When are payments for environmental services beneficial to the poor?

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Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA)


The impact of payment for environmental services (PES) on poverty varies. Generally, PES is good for landowners and may negatively affect consumers if food demand is inelastic. Impacts also depend on the correlation between poverty and environmental amenities. If the richer farmers also provide the best environmental services (ES), then the poor farmers may lose. If there is negative correlation between ES and productivity, then the poorer landowners may gain from ES. The distribution of land matters. If smallholders depend on earnings from work on larger farms, then PES may affect them negatively. Program specifications also matter. Working land programs may have better distributional effects then PES for land diversion.



Environmental services, Payments for environmental services, Conservation, Poverty, Economic modeling and analysis, PES, Land use change, Market-based mechanisms, Poverty reduction, Urban poor, Landless poor, Poor landholders, Agricultural production


ESA Working Paper No. 06-04