IDEAS home Printed from
   My bibliography  Save this article

The role of deforestation risk and calibrated compensation in designing payments for environmental services




This paper discusses the gain in efficiency from including deforestation risk as a targeting criterion in payments for environmental services (PES) programs. We contrast two payment schemes that we simulate using data from Mexican common property forests: a flat payment scheme with a cap on allowable hectares per enrollee, similar to the program implemented in many countries, and a payment that takes deforestation risk and heterogeneity in land productivity into account. We simulate the latter strategy both with and without a budget constraint. Using observed past deforestation, we find that while risk-targeted payments are far more efficient, capped flat payments are more egalitarian. We also consider the characteristics of communities receiving payments from both programs. We find that the risk-weighted scheme results in more payments to poor communities, and that these payments are more efficient than those made to non-poor ejidos. Finally, we show that the risk of deforestation can be predicted quite precisely with indicators that are easily observable and that cannot be manipulated by the community.

Suggested Citation

  • Alix-Garcia, Jennifer & De Janvry, Alain & Sadoulet, Elisabeth, 2008. "The role of deforestation risk and calibrated compensation in designing payments for environmental services," Environment and Development Economics, Cambridge University Press, vol. 13(03), pages 375-394, June.
  • Handle: RePEc:cup:endeec:v:13:y:2008:i:03:p:375-394_00

    Download full text from publisher

    File URL:
    File Function: link to article abstract page
    Download Restriction: no

