We examine how agricultural subsidies may induce deforestation and interact with conservation programs by analyzing two large-scale national programs in Mexico that have existed simultaneously for more than a decade: an agricultural subsidy for livestock (PROGAN) and a program of payments for ecosystem services (PES). Looking across the entire Mexican landscape, we exploit the surprises in the timing of enrollment in PROGAN's waves, fluctuations in program payments, and the change in the value of the subsidy induced by inflation and currency fluctuations to identify the impacts of the livestock subsidy on environmental outcomes. We find that PROGAN increased municipal deforestation by 7 per cent. The deforestation effects of PROGAN were smaller in municipalities with higher concentrations of PES recipients. We suggest that livestock subsidies could be better targeted to places with low deforestation risk and high livestock productivity to maximize food production and minimize negative externalities caused by deforestation.

Internationally, there is political impetus towards providing incentive mechanisms, such as payments for ecosystem services (PES), that motivate land users to conserve that which benefits wider society by creating an exchange value for conservation services. PES may incorporate a number of conservation goals other than just maximizing the area under a certain land use, so as to optimize multiple benefits from environmental conservation. Environmental additionality (conservation services generated relative to no intervention) and social equity aspects (here an equitable distribution of conservation funds) of PES depend on the conservation goals underlying the cost-effective targeting of conservation payments, which remains to be adequately explored in the PES literature. This paper attempts to evaluate whether multiple conservation goals can be optimized, in addition to social equity, when paying for the on-farm conservation of neglected crop varieties (landraces), so as to generate agrobiodiversity conservation services. Case studies based on a conservation auction in the Bolivian and Peruvian Andes (through which community-based groups identified the conservation area and the number of farmers taking part in conservation, as well as the payment required), identified significant cost-effectiveness tradeoffs between alternative agrobiodiversity conservation goals. There appears to be a non-complementary relationship between maximizing conservation area under specific landraces (a proxy for genetic diversity maintenance) and the number of farmers conserving such landraces (a proxy for agricultural knowledge and cultural traditions maintenance). Neither of the two are closely connected with maximizing the number of targeted farming communities (a proxy for informal seed exchange networks and hence geneflow maintenance). Optimizing cost-effectiveness with regard to conservation area or number of farmers would also be associated with a highly unequal distribution of payments. Multi-criteria targeting approaches can reach compromise solutions, but frameworks for these are still to be established and scientifically informed about the underlying link between alternative conservation goals and conservation service provision.

Intermediaries are seen as important actors in facilitating payments for environmental services (PES). However, few data exist on the adequacy of the services provided by intermediaries and the impacts of their interventions. Using four PES case studies in Vietnam, this paper analyses the roles of government agencies, non-government organizations, international agencies, local organizations and professional consulting firms as PES intermediaries. The findings indicate that these intermediaries are essential in supporting PES establishment. Their roles are as service and information providers, mediators, arbitrators, equalizers, representatives, watchdogs, developers of standards and bridge builders. Concerns have been raised about the quality of intermediaries’ participatory work, political influence on intermediaries’ activities and the neutral status of intermediaries. Although local organizations are strongly driven by the government, they are important channels for the poor to express their opinions. However, to act as environmental services (ES) sellers, local organizations need to overcome numerous challenges, particularly related to capacity for monitoring ES and enforcement of contracts. Relationships amongst intermediaries are complex and should be carefully examined by PES stakeholders to avoid negative impact on the poor. Each of the intermediaries may operate at a different level and can have different functions but a multi-sector approach is required for an effective PES implementation.

Paying landowners to conserve forests is a promising new strategy to protect biodiversity and ecosystem services. However to succeed with this approach, programme managers need reliable monitoring data to make informed payment decisions. This includes withholding payment from landowners who do not meet conservation objectives. The monitoring method used for the Monarch Butterfly Conservation Fund compared aerial photographs and conducted field sampling to identify forest changes. The comparison of aerial photographs showed that 161 hectares of forest were degraded in the central core zone of the Monarch Butterfly Biosphere Reserve in Mexico between 2001 and 2003. As a result, payment was withheld from one of 13 landowners. Analysis of high resolution (0.6 m) digital aerial photographs did not detect finer scale changes, despite obtaining an average pixel resolution 1000 times greater than Landsat satellite imagery. This suggests that current payment for ecosystem services programmes are underestimating environmental change and overpaying non-compliant participants. In addition, selecting a decision rule to enforce payment conditionality raised new questions about how much ecosystem degradation should be permitted before withholding payment. Sound decisions about withholding payment cannot be developed until the marginal value of ecosystem services is better understood. Until then, payment thresholds can be based on specific policy objectives.