From Polluter Pays to Provider Gets: Distribution of Rights and Costs under Payments for Ecosystem Services

Should society have the right to freely available clean air and water, or should people be required to pay for these as commodities just as they do for many other goods or services that they consume? With this question and further questions on environmental governance in mind, we reviewed the paradigm shift in natural resource management from the polluter pays principle (PPP), which focuses on polluters and enforcement of thresholds, to the principle of payments for ecosystem services (PES), which emphasizes provider-based economic approaches. Given that there are conflicts of interest over natural resources and ecosystem services (ESs), these conflicts could be resolved through rights and/or cost assignments via third-party intervention, i.e., by the “state,” or through private compensation beyond initial regulation and state-initiated assignments of cost. Our analysis includes an in-depth literature review and a description of existing policies on ESs. We also examine the so-called Coase theorem based on a “neutral” situation where no rights or costs are distributed in advance. This theorem provides room for the PPP approaches and the provider-gets approaches. Both of these approaches should ensure, given certain assumptions, an economically efficient allocation of resources; however, they still ignore two indispensable issues, namely, the ecologically sustainable scale and inherent qualities of ecosystems and the distributional effects. With regard to the relationship between these two sets of approaches and their respective relationship to the legal framework, PES programs can evolve instead of PPP where no regulations are in place, existing regulations are deemed to be insufficiently formulated, or regulations are not enforced at all. We also further address some critical issues that can arise when PES programs evolve instead of PPP in practice, such as the general necessity of PES to coexist with basic rights and legal obligations, inappropriate lexicographic claims from providers of ESs, alongside claims for potential damages and the relationship of PES with the intrinsic motivation of service providers. Critically, insufficient attention has been paid to the fact that by replacing the earlier PPP doctrine with the “provider-gets” principle, rights are redistributed from the public to the service provider with important distributional implications for society. Therefore, the replacement of PPP with PES includes obstacles as well as opportunities, in particular for the relationship between rich and poor, and developing and developed countries.