Payments for environmental services as an alternative to logging under weak property rights: The case of Indonesia

This paper assesses the potential for payments for environmental services (PES) to take the place of logging agreements that have a high environmental cost and low economic return for local communities. The analysis uses a game-theoretical model that considers both the weak forest rights of the community and the influence of timber companies desiring to exploit the forests. The authors discuss aspects of PES design that influence effectiveness - important factors for choosing which communities to target, complexities to consider, and the use of data and analysis to shape PES design. Although this analysis focuses on a particular Indonesian context, the results have implications for other regions that also have weak communal property rights and are influenced by external commercial interests. Additionally, this paper clearly shows necessity of understanding local context in effective PES program design.