Coping with risk and distortion in performance-based payment for environmental services schemes

Around the world, ecosystems are in decline and as human population increases new policy mechanisms to counteract this trend are increasingly being sought-after. A growing group of policy makers and practitioners are gaining interest in the new conservation performance payment approach. This policy approach falls within the larger group of payments for environmental services. This paper applies findings from a model developed by Baker (2002) on distortion and risk in performance-based employment contracts to conservation performance payments. Guidelines for the optimal design of pro-conservation incentives are identified. The theoretical considerations are backed-up by reviews of case studies on existing performance payments for water quality management and biodiversity conservation. --

Performance Payments for Environmental Services : Lessons from Economic Theory on the Strength of Incentives in the Presence of Performance Risk and Performance Measurement Distortion

Payments for environmental services (PES) schemes have become an increasingly accepted and popular mode for governmental and non-governmental agencies to use in addressing local and regional declines in ecosystem services. A defining characteristic of performance payments, a sub-category of PES schemes, is the linking of individual payments to environmental outputs themselves rather than to the inputs that affect the production of environmental services. Such a focus raises several practical issues during implementation. We review and translate key aspects of the economic theory of incentives into the context of performance payments schemes with special attention paid to two practical issues. The first is that of structuring individual incentives to account for risks outside the individual’s control such as weather that can affect the level of environmental services generated. The second deals with the possibility of distortion in the measurements of environmental services used to determine individual payments under PES schemes. Each challenge is accompanied by a discussion of advice based upon economic theory and a discussion of examples from different countries where such implementation issues arise.Optimal Incentive Contracts, Payments for Environmental Services, Performance Incentives, Distortion

Performance payments for carnivore conservation in Sweden

Solving carnivore-livestock conflicts is essential if goals to preserve biodiversity conservation are taken seriously and livelihoods especially of poor livestock owners are to be safeguarded. This paper presents an innovative performance payment approach for carnivore conservation, that has been successfully implemented in Sweden. Performance payments are made to reindeer herding Sami villages for certified carnivore offspring on the villages’ territories. First results support the assumption that this approach has the potential to solve many problems inherent to conventional compensation schemes. A well designed common pool regime is deemed necessary to direct the incentives set by the internal distribution of the performance payments toward collective action in carnivore conservation.Performance payments, Carnivore conservation, Sweden, Collective action, Environmental Economics and Policy, Institutional and Behavioral Economics, Resource /Energy Economics and Policy, Q2, Q57,

Outcomes and Determinants of Success of a Performance Payment Scheme for Carnivore Conservation

This paper presents a first empirical assessment of the outcomes and determinants of carnivore conservation success in Sweden’s pioneer performance payment scheme. Carnivores in northern Sweden depend on reindeer as prey which causes conflicts with reindeer herders. As compensation and conservation incentive, the government issues performance payments to reindeer herder villages based on the number of carnivore offspring certified on their land. The villages decide on the internal use and distribution of the payments. In the literature, it is generally assumed that benefit distribution rules are exogenously given. We extend the literature by developing a model to investigate such rules as endogenous decision. We hypothesize that conservation success is determined by natural geographical factors and each village’s capability to engage in collective action to manage the internal payments so that conserving rather than hunting carnivores becomes villagers’ optimal strategy. The hypotheses developed are tested with empirical village and household-level data from Sweden. The paper concludes that if limited hunting is legal, conservation success strongly depends on villages’ potential for collective action and their payment distribution rule. In cases without legal hunting, performance payments together with penalties on poaching provide sufficient incentives for herders to refrain from illicit hunting. Furthermore, the data reveals that villages’ group size has a direct negative effect on conservation outcomes as predicted by collective action theory. However, there is also an indirect effect which positively impacts conservation outcomes through the payment distribution rule. This result, at least in part, revises the general collective action hypothesis on purely negative effects of group size and highlights the importance of investigating factors driving groups’ internal benefit distribution rules.Conservation performance payments; wildlife conservation; collective action; empirical policy assessment; Sweden

Outcomes and Determinants of Success of a Performance Payment Scheme for Carnivore Conservation

This paper presents a first empirical assessment of carnivore conservation under a performance payment scheme. The Swedish government issues payments to reindeer herder villages based on the number of carnivore offspring certified on their pastures. The villages decide on the internal use and distribution of the payments. It is generally assumed that benefit distribution rules are exogenously given. We develop a model to investigate such rules as endogenous decision. The empirical data reveals that villages’ group size has a direct negative effect on conservation outcomes. However, there is also an indirect positive effect which impacts conservation outcomes through the benefit distribution rule. This result revises the general collective action hypothesis on purely negative effects of group size. The paper concludes that if limited hunting is legal, conservation success strongly depends on villages’ potential for collective action and the benefit distribution rule they choose.Conservation performance payments, Wildlife conservation, Collective action, Empirical policy assessment, Sweden, Resource /Energy Economics and Policy,

Comparing Conventional and New Policy Approaches for Carnivore Conservation – Theoretical Results and Application to Tiger Conservation

New policy approaches to facilitate the co-existence of wildlife and livestock are increasingly being sought-after as human sprawl increases and carnivore populations decrease. In this paper, models are developed to assess how alternative policy approaches can provide a livestock herder with incentives to sustain the socially optimal carnivore population. The wellestablished policy ex-post compensation is analyzed and compared to the innovative conservation performance payment approach. An empirical analysis of the model with data from tiger-livestock conflicts in India is presented.

