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An institutional analysis of payments for environmental services

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  • Vatn, Arild
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    Abstract

    In this paper the characteristics and functioning of PES is analyzed from an institutional perspective. While in theory PES is seen as a market solution to environmental problems -- as an alternative to state (hierarchical) and community governance -- a review of a large amount of case studies shows that PES in practice depends rather fundamentally on state and/or community engagement. Hence PES are foremost a reconfiguration of the roles of public bodies and communities becoming core intermediaries or 'buyers'. First, to establish PES, rights to the land that delivers the environmental service must be clarified. This demands public action. Second, transacting over environmental amenities is very costly. Creating 'markets' for environmental services depends therefore crucially on state and community facilitation. Hence 'buyers' are often public agencies. High transaction costs also influence price setting. Payments do not follow the market format as intermediaries frequently are setting the price, with users often being unaware even of the fact that they pay. Finally, the distinction between payments as incentives and as fair compensations is emphasized. While payments may strengthen community relations and simplify action for environmental care, they may also introduce a purely instrumental logic and in some cases worsen the environmental status by crowding out environmental virtues. For the future, greater awareness of these dynamics is warranted.

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    Bibliographic Info

    Article provided by Elsevier in its journal Ecological Economics.

    Volume (Year): 69 (2010)
    Issue (Month): 6 (April)
    Pages: 1245-1252

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    Handle: RePEc:eee:ecolec:v:69:y:2010:i:6:p:1245-1252

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    Web page: http://www.elsevier.com/locate/ecolecon

    Related research

    Keywords: PES Environmental governance Rights Transaction costs Motivation structures Markets Community;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Arild Vatn & Daniel Bromley, 1997. "Externalities — A market model failure," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 9(2), pages 135-151, March.
    2. Pagiola, Stefano, 2006. "Payments for Environmental Services in Costa Rica," MPRA Paper 2010, University Library of Munich, Germany.
    3. Gneezy, U. & Rustichini, A., 1998. "Pay Enough - Or Don't Pay at All," Discussion Paper 1998-57, Tilburg University, Center for Economic Research.
    4. Paavola, Jouni, 2007. "Institutions and environmental governance: A reconceptualization," Ecological Economics, Elsevier, vol. 63(1), pages 93-103, June.
    5. Vatn, Arild, 2005. "Rationality, institutions and environmental policy," Ecological Economics, Elsevier, vol. 55(2), pages 203-217, November.
    6. Uri Gneezy & Aldo Rustichini, 2000. "A fine is a price," Natural Field Experiments 00258, The Field Experiments Website.
    7. Kosoy, Nicolás & Corbera, Esteve, 2010. "Payments for ecosystem services as commodity fetishism," Ecological Economics, Elsevier, vol. 69(6), pages 1228-1236, April.
    8. Per Kristian Rørstad & Arild Vatn & Valborg Kvakkestad, 2007. "Why do transaction costs of agricultural policies vary?," Agricultural Economics, International Association of Agricultural Economists, vol. 36(1), pages 1-11, 01.
    9. Dobbs, Thomas L. & Pretty, Jules, 2008. "Case study of agri-environmental payments: The United Kingdom," Ecological Economics, Elsevier, vol. 65(4), pages 765-775, May.
    10. Arild Vatn, 2002. "Multifunctional agriculture: some consequences for international trade regimes," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 29(3), pages 309-327, July.
    11. Claassen, Roger & Cattaneo, Andrea & Johansson, Robert, 2008. "Cost-effective design of agri-environmental payment programs: U.S. experience in theory and practice," Ecological Economics, Elsevier, vol. 65(4), pages 737-752, May.
    12. Grieg-Gran, Maryanne & Porras, Ina & Wunder, Sven, 2005. "How can market mechanisms for forest environmental services help the poor? Preliminary lessons from Latin America," World Development, Elsevier, vol. 33(9), pages 1511-1527, September.
    13. Wunder, Sven & Engel, Stefanie & Pagiola, Stefano, 2008. "Taking stock: A comparative analysis of payments for environmental services programs in developed and developing countries," Ecological Economics, Elsevier, vol. 65(4), pages 834-852, May.
    14. Kosoy, Nicolas & Martinez-Tuna, Miguel & Muradian, Roldan & Martinez-Alier, Joan, 2007. "Payments for environmental services in watersheds: Insights from a comparative study of three cases in Central America," Ecological Economics, Elsevier, vol. 61(2-3), pages 446-455, March.
    15. Vatn, Arild, 2009. "Cooperative behavior and institutions," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(1), pages 188-196, January.
    16. Pascual, Unai & Muradian, Roldan & Rodríguez, Luis C. & Duraiappah, Anantha, 2010. "Exploring the links between equity and efficiency in payments for environmental services: A conceptual approach," Ecological Economics, Elsevier, vol. 69(6), pages 1237-1244, April.
    17. Corbera, Esteve & Soberanis, Carmen González & Brown, Katrina, 2009. "Institutional dimensions of Payments for Ecosystem Services: An analysis of Mexico's carbon forestry programme," Ecological Economics, Elsevier, vol. 68(3), pages 743-761, January.
    18. Wunder, Sven & Albán, Montserrat, 2008. "Decentralized payments for environmental services: The cases of Pimampiro and PROFAFOR in Ecuador," Ecological Economics, Elsevier, vol. 65(4), pages 685-698, May.
    19. Engel, Stefanie & Pagiola, Stefano & Wunder, Sven, 2008. "Designing payments for environmental services in theory and practice: An overview of the issues," Ecological Economics, Elsevier, vol. 65(4), pages 663-674, May.
    20. Chad P. Bown, 2005. "Participation in," World Bank Economic Review, World Bank Group, vol. 19(2), pages 287-310.
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