Saving the Forests and Reducing Poverty: Too Good to Be True?

According to the Food and Agriculture Organization of the United Nations (FAO), “129 million hectares of forest—an area almost equivalent in size to South Africa—have been lost since 1990.” Soil conservation, water management, carbon dioxide capture, and biodiversity conservation are just some of the numerous ecosystem services provided by forests. Given the important role that these services play in our environment, forest conservation is a highly relevant issue, especially considering the current environmental scenario the planet is facing.

In order to fight deforestation, one of the strategies that nations around the world have begun to use since the early 2000s is Payments for Ecosystem Services (PES) initiatives. As the name suggests, PES programs consist of monetary transfers to individuals—usually farmers—with the objective of incentivizing conservation, sustainable resource management, and the provision of ecological services.

Additionally, there is consistent evidence showing correlation between poverty and forest coverage, which has translated into a trend for program planners, especially in developing countries, to implement PES programs, not only as a way to protect environmental services but also as a poverty alleviation method. Nevertheless, there is a lack of comprehensive literature studying both the economic and environmental effects of these types of programs.

Recently, Jennifer Alix-Garcia, Katharine R. E. Sims, and Patricia Yañez-Pagans analyzed the socioeconomic and environmental impacts of Mexico’s Payment for Hydrological Services Program (PSAH), a federal initiative that transfers money to landowners to maintain forest cover under five year contracts.

The study focuses on six cohorts of the program, spanning from 2004 to 2009, and analyzes both environmental and socioeconomics effects. For the environmental analysis, the team uses data on land cover from 2003 to 2011 using infrared measurement techniques (NDVI), as well as forest cover data from 2000 and 2012 published in previous studies. By overlapping this information with the known location of different households in the different cohorts of the program, it is possible to measure changes in forest coverage over time and establish causal effects of the program.

In order to evaluate socioeconomic outcomes, the researchers measure pre- and post-program changes in consumption using poverty assessments at the locality level that are published by the Mexican government. Additionally, household consumption changes are measured using a survey administered to a subset of applicants accepted to the program, as well as a group of applicants rejected from the program. Prior to the analysis, a matching methodology was performed on the collected data, allowing the researchers to ensure that the only difference between accepted and rejected applicants is the presence or absence of the program, thus creating a control group of rejected applicants and a treatment group of program beneficiaries.

The results of the study show that Mexico’s PSAH Program is associated with a 40-51 percent mitigation of forest cover losses compared to what would have happened in the absence of the program. Researchers find that PSAH primarily reaches locations of moderate deforestation risk. This is important because one of the most frequently cited concerns about PES programs is the ability to correctly target the areas and populations that will benefit most from PES programs. Efficiency of PES programs can always be improved by reaching areas with higher risks of deforestation.

In the case of PSAH, it is not clear that the people (and forests) are benefiting from the program in areas where help is most needed. The greatest impacts of PES are observed in the areas from the sample with lower risks of deforestation—meaning that, although substantial amounts of forest are being protected, the program is not necessarily successful in preventing deforestation in the most high-risk areas.

Effects on beneficiary socioeconomic status were found to be insignificant in this study. Because it appears that these programs are more effective at achieving environmental goals, the study concludes that PES programs are more likely to be “win-neutral” policies regarding environmental and socioeconomic results than “win-win” policies, as is typically perceived by policymakers. Nevertheless, this research leaves space for future research to study ways to increase positive socioeconomic impacts while effectively conserving forests and other environmental goods.

Article Source: Alix-Garcia, Jennifer M., Katharine R. E. Sims, and Patricia Yañez-Pagans. “Only One Tree from Each Seed? Environmental Effectiveness and Poverty Alleviation in Mexico’s Payments for Ecosystem Services Program.” American Economic Journal: Economic Policy 7 (4), 2015.

Featured Photo: cc/(yotrak, photo ID: 27114869, from iStock by Getty Images)