Comparing Conventional and New Policy Approaches for Carnivore Conservation: Theoretical Results and Application to Tiger Conservation

New policy approaches to facilitate the co-existence of wildlife and livestock are needed for situations where predation incidents greatly impact households' income and retaliatory killing threatens endangered carnivore species' survival. In this paper, models are developed to assess how two alternative policy approaches impact a herder's decisions on carnivore hunting and livestock protection. We find that while the well-established ex-post compensation policy induces suboptimal livestock protection it can generate sufficient incentives for the herder to refrain from hunting so that the carnivore population reaches its socially optimal level. Performance payments are proposed as alternative policy. They are found not to distort livestock protection incentives and can also help achieve a socially optimal carnivore population level. Which of the two scheme types gives rise to less cost is ambiguous. An empirical analysis of the model with data from tiger-livestock conflicts in India is presente

Fighting climate change with bamboo in Africa: The case of Kyela, Rungwe and Mufindi districts – Tanzania

Responding to the African Forest Landscape Restoration Initiative (AFR100), 32 countries have committed to restoring more than 100 million hectares of land across Africa by 2030. Bamboo is being discussed as one of the nature-based solutions to achieve this ambitious target in the face of climate change. Major advantages are that it is a fast-growing versatile woody grass that can prosper in degraded lands. So far, landscape restoration strategies are driven by climate policy debates where bamboo is largely neglected. Most empirical research on the potential of bamboo for fighting climate change has been conducted in Asia, leaving open questions on the transferability of results to the African context. In this paper, we contribute to the debate by investigating how bamboo can contribute to climate change mitigation, especially in degraded ecosystems. Taking Tanzania as an example, we lay a special focus on bamboo carbon sequestration and storage potential and assess the dynamics of carbon stocks: (i) across an elevation gradient, (ii) between indigenous and exotic bamboo species, and (iii) between intensively and extensively managed bamboo ecosystems. We collected data from 60 destructive sample plots and estimated biomass carbon stocks in the aboveground carbon pool. The weighted average biomass, carbon stocks, and sequestration rates obtained were 52.4 t ha-1, 26.2 t C ha-1, and 19 t C ha-1yr-1, respectively. The ANOVA revealed a significant variation in carbon stocks across an elevation gradient and between bamboo species (P< 0.05), which explained 22% and 11% of the total variation. We also observed a significant two-way-factors interaction between elevation versus species and silvicultural management options (P< 0.05), explaining 12% and 5% of the total variation, respectively. Similarly, a three-way interaction between all factors was significant, accounting for 4% of the total aboveground carbon variation. Our results contribute to developing a more nuanced picture of the advantages and disadvantages of incorporating bamboo in landscape restoration efforts. The novel findings may be a first step toward unlocking future climate finance in Africa

Policy instruments for green infrastructure

Developing a green infrastructure is a major environmental policy ambition in many countries around the world. However, green infrastructure objectives can vary, especially in terms of requirements on the spatial allocation of conservation sites. In this paper, we investigate which policy instruments are being used to pursue green infrastructure objectives with differing spatial needs. We do this by reviewing a set of 127 papers. Our findings suggest that price-type instruments are often used for green infrastructure objectives that have no particular requirements on the spatial allocation of conservation sites. Procedural instruments are commonly applied when the aim is to build a green infrastructure with a contiguous but spread allocation of sites. While spatial planning and the development of financing strategies were commonly mentioned for green infrastructure with high connectivity requirements, we were surprised to find little use of incentive mechanisms that internalize the benefit of clustering and pass it on to landowners. We suggest that such incentive mechanisms are underutilized and call for more pilots and case study work, for example on agglomeration bonus and threshold payments for green infrastructure development. We further call for more research on green infrastructure policies in the global South

Conservation Costs Drive Enrolment in Agglomeration Bonus Scheme

Agglomeration bonus schemes have become important policy tools when the environmental benefit hinges on spatial coordination of conservation sites. We here analyse how spatial factors affect the uptake of an agglomeration payment scheme in a Swiss mountain region, which seeks to establish a network of conservation areas to conserve favourable conditions for biodiversity. We use a combination of spatially explicit farm census (44,279 parcels) and survey data in a spatially lagged explanatory variable model. In addition, we also consider the collaborative process in establishing the eligibility of parcels for receiving the bonus payment. We find that parcels that are more distant from the farm as well as those at steeper slopes are more likely to enter the scheme. This implies that conservation costs are an important driver of the farmers' decisions. The results remain robust when controlling for a wide range of parcel, farm and farmers' characteristics. The analysis also showed that the collaborative process increased the enrolment of parcels cultivated by larger farmers managing their land more intensively. We conclude that the collaborative process increased the weight given to biodiversity from connecting conservation sites in the planning process of the agglomeration bonus scheme