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payment for ecosystem services
Water. Clean air. Biodiversity. Nutrient-rich soil. These are all forest ecosystem services that have value for the economy, society and wellbeing, but because we tend to take them for granted, forests are often exploited unsustainably for short-term gain.
One way around this market failure is to enact regulations protecting forests. Another approach is to reward those living near forests for managing natural resources in a sustainable way. This is the principle at the heart of Payment for Ecosystem Services (PES) programs.
But despite a growing number of PES schemes around the world, there is little statistically rigorous evidence about the effectiveness or consequences of the PES approach. A new impact evaluation of Mexico’s national PES program – one of the oldest and largest incentive-based conservation initiatives in the world - is helping to fill that knowledge gap.
In 2003, Mexico’s National Forestry Commission (CONAFOR) launched the Payment for Hydrological Services Program (or PSA, for its Spanish acronym). The PSA provides communities with economic incentives to conserve and manage forests. Deforestation and forest degradation are critical challenges in Mexico, which lost nearly 8 percent of its forest cover between 1990 and 2010 – a significant cost given that millions of people depend on forests for their livelihoods.
Although the PSA has undergone numerous evaluations since it started, it has also evolved significantly over the years. Recently - with funding from the Mexican Government and the i2i Program supported by the United Kingdom, as well as a grant from the Program on Forests (PROFOR) and technical expertise from the World Bank and economists Jennifer Alix-Garcia at Oregon State University and Katharine Sims at Amherst College - CONAFOR conducted an impact evaluation to find out how more recent cohorts of households and communities were responding to the financial incentives.
The findings are striking. The PSA grants to communities are modest – on average roughly USD $24 per hectare of land enrolled, with a cap of 3,000 hectares - yet researchers found that participants took on significantly more forest management activities compared to the control group. For instance, participating communities were more active in patrolling against deforestation, building fire breaks, and fighting soil erosion. And despite being restricted in how they can use forested lands, PSA participants do not appear to be economically worse off.
In fact, PSA communities appear to gain in many aspects, notably community social capital. This is a particularly important result for a PES scheme, as Jennifer Alix-Garcia, a lead researcher for the study and professor of applied economics at Oregon State University, explained:
“Ever since PES programs have started, there have been concerns about undermining the social norms of collective action, deterring people from voluntarily conserving ecosystems, and causing tensions by distributing payments. But when we look at different measures of social capital, they either stay the same or increase. There’s 20-25 percent more investment in infrastructure that benefits everyone, like a community meeting house or a village vehicle. We also see marginally positive effects on peoples’ willingness to lend to other one, so there’s trust within the community.”
Not only do the results validate the importance of the PSA, but they will directly influence how the next iteration of the program is carried out. Notably, the data on forest cover change showed that the PSA had the greatest impacts where the risk of deforestation was high. This points to the need for additional targeting of participants, so that areas with a high risk of deforestation are prioritized over areas where forests are likely to remain intact without any intervention.
The study’s findings will also influence Mexico’s broader forest policies, confirmed officials with CONAFOR’s departments for General Planning and Information Coordination, and Planning and Evaluation. “They demonstrate that the program contributes to strengthening communities’ social capital, which is very important for their empowerment, allowing them to identify and manage their own sustainable development processes,” said Jorge D. Fernández Medina, Guillermo Muñoz Galindo, and Sofía Romo Monroy in written comments. “The results will contribute to planning instruments for the years 2019-2024, such as the National Development Plan and the National Forestry Program (PRONAFOR).”
This research may also generate greater interest in impact evaluations related to environmental management efforts. “Mexico’s PES program is the first to be evaluated with a regression discontinuity design,” said Victor Hugo Orozco Olvera, study co-principal investigator (PI) and economist with the World Bank’s Development Impact Evaluation Unit (DIME). “This methodology comes close to a randomized control trial, which is currently the most statistically precise way of determining whether the outcomes we see are truly caused by a given intervention. So far, it’s been challenging to carry out impact evaluations on land conservation policies, so this study really breaks new ground.”
