Performance Payments for Environmental Services : Lessons from Economic Theory on the Strength of Incentives in the Presence of Performance Risk and Performance Measurement Distortion
Payments for environmental services (PES) schemes have become an increasingly accepted and popular mode for governmental and non-governmental agencies to use in addressing local and regional declines in ecosystem services. A defining characteristic of performance payments, a sub-category of PES schemes, is the linking of individual payments to environmental outputs themselves rather than to the inputs that affect the production of environmental services. Such a focus raises several practical issues during implementation. We review and translate key aspects of the economic theory of incentives into the context of performance payments schemes with special attention paid to two practical issues. The first is that of structuring individual incentives to account for risks outside the individual’s control such as weather that can affect the level of environmental services generated. The second deals with the possibility of distortion in the measurements of environmental services used to determine individual payments under PES schemes. Each challenge is accompanied by a discussion of advice based upon economic theory and a discussion of examples from different countries where such implementation issues arise.
|Date of creation:||Jun 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +41 44 632 41 28
Fax: +41 44 632 12 18
Web page: http://www.ied.ethz.chEmail:
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.:
- Frank Wätzold & Martin Drechsler, 2005. "Spatially Uniform versus Spatially Heterogeneous Compensation Payments for Biodiversity-Enhancing Land-Use Measures," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(1), pages 73-93, 05.
- Pagiola, Stefano & Ramirez, Elias & Gobbi, Jose & de Haan, Cees & Ibrahim, Muhammad & Murgueitio, Enrique & Ruiz, Juan Pablo, 2007. "Paying for the environmental services of silvopastoral practices in Nicaragua," Ecological Economics, Elsevier, vol. 64(2), pages 374-385, December.
- Zabel, Astrid & Holm-Muller, Karin, 2007. "Performance payments for carnivore conservation in Sweden," Discussion Papers 57031, University of Bonn, Institute for Food and Resource Economics.
- Canice Prendergast, 2002. "The Tenuous Trade-off between Risk and Incentives," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1071-1102, October.
- Wunder, Sven & Engel, Stefanie & Pagiola, Stefano, 2008. "Taking stock: A comparative analysis of payments for environmental services programs in developed and developing countries," Ecological Economics, Elsevier, vol. 65(4), pages 834-852, May.
When requesting a correction, please mention this item's handle: RePEc:ied:wpsied:09-07. 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: ()
If references are entirely missing, you can add them using this form.