Redesigning payments for ecosystem services to increase cost-effectiveness

Santiago Izquierdo-Tort, Seema Jayachandran and Santiago Saavedra
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Santiago Izquierdo-Tort: Universidad Nacional Autonoma de Mexico

Working Papers from Princeton University, Department of Economics, Center for Economic Policy Studies.

Abstract: Payments for Ecosystem Services (PES) are a widely used approach to incentivize conservation efforts such as avoided deforestation. Although PES effectiveness has received significant scholarly attention, whether PES design modifications can improve program outcomes is less explored. We present findings from a randomized trial in Mexico that tested whether a PES contract that requires enrollees to enroll all of their forest is more effective than the traditional PES contract that allows them to exercise choice. The modification’s aim is to prevent landowners from enrolling only parcels they planned to conserve anyway while leaving aside other parcels to deforest. We find that the full-enrollment treatment significantly reduces deforestation compared to the traditional contract. This extra conservation occurs despite the full-enrollment provision reducing the compliance rate due to its more stringent requirements. The full-enrollment treatment quadrupled cost-effectiveness, highlighting the potential to substantially improve the efficacy of conservation payments through simple contract modifications.

Keywords: Deforestation; Payments for Ecosystem Services; financial incentives; contract design; Mexico (search for similar items in EconPapers)
JEL-codes: O13 Q23 Q56 Q57 (search for similar items in EconPapers)
Date: 2024-01
New Economics Papers: this item is included in nep-agr, nep-des and nep-env
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Journal Article: Redesigning payments for ecosystem services to increase cost-effectiveness (2024)
Working Paper: Redesigning payments for ecosystem services to increase cost-effectiveness (2024)
Working Paper: Redesigning Payments for Ecosystem Services to Increase Cost-Effectiveness (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:pri:cepsud:325

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