Payment for environmental services (PES) can encourage agricultural producers to reduce negative environmental impacts or produce positive outcomes. The impact of payment for environmental services (PES) on the poor varies, however, depending on the circumstances of the poor and the type of programme delivered.
This paper aims to develop a conceptual framework to analyse the conditions under which PES programmes can serve to reduce poverty. The paper models the impact of PES programmes on three categories of the poor – the urban poor, landless, and poor landowners. It considers the impact on these groups of two types of PES programs: programs where lands are diverted from agricultural production to other land uses; and those where lands remain in agriculture but production activities are modified to achieve environmental objectives.
The analysis concludes that there is a wide array of circumstances where PES can both promote environmental quality and reduce poverty. However, the impact on the poor will vary considerably depending on the local circumstances of the poor. Specific findings include:
- generally speaking, PES is good for landowners as producers because either they directly get environmental services that are of greater than the value of the production that they give up, or they benefit from changes in prices, which increase output price and sometimes reduce labour prices;
- poor consumers may lose from environmental services. For example, the urban poor may be negatively affected by an environmental services program that reduces the production of local staples, resulting in higher food prices;
- particularly when it comes to land diversion programs, labourers may lose as the demand for labour declines;
- the distribution of lands matters. If land distribution is unequal and landowners have minimal amounts of lands and much of their income is coming from their labour, then especially when it comes to land diversion program, they may lose work or suffer reduced wages;
- in general the poor are more likely to benefit from working land programmes (that modify production) where these increase demand for labour.
The paper notes that an assessment of the poverty impacts of any PES programme should also consider:
- the measurement of poverty and inequality in assessing benefits of any PES programme, taking into account not only earnings but any changes in the cost of living;
- 'slippage', whereby landowners bring new areas of land into production, potentially offsetting the positive effects of the PES programme;
- risk aversion behaviours of landowners and any impact on the risk of food insecurity for the local poor arising from changes in local food production and wages.
