Innovation Subsidy Design and Payments for Ecosystem Services: A Mixed-Methods Approach to Multilateral Environmental Governance
Institutional Design for Innovation and PES
DOI:
https://doi.org/10.66529/agripat.2026.2.1.29Keywords:
Ecosystem, Climate, Barani, Innovative, BureaucraticAbstract
Unsustainable land use practices are a major contributor to climate change through increased greenhouse gas (GHG) emissions. Payments for Ecosystem Services (PES) offer a promising solution by providing financial incentives to individuals and communities that engage in sustainable natural resource management. In Pakistan, where environmental challenges such as desertification, deforestation, and water scarcity are escalating due to climate change and poor land governance, PES remains underutilized and insufficiently embedded in environmental and agricultural policy frameworks. This study examined the household-level socio-economic and land-use characteristics across four ecological zones of Punjab. The study investigates the potential for innovation subsidy designs under a payment for ecosystem services (PES) framework. Quantitative results show that the PES program significantly increased household income ( = 0.550, p < 0.1) and adoption of sustainable practices ( = 0.310, p < 0.1). While vegetation cover showed a positive trend ( = 0.120$), ecological gains were moderate compared to socio-economic shifts. To ensure long-term success, Pakistan should formally integrate PES into the Climate Change Act through decentralized institutional coordination and timely payment disbursement. The results offer a practical roadmap for scaling up sustainable incentive mechanisms in line with the Pakistan Climate Change Act and Sustainable Development Goals (SDGs). Findings suggest that redesigned subsidies focusing on water-efficient crops and soil regeneration led to improved water use efficiency and increased farm-level incomes. PES initiatives showed moderate ecological improvements but high levels of community engagement and interest.
References
Ahmed, A. (2023). Environmental economics: Balancing growth and sustainability. Journal of Applied Finance and Economic Policy, 7(01), 1-18.
Akhtar, M., Zhao, Y., Gao, G., Gulzar, Q., & Hussain, A. (2022). Assessment of spatiotemporal variations of ecosystem service values and hotspots in a dryland: A case‐study in Pakistan. Land Degradation & Development, 33(9), 1383-1397. DOI: https://doi.org/10.1002/ldr.4245
Alam, K. (2013). Factors affecting public participation in river ecosystem restoration: using the contingent valuation method. The Journal of Developing Areas, 47(1), 223-240. DOI: https://doi.org/10.1353/jda.2013.0008
Ali, A., Shedayi, A. A., Haider Raza, E. H., & ul Hasnain, S. A. (2023). Economic valuation of ecosystem services of Qurumber national park in Gilgit-Baltistan, Pakistan. Parks, 11. DOI: https://doi.org/10.2305/IUCN.CH.2023.PARKS-29-1AA.en
Ali, M. A. S., Khan, S. U., Khan, A., Khan, A. A., & Zhao, M. (2020). Ranking of ecosystem services on the basis of willingness to pay: Monetary assessment of a subset of ecosystem services in the Heihe River basin. Science of the Total Environment, 734, 139447. DOI: https://doi.org/10.1016/j.scitotenv.2020.139447
Ali, M. A., & Kamraju, M. (2023). Ecosystem services. In natural resources and society: understanding the complex relationship between humans and the environment. Springer Nature Switzerland, 51-63. DOI: https://doi.org/10.1007/978-3-031-46720-2_4
Ali, S., & Shah, S. A. (2019). Environmental Governance and Policy Implementation in Pakistan: Assessing Institutional Capacities and Challenges. Journal of Development and Social Sciences, 1(2), 20-35.
Aziz, T. (2021). Changes in land use and ecosystem services values in Pakistan, 1950–2050. Environmental Development, 37, 100576. DOI: https://doi.org/10.1016/j.envdev.2020.100576
Balasubramanian, M. (2020). Valuation of Ecosystem Services and their implications for accounting for natural capital in Karnataka. Aarthika Charche FPI J. Econ. Gov, 5, 59-72.
