Compensating farmers for ecosystem services

Key messages


  • PES Benefits for Farmers: Boosts income diversification, encourages sustainable practices, and supports climate action.
  • CompensACTION Initiative Objectives: Enhance farmer incomes, promote sustainable farming, provide co-benefits, diversify funding, and attract climate finance.
  • Levers for Scaling: Innovate PES for affordability, blend public-private finance, and enable implementation readiness.
  • G7 Leadership: Lead PES efforts to improve livelihoods, ensure food security, and address climate goals while promoting policy reforms and research.


Lessons and an agenda for innovation


Payments for ecosystem services (PES) to smallholder farmers in low- and middle-income countries (LMICs) can increase and diversify farmers’ income while also incentivizing practices for ecosystem services, including climate change mitigation and adaptation. The world’s 480 million smallholder farmers produce one third of the world’s food supply on one quarter of global agricultural area and often earn less than USD 1.25/day. Yet schemes for paying smallholder farmers in LMICs for ecosystem services have been limited.

The CompensACTION Initiative seeks to promote PES innovation at large scales to increase the incomes of smallholder farmers in LMICs while incentivizing climate action and environmental outcomes. The Initiative has five objectives:

  1. Increase and diversify the incomes of smallholder men and women farmers, while also supporting long-term investment by farmers.
  2. Incentivize practices for sustainable farming practices that lead to resilient and low-emission food systems, as well as other ecosystem services on- and off-farm.
  3. Deliver co-benefits with compensation mechanisms such as improved credit ratings and easy access to finance for farmers.
  4. Diversify financial instruments and increase public and private funding in addition to climate finance.
  5. Attract international climate finance for adaptation and mitigation action in the agricultural sector that leads to improved ecosystem services maintenance.

Author: Eva Wollenberg, Timm Tennigkeit, Dhanush Dinesh, Sophia Baumert, Felicitas Röhrig, Lisa Kirfel-Rühle, Leanne Zeppenfeldt

Publisher: Farmers Union of Malawi, Climaeat, CIAT

Language: English

Year: 2023

Ecosystem(s): Agricultural Land

Location(s): Malawi

Related Publications