spatial targeting of payments for environmental services a tool for boosting conservation benefits abstract payments for environmental services pes have become an increasingly popular market based instrument to translate external non market environmental services into financial incentives for landowners to preserve the ecosystems that provide the services however lack of spatial differentiation in the targeting mechanism may lead to efficiency losses addressing this challenge we construct an applied site selection tool which takes into account three variables that vary in space environmental services provided risks of losing those services and participation costs using data from costa rica s nicoya peninsula we empirically test the tool s potential to increase the financial efficiency of the forest focused pes program in place results show that given a fixed budget efficiency increases radically if per hectare payments are aligned to landowners heterogeneity in participation costs involving opportunity transaction and direct costs of protection respectively selecting sites based on environmental service potential also moderately increases efficiency overall additionality could in the best case be doubled but remains generally limited due to current low deforestation risks prevailing in costa rica to take advantage of the high efficiency potentials of flexible payments we propose inverse auction systems as a cost effective approach for the determination of micro level participation costs

how can market mechanisms for forest environmental services help the poor preliminary lessons from latin america summary market mechanisms for forest environmental services are a new approach for conservation but there is also an increasing interest in the derived developmental benefits of these mechanisms we first propose a conceptual framework for future research on the livelihood impacts of environmental service markets we then review eight latin american case studies on carbon sequestration and watershed protection market initiatives finding positive local income effects in most cases more land tenure security and socioinstitutional strengthening in some cases but some negative effects also we recommend pro poor policy measures such as reducing smallholders transaction costs and removing inappropriate access restrictions

case study of agri environmental payments the united kingdom abstract the environmentally sensitive areas esa program when launched in the united kingdom uk in 1986 was the first agri environmental program in the european union eu this program grew to a total of 43 designated esa schemes in the uk as a whole 22 of which were in england a variety of agri environmental payments programs were created to supplement and complement the esa schemes in years to follow the most prominent of these in england was the countryside stewardship scheme css established in 1991 the css was available to farmers outside the esas and like the esa program was intended to protect valued landscapes and habitats and to improve public enjoyment of the countryside by 2003 over 10 of england s agricultural land was enrolled in either esa or css agreements these voluntary agreements were long term contracts usually for 10 years between the government and farmers to provide environmental services several major evaluations of the esa program and the css were conducted over the years and the results of many of those evaluations and the lessons derived are synthesized and summarized in this article both the esa program and the css proved to be generally effective in enrolling many farmers in the entry level contract tiers thereby halting or slowing degradation of rural landscape and other environmental features however the schemes did not generally offer sufficient economic incentives to attract high levels of enrollment in the intensive farming areas also the schemes were limited in their success in enrolling farmers in higher payment tiers tiers that required more substantial changes in farming practices the high crop and livestock related payments received by farmers under the eu s common agricultural policy cap contributed to the disincentives to participate especially in higher tiers following the latest 2003 reforms of the eu s cap england s esa program and css are being replaced by a new consolidated package of schemes that draws on lessons learned over the past 15 20 years with these two flagship programs

designing payments for environmental services in theory and practice an overview of the issues abstract payments for environmental services pes have attracted increasing interest as a mechanism to translate external non market values of the environment into real financial incentives for local actors to provide environmental services es in this introductory paper we set the stage for the rest of this special issue of ecological economics by reviewing the main issues arising in pes design and implementation and discussing these in the light of environmental economics we start with a discussion of pes definition and scope we proceed to review some of the principal dimensions and design characteristics of pes programs and then analyze how pes compares to alternative policy instruments finally we examine in detail two important aspects of pes programs their effectiveness and their distributional implications pes is not a silver bullet that can be used to address any environmental problem but a tool tailored to address a specific set of problems those in which ecosystems are mismanaged because many of their benefits are externalities from the perspective of ecosystem managers pes is based on the beneficiary pays rather than the polluter pays principle and as such is attractive in settings where es providers are poor marginalized landholders or powerful groups of actors an important distinction within pes is between user financed pes in which the buyers are the users of the es and government financed pes in which the buyers are others typically the government acting on behalf of es users in practice pes programs differ in the type and scale of es demand the payment source the type of activity paid for the performance measure used as well as the payment mode and amount the effectiveness and efficiency of pes depends crucially on program design

