Homespun strategy in paying for nature’s services reveals shortcomings

View of the Brazilian Amazon. CIAT/Neil Palmer
13 March 2018

BONN, Germany (Landscape News) — Mounting threats to the global ecosystem under pressures from population growth and commodity demands make economic incentives a vital component of environmental conservation.

One practice that has emerged over the past 20 years, Payments for Environmental Services (PES), involves assigning value through financial incentives paid to farmers and land owners for managing their land so it provides an ecological service. Remunerated services typically include carbon sequestration, watershed management, or biodiversity protection.

New research published in Nature Sustainability journal from the Center for International Forestry Research (CIFOR) and partners suggests that due to shortcuts in design and execution, PES programs may in practice work less effectively than they could, lowering their capacity to provide the right incentives, and restricting their impact on conservation efforts.

“Naturally enough, due to differences in contexts, priorities and goals, PES programs vary in design and execution,” said Sven Wunder, principal economist with CIFOR. “While we recognize variations in strategy will always exist, we note that PES designers often take impractical shortcuts, oversimplifying circumstances, leading to deficiencies in execution, and thus probably in impact.”

One shortcoming often relates to fears among PES regulation enforcers in applying fines and penalties for not meeting agreed goals, the researchers led by CIFOR and Canada’s University of Waterloo discovered.

“Less than a matter of problems with complex biophysical monitoring or prohibitive transaction costs, we believe enforcement is often a politically sensitive question, the paper titled “From principles to practice in paying for nature’s services” states.

“In conservation, the observed frequency to sanction, and the size of the penalties, may vary with factors such as agents’ level of information, incidence of corruption and the monetary and social costs of applying sanctions.”

To reach their conclusions, the scientists analyzed a new global dataset accrued from 70 PES projects over the past 20 years around the world. They coded design and implementation features from the case descriptions and their own field-based observations.

PES programs assessed included watersheds, forest carbon and biodiversity schemes from North America, South America, Asia, Australia, Africa and Europe.

The authors observed that PES programs are sometimes perceived by those involved as a silver bullet, leading to potentially misguided implementation when perhaps other policy programs would be better suited to a given scenario.

Difficulties arise when the environmental service provider offers less compensation than expected from the landholder, when the institutional frameworks for introducing and administering PES are lacking, when provider control over the environmental service is weak, and when payments are insufficient to incentivize further ecosystem services, the report said.

All the initiatives monitored compliance, two thirds comprehensively. However, only a quarter of the initiatives were consistent in sanctioning non-compliance when detected by reducing or stopping payments. Around the same number partially enforced the rules, but almost half did not sanction any violator.

“Evidence shows that over time rules will typically be tested by tentative defiance as an economically rational strategy,” Wunder said. “More likely than continuously perfect compliance we believe that PES implementers will frequently tolerate some degree of non-compliance.”

A second problem is that implementers often fail to effectively target land areas where the environmental threats are most eminent. It is a problem when efforts are made to enroll only those landowners who were already environmentally responsible, Wunder said.

Additionally, implementers often took the shortcut of making payments uniform for all beneficiaries, which often may reflect pro-poor, anti-poverty aims built into PES ideology.

In conclusion, the scientists found that tradeoffs and deficiencies in the way PES are designed and executed may help explain why performance in early environmental impact evaluation studies lags behind expectations.

Pressures are escalating to put conservation finance programs to more effective use. Shortcomings in PES programs may lead to political pressure to create more transparent and economically sound policy choices.

“We hope that this may lead to better realization of the potential for PES to achieve efficient and equitable conservation,” Wunder said.

Read the full paper:

From principles to practice in paying for nature’s services