Approaches to cost-effectiveness of payments for tree planting and forest management for water quality services

A B S T R A C TThe evaluation of the cost-effectiveness of Payments for ecosystem services (PES) in fostering positive environmentaloutcomes has been central to the scientific debate on their implementation. PES cost-effectiveness canbe affected by a myriad of environmental, institutional and socio-economic factors operating at different spatialand temporal scales. Moreover, it can be affected by synergies and trade-offs in the provision of ecosystemservices (ES). Planting trees is increasingly considered an effective measure to provide water-related ES. It canenhance watershed services such as nutrient retention, erosion control, stream flow regulation, protectionagainst extreme events (e.g., floods and landslides), and lead to a permanent change in land use, replacingagricultural activities that give rise to diffuse pollution. Very few studies currently exist on the cost-effectivenessof tree planting for water quality benefits PES schemes in Europe. Including both review and research elements,this paper highlights challenges in undertaking such assessments. It develops a conceptual framework to helpunderpin future studies, with its application to three case studies in Denmark explored. Particular attention isgiven to the estimation of environmental effectiveness in the provision of water quality services and theimportance of co-benefits. In the case where we exclude co-benefits from the analysis, the financial costeffectivenessis always above zero, with central estimates (without discounting environmental improvements