liquidity constraints and deforestation the limitations of payments for ecosystem services abstract a popular environmental policy is to pay forest owners for avoiding deforestation on their land this is an example of payments for ecosystem services pes this paper shows that liquidity constraints can limit the effectiveness of pes programs if an individual would have cut down trees to sell them his opportunity costs are more front loaded than the stream of pes income if credit constrained he might decline the program even if the net present value npv of the pes income exceeds the npv of his opportunity costs i present evidence consistent with this prediction using data on forest owners in uganda

payments for environmental services as an alternative to logging under weak property rights the case of indonesia decentralization reforms in indonesia have led to local communities negotiating logging agreements with timber companies for relatively low financial payoffs and at high environmental cost this paper analyzes the potential of payments for environmental services pes to provide an alternative to logging for these communities and to induce forest conservation we apply a game theoretical model of community firm interactions that explicitly considers two stylized conditions present in the indonesian context i community rights to the forest remain weak even after decentralization and ii the presence of logging companies interested in the commercial exploitation of the forest intuition may suggest that pes design should focus on those communities with the lowest expected payments from logging deals however we show that these communities may not be able to enforce a pes agreement i e they may not be able to prevent logging activities by timber companies moreover some communities would conserve the forest anyway in these cases pes would not lead to additional environmental gains most important the introduction of pes may increase a community s expected payoff from a logging agreement a failure to consider this endogeneity in expected payoffs could lead to communities opting for logging agreements despite pes simply allowing communities to negotiate better logging deals our results indicate that pes design is a complex task and that the costs of an effective pes system could potentially be much higher than expected from observing current logging fees using data collected in indonesia on actual logging fees received by communities we illustrate how the theoretical results could be used in empirical analysis to guide pes design our results are likely to be useful in other cases where local people make resource use decisions but have weak property rights over these resources and where external commercial forces are present the results highlight the importance of understanding the details of the local context in order to design pes programs appropriately

enduring impacts of land retirement policies evidence from the conservation reserve program we examine the persistence of cropland retirements induced by the conservation reserve program crp the largest u s conservation program we analyze micro data on observed land use choices following crp contract expiration over 1995 1997 and predict that 42 of crp acres would not have been returned to crops within a year if the program had expired in 1997 these results indicate that temporary cropland retirement payments under crp generate land use changes that often extend beyond contract periods the analysis suggests that targeted signing bonuses for first time enrollees would increase the longer term impacts of crp and perhaps other incentive based land use programs

targeting conservation investments in heterogeneous landscapes a distance function approach and application to watershed management to achieve an environmental objective at least cost decision makers must integrate information about spatially variable biophysical and economic conditions although the biophysical attributes that contribute to an environmental outcome are often known the way in which these attributes interact to produce the outcome is often unknown we introduce a nonparametric conservation targeting approach that relies on distance functions to cost efficiently allocate conservation funds we apply the approach empirically to the case of conservation contracting for water quality objectives the contract portfolios derived from the application have many desirable properties including intuitive appeal and robust performance across plausible parametric scoring measures

