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2015-10-08 | project

Impact evaluation of the Payments for Environmental Services Program on welfare in Costa Rica

Our hypothesis base on previous studies’ findings (see literature review section) suggest that so far PES are being assigned to big and relatively wealthy landowners, and that most landowners use the payment for investments within the property. 

Payments for Environmental Services (PES) are a market-based instrument aimed to compensate environmental services’ suppliers for the positive externality that is being provided. The first country-wide PES program started in Costa Rica in 1997, but they are becoming more popular as a way to guarantee biodiversity conservation, mitigate climate change through carbon sequestration, and protect watershed services. Even when substantial funding has been channeled to landowners, the question of what is the impact of PES on socioeconomic outcomes remains unanswered. There is not solid evidence yet about what the possible tradeoffs are, or even if PES can be an effective policy to alleviate poverty or other social outcomes. For instance, we still do not know how these impacts differ according to farm-size and economic characteristics of landowners. In this project we will use both spatial explicit and socioeconomic data to address the question of what has been the impact of the PES on socioeconomic outcomes in Costa Rica. We will measure the impact at two separate but complementary levels: macro and micro. Evidence derived from the micro analysis will validate and support results at a macro level. For the macro level, our key question is if regions with higher share of land under payments are better-off in terms of employment, poverty and income compared with the no-payment situation. For the micro level, two objectives are pursued. First, to describe what is the potential impact of the program given its conditions at the baseline, and second to establish adequate treated and control groups as baseline to impact evaluation. For the macro level we will use administrative data, while for the micro level household surveys are to be collected both for enrolled and not enrolled landowners in a specific area in Costa Rica. By estimating the effects and identifying the conditions under which payments achieve higher social returns, more informed decisions can be made and better results can be obtained from the investment. Learning how to better design the program with an eye to social objectives is also useful for replication in other countries as PES schemes are becoming a popular tool for carbon sequestration within the REDD context that is absorbing considerable amounts of money and effort.