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Cost-effective provision of environmental services: the role of relaxing market constraints

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  • GROOM, BEN
  • PALMER, CHARLES

Abstract

Ferraro and Simpson (2002) argue that when markets are competitive, payments for environmental services (PES) are more cost-effective in achieving environmental goals than more indirect approaches such as subsidies to capital. However, when eco-entrepreneurs face non-price rationing in input or output markets, as is typical for credit in developing countries for example, we show that interventions which relax constraints can be more cost-effective than PES. One corollary of this is that such indirect approaches are preferred to PES by interveners (e.g., donors) and eco-entrepreneurs alike. Both of these outcomes are more likely when constraints are severe. This has implications for schemes with dual environment and poverty alleviation objectives.

Suggested Citation

  • Groom, Ben & Palmer, Charles, 2010. "Cost-effective provision of environmental services: the role of relaxing market constraints," Environment and Development Economics, Cambridge University Press, vol. 15(2), pages 219-240, April.
    • Handle: RePEc:cup:endeec:v:15:y:2010:i:02:p:219-240_99
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    Cited by:

    1. Wolfersberger, Julien & Amacher, Gregory S. & Delacote, Philippe & Dragicevic, Arnaud, 2022. "The dynamics of deforestation and reforestation in a developing economy," Environment and Development Economics, Cambridge University Press, vol. 27(3), pages 272-293, June.
    2. Delacote, Philippe & Palmer, Charles & Bakkegaard, Riyong Kim & Thorsen, Bo Jellesmark, 2014. "Unveiling information on opportunity costs in REDD: Who obtains the surplus when policy objectives differ?," Resource and Energy Economics, Elsevier, vol. 36(2), pages 508-527.
    3. Beygi Heidarlou, Hadi & Banj Shafiei, Abbas & Erfanian, Mahdi & Tayyebi, Amin & Alijanpour, Ahmad, 2019. "Effects of preservation policy on land use changes in Iranian Northern Zagros forests," Land Use Policy, Elsevier, vol. 81(C), pages 76-90.
    4. George A Dyer & Robin Matthews & Patrick Meyfroidt, 2012. "Is There an Ideal REDD+ Program? An Analysis of Policy Trade-Offs at the Local Level," PLOS ONE, Public Library of Science, vol. 7(12), pages 1-12, December.
    5. Perrings, Charles, 2014. "Environment and development economics 20 years on," Environment and Development Economics, Cambridge University Press, vol. 19(3), pages 333-366, June.
    6. Lykke Andersen & Ugur Bilge & Ben Groom & David Gutierrez & Evan Killick & Juan Carlos Ledezma & Charles Palmer & Diana Weinhold, 2014. "Modelling land use, deforestation, and policy analysis: A hybrid optimization-ABM heterogeneous agent model with application to the Bolivian Amazon," GRI Working Papers 164, Grantham Research Institute on Climate Change and the Environment.
    7. Andersen, Lykke E. & Groom, Ben & Killick, Evan & Ledezma, Juan Carlos & Palmer, Charles & Weinhold, Diana, 2017. "Modelling Land Use, Deforestation, and Policy: A Hybrid Optimisation-Heterogeneous Agent Model with Application to the Bolivian Amazon," Ecological Economics, Elsevier, vol. 135(C), pages 76-90.
    8. Groom, Ben & Palmer, Charles, 2014. "Relaxing constraints as a conservation policy," Environment and Development Economics, Cambridge University Press, vol. 19(4), pages 505-528, August.
    9. Engel, Stefanie & Palmer, Charles & Taschini, Luca & Urech, Simon, 2012. "Cost-effective payments for reducing emissions from deforestation under uncertainty," LSE Research Online Documents on Economics 44837, London School of Economics and Political Science, LSE Library.
    10. Laing, Timothy & Palmer, Charles, 2015. "Economy-wide impacts of REDD when there is political influence," Resource and Energy Economics, Elsevier, vol. 40(C), pages 107-126.
    11. Brusselaers, Jan & Verbeke, Wim & Mettepenningen, Evy & Buysse, Jeroen, 2020. "Unravelling the true drivers for eco-certified wood consumption by introducing scarcity," Forest Policy and Economics, Elsevier, vol. 111(C).
    12. Brusselaers, Jan & Van Huylenbroeck, Guido & Buysse, Jeroen, 2017. "Green Public Procurement of Certified Wood: Spatial Leverage Effect and Welfare Implications," Ecological Economics, Elsevier, vol. 135(C), pages 91-102.
    13. Palmer, Charles, 2011. "Property rights and liability for deforestation under REDD+: Implications for 'permanence' in policy design," Ecological Economics, Elsevier, vol. 70(4), pages 571-576, February.
    14. Börner, Jan & Baylis, Kathy & Corbera, Esteve & Ezzine-de-Blas, Driss & Honey-Rosés, Jordi & Persson, U. Martin & Wunder, Sven, 2017. "The Effectiveness of Payments for Environmental Services," World Development, Elsevier, vol. 96(C), pages 359-374.
    15. Randrianarison, Henintsoa & Ramiaramanana, Jeannot & Wätzold, Frank, 2017. "When to Pay? Adjusting the Timing of Payments in PES Design to the Needs of Poor Land-users," Ecological Economics, Elsevier, vol. 138(C), pages 168-177.
    16. Cranford, Matthew & Mourato, Susana, 2014. "Credit-Based Payments for Ecosystem Services: Evidence from a Choice Experiment in Ecuador," World Development, Elsevier, vol. 64(C), pages 503-520.
    17. Reutemann, Tim & Engel, Stefanie & Pareja, Eliana, 2016. "How (not) to pay — Field experimental evidence on the design of REDD+ payments," Ecological Economics, Elsevier, vol. 129(C), pages 220-229.
    18. Palmer, Charles & Taschini, Luca & Laing, Timothy, 2017. "Getting more ‘carbon bang’ for your ‘buck’ in Acre State, Brazil," Ecological Economics, Elsevier, vol. 142(C), pages 214-227.
    19. Philippe Delacote & Gwenolé Le Velly & Gabriela Simonet, 2018. "A tale of REDD+ projects. How do location and certification impact additionality?," Working Papers 1808, Chaire Economie du climat.
    20. Philippe Delacote & Gwenolé Le Velly & Gabriela Simonet, 2020. "Distinguishing potential and effective additionality to revisit the location bias of REDD+ project," Working Papers hal-01954923, HAL.
    21. Carlson, Anna & Palmer, Charles, 2016. "A qualitative meta-synthesis of the benefits of eco-labeling in developing countries," Ecological Economics, Elsevier, vol. 127(C), pages 129-145.
    22. Mengmeng Liu & Limin Bai & Hassan Saif Khan & Hua Li, 2023. "The Influence of the Grassland Ecological Compensation Policy on Regional Herdsmen’s Income and Its Gap: Evidence from Six Pastoralist Provinces in China," Agriculture, MDPI, vol. 13(4), pages 1-16, March.
    23. Jichuan Sheng & Weihai Zhou & Alex De Sherbinin, 2018. "Uncertainty in Estimates, Incentives, and Emission Reductions in REDD+ Projects," IJERPH, MDPI, vol. 15(7), pages 1-21, July.

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