Payment for environmental services (PES), including watershed restoration and maintenance, are potential sources of substantial fi nancing to support rural communities' management of their natural assets, and to provide benefi ts to downstream water users or other communities. But while it may be simple enough to identify those who provide environmental services and the benefi ciaries of those services, creating contractual relationships between them has proven thorny.

Recent work in Africa tested innovative techniques for promoting PES through negotiated environmental service contracts with poor communities based on the principles of 'willingness to provide services' and 'willingness to pay'. This work was funded by an IFAD grant to the World Agroforestry Centre (ICRAF) – Pro-poor Rewards for Environmental Services in Africa (PRESA) – which is linked to IFAD investment projects in Guinea, Kenya, Uganda and the United Republic of Tanzania.

Similar work with ICRAF is ongoing in Asia, where the Programme for Developing Mechanisms to Reward the Upland Poor of Asia for the Environment Services They Provide (RUPES) is currently active in 12 sites in China, Indonesia, the Lao People's Democratic Republic, Nepal, the Philippines and Viet Nam. In Indonesia alone, over 6,000 farmers in 18 communities received permits to grow coffee while protecting the forests. Providing communities with clear land tenure rights gave them the incentive to maintain or restore environmental services, such as replanting and managing forest areas. One community negotiated with a private dam operator to reduce silt in the river by applying soil protection techniques on their plots in return for a microhydroelectric machine for energy supply. The company then engaged in negotiations with communities upstream of other dams. The activities also benefi t lowland communities by protecting the watersheds, and they shore up carbon sinks. These activities are providing further evidence that PES incentives do not necessarily need to be fi nancial, but can be provided in the form of secure land rights.