china s sloping land conversion program institutional innovation or business as usual abstract china s sloping land conversion program slcp is the largest land retirement reforestation program in the developing world having the goal of converting 14 67 million hectares of cropland to forests by 2010 4 4 million of which is on land with slopes greater than 25 and an additional soft goal of afforesting a roughly equal area of wasteland by 2010 pending successful completion it could represent a 10 20 increase in china s national forest area and a 10 decrease in current cultivated area in contrast to china s other forest sector policies slcp uses a public payment scheme that directly engages millions of rural households as core agents of project implementation and has the stated principals of volunteerism thus insofar as current or future de facto program implementation involves decentralized voluntary grassroots participation slcp represents an important departure from business as usual in how china manages its forest resources this work draws upon current available research of the program and uses a 2003 household and village level survey conducted by the center for chinese agricultural policy cas to examine program design implementation and outcomes to date results indicate that significant problems in design and implementation exist with these including shortfalls in subsidies delivered lack of respect of the principals of volunteerism and insufficient technical support and budgeting for local implementation costs more fundamentally some program goals appear to be based on common misperceptions regarding the linkages between forests and watershed services overall slcp contains both innovative elements volunteerism and the direct engagement of farmers as well as components that hark back to policies and mindsets of decades past the program s top down simplified contract structure lack of sufficient consultation with local communities and rural households and campaign style mobilization the paper concludes by providing four main suggestions to improve the program 1 increase local community input in design and implementation and ensure that households have full autonomy in participation choice 2 improve technical support and budgeting for local administrative costs and capacity building 3 clarify the environmental services targeted and verify the measures needed to acquire these services and 4 integrate slcp into an overall package of complementary policies aimed at the rural sector

conservation payments under risk a stochastic dominance approach conservation payments can be used to preserve forest and agroforest systems to explain landowners land use decisions and determine appropriate conservation payments it is necessary to focus on revenue risk marginal conditional stochastic dominance rules are used to derive conditions for determining the conservation payments required to guarantee that the environmentally preferred land use dominates an empirical application to shaded coffee protection in the biologically important choco region of west ecuador shows that conservation payments required for preserving shaded coffee areas are much higher than those calculated under risk neutral assumptions further the extant distribution of land has strong impacts on the required payments

selling two environmental services in kind payments for bird habitat and watershed protection in los negros bolivia abstract marketing several environmental services from a single area can help access diverse sources of funding and make conservation a more competitive land use in bolivia s los negros valley department of santa cruz bordering the amboro national park 46 farmers are currently paid to protect 2774 ha of a watershed containing the threatened cloud forest habitat of 11 species of migratory birds in this payment for environmental services pes scheme annual contracts prohibit tree cutting hunting and forest clearing on enrolled lands farmer landowners as service providers submit to independent yearly monitoring and are sanctioned for non compliance facilitated by a local ngo fundacion natura bolivia one service buyer is an international conservation donor the us fish and wildlife service interested in biodiversity conservation the second service users are downstream irrigators who likely benefit from stabilized dry season water flows if upstream cloud forests are successfully protected individual irrigators have been reluctant to pay but the los negros municipal government has on their behalf contributed us 4500 to the scheme the negotiated payment mode is annual quid pro quo in kind compensations in return for forest protection predominantly payments are made as contingent project implementation transferring beehives supplemented by apicultural training with regard to service provision environment committees and education programs have increased awareness in downstream communities of the probable water supply reduction effect of continued upstream deforestation external donors have funded subsequent studies providing basic economic hydrological and biodiversity data and covered pes start up us 40 000 and running transaction costs us 3000 per year over the last three years the greatest challenges in the development of the pes mechanism have been the slow process of building trust between service buyers and providers and in achieving clear service provision additionality

for better or for worse local impacts of the decentralization of indonesia s forest sector this paper quantifies the local impacts of mechanized logging on forest dependent communities in indonesia before and after decentralization a conceptual framework incorporates financial social enforcement rent seeking and environmental impacts using data from 60 communities in east kalimantan the empirical results suggest that significantly more households received financial and in kind benefits after decentralization compared to before many communities engaged in self enforcement activities against firms both before and after decentralization post decentralization a significantly higher proportion of households perceived community forest ownership there were few significant differences in perceived environmental impacts little evidence exists of a post decentralization trade off between environmental and financial contractual provisions

