conservation efforts in
order to prevent the deterioration of coral reefs and marine life in Gili Matra. One of the
potential solutions is implementing a Payment for Ecosystem Services (PES) program where
buyers pay providers to conserve resources and ensure the sustainability of ecosystem
services.
The PES concept refers to tourism businesses and tourists act as ‘buyers’ of
ecosystem services and should pay for the preservation of coral reefs and marine life.
Meanwhile, the institutions such as the Ministry of Maritime Affairs and Fisheries or local
fishermen act as ‘sellers’ of the ecosystem services. The funds collected are used for local
conservation activities and community empowerment. This study aims to analyze the
potential for aligning marine tourism and conservation specifically coral reefs through PES
scheme. This system is expected to enhance marine resource sustainability and empower
local communities to promote sustainable tourism activities in Gili Matra.
Furthermore, the research aims to propose policies applicable to other marine tourism
locations for achieving a balance between tourism, conservation and community
empowerment using Gili Matra as a case study. This study used a quantitative method and the
data collected through a random survey of 100 international tourists in Gili Matra. The survey
focused on gathering opinions about the benefits of coral reefs for humans and their
Willingness To Pay (WTP) for coral reefs conservation. This survey consist of Contingent
Valuation (CV) questions presented a hypothetical scenario where the local government
would charge a certain amount to tourists for coral conservation.
The study identified factors influencing the Willingness To Pay (WTP) of tourists and
hypothesizing the variables such as education, income, gender and previous visit. The study
also identified potential for balancing tourism and coral reefs conservation in Gili Matra,
Lombok as international tourists are willing to pay an average of USD 21.46 per visit for
conservation efforts. The Willingness To Pay (WTP) amount was influenced by income and
education level of tourists, with higher income individuals were willing to pay more while
better educated individuals tended to pay less. Gender and previous visits did not affect the
Willingness To Pay (WTP) to conserve related environment. The study recommends
developing a Payment for Ecosystem Services (PES) program to promote sustainable tourism
in Gili Matra.
e) Implementing Payment for Ecosystem Services in the Northern Plains of Cambodia
Implementing Payment for Ecosystem Services (PES) in the ecotourism sector poses
several challenges, including economic sustainability and financial issues. Securing steady
and sustainable funding for PES programs can be difficult, as these initiatives are highly
reliant on market conditions. Fluctuations in tourism, such as during economic crises or
changes in tourist preferences, can significantly impact revenues. For instance, the global
economic crisis in 2008 led to a significant drop in turkey hunters in Guatemala, which
disrupted the PES program there (Ingram et al., 2014) Additionally, the absence of concrete
policies and financial mechanisms has hindered the effective implementation of PES schemes
in Nepal (Bhatta et al., 2014). Financial challenges also encompass fluctuating tourism
revenues, making it difficult to ensure consistent payments to service providers.
The potential of Payment for Ecosystem Services (PES) to provide social benefits has
been widely explored in recent years. In high-income nations, PES mechanisms primarily
focus on conserving or restoring key ecosystem services, while in developing countries, PES
is also seen as a potential tool for poverty reduction (Leimona and Lee, 2008; Pagiola et al.,
2005; Pattanayak et al., 2010; Wendland et al., 2010).
Biodiversity conservation in the Northern Plains of Cambodia includes two protected
areas: the Kulen Promtep Wildlife Sanctuary and the Preah Vihear Protected Forest. The
Northern Plains landscape is globally significant for conservation due to the presence of the
largest remaining tracts of deciduous dipterocarp forests in the area. The Northern Plains still
support nearly intact wildlife populations, although at greatly reduced densities. It is home to
critically endangered species like the Giant Ibis and the White-shouldered Ibis (Pseudibis
gigantea and P. davisonii). Both protected areas also have long-established communities, with
most residents living in extreme poverty, as the Northern Plains is one of the poorest areas in
Cambodia (Ingram et al., 2014).
Wildlife ecotourism, which is a market-based Payment for Ecosystem Services (PES)
approach, was introduced in the same villages within the two Northern Plains protected areas.
The site meets several criteria for a successful ecotourism location as identified by Wilkie
and Carpenter (1999): it is home to rare species that are popular among international
birdwatchers (e.g., the Giant Ibis); sightings of rare species are reliably available throughout
the year; and the site is easily accessible from the major tourism center at Siem Reap, which
attracts over two million visitors annually (Ingram et al., 2014).
