Can payments for ecosystem services (PES) help alleviate poverty?

Introduction

Avoiding deforestation in the Global South is regarded as one of the most cost-effective strategies to reduce global CO2 emissions. In this effort, countries are increasingly using Payments for Ecosystem Services (PES), which are voluntary incentive-based programmes that pay landowners in exchange for safeguarding the benefits humans obtain from ecosystems, such as carbon sequestration, water purification or biodiversity conservation. However, although PES can be a cost-effective way for providing valuable ecosystem services such as carbon sequestration, the empirical evidence shows that it is not necessarily beneficial for the rural poor in the Global South. 

PES programmes are not a magic wand for poverty reduction

While the main objective of PES programmes is the prevention of deforestation, programme managers increasingly face demands to employ them for poverty reduction. It is often assumed that PES payments can effectively furnish a consistent source of revenue for the rural poor, potentially lifting them out of poverty traps, while also reducing the degradation of their local environment.  

By looking at empirical studies on this matter, however, a mixed picture emerges. In their analysis of Mexico's Federal Payments for Ecosystem Services programme, Alix-Garcia et al. demonstrate that the programme reduced expected land cover loss by 40-51% while generating small but positive poverty alleviation, suggesting a "win-win" scenario. However, the authors reveal the challenges of pursuing multiple policy goals with a single tool. As their study shows, the benefits of avoiding deforestation are higher in areas with lower poverty rates, while poverty alleviation gains are greater in regions with lower deforestation risks. This trade-off emerges because rural poor communities, who stand to benefit the most from these programmes, often own the least productive land (e.g., that is far from markets or of low quality) or don’t own much land in the first place. Another study by Miteva et al. highlights that the poor often suffer from uncertain property rights, which can result in exclusion from negotiating land outcomes and is associated with negative weath effects. 

By analysing upcoming PES policies in Vietnam, McElwee argues that PES are unlikely to produce major shifts as they are often adjusted to correspond to “on-the-ground politics” and pay insufficient regard to power dynamics. In other words, existing inequalities mean that these programmes often fail to incorporate poverty-stricken and ethnic minority communities into forest management. Another potential concern is that many actors will be seeking PES rents, leading to corruption. For instance, evidence has shown that elite capture of PES rents that were intended for the poor has been occuring in Mexico (Almeida-Leñero et al.). Finally, Adhikari and Agrawal find that high transaction costs (e.g., associated with negotiation and enforcement) are a significant obstacle to participation in PES programmes for poorer communities. Poorer communities may lack the necessary resources, information, and legal or technical expertise to effectively engage in these negotiations. They also often lack the financial resources and institutional support necessary for monitoring and enforcement activities. Therefore, it appears that in order for PES to maximise environmental and poverty outcomes, social and political issues need to be addressed. 

To truly harness the potential of PES to enhance both environmental and poverty alleviation outcomes, it is imperative that these social and political challenges are addressed. It may involve the development of more inclusive policies that actively lower barriers to entry for disadvantaged groups, more rigorous oversight to prevent corruption, and the provision of support mechanisms to bolster the negotiation capabilities of poorer communities. Only with such equity-focused reforms can PES programs fulfill their dual mission of environmental conservation and poverty reduction.

Conclusion

PES can be a cost-effective way of delivering valuable ecosystem services such as carbon sequestration, but its influence on assisting the rural poor remains uncertain. Initiatives in Indonesia, Uganda and Mexico have proved to offer significant and cost-effective emissions reductions from forests. While PES have generated minor but positive poverty alleviation in some studies, a trade-off often emerges between poverty alleviation gains and deforestation risks. More rigorous empirical research on PES-poverty linkages is necessary to ensure that the rural poor benefit from them. Scholars have warned that the empirical evidence base on the effects of PES on poverty outcomes is very limited and methodologically weak (Samii et al.; Miteva et al.). Therefore, until this improves, it will remain uncertain whether PES is an effective policy for providing ecosystem services while also helping rural livelihoods.

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References 

Adhikari, B., & Agrawal, A. (2013). Understanding the social and ecological outcomes of PES projects: A review and an analysis. Conservation and Society, 11(4), 359-374.

Alix-Garcia, J. M., Sims, K. R., & Yañez-Pagans, P. (2015). Only one tree from each seed? Environmental effectiveness and poverty alleviation in Mexico’s payments for ecosystem services program. American Economic Journal: Economic Policy, 7(4), 1-40.

Almeida-Leñero, L., Revollo-Fernández, D., Caro-Borrero, A., Ruiz-Mallén, I., Corbera, E., Mazari-Hiriart, M., & Figueroa, F. (2017). Not the same for everyone: Community views of Mexico's payment for environmental services programmes. Environmental Conservation, 44(3), 201-211.

McElwee, P. D. (2012). Payments for environmental services as neoliberal market-based forest conservation in Vietnam: Panacea or problem?. Geoforum, 43(3), 412-426.

Miteva, D. A., Pattanayak, S. K., Ferraro, P. J., Helm, D., & Hepburn, C. (2014). Do biodiversity policies work? The case for Conservation Evaluation 2.0. Nature in the balance: the economics of biodiversity, 301-315.

Samii, C., Lisiecki, M., Kulkarni, P., Paler, L., Chavis, L., Snilstveit, B., ... & Gallagher, E. (2014). Effects of payment for environmental services (PES) on deforestation and poverty in low and middle income countries: a systematic review. Campbell Systematic Reviews, 10(1), 1-95.