Do Environmental Services Buyers Prefer Differentiated Rates? A Case Study from the Colombian Andes
AbstractFlat user fees in payment for environmental services (PES) schemes promote administrative ease, and are sometimes perceived as egalitarian. However, when environmental service (ES) buyers are heterogeneous in their income and water consumption levels, this may not be optimal, as total payments become too low and services are under-supplied. This paper identifies ES buyer preferences and estimates their willingness to pay (WTP) differentiated fees in an ongoing PES initiative in an Andean watershed in Colombia. Small, flat user payments have recently been introduced to implement incipient watershed protection upstream. Environmental service users fall into two highly heterogeneous categories: smallholder peasants and owners of recreational houses. We performed a contingent valuation analysis in a representative stratified sample of 218 user households. For improved water services, ES buyers on average were willing to pay a monthly US$1 premium over current flat PES rates. Owners of recreational houses were willing to pay about US$1.50 more; smallholders only US$0.5. 85% of ES buyers also agree to pay differentiated fees. Of these, 41% would prefer fees differentiated by water consumption, 23% by household income, 30% criteria combination, and 6% by other criteria. Spatial variables, such as distance to the water distribution point and to the town center, importantly influenced WTP. The results may help designing users-driven PES schemes in accordance with efficiency and equity objectives.
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Bibliographic InfoPaper provided by UNIVERSIDAD DE LOS ANDES-CEDE in its series DOCUMENTOS CEDE with number 006007.
Date of creation: 06 Nov 2009
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- Moreno-Sanchez, Rocio del Pilar & Maldonado, Jorge Higinio & Wunder, Sven & Borda, Carlos Andres, 2009. "Do Environmental Services Buyers Prefer Differentiated Rates? A Case Study from the Colombian Andes," Documentos CEDE Series 91171, Universidad de Los Andes, Economics Department.
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
- Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
- Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- D - Microeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-21 (All new papers)
- NEP-ENV-2009-11-21 (Environmental Economics)
- NEP-LAM-2009-11-21 (Central & South America)
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