Climate Change Feedback Effects on Payments for Ecosystem Service Contract Adherence

Payment for Ecosystem Service (PES) programs are increasingly being used by policymakers to protect watersheds, prevent deforestation, and support biodiversity. At the same time, the world is facing an increasing prevalence of climate related shocks that can have direct and indirect impacts on agricultural output and household wellbeing. In this setting, it is critically important to understand how participants of PES program respond when faced with climate shocks that impact income and if there are policy mechanisms that can be additionally leveraged to increase PES contract adherence. We use lab-in-the-field experiments and surveys conducted in either South Africa or Chile to study the (1) potential feedback effects of climate uncertainty and severe weather on PES contract adoption and violations using an application of a forestry PES program and (2) if PES contract providers can incentivize adoption of contract and reduce violations by providing participants with the additional benefit of insurance for crop failure due to weather shocks.