Changing Land Uses in Forestry and Agriculture Through Payments for Environmental Services

Examining international experiences, Sven Wunder and Jan Börner argue that Payment for Environmental Services (PES) systems have met with some success in both developing and developed countries. They report that the majority of PES systems are use-restricting instead of use-modifying. Using data from the ASB Partnership for the Tropical Forest Margins and the Secondary Forests and Fallow Vegetation in the Eastern Amazon Region–Function and Management Project of the SHIFT-Capoeira program in Brazilian Amazon, they come up with four explanations for why use-restricting policies are favored. First, conserving agricultural lands by applying the use-modifying approach produces fewer environmental services than preserving natural forests using the use-restricting method. Carbon mitigation resulting from use- modifying PES is in the 0–3 tCO2/ha/yr range, which is much lower than that resulting from use-restricting options in forestry and soil restoration (73.33 tCO2/ha/yr).

Second, the opportunity costs and technological complexity of use-modifying PES are higher than those of use-restricting PES. Farmers are often averse to adopting complex technologies because changes require substantial capital and labor investments. In the western and eastern Amazon studies, technological alternatives to traditional practices that could yield higher per-hectare net returns have largely been ignored by farmers. Prohibiting factors for technological adoption include culture and norms, labor market constraints, and limited information about technology performance.

Third, negotiation and monitoring costs of use-modifying PES are higher than those of use-restricting PES. Population density is normally higher in prime agricultural areas than in forests. Hence, negotiations associated with agricultural modifications involve a large number of bargaining parties. Unlike the enforcement of use-restricting agreements for forests, which can rely on the use of remote sensing, monitoring agricultural land management requires direct field visits that are time-consuming and expensive.

Fourth, successful use-modifying PES may induce farmers to expand their operations into environmentally sensitive areas. Crop changes can also generate the migration of farming activities across spaces due to unintended price effects on agricultural outputs and inputs. Based on these factors, the authors caution against any overstatement of benefits from use-modifying PES interventions.

This paper was presented at the Lincoln Institute’s Land Policy Conference of 2010 and is Chapter 11 of the book Climate Change and Land Policies.