Hostname: page-component-78c5997874-94fs2 Total loading time: 0 Render date: 2024-11-20T05:33:49.161Z Has data issue: false hasContentIssue false
  • English
  • Français

Cost-effective provision of environmental services: the role of relaxing market constraints*

Published online by Cambridge University Press:  26 January 2010

BEN GROOM  and
CHARLES PALMER
BEN GROOM
Affiliation:
Department of Economics, School of Oriental and African Studies, Thornhaugh St, Russell Square, London WC1H 0XG, United Kingdom. Tel: +44 (0)20 78984730. Email: [email protected]
CHARLES PALMER
Affiliation:
Chair of Environmental Policy and Economics, Institute for Environmental Decisions, ETH Zürich, Zürich, Switzerland. Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Ferraro and Simpson (2002) argue that when markets are competitive, payments for environmental services (PES) are more cost-effective in achieving environmental goals than more indirect approaches such as subsidies to capital. However, when eco-entrepreneurs face non-price rationing in input or output markets, as is typical for credit in developing countries for example, we show that interventions which relax constraints can be more cost-effective than PES. One corollary of this is that such indirect approaches are preferred to PES by interveners (e.g., donors) and eco-entrepreneurs alike. Both of these outcomes are more likely when constraints are severe. This has implications for schemes with dual environment and poverty alleviation objectives.

Type
Research Article
Information
Environment and Development Economics , Volume 15 , Issue 2 , April 2010 , pp. 219 - 240
Copyright
Copyright © Cambridge University Press 2010

