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Environmental services and poverty alleviation: either, or, or both?

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  • Ben Groom
  • Charles Palmer

Abstract

Payments for environmental services (PES) schemes in developing countries face trade-offs between environmental and development objectives. This tension is inherent in cost effective direct PES since, by their very nature, they limit transfers to recipients. However, where recipients of PES are subject to market constraints (e.g. credit rationing, input constraints etc.), we show that indirect payments which relax constraints can be cost effective and achieve both environmental and poverty alleviation objectives. Contrary to where markets are perfect, cost effectiveness is dependent on the nature of the recipient’s production and the severity of constraints. An empirical example from Madagascar illustrates that it is unlikely these dual objectives will be achieved in the case of forest honey production, despite a severe technology constraint. Yet indirect PES schemes are shown to be cost effective where production is more closely linked to land use, such as in agriculture and forestry. This accords with recent work on agri-environmental schemes, which achieved poverty alleviation and environmental objectives by relaxing household constraints. This highlights the need to understand the market conditions, institutional context and production processes of PES recipients.

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File URL: http://eprints.lse.ac.uk/27951/
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 27951.

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Length: 23 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:ehl:lserod:27951

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Keywords: payments for environmental services; cost effectiveness; market constraints; poverty alleviation;

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Cited by:
  1. Groom, Ben & Palmer, Charles, 2014. "Relaxing constraints as a conservation policy," Environment and Development Economics, Cambridge University Press, vol. 19(04), pages 505-528, August.

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