A Dynamic approach to PES pricing and finance for interlinked ecosystem services: Watershed conservation and groundwater management
A theory of payment for ecosystem services (PES) pricing consistent with dynamic efficiency and sustainable income requires optimized shadow prices. Since ecosystem services are generally interdependent, this requires joint optimization across multiple resource stocks. We develop such a theory in the context of watershed conservation and groundwater extraction. The optimal program can be implemented with a decentralized system of ecosystem payments to private watershed landowners, financed by efficiency prices of groundwater set by a public utility. The theory is extended to cases where land is publicly owned, conservation instruments exhibit non-convexities on private land, or the size of a conservation project is exogenous. In these cases, conservation investment can be financed from benefit taxation of groundwater consumers. While volumetric conservation surcharges induce inefficient water use, a dynamic lump-sum tax finances investment without distorting incentives. Since the optimal level of conservation is generated as long as payments are correct at the margin, any surplus can be returned to consumers through appropriate block pricing. The present value gain in consumer surplus generated by the conservation-induced reduction in groundwater scarcity serves as a lower bound to the benefits of conservation without explicit measurement of other benefits such as recreation, biodiversity, and cultural values.
|Date of creation:||Oct 2012|
|Date of revision:|
|Contact details of provider:|| Postal: 2424 Maile Way, Social Sciences Building 542, Honolulu, Hawaii 96822|
Fax: (808) 956-2889
Web page: http://www.uhero.hawaii.edu
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Farber, Stephen C. & Costanza, Robert & Wilson, Matthew A., 2002. "Economic and ecological concepts for valuing ecosystem services," Ecological Economics, Elsevier, vol. 41(3), pages 375-392, June.
- Edward Barbier & Ivar Strand & Suthawan Sathirathai, 2002. "Do Open Access Conditions Affect the Valuation of an Externality? Estimating the Welfare Effects of Mangrove-Fishery Linkages in Thailand," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 21(4), pages 343-365, April.
- Pitafi, Basharat A.K. & Roumasset, James A., 2003. "Efficient Groundwater Pricing And Watershed Conservation Finance: The Honolulu Case," 2003 Annual meeting, July 27-30, Montreal, Canada 21958, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- S Sathirathai & EB Barbier, 2001. "Valuing Mangrove Conservation In Southern Thailand," Contemporary Economic Policy, Western Economic Association International, vol. 19(2), pages 109-122, 04.
- Phoebe Koundouri, 2004.
"Current Issues in the Economics of Groundwater Resource Management,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 18(5), pages 703-740, December.
- Koundouri, Phoebe, 2004. "Current issues in the economics of groundwater resource management," MPRA Paper 38425, University Library of Munich, Germany.
- Phoebe Koundouri, . "Current issues in the economics of groundwater resource management," DEOS Working Papers 0402, Athens University of Economics and Business.
- Engel, Stefanie & Pagiola, Stefano & Wunder, Sven, 2008. "Designing payments for environmental services in theory and practice: An overview of the issues," Ecological Economics, Elsevier, vol. 65(4), pages 663-674, May.
- Koundouri, Phoebe & Christou, Christina, 2006.
"Dynamic adaptation to resource scarcity and backstop availability: theory and application to groundwater,"
Australian Journal of Agricultural and Resource Economics,
Australian Agricultural and Resource Economics Society, vol. 50(2), June.
- Phoebe Koundouri & Christina Christou, 2006. "Dynamic adaptation to resource scarcity and backstop availability: theory and application to groundwater ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(2), pages 227-245, 06.
- 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.
- Kaiser, Brooks & Roumasset, James, 2002. "Valuing indirect ecosystem services: the case of tropical watersheds," Environment and Development Economics, Cambridge University Press, vol. 7(04), pages 701-714, October.
- Darrell Krulce & James A. Roumasset & Tom Wilson, 1997. "Optimal Management of a Renewable and Replaceable Resource: The Case of Coastal Groundwater," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1218-1228.
- Dasgupta, Partha, 2001. "Human Well-Being and the Natural Environment," OUP Catalogue, Oxford University Press, number 9780199247882, May.
- Pagiola, Stefano, 2008.
"Payments for environmental services in Costa Rica,"
Elsevier, vol. 65(4), pages 712-724, May.
- Paul J. Ferraro & R. David Simpson, 2002.
"The Cost-Effectiveness of Conservation Payments,"
University of Wisconsin Press, vol. 78(3), pages 339-353.
- Weitzman, Martin L, 1997. " Sustainability and Technical Progress," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 1-13, March.
- Partha Dasgupta, 2009. "The Welfare Economic Theory of Green National Accounts," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 42(1), pages 3-38, January.
- Rodini, Mark & Ward, Michael R. & Woroch, Glenn A., 0. "Going mobile: substitutability between fixed and mobile access," Telecommunications Policy, Elsevier, vol. 27(5-6), pages 457-476, June.
- Batabyal, Amitrajeet A. & Kahn, James R. & O'Neill, Robert V., 2003. "On the scarcity value of ecosystem services," Journal of Environmental Economics and Management, Elsevier, vol. 46(2), pages 334-352, September.
- James Sanchirico & Michael Springborn, 2011. "How to Get There From Here: Ecological and Economic Dynamics of Ecosystem Service Provision," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 48(2), pages 243-267, February.
- Baumol,William J. & Oates,Wallace E., 1988.
"The Theory of Environmental Policy,"
Cambridge University Press, number 9780521311120, june. pag.
- Hines Jr., James R., 2000. "What is benefit taxation?," Journal of Public Economics, Elsevier, vol. 75(3), pages 483-492, March.
- Muñoz-Piña, Carlos & Guevara, Alejandro & Torres, Juan Manuel & Braña, Josefina, 2008. "Paying for the hydrological services of Mexico's forests: Analysis, negotiations and results," Ecological Economics, Elsevier, vol. 65(4), pages 725-736, May.
- R. Turner & G. Daily, 2008. "The Ecosystem Services Framework and Natural Capital Conservation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 39(1), pages 25-35, January.
- Basharat A. Pitafi & James A. Roumasset, 2009. "Pareto-Improving Water Management over Space and Time: The Honolulu Case," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 138-153.
When requesting a correction, please mention this item's handle: RePEc:hae:wpaper:2012-7. 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: (UHERO)
If references are entirely missing, you can add them using this form.