payments for environmental services in costa rica costa rica pioneered the use of the payments for environmental services pes approach in developing countries by establishing a formal country wide program of payments the psa program the psa program has worked hard to develop mechanisms to charge the users of environmental services for the services they receive it has made substantial progress in charging water users and more limited progress in charging biodiversity and carbon sequestration users because of the way it makes payments to service providers using approaches largely inherited from earlier programs however the psa program has considerable room for improvement in the efficiency with which it generates environmental services with experience many of these weaknesses are being gradually corrected as the psa program evolves towards a much more targeted and differentiated program an important lesson is the need to be flexible and to adapt to lessons learned and to changing circumstances

paying for environmental services an analysis of participation in costa rica s psa program summary costa rica has long been a leader among developing countries in the design of and experimentation with innovative environmental programs since 1997 costa rica s pagos de servicios ambientales payments for environmental services program has provided payments to more than 4 400 farmers and forest owners for reforestation forest conservation and sustainable forest management activities econometric analysis of a survey of farmers and forest owners including both psa participants and nonparticipants shows that farm size human capital and household economic factors and information variables significantly influence participation in psa program alternatives large farmers and forest owners are disproportionately represented among program participants

the campfire programme in zimbabwe payments for wildlife services abstract payments for environmental services pes have been distinguished from the more common integrated conservation and development projects on the grounds that pes are direct more cost effective less complex institutionally and therefore more likely to produce the desired results both kinds of schemes aim to achieve similar conservation outcomes however and generally function in analogous social political and economic environments given the relative novelty of pes what lessons can be learnt and applied from earlier initiatives in this paper we describe the evolution over the first 12 years 1989 2001 of zimbabwe s communal areas management programme for indigenous resources campfire a community based natural resource management programme in which rural district councils on behalf of communities on communal land are granted the authority to market access to wildlife in their district to safari operators these in turn sell hunting and photographic safaris to mostly foreign sport hunters and eco tourists the district councils pay the communities a dividend according to an agreed formula in practice there have been some underpayments and frequent delays during 1989 2001 campfire generated over us 20 million of transfers to the participating communities 89 of which came from sport hunting the scale of benefits varied greatly across districts wards and households twelve of the 37 districts with authority to market wildlife produced 97 of all campfire revenues reflecting the variability in wildlife resources and local institutional arrangements the programme has been widely emulated in southern and eastern africa we suggest five main lessons for emerging pes schemes community level commercial transactions can seldom be pursued in isolation non differentiated payments weaken incentives start up costs can be high and may need to be underwritten competitive bidding can allow service providers to hold on to rents and schemes must be flexible and adaptive

paying for the hydrological services of mexico s forests analysis negotiations and results abstract mexico faces both high deforestation and severe water scarcity the payment for hydrological environmental services psah program was designed to complement other policy responses to the crisis at the interface of these problems through the psah the mexican federal government pays participating forest owners for the benefits of watershed protection and aquifer recharge in areas where commercial forestry is not currently competitive funding comes from fees charged to water users from which nearly us 18 million are earmarked for payments of environmental services applicants are selected according to several criteria that include indicators of the value of water scarcity in the region this paper describes the process of policy design of the psah the main actors involved in the program its operating rules and provides a preliminary evaluation one of the main findings is that many of the program s payments have been in areas with low deforestation risk selection criteria need to be modified to better target the areas where benefits to water users are highest and behavior modification has the least cost otherwise the program main gains will be distributive but without bringing a pareto improvement in overall welfare

can payments for environmental services help reduce poverty an exploration of the issues and the evidence to date from latin america summary this paper examines the main ways in which payments for environmental services pes might affect poverty pes may reduce poverty mainly by making payments to poor natural resource managers in upper watersheds the extent of the impact depends on how many pes participants are in fact poor on the poors ability to participate and on the amounts paid although pes programs are not designed for poverty reduction there can be important synergies when program design is well thought out and local conditions are favorable possible adverse effects can occur where property rights are insecure or if pes programs encourage less labor intensive practices 2004 elsevier ltd all rights reserved

