Title

Redesigning payments for ecosystem services to increase cost-effectiveness

Author(s)

Santiago Izquierdo-Tort Santiago Izquierdo-Tort (Universidad Nacional Autonoma de Mexico)

Seema Jayachandran Seema Jayachandran (Princeton University)

Santiago Saavedra Santiago Saavedra (Universidad del Rosario)

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.

Creation Date

2024-01

Section URL ID

Paper Number

325

URL

https://gceps.princeton.edu/wp-content/uploads/2024/05/wp325_Jayachandran_redesign_mexico.pdf

File Function

Jel

O13, Q23, Q56, Q57

Keyword(s)

Deforestation, Payments for Ecosystem Services, financial incentives, contract design, Mexico

Suppress

false

Series

3