PES pays people to protect forests—and it works. For the 1.6 billion people who depend on forests for their livelihoods, charging fines is an inadequate tool to encourage people to shift away from practices like harvesting timber, crop burning, and using fuelwood. PES flips the script by paying landholders cash in exchange for protecting nature in a number of ways, including conserving forests on their property, planting trees, and using machines to harvest crops without burning. Rigorous evaluations show PES can materially reduce pollution from crop burning and tree loss at a fraction of the price of popular climate policies in wealthy countries, such as electric vehicle subsidies.

Evidence-informed PES programs deliver a large climate bang‑for‑buck. Across several randomized evaluations, cost per ton of CO₂ averted is often just a few dollars because preventing deforestation or burning is extremely cheap relative to the damages avoided. Estimates for a program evaluated in Uganda indicate that on average, every US$2.60 spent on PES–less than a cup of coffee–avoided 1 ton of CO₂ from being released into the atmosphere.

Design details can make or break a program’s success. Three lessons are clear from the research: (1) Target high‑risk landholders to maximize the effect of the payments in slowing down potential deforestation or crop burning; (2) Verify compliance with satellite footage to ensure payments reward real conservation and damage is not displaced to neighboring areas; and (3) Fix contract incentives—from requiring participants to enroll all of their land, to building in upfront payments that overcome distrust and cash constraints.

Scale and keep testing. Long‑run sustainability depends on continued budget availability to avoid program disruptions, and on effective targeting of farmers living on land at high risk of deforestation. As climate budgets tighten, funders should prioritize designs that boost the impact of each dollar spent, along with transparent monitoring, reporting, and continuous evaluation to sustain environmental gains.

PES often achieves large emissions cuts at very low cost—making it ideal for scarce climate dollars. In Uganda, randomized evidence shows the net climate benefits of avoided emissions were more than double program costs; outside comparisons suggest PES can beat the cost‑effectiveness of many energy‑sector subsidies by wide margins. In Mexico, contracts that require farmers to enroll all of their land quadrupled cost‑effectiveness relative to the existing government PES design, by ensuring payments result in additional conservation rather than going towards land that was not going to be deforested anyway.

Small tweaks to programs can have an outsize impact on each dollar spent. Implementers should: (i) Target parcels and participants at high risk of clearing using historic loss, access, and poverty data. Where budgets are tight, use mechanisms like auctions to select the most motivated participants—this cut costs by about 30 percent in Malawi. (ii) Structure contracts to require farmers to enroll their entire property where feasible, and to give upfront payments to increase trust and give landholders the resources to change behavior early in the program; and (iii) Use satellite data to verify that clearing is not increasing in neighboring areas.