Payment for Environmental Services: Hypotheses and Evidence
Krister Andersson and
No 18740, NBER Working Papers from National Bureau of Economic Research, Inc
The use of Payment for Environmental Services (PES) is not a new type of contract but they have become more in vogue because of the potential for sequestering carbon by paying to prevent deforestation and degradation of forest lands. We provide a framework utilizing transaction costs to hypothesize which services are more likely to be provided effectively. We then interpret the literature on PES programs to see the extent to which transaction costs vary as predicted across the type of service and assess the performance of PES programs. As predicted we find that transaction costs are the least for club goods like water and greatest for pure public goods like carbon reduction. Actual performance is difficult to measure and varies across the examples. More work and experimentation is needed to gain a better outlook on what elements support effective delivery of environmental services.
JEL-codes: Q15 Q54 Q57 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-env and nep-res
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Published as Lee J. Alston & Krister Andersson & Steven M. Smith, 2013. "Payment for Environmental Services: Hypotheses and Evidence," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 139-159, 06.
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