Báliková, K., Hillayová, M. K., Dúbravská, B., Bartalský, B., Halaj, D., & Dobšinská, Z. (2024). Understanding the role of innovation systems in PES development: A survey of stakeholder DOI: https://doi.org/10.1016/j.tfp.2024.100498
Boeuf, B., & Fritsch, O. (2016). Studying the implementation of the Water Framework Directive in Europe: A meta-analysis of 89 journal articles. Ecology and Society, 21(2). DOI: https://doi.org/10.5751/ES-08411-210219
Bredemeier, B., Herrmann, S., Sattler, C., Prager, K., van Bussel, L. G., & Rex, J. (2022). Insights into innovative contract design to improve the integration of biodiversity and ecosystem services in agricultural management. Ecosystem Services, 55, 101430. DOI: https://doi.org/10.1016/j.ecoser.2022.101430
Din, J. U., Nawaz, M. A., Norma-Rashid, Y., Ahmad, F., Hussain, K., Ali, H., & Adli, D. S. H. (2020). Ecosystem services in a snow leopard landscape: A comparative analysis of two high-elevation national parks in the Karakoram–Pamir. Mountain Research and Development, 40(2), 1-11. DOI: https://doi.org/10.1659/MRD-JOURNAL-D-19-00047.1
Garrido Mateos, L. (2025). Economic causes and consequences of a new paradigm in environmental protection. The case of ecosystem impact accountability.
https://hdl.handle.net/10366/164943
Geneva Environment Network. (2025). Desertification, Land Degradation and Drought, and the Role of Geneva. https://www.genevaenvironmentnetwork.org/resources/updates/desertification-land-degradation-and-drought-and-the-role-of-geneva
Giefer, M. M. (2020). Payment for Ecosystem Services’ Effects on Coupled Human-Natural Systems at Fanjingshan National Nature Reserve, China (Doctoral dissertation, The University of North Carolina at Chapel Hill).
Hassan, M., Hussain, M., Ali, A., Rehman, F., Tabassum, A., Amin, M., ... & Shah, S. W. A. (2022). Economic valuation of selected ecosystem services in Islamabad Capital Territory (ICT), Pakistan. Brazilian Journal of Biology, 84, e260614. DOI: https://doi.org/10.1590/1519-6984.260614
Igini, M. (2024). Elections 2024: Pakistan’s next Government faces pressing environmental issues.https://earth.org/elections-2024-pakistans-next-government-faces-pressing-environmental-issues
Jack, B. K., Kousky, C., & Sims, K. R. (2008). Designing payments for ecosystem services: Lessons from previous experience with incentive-based mechanisms. Proceedings of the national Academy of Sciences, 105(28), 9465-9470. DOI: https://doi.org/10.1073/pnas.0705503104
Kalkuta, A. (2025, September). Biodiversity Crisis: A Critical Global Challenge for the 21st Century. In International Conference on Global Trends and Innovations in Multidisciplinary Research, 1(3), 4-9.
Kc, B., Kandel, P. N., & Adhikari, S. (2013). Economic valuation of ecosystem services in protected areas: A case study from Nepal. Banko Janakari, 23(1), 42-50. DOI: https://doi.org/10.3126/banko.v23i1.9466
Kemigisha, E., Babweteera, F., Mugisha, J., & Angelsen, A. (2023). Payment for environmental services to reduce deforestation: Do the positive effects last?. Ecological economics, 209, 107840. DOI: https://doi.org/10.1016/j.ecolecon.2023.107840
Khan, I., & Zhao, M. (2019a). Water resource management and public preferences for water ecosystem services: A choice experiment approach for inland river basin management. Science of the Total Environment, 646, 821-831. DOI: https://doi.org/10.1016/j.scitotenv.2018.07.339
Khan, I., Lei, H., Ali, G., Ali, S., & Zhao, M. (2019b). Public attitudes, preferences and willingness to pay for river ecosystem services. International Journal of Environmental Research and Public Health, 16(19), 3707. DOI: https://doi.org/10.3390/ijerph16193707
Le, T. A. T., Vodden, K., Wu, J., Bullock, R., & Sabau, G. (2024). Payments for ecosystem services programs: A global review of contributions towards sustainability. Heliyon, 10(1). DOI: https://doi.org/10.1016/j.heliyon.2023.e22361
Lekshmi, U. D., Mohan, G., Subramanya, K. H. S., & Chandrakanth, M. (2015). Estimation of Payment for Ecosystem Services of GKVK: A Resource Economics Study. Mysore. J. Agric. Sci, 49(4), 738-743.
Mayr, S., Pokorny, B., Montero-de-Oliveira, F. E., & Reinecke, S. (2025). Scaling agroforestry through payments for ecosystem services: a scoping review. Climate Policy, 1-20. DOI: https://doi.org/10.1080/14693062.2025.2490205
Millennium Ecosystem Assessment. (2005). Ecosystems and Human Well-being: Synthesis. https://www.millenniumassessment.org/documents/document.356.aspx.pdf
Nath, A. J., Nath, P. C., & Sileshi, G. W. (2023). Payment for Ecosystem services from Agroforestry: Case studies and lessons. In Agroforestry for sustainable intensification of agriculture in Asia and Africa (pp. 739-757). Singapore: Springer Nature Singapore. DOI: https://doi.org/10.1007/978-981-19-4602-8_23
Pagiola, S. (2008). Payments for environmental services in Costa Rica. Ecological economics, 65(4), 712-724. DOI: https://doi.org/10.1016/j.ecolecon.2007.07.033
Sainz‐Santamaria, J. (2025). Policy Capacities Under Weak Institutions: The Design of Paying for Ecosystem Services in Latin America. Public Administration and Development.