The one question that the researchers were not able to answer is whether the PSA reduced rates of deforestation in the long run, particularly after the five-year contracts with communities came to an end. “There is a gap between what we can learn from current remote-sensing data designed for large scales, and what we would like to know about what is happening at the parcel level,” said PIs Alix-Garcia and Sims. “If we’re really worried about tropical forests, then investing in deforestation monitoring systems could really improve the efficacy of PES programs.”
Photo credit: CONAFOR
Last Updated : 08-21-2018
Department of Applied Economics, Oregon State University; Economics Department, Environmental Studies Affiliate, Amherst College; c Development Research Group, The World Bank; and Evaluation Department, National Forestry Commission of Mexico
Between 1990 and 2010, Mexico lost 5.5 million hectares (or 7.8 percent) of its forest cover (FAO 2010). Deforestation is largely driven by the conversion of forests to croplands or pasture. In response, Mexico’s National Forestry Commission (CONAFOR) introduced its first program of payments for ecosystem services (PES) in 2003. The program encourages forest conservation by making payments to owners of ecologically valuable land. The program has grown substantially since its inception, encompassing 2.5 million hectares of forests as of the end of 2013, making it by far the largest PES program in Latin America. This activity is the first attempt at applying rigorous evaluation methods to a large-scale PES program, to extract valuable lessons learned for similar programs elsewhere. Mexico is planning to make PES a central tool in its strategy for implementing REDD+ and other carbon funds, so a better understanding of the impact of the current program on deforestation is critical.
- The use of payments differentiated by land cover type and economic pressure to deforest, in an effort to attract lands with greater potential environmental benefits;
- Longer-term environmental impacts as a result of participant behavior, including whether applicants re-apply and what their behavior is upon exiting voluntarily or being rejected upon reapplication;
- Whether enrolling forest land lead to deforestation in other, non-enrolled areas;
- The impacts on social capital, especially in regard to the program component that encourages communities to organize themselves in groups in order to better administer forests;
- Household socioeconomic impacts, and whether the program reduces agricultural or pastoral development and incomes as land is committed to conservation uses;
- Whether households and communities are willing to accept contracts with different payment levels.
The study found causal evidence of program effectiveness for this large-scale, government-run program. Looking at an index of community land management activities, communities involved in the program increased their participation by over 50%, protecting land cover by patrolling for illegal conversion, building fire breaks, or combatting soil erosion. Compared to control households, participant households spent approximately 2.7 days more per year in land management activities.
Estimated impacts were small and not statistically significant for changes in average household assets, housing stock, food consumption, and primary education. However, they there was a statistically significant increase of 20-25% in community infrastructure, and a substantive 30-40% increase in school attendance by 16-18-year-olds.
The program’s conditional payments have maintained or made modest improvements in pro-social work effort and measures of social capital at the communal and household level, including measures of institutions, attitudes and participation in community governance. Across all cohorts, the study finds a significant increase of approximately 8% in an index of community social capital, compared to controls. Additional time spent in land management activities does not crowd out other community work by households. Household-level measures of trust and participation are not changed by the program.
Due to data limitations and the overall low rates of forest cover change during the study period, it was difficult to detect anything except a 100% impact by the program. Drawing on the only published data source with annual variation, the analysis suggests that the program has likely reduced the rate of tree cover loss. Within areas at high risk of deforestation, the program reduced the loss of tree cover by approximately 40%. Larger reductions of land cover change were observed in the Yucatan peninsula. Although imprecise, estimates of the percentage change in loss rates are similar in magnitude to prior studies, which found changes between 20-50% depending on the method used.
This study illustrated that an impact evaluation based on causal analysis is possible, and most importantly, research can be done for large-scale government-run programs. With the expansion of climate change initiatives, it is key to support impact evaluation work, especially for a subset of programs that are likely to be replicated or scaled up across different countries.
Author : Department of Applied Economics, Oregon State University; Economics
Department, Environmental Studies Affiliate, Amherst College; c Development
Research Group, The World Bank; and Evaluation Department, National Forestry
Commission of Mexico
Last Updated : 06-17-2018