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The Cost-Effectiveness of Conservation Payments

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  • Paul J. Ferraro
  • R. David Simpson

Abstract

International donors invest billions of dollars to conserve ecosystems in low-income nations. The most common investments aim to encourage commercial activities, such as ecotourism, that indirectly generate ecosystem protection as a joint product. We demonstrate that paying for ecosystem protection directly can be far more cost-effective. Although direct-payment initiatives have imposing institutional requirements, we argue that all conservation initiatives face similar challenges. Thus conservation practitioners would be well advised to implement the first-best direct-payment approach, rather than a secondbest policy option. An empirical example illustrates the spectacular cost savings that can be realized by direct-payment initiatives.

Suggested Citation

  • Paul J. Ferraro & R. David Simpson, 2002. "The Cost-Effectiveness of Conservation Payments," Land Economics, University of Wisconsin Press, vol. 78(3), pages 339-353.
    • Handle: RePEc:uwp:landec:v:78:y:2002:i:3:p:339-353
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    References listed on IDEAS

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    1. Ferraro, Paul J., 2000. "Global Habitat Protection: Limitations of Development Interventions and the Role for a Permanent International Habitat Reserve," Working Papers 179545, Cornell University, Department of Applied Economics and Management.
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    4. Simpson, R. David & Sedjo, Roger A., 1996. "Paying for the conservation of endangered ecosystems: a comparison of direct and indirect approaches," Environment and Development Economics, Cambridge University Press, vol. 1(2), pages 241-257, May.
    5. Chomitz, Kenneth M & Kumari, Kanta, 1998. "The Domestic Benefits of Tropical Forests: A Critical Review," The World Bank Research Observer, World Bank, vol. 13(1), pages 13-35, February.
    6. Don Fullerton & Ann Wolverton, 2002. "The Case for a Two-Part Instrument: Presumptive Tax and Environmental Subsidy," Chapters, in: Don Fullerton & Thomas C. Kinnaman (ed.), The Economics of Household Garbage and Recycling Behavior, chapter 10, pages 175-200, Edward Elgar Publishing.
    7. Heal, G., 1998. "Markets and Sustainability," Papers 98-02, Columbia - Graduate School of Business.
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    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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