Sainz‐Santamaria, J. (2025). Policy Capacities Under Weak Institutions: The Design of Paying for Ecosystem Services in Latin America. Public Administration and Development. DOI: https://doi.org/10.1002/pad.70015
Shedayi, A. A., Xu, M., Gonalez-Redin, J., Hagist, S. C. N., Aslam, S., & Khan, N. (2019). Spatiotemporal assessment and valuation of provisioning ecosystem services of Pakistan. Appl Ecol Environ Res, 17(3), 6735-6759. DOI: https://doi.org/10.15666/aeer/1703_67356759
Shekhar, S., Pushpanjali, P., & Badola, R. (2025). An economic perspective of ecosystem services with special reference to Kaziranga National Park. In Forests for Inclusive and Sustainable Economic Growth. 293-308. DOI: https://doi.org/10.1016/B978-0-443-31406-3.00022-9
Siddique, K., Shah, S. A., & Ali, G. (2025). Do forest ecological services matter to the poor and should they be considered in development planning: facts from Pakistan-administered Kashmir. Environment, Development and Sustainability, 27(2), 5371-5392. DOI: https://doi.org/10.1007/s10668-024-05892-9
Song, C., Liu, Y., Liu, L., Xian, C., & Wang, X. (2023). A scientometric analysis of payments for ecosystem services research: Mapping global trends and directions. Sustainability, 15(21), 15649. DOI: https://doi.org/10.3390/su152115649
Vuletić, D., Krajter Ostoić, S., Keča, L., Avdibegović, M., Potočki, K., Posavec, S., ... & Pezdevšek Malovrh, Š. (2020). Water-related payment schemes for forest ecosystem services in selected Southeast European (SEE) countries. Forests, 11(6), 654. DOI: https://doi.org/10.3390/f11060654
Winkel, G., Lovrić, M., Muys, B., Katila, P., Lundhede, T., Pecurul, M., ... & Wunder, S. (2022). Governing Europe's forests for multiple ecosystem services: Opportunities, challenges, and policy options. Forest Policy and Economics, 145, 102849. DOI: https://doi.org/10.1016/j.forpol.2022.102849
Wunder, S., Börner, J., Ezzine-de-Blas, D., Feder, S., & Pagiola, S. (2020). Payments for environmental services: Past performance and pending potentials. Annual Review of Resource Economics, 12(1), 209-234. DOI: https://doi.org/10.1146/annurev-resource-100518-094206
Yu, Y., Wu, Y., Wang, P., Zhang, Y., Yang, L. E., Cheng, X., & Yan, J. (2021). Grassland subsidies increase the number of livestock on the Tibetan plateau: why does the “payment for ecosystem services” policy have the opposite outcome?. Sustainability, 13(11), 6208. DOI: https://doi.org/10.3390/su13116208
Zaheer, S., Afzal, M., & Khurshid, M. (2019). Environmental Governance in Pakistan: An Analysis of Institutional and Policy Constraints. Pakistan Journal of Social Sciences, 39(1), 77-90.
Zandebasiri, M., Jahanbazi Goujani, H., Iranmanesh, Y., Azadi, H., Viira, A. H., & Habibi, M. (2023). Ecosystem services valuation: A review of concepts, systems, new issues, and considerations about pollution in ecosystem services. Environmental Science and Pollution Research, 30(35), 83051-83070. DOI: https://doi.org/10.1007/s11356-023-28143-2
Zemke, L. (2026). Private Finance for Nature-based Solutions in Developing Countries: A Study of Kenya with Perspectives from Costa Rica. (Doctoral dissertation, UCL (University College London)).
Downloads
Published
Data Availability Statement
The datasets analyzed during the current study are available from the corresponding author upon reasonable request.
Issue
Section
License
Copyright (c) 2026 Authors retain the copyright of their published work and grant the journal the right of first publication.
This work is licensed under a Creative Commons Attribution 4.0 International License.
All articles published in AgriPaT are licensed under the Creative Commons Attribution 4.0 International (CC BY 4.0) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
