User Financing in a National Payments for Environmental Services Program: Costa Rican Hydropower

Allen Blackman () and Richard T. Woodward

Discussion Papers from Resources For the Future

Abstract: National government-funded payments for environmental services (PES) programs often lack sustainable financing and fail to target payments to providers of important environmental services. In principle, these problems could be mitigated by replacing at least some government funding with direct contributions from individual environmental service users who have incentives to underwrite payments and who can ensure that they are targeted appropriately. We use original survey data and official statistics to analyze user financing in Costa Rica’s renowned national PES program, focusing on the amounts and sources of such financing, the drivers of contributions by private hydroelectricity plants (the most important sources of user financing), and hydroelectric plant managers’ perceptions of the PES program. We find that user financing from all sources supports less than three percent of the program’s total payments to environmental service providers. In the private hydroelectric sector, not surprisingly, large plants tend to contribute while small ones do not. Beyond that, the weight of evidence suggests that improving relations with local communities and government regulators may be as important a motive for contributing to the PSA program as ensuring the provision of forest environmental services. These findings raise questions about the potential of user financing to improve the efficiency and financial sustainability of national PES programs.

Keywords: payments for environmental services; voluntary regulation; hydroelectricity; Costa Rica (search for similar items in EconPapers)
JEL-codes: Q23 Q24 Q28 (search for similar items in EconPapers)
Date: 2009-02-18
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Persistent link: http://EconPapers.repec.org/RePEc:rff:dpaper:dp-09-04

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