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The role of deforestation risk and calibrated compensation in designing payments for environmental services

Published online by Cambridge University Press:  01 June 2008

JENNIFER ALIX-GARCIA ,
ALAIN DE JANVRY  and
ELISABETH SADOULET
JENNIFER ALIX-GARCIA*
Affiliation:
University of San Francisco, Department of Economics, 2130 Fulton St., San Francisco, CA 94117. Email: jmalixgarcia@usfca.edu
ALAIN DE JANVRY
Affiliation:
Department of Agricultural and Resource Economics, University of California at Berkeley, 207 Giannini Hall, Berkeley, CA 94720
ELISABETH SADOULET
Affiliation:
Department of Agricultural and Resource Economics, University of California at Berkeley, 207 Giannini Hall, Berkeley, CA 94720
*
*Corresponding author.
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Abstract

This paper discusses the gain in efficiency from including deforestation risk as a targeting criterion in payments for environmental services (PES) programs. We contrast two payment schemes that we simulate using data from Mexican common property forests: a flat payment scheme with a cap on allowable hectares per enrollee, similar to the program implemented in many countries, and a payment that takes deforestation risk and heterogeneity in land productivity into account. We simulate the latter strategy both with and without a budget constraint. Using observed past deforestation, we find that while risk-targeted payments are far more efficient, capped flat payments are more egalitarian. We also consider the characteristics of communities receiving payments from both programs. We find that the risk-weighted scheme results in more payments to poor communities, and that these payments are more efficient than those made to non-poor ejidos. Finally, we show that the risk of deforestation can be predicted quite precisely with indicators that are easily observable and that cannot be manipulated by the community.

Type
Research Article
Information
Environment and Development Economics , Volume 13 , Issue 3: Payment for ecosystem services , June 2008 , pp. 375 - 394
Copyright
Copyright © Cambridge University Press 2008

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