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Show Me the Money: Do Payments Supply Environmental Services in Developing Countries?

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  • Subhrendu K. Pattanayak
  • Sven Wunder
  • Paul J. Ferraro

Abstract

Many of the services supplied by nature are externalities. Economic theory suggests that some form of subsidy or contracting between the beneficiaries and the providers could result in an optimal supply of environmental services. Moreover, if the poor own resources that give them a comparative advantage in the supply of environmental services, then payments for environmental services (PES) can improve environmental and poverty outcomes. While the theory is relatively straightforward, the practice is not, particularly in developing countries where institutions are weak. This article reviews the empirical literature on PES additionality by asking, "Do payments deliver environmental services, everything else being equal, or, at least, the land-use changes believed to generate environmental services?" We examine both qualitative case studies and rigorous econometric quasi-experimental analyses. We find that government-coordinated PES have caused modest or no reversal of deforestation. Case studies of smaller-scale, user-financed PES schemes claim more substantial impacts, but few of these studies eliminate rival explanations for the positive effects. We conclude by discussing how the dearth of evidence about PES impacts, and unanswered questions about institutional preconditions and motivational "crowding out," limit the prospects for using international carbon payments to reduce emissions from deforestation and degradation. Copyright 2010, Oxford University Press.

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Bibliographic Info

Article provided by Association of Environmental and Resource Economists in its journal Review of Environmental Economics and Policy.

Volume (Year): 4 (2010)
Issue (Month): 2 (Summer)
Pages: 254-274

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Handle: RePEc:oup:renvpo:v:4:y:2010:i:2:p:254-274

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Cited by:
  1. Venghaus, Sandra & Selbmann, Kirsten, 2014. "Biofuel as social fuel: Introducing socio-environmental services as a means to reduce global inequity?," Ecological Economics, Elsevier, vol. 97(C), pages 84-92.
  2. Alexandre Marcellesi & Nancy Cartwright, 2013. "Modeling climate mitigation and adaptation policies to predict their effectiveness: The limits of randomized controlled trials," Grantham Research Institute on Climate Change and the Environment Working Papers 120, Grantham Research Institute on Climate Change and the Environment.
  3. Allen Blackman, 2010. "Alternative Pollution Control Policies in Developing Countries," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(2), pages 234-253, Summer.
  4. Coria, Jessica & Calfucura, Enrique, 2012. "Ecotourism and the development of indigenous communities: The good, the bad, and the ugly," Ecological Economics, Elsevier, vol. 73(C), pages 47-55.
  5. Kroeger, Timm, 2013. "The quest for the “optimal” payment for environmental services program: Ambition meets reality, with useful lessons," Forest Policy and Economics, Elsevier, vol. 37(C), pages 65-74.
  6. Larson, Donald F. & Dinar, Ariel & Blankespoor, Brian, 2012. "Aligning climate change mitigation and agricultural policies in Eastern Europe and Central Asia," Policy Research Working Paper Series 6080, The World Bank.
  7. Persson, U. Martin & Alpizar, Francisco, 2011. "Conditional Cash Transfers and Payments for Environmental Services: A Conceptual Framework for Explaining and Judging Differences in Outcomes," Discussion Papers dp-11-06-efd, Resources For the Future.
  8. Pascual, Unai & Garmendia, Eneko & Phelps, Jacob & Ojea, Elena, 2013. "Leveraging global climate finance for sustainable forests: Opportunities and conditions for successful foreign aid to the forestry sector," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  9. Vincent, Jeffrey R., 2012. "Ecosystem services and green growth," Policy Research Working Paper Series 6233, The World Bank.
  10. Martin Persson, U. & Alpízar, Francisco, 2013. "Conditional Cash Transfers and Payments for Environmental Services—A Conceptual Framework for Explaining and Judging Differences in Outcomes," World Development, Elsevier, vol. 43(C), pages 124-137.
  11. Luca Corato & Michele Moretto & Sergio Vergalli, 2013. "Land conversion pace under uncertainty and irreversibility: too fast or too slow?," Journal of Economics, Springer, vol. 110(1), pages 45-82, September.
  12. Barbier, Edward B., 2012. "Natural capital, ecological scarcity and rural poverty," Policy Research Working Paper Series 6232, The World Bank.
  13. Rodríguez, Luis C. & Pascual, Unai & Muradian, Roldan & Pazmino, Nathalie & Whitten, Stuart, 2011. "Towards a unified scheme for environmental and social protection: Learning from PES and CCT experiences in developing countries," Ecological Economics, Elsevier, vol. 70(11), pages 2163-2174, September.
  14. Nordén, Anna, 2014. "Payment Types and Participation in Payment for Ecosystem Services Programs: Stated Preferences of Landowners," Working Papers in Economics 591, University of Gothenburg, Department of Economics.
  15. Ina, Porras & Bruce, Alyward & Jeff, Dengel, 2013. "Monitoring payments for watershed services schemes in developing countries," MPRA Paper 47185, University Library of Munich, Germany.
  16. Narloch, Ulf & Pascual, Unai & Drucker, Adam G., 2012. "Collective Action Dynamics under External Rewards: Experimental Insights from Andean Farming Communities," World Development, Elsevier, vol. 40(10), pages 2096-2107.
  17. Alix-Garcia, Jennifer & Wolff, Hendrik, 2014. "Payment for Ecosystem Services from Forests," IZA Discussion Papers 8179, Institute for the Study of Labor (IZA).
  18. Nordén, Anna, 2014. "Payment Types and Participation in Payment for Ecosystem Services Programs: Stated Preferences of Landowners," Discussion Papers dp-14-11-efd, Resources For the Future.
  19. Suzi Kerr, 2012. "The Economics of International Policy Agreements to Reduce Emissions from Deforestation and Degradation," Working Papers 12_12, Motu Economic and Public Policy Research.
  20. B. Kelsey Jack, 2013. "Private Information and the Allocation of Land Use Subsidies in Malawi," American Economic Journal: Applied Economics, American Economic Association, vol. 5(3), pages 113-35, July.
  21. Michael Greenstone & B. Kelsey Jack, 2013. "Envirodevonomics: A Research Agenda for a Young Field," NBER Working Papers 19426, National Bureau of Economic Research, Inc.
  22. Hayo, Bernd & Vollan, Björn, 2012. "Group interaction, heterogeneity, rules, and co-operative behaviour: Evidence from a common-pool resource experiment in South Africa and Namibia," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 9-28.

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