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Direct Payments to Protect Endangered Ecosystems and Experimental Methods to Estimate Payment Costs


  • Paul J. Ferraro

    () (Department of Economics, Andrew Young School of Policy Studies, Georgia State University, University Plaza, Atlanta, GA, USA.)


The international community has invested billions of dollars to stem the loss of native ecosystems in low-income nations (Hardner and Rice; James et al.). Despite these investments, the loss continues (Achard et al.; Balmford et al.). Ecosystems and the services they provide (biodiversity, climate regulation, hydrological regulation, etc.) are public goods and thus not supplied in sufficient quantities by individuals acting in their own self-interest. Conservation practitioners try to provide individuals who destroy ecosystems and species with incentives to preserve them. These incentives lie on a spectrum from indirect to direct with respect to their link with conservation objectives (Ferraro and Kiss). Conservation initiatives in high-income nations increasingly emphasize more direct incentives: land purchases, leases, and easements, and financial incentives such as performance payments and tax relief. For example, the U.S. government spends over $1.7 billion per year to induce farmers to protect land, and The Nature Conservancy, with an annual budget of over $700 million, operates almost exclusively through land purchases and easements. These payment approaches are based on a willing buyer-willing seller model. Sellers deliver conservation outcomes in exchange for a negotiated payment in cash or in kind. Payments are conditional on conservation outcomes. Conservation in low-income nations has emphasized the more indirect end of the spectrum. Indirect approaches include initiatives like Integrated Conservation and Development Projects (ICDP) and Community-based Natural Resource Management. Such projects encourage rural communities to maintain ecosystems by helping them to use ecosystems sustainably. They may also provide alternative sources of products, income, or social benefits (schools, wells, clinics, etc.) as a means of encouraging communities to cooperate. These kinds of efforts have been referred to as "conservation by distraction" (Ferraro and Simpson, 2002). After decades of global efforts to conserve biodiversity through indirect approaches, there is a growing recognition that such initiatives rarely work. Some authors (Ferraro; Kiss) have pointed to basic conceptual flaws; for example, people are more likely to incorporate new sources of income as complements to existing activities rather than as substitutes for them. Others have noted that the technical, economic, social and political conditions needed for an indirect approach to succeed are difficult to find in the real world (Salafsky et al.; Roe et al.). For conservation initiatives that encourage extractive activities (e.g., non-timber forest product collection), sustainability is a key concern (Tewari and Campbell; Barrett and Arcese; Norris and Chao). A recent review of ICDPs (Wells et al.) declared that there was "a notable lack of successful and convincing cases where people's development needs have been effectively reconciled with protected area management."

Suggested Citation

  • Paul J. Ferraro, 2004. "Direct Payments to Protect Endangered Ecosystems and Experimental Methods to Estimate Payment Costs," EEPSEA Special and Technical Paper sp200406s1, Economy and Environment Program for Southeast Asia (EEPSEA), revised Jun 2004.
  • Handle: RePEc:eep:tpaper:sp200406s1

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    Cited by:

    1. Ferraro, Paul J., 2008. "Asymmetric information and contract design for payments for environmental services," Ecological Economics, Elsevier, vol. 65(4), pages 810-821, May.

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    ecosystem; payment cost;


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