Concept of compensation payments and ecosystems

Abstract

Economic valuation of the tropical forest resource is en vogue. The acknowledgment of the environment’s multiple benefit delivery paves the way for reciprocal bargain-like transactions, opening up the potential for designing efficient and effective compensation mechanisms. The following chapter contributes to the economic section of the present handbook, introducing in a first step theoretical considerations necessary to gain an understanding of the rationale environmental and forest-related compensation schemes are based on. Subsequently, the reader will be familiarized with practical examples including Kyoto’s Clean Development Mechanism (CDM), Payments for Ecosystem Services (PES), and Reducing Emissions from Deforestation and Forest Degradation (REDD). Through the combination of theory and their practical embedding, this chapter offers a holistic overview of compensation payment arrangements found throughout the tropical hemisphere, providing guidance and material for mastering the subject.