decentralized payments for environmental services the cases of pimampiro and profafor in ecuador abstract few payment for environmental services pes schemes in developing countries operate outside of the central state s umbrella and are at the same time old enough to allow for a meaningful evaluation ecuador has two such decentralised consolidated experiences the five year old pimampiro municipal watershed protection scheme and the twelve year old profafor carbon sequestration programme we describe and compare the two cases using a common pes definition and methodology drawing on both primary interview based information and secondary data we find that both schemes have been relatively effective in reaching their environmental objectives in terms of having probably high additionality levels and low leakage effects a strong focus on the targeted environmental service and a strong degree of conditionality seem to be two key factors explaining these achievements although neither scheme has targeted poverty alleviation or other side objectives both are likely to have improved pes recipients welfare mostly through higher incomes we highlight several observations with more generalised relevance and lessons for the design of pes schemes

poor household participation in payments for environmental services lessons from the silvopastoral project in quindio colombia as the use of payments for environmental services pes approaches in developing countries has grown concern has arisen over the ability of poorer households to participate this paper uses data from a pes project implemented in quindio colombia to examine the extent to which poorer households that are eligible to participate are in fact able to do so the project provides a strong test of the ability of poorer households to participate in a pes program as it required participants to make substantial and complex land use changes the results show that poorer households are in fact able to participate at levels that are broadly similar to those of better off households moreover their participation was not limited to the simpler least expensive options transaction costs may be greater obstacles to the participation of poorer households than household specific constraints

scaling up pro environmental agricultural practice using agglomeration payments proof of concept from an agent based model rates of adoption of pro environmental practices in agriculture in many parts of the world are low in some cases this is attributable to the private costs borne by farmers to adopt these practices often well in advance of any benefits public or private that they may bring monetary incentives such as through payments for ecosystem services pes programs may be of assistance and in this study we examine the potential for a recent innovation the agglomeration payment to improve adoption of pro environmental practice in a rural agricultural context agglomeration payments include bonus payments for adoption by neighboring farms which may help to encourage both compliance with the program they promote as well as the overall diffusion of the program across rural contexts we develop an abstract agent based model abm of an agglomeration payment program to encourage adoption of the pro environment practice of conservation agriculture ca we find that agglomeration payments have the potential to improve levels of adoption of pro environmental practice per program dollar and may help to reduce required spending on project monitoring and enforcement

the cost effectiveness of conservation payments international donors invest billions of dollars to conserve ecosystems in low income nations the most common investments aim to encourage commercial activities such as ecotourism that indirectly generate ecosystem protection as a joint product we demonstrate that paying for ecosystem protection directly can be far more cost effective although direct payment initiatives have imposing institutional requirements we argue that all conservation initiatives face similar challenges thus conservation practitioners would be well advised to implement the first best direct payment approach rather than a secondbest policy option an empirical example illustrates the spectacular cost savings that can be realized by direct payment initiatives

taking stock a comparative analysis of payments for environmental services programs in developed and developing countries abstract payments for environmental services pes are an innovative approach to conservation that has been applied increasingly often in both developed and developing countries to date however few efforts have been made to systematically compare pes experiences drawing on the wealth of case studies in this special issue we synthesize the information presented according to case characteristics with respect to design costs environmental effectiveness and other outcomes pes programs often differ substantially one from the other some of the differences reflect adaptation of the basic concept to very different ecological socioeconomic or institutional conditions others reflect poor design due either to mistakes or to the need to accommodate political pressures we find significant differences between user financed pes programs in which funding comes from the users of the es being provided and government financed programs in which funding comes from a third party the user financed programs in our sample were better targeted more closely tailored to local conditions and needs had better monitoring and a greater willingness to enforce conditionality and had far fewer confounding side objectives than government financed programs we finish by outlining some perspectives on how both user and government financed pes programs could be made more effective and cost efficient

