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


  • Groom, Ben
  • Palmer, Charles


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.

Suggested Citation

  • Groom, Ben & Palmer, Charles, 2009. "Environmental services and poverty alleviation: either, or, or both?," LSE Research Online Documents on Economics 27951, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:27951

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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.
    2. Cranford, Matthew & Mourato, Susana, 2014. "Credit-Based Payments for Ecosystem Services: Evidence from a Choice Experiment in Ecuador," World Development, Elsevier, vol. 64(C), pages 503-520.

    More about this item


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

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth


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