The wealth of nature, in the form of environmental income, is already a key component of rural livelihoods for both the rich and poor. But there is great potential for this component to grow, given the right conditions, and contribute to higher household incomes that lessen poverty. The first condition is an acceptance that better management of ecosystems can increase their productivity—immediately and over the long term. And, since the wealth of nature flows directly from the productivity of ecosystems, better management brings the potential for greater environmental income.

The second condition is that the access to and control of nature shifts so that the rural poor can both see the advantages of good ecosystem management and claim the benefits from it, overcoming the obstacles of disenfranchisement that have kept them economically and politically marginalized.

In this chapter we explore both these conditions—prudent management of ecosystems and governance that empowers the poor to profit from it. We consider the questions: What do we mean by better ecosystem management? What is its potential for poverty reduction? And what governance changes are required to route environmental income to the poor?

In addition, we examine the factors besides governance and eco-friendly practices that support the evolution of environmental income for poverty reduction. These revolve around the need to find successful models to commercialize ecosystem goods and services, coping with such constraints as marketing, transportation, and the need to capture greater value from nature-based enterprises than the poor often do. In addition, we consider the potential for "payment for environmental services" (payments for preserving the functions of ecosystems, such as water supply or carbon storage) to contribute to the portfolio of incomegenerating enterprises based on nature that the poor can tap.

In examining these factors, we put forth four steps to generate greater environmental income for the rural poor.

This is good news for rural economies in general. But how effective is this increase in environmental income at reducing village-level poverty? Unfortunately, evidence shows that the benefits of ecosystem improvements are often skewed toward higher income brackets. With more land, trees, cattle, or capital to invest in the increased farming potential of their recovered lands, the rich tend to capture more of the income bonus that healthier ecosystems provide (Reddy et al. 2004:318).

But poor families certainly do benefit also, for example by greater availability of wage employment, and greater ability to meet their subsistence needs for firewood, fish, and the like. This provides a maintenance level of ecosystem support and greater income resilience for hard times. But it may not provide enough support to take a firm step out of poverty. For that, governance changes that free up access to ecosystems and promote information and market support to the poor are needed.