The Role of Risk in Targeting Payments for Environmental Services

29 Pages Posted: 4 Nov 2005

See all articles by Jennifer Alix‐Garcia

Jennifer Alix‐Garcia

University of San Francisco - College of Arts & Sciences

Alain de Janvry

University of California, Berkeley - The Richard & Rhoda Goldman School of Public Policy

Elisabeth Sadoulet

University of California, Berkeley - The Richard & Rhoda Goldman School of Public Policy

Date Written: October 25, 2005

Abstract

This paper discusses the gain in efficiency from including deforestation risk as a targeting criterion in payments for environmental services (PES) programs. We contrast two payment schemes that we simulate using data from Mexican common property forests: a flat payment scheme with a cap on allowable hectares, similar to the program implemented in several countries, and a payment that takes deforestation risk into account. We simulate the latter strategy both with and without a budget constraint. Using observed past deforestation, we find that while risk-targeted payments are far more efficient, flat payments are more egalitarian. We also consider the characteristics of communities receiving payments from both programs. We find that the risk-weighted scheme results in more, though smaller, payments to poor communities, and these payments are more efficient than those to non-poor ejidos. In the flat scheme, payments to poor and non-poor are equal, though they receive less of the budget than in the more efficient program.

Keywords: environmental services, targeting, forest policy, deforestation, Mexico

JEL Classification: Q23, Q28

Suggested Citation

Alix-Garcia, Jennifer and de Janvry, Alain and Sadoulet, Elisabeth, The Role of Risk in Targeting Payments for Environmental Services (October 25, 2005). Available at SSRN: https://ssrn.com/abstract=836144 or http://dx.doi.org/10.2139/ssrn.836144

Jennifer Alix-Garcia (Contact Author)

University of San Francisco - College of Arts & Sciences ( email )

San Francisco, CA 94117
United States

HOME PAGE: http://www.usfca.edu/artsci/fac_staff/A/alix-garcia_jennifer.html

Alain De Janvry

University of California, Berkeley - The Richard & Rhoda Goldman School of Public Policy ( email )

2607 Hearst Avenue
Berkeley, CA 94720-7320
United States

Elisabeth Sadoulet

University of California, Berkeley - The Richard & Rhoda Goldman School of Public Policy ( email )

2607 Hearst Avenue
Berkeley, CA 94720-7320
United States

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