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Research Report

Payments for environmental services:: Some nuts and bolts

Sven Wunder
Copyright Date: Jan. 1, 2005
Pages: 32
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Table of Contents

  1. (pp. 1-3)

    Following the Brundtland Report (Brundtland 1987) and the Rio 1992 conference, tropical conservation gradually headed in a more people-oriented direction. The trend reflected the conventional wisdom that alleviating poverty was the only way to conserve and protect the environment. Integrated conservation and development projects (ICDPs), and sustainable forest management were two major instruments intended to simultaneously increase incomes and conserve the environment (Salafsky and Wollenberg 2000; Pearce, Putz, and Vanclay 2003). Yet despite scattered successes, neither approach has so far achieved major shifts in tropical land-use trends (Brandon, Redford, and Sanderson 1998; Sayer 1995) or silvicultural practices (Poore 2003; Rice...

  2. (pp. 3-8)

    To my knowledge, the literature so far does not formally define PES, which contributes to some conceptual confusion. For our field work in Bolivia and Vietnam, we used five relatively simple criteria to describe the PES principle. A PES is:

    1. a voluntary transaction where

    2. a well-defined ES (or a land-use likely to secure that service)

    3. is being ‘bought’ by a (minimum one) ES buyer

    4. from a (minimum one) ES provider

    5. if and only if the ES provider secures ES provision (conditionality).

    First, PES is a voluntary, negotiated framework, which distinguishes it from command-and-control measures. This presupposes that potential ES providers...

  3. (pp. 8-10)

    If you go to the market and buy a fish to cook for lunch, it may eventually taste better or worse than expected – but basically you know in advance what you buy. If you buy an ES, whether you get what you paid for is much less self-evident. Since the ES is provided over time, you always need to consider what would hypothetically happen without your PES scheme, i.e. you need to construct some counterfactual ES baselines. The first and prime question to ask is whether the PES scheme has a sufficiently large, additional effect vis-à-vis that baseline: Does...

  4. (pp. 10-11)

    In interpreting the emerging theoretical literature advocating PES schemes (Ferraro and Kiss 2002; Ferraro and Simpson 2002; Ferraro 2001), one might be tempted to believe PES has an absolute advantage over other approaches, specifically ICDPs. But as mentioned above, third instruments may also be available, and their conservation-efficiency ranking may be highly context-specific. Conservation’s opportunity cost, i.e. the returns to alternative land uses, are one discriminating factor determining where PES is applicable. Figure 3 provides a numerical example of land-use profitability from Paragominas County in the Brazilian Amazon, which we can use for discussion.

    Let us for the sake of...

  5. (pp. 12-13)

    In conservation and rural development circles, many look to PES as a source of just reward for poor rural dwellers who take care of the environment and continuously ‘produce’ ES – until now, for free (Shilling and Osha 2003; Rosa, Kandel, and Dimas 2003; van Noordwijk, Chandler, and Tomich 2004). However, from an efficiency point of view, only those who constitute a credible threat to ES provision should be paid. Let us return to the Brazilian Amazon for an example.

    First, the remote federal states of Amazonas and Amapá have recently declared large areas to be protected, and federal government...

  6. (pp. 13-15)

    This section will deal with three concerns in selecting possible PES recipients: the value-added chain, insecure land tenure, and illegal resource use. The first issue relates to the vertical distribution of opportunity costs. Consider the Setulang case (Wunder et al. 2004). For a biodiversity PES to be politically acceptable, one needs to compensate a critical mass of decision makers that would otherwise benefit from the biodiversity-threatening activity, logging. Figure 4 shows the approximate distribution of timber-extraction benefits, combined with the financial and commodity flows. Logs are being extracted from de jure state forests, the use rights of which are de...

  7. (pp. 15-16)

    Payment methods also matter for PES efficiency. A cynical ES buyer might be indifferent about the mode of payment, as long as the provider signs the contract. But the contract’s sustainability may eventually depend on the unforeseen development effect of payments on household incomes, changes in consumption, and demand for land and labor. Also, these changes may have environmental side-effects on conservation, beyond what is stipulated in the contract. So it is advisable to ex ante think about (and even experiment with) different payment modes, including the cash vs. non-cash selection and the periodicity of payment.

    Economists often think of...

  8. (pp. 16-20)

    At a time when overseas development assistance is increasingly focusing on poverty alleviation, it is no surprise that fads like PES are scrutinized for their potential to achieve this goal. Much hope exists that poor ES providers (e.g. remote upland farmers) can raise their incomes by receiving PES from the allegedly richer ES buyers (e.g. urban water users); indeed some donors are only interested in PES for their hoped-for, pro-poor effects.

    Conceptually, it is convenient to look at three poverty-related sub-question (Grieg-Gran et al 2005):

    1) Participation: what access to and ‘market share’ in PES schemes can poor potential ES...

  9. (pp. 20-22)

    This popular proverb expresses well the appeal of ICDPs and other indirect approaches: removing the obstacles to sustainable development (poverty, shortages of capital, technology and skills) would ‘fix the problem’ and make people embark on pro-conservation paths – in principle, forever. This message about the alleged synergy between development and environment from Brundtland and Rio 1992 was politically attractive, but unfortunately, in the conservation field, the flaws in the ‘teaching-to-fish’ strategy are increasingly apparent.

    ICDPs attract two main criticisms. First, although you have taught the man to fish, he might still have enough time and resources to extract logs, shoot...