The eco-tourism model requires that every tourist who comes to the village to go
birdwatching must pay either US$30 if they see all of the species, including the rare ibis
species, or US$15 if they only see a subset of key species. The opportunity to receive a
higher payment if a tourist sees all of the species represents an additional, conditional
incentive, which has been integrated into the eco-tourism venture. The establishment of the
village-level ecotourism enterprise was based on a contractual agreement between the
protected area authorities, the WCS, and the village, which stipulated that the transfer of
tourism and associated benefits to the village was conditional on the discontinuation of local
hunting of key species and abiding by the agreed land-use plan (Ingram et al., 2014).
After the introduction of the PES scheme in the Northern Plains of Cambodia, the
population of the White-shouldered Ibis, one of the rarest birds in the world (Hirschfield,
2009), increased from one nest and a single pair of birds in 2002 to at least six nests and 23
individuals in August 2008 (Clements et al., 2010). Additionally, the area has seen an
increase in revenue from tourism-based opportunities. During the 2007–2008 season, the
village earned approximately US$12,000 in annual revenue, with nearly US$8500 being used
to pay for services provided by villagers (Ingram et al., 2014).
In Cambodia, it has been shown that in areas with weak institutions and poor
governance, it is crucial to invest in building institutions at the village level. For instance, the
locally elected committee responsible for managing and using tourism revenue for village
activities and projects has promoted democratic processes and transparency in decision-
making regarding the use of income (Clements et al., 2008). Additionally, involving multiple
actors, such as the Wildlife Conservation Society (WCS) in this case, has helped reinforce the
institutional arrangements established or improved through the project.
f) Payment for ecosystem (PES) scheme for Pathio Mangrove conservation in Thailand
The kingdom of Thailand is ubiquitous to the successes of some PES mechanism in
the country. According to (Thompson, 2019), there are at least three successful PES projects
in the country, namely: a) Pathio Mangrove PES project, b) Mae Rim Watershed PES project,
and c) Mae Taeng Watershed PES project. The Pathio Mangrove is a conservation approach
where stakeholders worked to conserve an area encompassing 20 hectares (Thompson &
Friess, 2019). Among the PES approaches implemented include ecotourism activities where
local communities will be hired for mangrove rehabilitation activities including continuous
funding by corporation through corporate social responsibilities (CSR) and commercial
payments through sustainable mangrove product creation such as biomass wastes (deadwood
and leaves) into specific fertiliser products. IT is expected that this approach will spearhead
conservation efforts in the area.
g) Conclusion
In concluding the findings from the review conducted on the case studies in Malaysia
and neighbouring countries, the studies highlighted about the incentive-driven programs and
projects aimed at protecting or providing sustainable flows of ecosystem services, through
PES mechanism. Generally, PES mechanism involves the compensation of landowners or
communities for providing specific ecosystem services. PES can helps to achieve
conservation goals while boosting socio-economic growth and community well-being.
It can also be concluded that PES can range from small local projects targeting
specific species to larger, governmental-driven initiatives. It can be private, government-
driven, or hybrid. In recent years, PES has gained increasing attention, but nonetheless some
of the proposed projects remains largely unproven. The expanding literature on PES has
important gaps, as the vast diversity of projects makes it difficult to discuss PES as a unit.
However, recent reviews have begun to address this gap by identifying important conditions
and contexts and which design features of PES are most appropriate for each.
One design that might facilitate this is the reverse auction, which includes a
competitive bidding process that encourages ES providers to bid low, particularly when bids
are closed. This basically can be identified through the CVM method. Additionally, this
design feature might be further leveraged to intentionally accomplish the value-change that is
likely essential for sustainability. Program communication could explicitly label funding as
awards for good stewardship, and by publicly recognizing individual actions and
commitments. Thus, it can grow leadership identities and encourage future behaviors
consistent with those identities. In a nutshell, cost-effectiveness at the scale of the project can
be enhanced by program designs that attract a large number of proce determination through
WTP. A thorough study about the financial funding and payment preferences could close the
loopholes that inevitably arise with any fixed metric for payment, thus reducing the risk of
new externalities in any proposed PES mechanism. Once implemented, the PES mechanism
will contribute towards sustainability of the program, both on the conservation activities as
well as financially over the long term.
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