    References listed on IDEAS

    1. Pfaff, Alexander S. P. & Kerr, Suzi & Hughes, R. Flint & Liu, Shuguang & Sanchez-Azofeifa, G. Arturo & Schimel, David & Tosi, Joseph & Watson, Vicente, 2000. "The Kyoto protocol and payments for tropical forest:: An interdisciplinary method for estimating carbon-offset supply and increasing the feasibility of a carbon market under the CDM," Ecological Economics, Elsevier, vol. 35(2), pages 203-221, November.
    2. Barrett, Christopher B. & Lee, David R. & McPeak, John G., 2005. "Institutional Arrangements for Rural Poverty Reduction and Resource Conservation," World Development, Elsevier, vol. 33(2), pages 193-197, February.
    3. 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.
    4. Heath, John & Binswanger, Hans, 1996. "Natural resource degradation effects of poverty and population growth are largely policy-induced: the case of Colombia," Environment and Development Economics, Cambridge University Press, vol. 1(01), pages 65-84, February.
    5. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    6. Pagiola, Stefano, 2008. "Payments for environmental services in Costa Rica," Ecological Economics, Elsevier, vol. 65(4), pages 712-724, May.
    7. Feder, Gershon & Just, Richard E & Zilberman, David, 1985. "Adoption of Agricultural Innovations in Developing Countries: A Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 33(2), pages 255-298, January.
    8. Kerr, John, 2002. "Watershed Development, Environmental Services, and Poverty Alleviation in India," World Development, Elsevier, vol. 30(8), pages 1387-1400, August.
    9. Ravallion, M., 1992. "Poverty Comparisons - A Guide to Concepts and Methods," Papers 88, World Bank - Living Standards Measurement.
    10. 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.
    11. Ephraim Nkonya & Ted Schroeder & David Norman, 1997. "Factors Affecting Adoption Of Improved Maize Seed And Fertiliser In Northern Tanzania," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1-3), pages 1-12.
    12. Pagiola, Stefano & Arcenas, Agustin & Platais, Gunars, 2005. "Can Payments for Environmental Services Help Reduce Poverty? An Exploration of the Issues and the Evidence to Date from Latin America," World Development, Elsevier, vol. 33(2), pages 237-253, February.
    13. Stefano Pagiola & Paola Agostini & José Gobbi & Cees de Haan & Muhammad Ibrahim, 2004. "Paying for Biodiversity Conservation Services in Agricultural Landscapes," Others 0405005, EconWPA.
    14. Schelhas, John W. & Lee, David R. & Thacher, Thomas, 1997. "Farmer Participation In Reforestation Incentive Programs In Costa Rica," Working Papers 127854, Cornell University, Department of Applied Economics and Management.
    15. Pagiola, Stefano & Ramirez, Elias & Gobbi, Jose & de Haan, Cees & Ibrahim, Muhammad & Murgueitio, Enrique & Ruiz, Juan Pablo, 2007. "Paying for the environmental services of silvopastoral practices in Nicaragua," Ecological Economics, Elsevier, vol. 64(2), pages 374-385, December.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. repec:idb:brikps:64998 is not listed on IDEAS
    2. repec:eee:jeeman:v:86:y:2017:i:c:p:8-28 is not listed on IDEAS
    3. Lewis, Kate & Porras, Ina & Miranda, Miriam & Barton, David & Chacon, Adriana, 2012. "De Rio a Rio+ Lecciones de 20 años de experiencia en servicios ambientales en Costa Rica
      [From Rio to Rio + Lessons from 20 years of experience in environmental services in Costa Rica]
      ," MPRA Paper 43649, University Library of Munich, Germany.
    4. Van Hecken, Gert & Bastiaensen, Johan & Windey, Catherine, 2015. "The frontiers of the debate on Payments for Ecosystem Services: a proposal for innovative future research," IOB Discussion Papers 2015.05, Universiteit Antwerpen, Institute of Development Policy (IOB).
    5. Stine Broch & Suzanne Vedel, 2012. "Using Choice Experiments to Investigate the Policy Relevance of Heterogeneity in Farmer Agri-Environmental Contract Preferences," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(4), pages 561-581, April.
    6. Vorlaufer, Miriam & Ibanez, Marcela & Juanda, Bambang & Wollni, Meike, 2015. "Conservation vs. equity: Can payments for environmental services achieve both?," EFForTS Discussion Paper Series 18, University of Goettingen, Collaborative Research Centre 990 "EFForTS, Ecological and Socioeconomic Functions of Tropical Lowland Rainforest Transformation Systems (Sumatra, Indonesia)".
    7. Ross, Cody T., 2016. "Sliding-scale environmental service payments and non-financial incentives: Results of a survey of landowner interest in Costa Rica," Ecological Economics, Elsevier, vol. 130(C), pages 252-262.
    8. Fisher, Brendan & Kulindwa, Kassim & Mwanyoka, Iddi & Turner, R. Kerry & Burgess, Neil D., 2010. "Common pool resource management and PES: Lessons and constraints for water PES in Tanzania," Ecological Economics, Elsevier, vol. 69(6), pages 1253-1261, April.
    9. Nystad Handberg , Øyvind & Angelsen, Arild, 2016. "Pay little, get little; pay more, get a little more: A framed forest experiment in Tanzania," Working Paper Series 02-2016, Norwegian University of Life Sciences, School of Economics and Business.
    10. repec:eee:wdevel:v:96:y:2017:i:c:p:359-374 is not listed on IDEAS
    11. Hegde, Ravi & Bull, Gary Q., 2011. "Performance of an agro-forestry based Payments-for-Environmental-Services project in Mozambique: A household level analysis," Ecological Economics, Elsevier, vol. 71(C), pages 122-130.
    12. Mohebalian, Phillip M. & Aguilar, Francisco X., 2016. "Additionality and design of forest conservation programs: Insights from Ecuador's Socio Bosque Program," Forest Policy and Economics, Elsevier, vol. 71(C), pages 103-114.
    13. 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.
    14. Alix-Garcia, Jennifer & Wolff, Hendrik, 2014. "Payment for Ecosystem Services from Forests," IZA Discussion Papers 8179, Institute for the Study of Labor (IZA).
    15. Kolinjivadi, Vijay & Gamboa, Gonzalo & Adamowski, Jan & Kosoy, Nicolás, 2015. "Capabilities as justice: Analysing the acceptability of payments for ecosystem services (PES) through ‘social multi-criteria evaluation’," Ecological Economics, Elsevier, vol. 118(C), pages 99-113.
    16. Wunscher, Tobias & Engel, Stefanie & Wunder, Sven, 2011. "Practical Alternatives to Estimate Opportunity Costs of Forest Conservation," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 115774, European Association of Agricultural Economists.
    17. Barbier, Edward B., 2012. "Natural capital, ecological scarcity and rural poverty," Policy Research Working Paper Series 6232, The World Bank.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:endeec:v:13:y:2008:i:03:p:375-394_00. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.