University of Innsbruck

Rainforest slash and burn

Sus­tain­able Envi­ron­men­tal Pro­tec­tion via Pay­ments for Ecosys­tem Ser­vices

Can cash incentives lead to the long-term protection of ecosystems? So-called "Payments for Ecosystem Services" motivate landowners to conserve the environment through payments. Esther Blanco, professor of economics at the University of Innsbruck, shows in a new study of Colombian landowners that the motivation to protect the environment remains even after the payments have been stopped.

Many of the world's ecosystems are overloaded and facing tipping points. This also threatens their many services that are essential for our survival and are usually taken for granted. These include, for example, fresh drinking water, breathable air and plant pollination. One approach to protecting ecosystems is the so-called Payments for Ecosystem Services (PES). However, critics fear that this approach could displace other, moral motivations for environmental protection. A study by Esther Blanco, Professor of Public Economics at the University of Innsbruck, now shows that this is not the case.

Concern about crowding out effect

"PES are programs where landowners are paid to conserve nature," explains Esther Blanco. "They are a way of assigning value to nature itself, so that landowners see nature as valuable in its pristine state and are not just looking to use it productively. For example, a tree is given value without having to be cut down and processed for timber." Thus, PES represent a tool to change the notion that benefits and services derived from nature are free. An estimated 550 PES programs are currently underway worldwide, with a total of $36 billion invested annually in conservation payments. However, PES can also be discontinued for a variety of reasons, such as political motivation or because a program is coming to an end.

One fundamental fear is repeatedly voiced by critics: putting a price on nature could lead to conservation being viewed solely in financial terms, and people could be demotivated to conserve nature for other reasons that have been important to them in the past. "These motivations include pride in one's conservation efforts, a sense of responsibility, moral values and social norms," Blanco says. This displacement of original motivations by monetary incentives is called the "crowding out" or "crowding out" effect in economics. If the payments disappear, the fear goes, so does the motivation.

Study shows lasting motivation

In a newly published study, Blanco compared landowners in Colombia who had stopped receiving PES payments with those who had not or were still receiving them. She found that there was no displacement effect. The landowners remained motivated and continued to protect their land even after the paymentswere stopped. The severe criticism against PES could not be confirmed.

Blanco teaches and conducts research with a focus on sustainability. Her research examines the influence of institutions on cooperative behavior and the strengthening of green, fair, knowledge-based societies. She has studied PES in depth and published numerous studies on the topic.

"PES are very commonly used in the fight against climate change, for example in the REDD+ initiative, which aims to make forests financially attractive as carbon sinks," Blanco says. "My opinion on climate policies is very pragmatic: if they are effective and improve well-being and equity, they should be used. Individual policy solutions to climate change will not be enough, in my opinion. I see the best hope in a policy mix that includes compensation for those who do more to protect the climate."

As a next step, Blanco plans to draw general conclusions from the results of her study. "I have conducted several economic experiments on the characteristics of PES programs to determine positive interactions between donor  recipients. "It would be very interesting to test some of the results in the real world, similar to the recently published study," Blanco says. For example, we have the very robust finding that compensation works best when relative effort is compensated with relative rewards, meaning that those who put in more effort receive more compensation. When compensation is distributed equally to all, regardless of effort, we do not see an increase in effort. One of the things we are currently working on is testing these results in practice."

Esther Blanco, Lina Moros, Alexander Pfaff, Ivo Steimanis, Maria Alejandra Velez, Björn Vollan, No crowding out among those terminated from an ongoing PES program in Colombi, Journal of Environmental Economics and Management, Volume 120, 2023.


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