Payments for environmental services in Costa Rica: increasing efficiency through spatial differentiation

Costa Rica was the first developing country to have implemented a nation-wide program of payments for environmental services. We analyze whether the efficiency of the program could be increased through better targeting techniques and propose a targeting mechanism which takes into account the spatial diversity of service provision and opportunity cost. Given a fixed budget we show that selecting sites according to their service delivery potential increases the amount of contracted services. The efficiency increase is even more pronounced when opportunity costs are taken into account and payment levels are varied accordingly. We also observe that the use of the above mentioned concepts decreases the average area of the selected, sites which might indicate that the proposed approaches encourage participation of the poor

Increasing the efficiency of conservation spending: the case of payments for environmental services in Costa Rica

Payments for environmental services (PES) are an increasingly used instrument both for financing and implementing conservation. The Costa Rican national PES scheme is often considered as a leading model in this regard. We find that improved targeting could substantially increase the efficiency of the program, in the sense that total environmental services achieved with a given budget were found to nearly double when environmental benefits, threat, and participation costs are considered in site selection. The results have implications for an upscaling of PES or the selection among potential conservation projects more generally. Nevertheless, targeting involves implementation costs and faces scientific, administrative and political challenges. Promising approaches for overcoming these challenges include: development of simple targeting tools; improved data availability; implementing targeting from the very start of a program; and using auctions to elicit participation costs

Designer policy for carbon and biodiversity co-benefits under global change

Carbon payments can help mitigate both climate change and biodiversity decline through the reforestation of agricultural land1. However, to achieve biodiversity co-benefits, carbon payments often require support from other policy mechanisms2 such as regulation3, 4, targeting5, 6, and complementary incentives7, 8. We evaluated 14 policy mechanisms for supplying carbon and biodiversity co-benefits through reforestation of carbon plantings (CP) and environmental plantings (EP) in Australia’s 85.3 Mha agricultural land under global change. The reference policy—uniform payments (bidders are paid the same price) with land-use competition (both CP and EP eligible for payments), targeting carbon—achieved significant carbon sequestration but negligible biodiversity co-benefits. Land-use regulation (only EP eligible) and two additional incentives complementing the reference policy (biodiversity premium, carbon levy) increased biodiversity co-benefits, but mostly inefficiently. Discriminatory payments (bidders are paid their bid price) with land-use competition were efficient, and with multifunctional targeting of both carbon and biodiversity co-benefits increased the biodiversity co-benefits almost 100-fold. Our findings were robust to uncertainty in global outlook, and to key agricultural productivity and land-use adoption assumptions. The results suggest clear policy directions, but careful mechanism design will be key to realising these efficiencies in practice. Choices remain for society about the amount of carbon and biodiversity co-benefits desired, and the price it is prepared to pay for them