Context Matters: Exploring the Cost-effectiveness of Fixed Payments and Procurement Auctions for PES
Authored by Kristian Lindgren, Liv Lundberg, U Martin Persson, Francisco Alpizar
Date Published: 2018
DOI: 10.1016/j.ecolecon.2017.11.021
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Abstract
Successfully implemented payment for ecosystem services (PES) programs
can provide both conservation of nature and financial support to rural
communities. In this paper, we explore how PES programs can be designed
so as to maximize the amount of additional ecosystem services provided
for a given budget. We also provide a brief summary of the use of
auction mechanisms in real world PES programs. To explore the potential
additionality of different PES program designs we use a conceptual agent
based simulation model where payments are either fixed, or set through a
uniform or discriminatory auction. The program can also be designed to
target payments to land-owners based on their provision of ecosystem
services. Theoretically, auctions should be the most effective design,
especially if payments are differentiated and targeted by ecosystem
service provision. However, what we find is that the context in which
the PES program is implemented baseline compliance with program
standards among the participants, correlation between opportunity costs
and ecosystem services in the landscape, heterogeneity in costs and
budget size has a determining impact on the relative effectiveness of
the different payment designs, with fixed payments schemes being much
more effective than auctions in certain settings. Our findings suggest
that context should be taken into serious consideration when a PES
program design is chosen.
Tags
Design
Performance
Agent based modelling
Ecosystem services
information
conservation auctions
Provision
Environmental services
Payment for ecosystem services
Auction
efficiency
Additionality
Benefit targeting
Nonpoint-source pollution
Adverse selection
Reverse auctions