Social-Economic Benefits of Payment for Environmental Services in Yaque del Norte Watershed, Dominican Republic

This research analyzes private and social costs of forest conservation in Yaque del Norte watershed, DR. It calculates private costs as average annual income from farming activities and social costs as the externalities from erosion and CO2 emissions. Social cost estimates are based on the difference in erosion and CO2 between conserved forest and other land use categories. The effect of soil erosion on the wellbeing of people is measured by its effect on reduced space at Tavera dam for water availability to generate electricity and to irrigate agricultural lands downstream. The social cost of increased annual carbon emission from potential land use change is estimated using IPCC default emission factors and social cost of carbon estimates. Private costs are inferred from a nonlinear binary response model that estimates the relative importance of factors affecting forest conservation decisions of households. Results show that payment level, measured through rental value, is not significant for landholders' decisions to sign a PES contract. Annual cropland is the most profitable land use in the area. Other important, but less profitable, land covers are pasture, coffee and managed forest. Cropland also generates the highest cost for society in terms of erosion and CO2 emissions. The comparison of private and social costs shows that only livestock generates a social cost that exceeds average private income. If forest conservation were to be justified based on social benefits, the analysis must include a more comprehensive assessment of what people value from conserved forest in YNW, such as the effect of erosion for water treatment costs. Any proposal to retain forests social benefits, such as REDD+ initiative, should take into account the high cost forgone by forest owners when deciding the distribution of benefits of carbon sequestration.