migration remittances and inequality estimating the net effects of migration on income distribution this paper examines the net effects of migration and remittances on income distribution potential home earnings of migrants are imputed as are the earnings of non migrants in migrant households in order to construct no migration counterfacmals to compare with the observed income distribution including remittances the earnings functions used to impute migrant home earnings are estimated from observations on non migrants in a selection corrected estimation framework which incorporates migration choice and labor force participation decisions for a sample of households in bluefields nicaragua migration and remittances increase income inequality when compared with the no migration counterfactual 1998 elsevier science b v

assessing the cost effectiveness of a biodiversity conservation policy a bio econometric analysis of natura 2000 contracts in forest abstract in france the implementation of the eu biodiversity conservation policy within the natura 2000 network combines regulatory tools and voluntary contracting in this article we empirically assess the cost effectiveness of natura 2000 contracts in forest areas we simultaneously estimate a cost function for biodiversity conservation and the production set of biodiversity output and timber while controlling for conservation measures we show strong substitutability between biodiversity conservation and timber production estimate results on the cost elasticity of biodiversity conservation also suggest the possibility of more ecologically ambitious contracts with lower average costs results also show that public owners are able to bear higher opportunity costs than private owners our findings may help to formulate policy recommendations in terms of contracts targeting likely to enhance the cost effectiveness of the incentive scheme

regulation via the polluter pays principle we consider the problem of regulating an economy with environmental pollution we examine the distributional impact of the polluter pays pp principle which requires that any agent compensates all other agents for the damages caused by his or her pollution emissions with constant marginal damages we show that regulation via the pp principle leads to the unique welfare distribution that induces non negative individual welfare change and renders each agent responsible for his or her pollution impact we extend both the pp principle and this result to increasing marginal damages due to pollution we also compare the pp principle with the vickrey clark groves scheme

spatially uniform versus spatially heterogeneous compensation payments for biodiversity enhancing land use measures the importance of compensation payments for biodiversity enhancing land use measures has grown over the past decade particularly in connection with agri environmental policy given that both the costs and the benefits of biodiversity enhancing land use measures are subject to spatial variation the criterion of cost effectiveness calls for spatially heterogeneous compensation payments however when deciding whether to implement uniform or heterogeneous compensation payments the regulator has to compare the disadvantage of uniform payments in terms of cost effectiveness with the disadvantages of spatially heterogeneous payments to help resolve this issue this paper provides a simple ecological economic model that allows the reduced cost effectiveness associated with uniform payments for biodiversity enhancing land use measures to be assessed for different types of benefit and cost functions

agri environmental policies in the eu and united states a comparison abstract agri environmental policies aeps in the united states and the european union are examples of payments for environmental services that pay farmers to reduce the negative externalities of agricultural production while serving as a means to transfer public funds to farmers we show that despite similar origins aeps in the two regions differ both in their specific objectives and in their implementation for example aeps in most member states of the eu 15 have the additional objective of using agriculture as a driver for rural development this objective is achieved by compensating farmers for the private delivery of positive public goods such as attractive landscapes produced by agriculture the rationale is market failure and there is empirical evidence that europeans are willing to pay for such positive externalities no comparable provision exists in u s policy by contrast u s aeps focus almost entirely on reducing agriculture s negative externalities such as soil erosion second we find that u s programs are more targeted than their eu counterparts and take opportunity cost into account the eu programs on the other hand address a wider range of externalities and are focused more on the paying for a particular farming process than reducing specific negative externalities the eu takes a broader view of aeps than does the united states both in terms of type of activity that can be funded and by using less targeting by land characteristics and so the european program could be more easily used as a mechanism for transferring income to producers despite this we find evidence that many of the amenities targeted by the programs are demanded by the population