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Payment for Environmental Services: Hypotheses and Evidence

Author

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  • Lee J. Alston

    () (Institute of Behavioral Science, University of Colorado, Boulder, Colorado 80309
    Department of Economics, University of Colorado, Boulder, Colorado 80309
    National Bureau of Economic Research, Cambridge, Massachusetts 02138)

  • Krister Andersson

    () (Institute of Behavioral Science, University of Colorado, Boulder, Colorado 80309
    Department of Political Science, University of Colorado, Boulder, Colorado 80309
    Centro de Investigación Sociedad y Políticas Públicas, Universidad de los Lagos, Santiago 8370321, Chile)

  • Steven M. Smith

    () (Institute of Behavioral Science, University of Colorado, Boulder, Colorado 80309
    Department of Economics, University of Colorado, Boulder, Colorado 80309)

Abstract

The use of payment for environmental services (PES) is not a new type of contract, but PES programs have become more in vogue because of the potential for sequestering carbon by paying to prevent deforestation and degradation of forestlands. We provide a framework utilizing transaction costs to hypothesize which services are more likely to be provided effectively. We then interpret the literature on PES programs to see the extent to which transaction costs vary as predicted across the type of service and to assess the performance of PES programs. As predicted, we find that transaction costs are the least for club goods like water and greatest for pure public goods like carbon reduction. Actual performance is difficult to measure and varies across the examples. More work and experimentation are needed to gain a better outlook on what elements support effective delivery of environmental services.

Suggested Citation

  • Lee J. Alston & Krister Andersson & Steven M. Smith, 2013. "Payment for Environmental Services: Hypotheses and Evidence," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 139-159, June.
  • Handle: RePEc:anr:reseco:v:5:y:2013:p:139-159
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-resource-091912-151830
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    Cited by:

    1. repec:eee:wdevel:v:98:y:2017:i:c:p:148-159 is not listed on IDEAS
    2. repec:eee:ecoser:v:6:y:2013:i:c:p:54-63 is not listed on IDEAS
    3. repec:eee:ecoser:v:29:y:2018:i:pb:p:404-410 is not listed on IDEAS
    4. Bennett, Drew E. & Gosnell, Hannah, 2015. "Integrating multiple perspectives on payments for ecosystem services through a social–ecological systems framework," Ecological Economics, Elsevier, vol. 116(C), pages 172-181.
    5. Gary D. Libecap, 2014. "Addressing Global Environmental Externalities: Transaction Costs Considerations," Journal of Economic Literature, American Economic Association, vol. 52(2), pages 424-479, June.

    More about this item

    Keywords

    REDD+; transaction costs; property rights;

    JEL classification:

    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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