The importance of intact ecosystems for human-wellbeing as well as the dependence on functions and services they provide is undoubted. But still neither the costs of ecosystem degradation nor the benefits from ecosystem functions and services appear on socio-economic balance sheets when development takes place. Consequently overuse of natural resources is socio-economically promoted by conventional resource management policies and external effects (externalities), equally positives and negatives, remain unregarded. In this context the potential of payments for hydrological ecosystem services as a political instrument to foster sustainable natural resource use, and rural development shall be investigated. This paper introduces the principle concept of such payments, presents a case study from Nicaragua and highlights preliminary effects of the application of this instrument on natural resource use and development.

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