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ascher, W. (1994), ‘Communities and sustainable forestry in developing countries’, report to the Center for Tropical Conservation, Duke University.Google Scholar
Azam, J.P., Biais, B., Dia, M., and Maurel, C. (2001), ‘Informal and formal credit markets and credit rationing in Cote D'Ivoire’, Oxford Review of Economic Policy 17: 520–534.CrossRefGoogle Scholar
Barslund, M. and Tarp, F. (2007), ‘Formal and informal rural credit in four provinces of Vietnam’, Discussion Paper 07-07, Department of Economics, University of Copenhagen.Google Scholar
Bulte, E., Lipper, L., Stringer, R., and Zilberman, D. (2008), ‘Payments for ecosystem services and poverty reduction: concepts, issues, and empirical perspectives’, Environment and Development Economics 13: 245–254.CrossRefGoogle Scholar
Campos, M., Francis, M., and Merry, F. (2005), ‘Stronger by association—improving the understanding of how forest resource-based SME associations in Brazil can benefit the poor’, report of Instituto de Pesquisa Ambiental da Amazônia (IPAM) and International Institute for Environment and Development (IIED), London.Google Scholar
Colman, D., Solomon, A., and Gill, L. (2005), ‘Supply response of UK milk producers’, Agricultural Economics 32: 239–251.CrossRefGoogle Scholar
Donovan, J., Stoian, D., Macqueen, D., and Grouwels, S. (2006), ‘The business side of sustainable forest management: small and medium forest enterprise development for poverty reduction’, Natural Resource Perspectives 104, Overseas Development Institute (ODI), London.Google Scholar
Drechsler, M., Wätzold, F., Johst, K., Bergmann, H., and Settele, J. (2007), ‘A model-based approach for designing cost-effective compensation payments for conservation of endangered species in real landscapes’, Biological Conservation 140: 174–186.CrossRefGoogle Scholar
Feng, H. (2007), ‘Green payments and dual policy goals’, Journal of Environmental Economics and Management 54: 323–335.CrossRefGoogle Scholar
Ferraro, P. and Simpson, D. (2002), ‘The cost-effectiveness of conservation performance payments’, Land Economics 78: 339–353.CrossRefGoogle Scholar
Ferraro, P. and Simpson, D. (2005), ‘Cost-effective conservation when eco-entrepreneurs have market power’, Environment and Development Economics 10: 651–663.CrossRefGoogle Scholar
Fulginiti, L. and Perrin, R. (1993), ‘The theory and measurement of producer response under quotas’, The Review of Economics and Statistics 75: 97–106.CrossRefGoogle Scholar
Gauvin, C., Uchida, E., Rozelle, S., Xu, J., and Zhan, J. (2009), ‘Cost-effectiveness of payments for ecosystem services with dual goals of environment and poverty alleviation’, Journal of Environmental Mangagement. DOI 10.1007/S00267-009-9321-9Google Scholar
Ghosh, P., Mookherjee, D., and Ray, D. (2000), ‘Credit rationing in developing countries: an overview of the theory’, in Mookherjee, D. and Ray, D. (eds), Readings in the Theory of Economic Development, London: Blackwell, pp. 283–301.Google Scholar
Groom, B., Grosjean, P., Kontoleon, A., Swanson, T., and Zhang, S. (2009), ‘Relaxing constraints with compensation: a “win-win” policy for environment and poverty in China?’ Oxford Economic Papers, doi:10.1093/oep/gpp021.CrossRefGoogle Scholar
Guérin-McManus, M., Famolare, L., Bowles, I., Malone, S., Mittermeier, R., and Rosenfeld, A. (1996), ‘Bioprospecting in practice: a case study of the Suriname ICBG project and benefits sharing under the Convention on Biological Diversity’, report for the Convention on Biological Diversity, Montreal.Google Scholar
Hernandez Cruz, R., Baltazar, E., Gomez, G., and Lugo, E.E. (2005), ‘Social adaptation. Ecotourism in the Lacandon forest’, Annals of Tourism Research 32: 610–627.CrossRefGoogle Scholar
Hoff, K. and Stiglitz, J.E. (1993), ‘Imperfect information and rural credit markets: puzzles and policy perspectives’, in Hoff, K., Braverman, A. and Stiglitz, J.E. (eds), The Economics of Rural Organization. Theory, Practice and Policy, Oxford: Oxford University Press, pp. 33–52.Google Scholar
Key, N., Sadoulet, E., and de Janvry, A. (2000), ‘Transactions costs and agricultural supply curves’, American Journal of Agricultural Economics 82: 245–259.CrossRefGoogle Scholar
Kotchen, M. (2005), ‘Impure public goods and the comparative statics of environmentally friendly consumption’, Journal of Environmental Economics and Management 49: 281–300.CrossRefGoogle Scholar
Macqueen, D., Dufey, A., Gomes, A.P.C., Hidalgo, N.S., Nouer, M.R., Pasos, R., Suárez, L.A.A., Subendranathan, V., Trujillo, Z.H.G., Vermeulen, S., Voivodic, M. de Almeida, and Wilson, E. (2008), ‘Distinguishing community forest products in the market: industrial demand for a mechanism that brings together forest certification and fair trade’, report of the International Institute for Environment and Development (IIED), London.Google Scholar
Mohieldin, M.S. and Wright, P. (2000), ‘Formal and informal credit markets in Egypt’, Economic Development and Cultural Change 48: 657–670.CrossRefGoogle Scholar
Muller, J. and Albers, H. (2004), ‘Enforcement, payments, and development projects near protected areas: how the market setting determines what works where’, Resource and Energy Economics 26: 185–204.CrossRefGoogle Scholar
Pagiola, S. (2008), ‘Payments for environmental services in Costa Rica’, Ecological Economics 65: 712–724.CrossRefGoogle Scholar
Pagiola, S. and Platais, G. (2007), Payments for Environmental Services: From Theory to Practice, Washington DC: World Bank.Google Scholar
Petrick, M. (2005), ‘Empirical measurement of credit rationing in agriculture: a methodological survey’, Agricultural Economics 33: 191–203.CrossRefGoogle Scholar
RCW (Ramsar Convention on Wetlands) (2007), ‘Sustainable trade facilitation in Indonesia background’, [Online], http://www.ramsar.org/features/features_indonesia_trade1.htm) accessed on 8 July 2008.Google Scholar
Wätzold, F. and Schwerdtner, K. (2005), ‘Why be wasteful when preserving a valuable resource? A review article on the cost-effectiveness of European biodiversity conservation policy’, Biological Conservation 123: 327–338.CrossRefGoogle Scholar
Wunder, S. (2000), ‘Ecotourism and economic incentives—an empirical approach’, Ecological Economics 32: 465–479.CrossRefGoogle Scholar
Wunder, S. and Albán, M. (2008), ‘Decentralized payments for environmental services: the cases of Pimampiro and PROFAFOR in Ecuador’, Ecological Economics 65: 685–698.CrossRefGoogle Scholar
Vakis, R., Sadoulet, E., de Janvry, A., and Cafiero, C. (2004), ‘Testing for separability in household models with heterogeneous behavior: a mixture model approach’, Working Paper Series 990, Department of Agricultural & Resource Economics, UC Berkeley.Google Scholar
Xu, J. and Cao, Y. (2002), ‘The sustainability of converting the land for forestry and pasture’, International Economic Review 3–4: 56–60.Google Scholar