Payments for Environmental Services: Some Nuts and Bolts

Payments for environmental services (PES) are part of a new and more direct conservation paradigm, explicitly recognizing the need to bridge the interests of landowners and outsiders. Eloquent theoretical assessments have praised the absolute advantages of PES over traditional conservation approaches. Some pilot PES exist in the tropics, but many fi eld practitioners and prospective service buyers and sellers remain skeptical about the concept. This paper aims to help demystify PES for non-economists, starting with a simple and coherent defi nition of the term. It then provides practical 'how-to' hints for PES design. It considers the likely niche for PES in the portfolio of conservation approaches. This assessment is based on a literature review, combined with fi eld observations from research in Latin America and Asia. It concludes that service users will continue to drive PES, but their willingness to pay will only rise if schemes can demonstrate clear additionality vis-à-vis carefully established baselines, if trust-building processes with service providers are sustained, and PES recipients' livelihood dynamics is better understood. PES best suits intermediate and/or projected threat scenarios, often in marginal lands with moderate conservation opportunity costs. People facing credible but medium-sized environmental degradation are more likely to become PES recipients than those living in relative harmony with Nature. The choice between PES cash and in-kind payments is highly context-dependent. Poor PES recipients are likely to gain from participation, though their access might be constrained and non-participating landless poor could lose out. PES is a highly promising conservation approach that can benefi t buyers, sellers and improv

Practical Alternatives to Estimate Opportunity Costs of Forest Conservation

Numerous studies have shown the merits of targeting the costs of conservation besides environmental benefits and aligning payments for ecosystem services with incurred costs. However, cost-effective and precise estimation of site specific opportunity costs is a major challenge. In this paper we test two approaches to estimate opportunity costs of conservation: One approach derives opportunity costs from annual land rents, and the other models regresses opportunity costs on easily obtainable and difficult to manipulate spatial and socio-economic independent variables such as soil quality. None of these approaches appeared to estimate opportunity costs sufficiently well. But since this judgment is based on how well the estimates compare to the reference opportunity costs, which were computed from farm budgets, we also considered potential flaws in the reference data and tested their plausibility. The tests confirmed the plausibility of data. Based on the results presented in this paper none of the two cost estimation approaches can be recommended for practical application in conservation programs. Yet, further research is necessary to confirm these findings giving special attention to the techniques that are applied to deliver reference point data on opportunity costs.Resource /Energy Economics and Policy,

Opportunity Costs as a Determinant of Participation in Payments for Ecosystem Service Schemes

Landholders are generally assumed to be willing to participate in payments for ecosystem service (PES) schemes if the offered payment exceeds the opportunity cost of participation. The calculation of opportunity costs is often based on historic financial data such as net returns of the formerly practiced land use. Reliable estimates of opportunity costs are required especially in flexible, cost-aligned payment schemes with differentiated payments at the farm scale. We question whether opportunity cost estimates that do not consider personal landholder characteristics such as risk considerations, information access and non-monetary personal preferences (e.g. for traditional land use practices) are sufficient to explain a landholder's decision to enrol land in PES. To test these assumptions, a PES adoption model was developed for hypothetical adoption decisions by 178 landholders in Costa Rica. The model explained up to 73.5% (Nagelkerkes pseudo R2) of adoption variance. The results confirm that adoption is not determined by financial costs alone. Trust in state institutions, for example, was highly significant. The results call for more integrated methods of opportunity cost estimation such as inverse auctions. Their strength lies, among others, in that all adoption determinants are potentially expressed in the landholder's bid.Resource /Energy Economics and Policy,

Do Environmental Services Buyers Prefer Differentiated Rates? A Case Study from the Colombian Andes

Flat user fees in payment for environmental services (PES) schemes promote administrative ease, and are sometimes perceived as egalitarian. However, when environmental service (ES) buyers are heterogeneous in their income and water consumption levels, this may not be optimal, as total payments become too low and services are under-supplied. This paper identifies ES buyer preferences and estimates their willingness to pay (WTP) differentiated fees in an ongoing PES initiative in an Andean watershed in Colombia. Small, flat user payments have recently been introduced to implement incipient watershed protection upstream. Environmental service users fall into two highly heterogeneous categories: smallholder peasants and owners of recreational houses. We performed a contingent valuation analysis in a representative stratified sample of 218 user households. For improved water services, ES buyers on average were willing to pay a monthly US$1 premium over current flat PES rates. Owners of recreational houses were willing to pay about US$1.50 more; smallholders only US$0.5. 85% of ES buyers also agree to pay differentiated fees. Of these, 41% would prefer fees differentiated by water consumption, 23% by household income, 30% criteria combination, and 6% by other criteria. Spatial variables, such as distance to the water distribution point and to the town center, importantly influenced WTP. The results may help designing users-driven PES schemes in accordance with efficiency and equity objectives.PES, WTP, environmental services, Colombia, watershed protection.

Synergies and trade-offs between ecosystem services in Costa Rica

International audienceEcosystems services have become a key concept in understanding the way humans benefit from ecosystems. In Costa Rica, a pioneer national scheme of payment provides compensation for forest conservation that is assumed to jointly produce services related to biodiversity conservation, carbon storage, water and scenic beauty, but little is known about the spatial correlations among these services. A spatial assessment, at national scale and with fine resolution, identified the spatial congruence between these services, by considering the biophysical potential of service provision and socioeconomic demand. Services have different spatial distributions but are positively correlated. Spatial synergies exist between current policies (national parks and the payment scheme) and the conservation of ecosystem services: national parks and areas receiving payments provide more services than other areas. Biodiversity hotspots have the highest co-benefits for other services, while carbon hotspots have the lowest. This finding calls for cautiousness in relation to expectations that forestbased mitigation initiatives such as REDD (reducing emissions from deforestation and forest degradation) can automatically maximize bundled co-benefits for biodiversity and local ecosystem services

Measuring forest and wild product contributions to household welfare : Testing a scalable household survey instrument in Indonesia

Systematic comparisons of human dependence on forests and environmental resources have been challenging, as a result of heterogeneous methodologies. Specialized Forestry Modules have been developed, with the goal of filling current information gaps concerning the economic importance of forest and wild products in household welfare and rural livelihoods. Results from a pilot assessment of the Forestry Modules in West Kalimantan, Indonesia, are presented, showing that the Forestry Modules perform well in extracting the expected information: mean per capita forest and wild product income shifts according to the geographical “forest gradient”. Significantly, in the forest-rich upstream village, mean forest and wild product income and mean forest-related wage and business incomes exceeds current mean agricultural income statistics for West Kalimantan and mean non-agricultural rural household incomes in the lowest bracket. Consumption of forest products and importance as a coping strategy was higher in the most upstream village, where sale of forest products in times of shock was more marked in the most downstream village (where forest coping strategies were also least important). The Forestry Modules' detailed and systematic approach can help ensure that contributions of forest and wild products are not underestimated in national figures.Peer reviewe