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The Role of Risk Targeting Payments for Environmental Services

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Type: Working Paper
Author: Alix-Garcia, Jennifer; de Janvry, Alain; Sadoulet, Elisabeth
Date: 2005
URI: https://hdl.handle.net/10535/5691
Sector: Forestry
Region: Central America & Caribbean
Subject(s): conservation
environmental policy
rural development
environmental services
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."

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