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Putting Payments for Environmental Services in the Context of Economic Development

Author

Listed:
  • David Zilberman

    (Department of Agricultural and Resource Economics, University of California at Berkeley)

  • Leslie Lipper

    (Agricultural and Development Economics Division, Food and Agriculture Organization)

  • Nancy McCarthy

    (International Food Policy Research Institute Washington, D. C.)

Abstract

Paying for the provision of environmental services is a recent policy innovation that is attracting much attention in both developed and developing countries. The innovation involves a move away from command and control environmental policies, harnessing market forces to obtain more efficient environmental outcomes. Linking payments for environmental services (PES) to economic development and poverty reduction is an issue of importance since they may represent a new source of finance to developing countries, and developing countries are potentially important suppliers of global environmental services. The objective of this paper is to apply economic concepts, particularly those from natural resource and environmental economics, to a wide range of issues associated with the introduction of ES programs in the context of economic development. We introduce a typology of ES based upon economic reasoning, showing that payments for ES provide a solution to externalities and public good problems within the bounds of political economic constraints. Secondly, we focus on the problem of who should pay for ES: to what extent are payments likely to be covered within a global framework rather within a national or regional framework? Third, we will turn to issues of program design. We present some answers to the questions of how to target payments to achieve their objectives efficiently, and what the implications of alternative design schemes are. In particular, we focus upon the equity implications of ES programs and how can they affect poverty alleviation. The final section addresses issues of monitoring and enforcement of ES contracts, and we summarize the key findings in the conclusion.

Suggested Citation

  • David Zilberman & Leslie Lipper & Nancy McCarthy, 2006. "Putting Payments for Environmental Services in the Context of Economic Development," Working Papers 06-15, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).
  • Handle: RePEc:fao:wpaper:0615
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    File URL: ftp://ftp.fao.org/docrep/fao/009/ah633e/ah633e00.pdf
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    References listed on IDEAS

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    1. Wu, JunJie & Zilberman, David & Babcock, Bruce A., 2001. "Environmental and Distributional Impacts of Conservation Targeting Strategies," Journal of Environmental Economics and Management, Elsevier, vol. 41(3), pages 333-350, May.
    2. Smith, Rodney B. W. & Shogren, Jason F., 2002. "Voluntary Incentive Design for Endangered Species Protection," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 169-187, March.
    3. Geoffrey Heal, 2003. "Bundling Biodiversity," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 553-560, 04/05.
    4. Parkhurst, Gregory M. & Shogren, Jason F. & Bastian, Chris & Kivi, Paul & Donner, Jennifer & Smith, Rodney B. W., 2002. "Agglomeration bonus: an incentive mechanism to reunite fragmented habitat for biodiversity conservation," Ecological Economics, Elsevier, vol. 41(2), pages 305-328, May.
    5. 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.
    6. Kenneth J. Arrow & Anthony C. Fisher, 1974. "Environmental Preservation, Uncertainty, and Irreversibility," The Quarterly Journal of Economics, Oxford University Press, vol. 88(2), pages 312-319.
    7. Leslie Lipper & Romina Cavatassi, 2003. "Land Use Change, Carbon Sequestration and Poverty Alleviation," Working Papers 03-13, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).
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    More about this item

    Keywords

    Environmental Services; Agricultural Development; Poverty Reduction; Natural Resource Management.;

    JEL classification:

    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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