11. Payment for Ecosystem Services

Question 1

What does additionality mean?

Answer 1

When financial compensation results in actions towards the provision of ecosystem services.

Question 2

What 2 factors influence the decision to harvest?

Answer 2

• Opportunity cost of conservation
• Change of getting caught

Question 3

What is the difference between uncertainty and risky?

Answer 3

Uncertainty means you don’t know, risky means you know the probability distribution.

Question 4

How can a PES contract function as an insurance?

Answer 4

Regardless of risks increasing or harvest values decreasing, there is a guarantee of income.

Question 5

How much of global forests has been converted to human use since the advent of agriculture?

Answer 5

> 50%

Question 6

What are PES programs?

Answer 6

PES programs use a market to connect the receivers of an ecosystem service to the providers of that services.

Question 7

Name 3 examples of systems for which one can design a PES program.

Answer 7

1. Reforests (carbon sequestration)
2. Changing farming practice (limit nitrogen emissions)
3. Watershed services (water purification, flood risk mitigation, aquifer recharge, erosion minimization)

Question 8

Name a real-world example of a PES program.

Answer 8

REDD+: Reducing Emissions from Deforestation and Forest Degradation

Question 9

Name 2 actors that local communities have to deal with in PES scheme.

Answer 9

1. Private sector entities who buy ES
2. Governments who regulate
3. Government agencies that bridge organisations
4. Local consumers of sustainable ES products
5. Global consumers supporting sustainable production

Question 10

What is the definition of PES? (Answer should contain 5 elements)

Answer 10

1. A voluntary transaction where
2. A well-defined environmental service
3. Is being bought by a service buyer
4. From a service provider
5. If the service provider secures service privision

Question 11

When is the cost of conservation/sustainable management compensated by the buyers of the ES?

Answer 11

When WTA < WTP

Question 12

Name 4 of the 8 conditions for a PES scheme.

Answer 12

1. Additionality
2. Conditionality
3. Limited transaction costs
4. Transparency
5. Limited leakage
6. Permanence
7. Payments can be organized
8. Property rights

Question 13

True or false: paying for ecosystem service delivery may ‘crowd-out’ intrinsic motivations for sustainable management.

Answer 13

True.

Question 14

True or false: property rights at the invidual level make it difficult for PES schemes to be pro-poor.

Answer 14

True

Question 15

What is an alternative to PES schemes?

Answer 15

Co-investment in stewardship

Question 16

Name 2 characteristics of co-investment in stewardship

Answer 16

1. Based on collective action
2. Social capital required
3. Opportunity for pro-poor arrangements
4. Opportunity for rural communities to enter
5. Likely to require higher WTP
6. Motivation based in more than WTA
7. Long-term contract between buyer and seller

Question 17

Who are often the brokers/intermediaries in PES schemes?

Answer 17

Governments and NGOs

Question 18

Why are effectiveness and efficiency of PES schemes not well understood?

Answer 18

• Few projects have baseline data
• Limited monitoring

Question 19

Name 3 issues with PES programs.

Answer 19

1. Power relations
2. Short-term wins because of money
3. Transaction costs
4. Definition of services
5. Property rights
6. Equity issues
7. Distance between providers and beneficiaries
8. How much to pay/accept?
9. Who can pay and sell?
10. Hard to measure what ESS are delivered
11. Adverse self-selection of participants
12. Noncompliance
13. Leakage
14. Motivation crowdfing
15. Paying for proxies, not ES delivery

Question 20

Why are watershed PES schemes easier to scale up? Name 2 reasons.

Answer 20

1. Often there is a single buyer, making transaction costs low
2. It is easy to see who is upstream and downstream
3. Potentially can happen in a single country
4. Actors may know each other

Question 21

What is the aim of PES schemes?

Answer 21

To incentivize landholders and other resource stewards to adopt environmentally friendlier practices of protection or restoration.

Question 22

Where have PES schemes been most popular?

Answer 22

Americans and China.

Question 23

What are the three different types of PES when it comes to who the buyer is?

Answer 23

1. User-financed PES
2. Government-financed PES
3. Compliance PES

Question 24

Name 1 pro of user-financed PES and 1 pro of government-financed PES.

Answer 24

User-financed PES:

• More effective in directly overseeing contractual delivery

Government-financed PES:

• More effective in addressing ES free-rider problems by taxing multiple users
• More cost-efficient in organizing payment programs at scale

Question 25

What are the issues with PES contracts that are too long or too short?

Answer 25

• Contract that are too short may not be seen as worthwhile by landowners in terms of transaction costs involved
• Contracts that are too long may not allow for changes of opportunity costs or be seen as substantive reduction in the flexibility of land-use decisions

Question 26

What are magnet effects?

Answer 26

Magnet effects occur when the spending on PES raises incomes locally, thus attracting migrants from outside.

Question 27

What are rebound effects?

Answer 27

When PES recipient households face higher net incomes, the new income flow could expand consumption and land use.

Question 28

Why is it better if ES users would pay directly for impacts than outcomes?

Answer 28

This minimizes risk of not getting what they paid for.

Question 29

True or false: protected areas often have more impact than PES schemes.

Answer 29

False.

Question 30

True or false: supply exceeds demand for voluntary forest carbon.

Answer 30

True.

Question 31

What are the four key features for scaling up PES, according to Salzman (2018)?

Answer 31

1. Motivated buyers
2. Motivated sellers
3. Metrics
4. Low-transaction-cost institutions

Question 32

True or false: there is overwhelming evidence that PES schemes contribute to poverty alleviation.

Answer 32

False