Measuring the net benefits of payments for hydrological services programs in Mexico

A number of studies show that payments for ecosystem services (PES) programs contribute to reducing deforestation, but few have measured the impact on ecosystem service provision or compared economic benefits and costs of these programs. We integrate impact evaluation and ecosystem service measurement to examine the effects of PES programs in Veracruz, Mexico. We use quasi-experimental methods to measure the effect of enrolling in PES on forest cover. We link these changes in forest cover to field-calibrated measures of water regulation and carbon storage. After converting these changes in ecosystem services to monetary values we calculate the net benefits of the programs. We find that PES reduces losses of forest cover but that the additional gains in forest cover are small. However, these gains in forest lead to positive water regulation and carbon storage services. The net benefits of the PES programs over a 10-year period are as large as USD 3.2 million for watershed services and USD 4.9 million for water plus carbon storage. However, when there is no additionality in forest cover due to PES, the programs result in economic losses. Adopting this type of integrated modeling of PES impacts sheds light on the economic efficiency of these approaches.