This presentation summarizes the IIED program "Developing markets for watershed protection services and improved livelihoods", suggests early findings from literature review, and concludes with emerging issues and future plans. The literature review assesses developments in PES schemes since the publication of existing case studies in "Silver Bullet or Fools Gold" (Landell-Mills and Porras, 2002) and summarizes encountered problems. The potential application to Europe and likely obstacles and opportunities are extensively discussed. The focus of the IIED project in the following 12 months is on the key constraints to PWS (payments for watershed services) and the pro-poor nature of markets.