Payments for environmental services (PES) layered over existing but weakly enforced environmental regulations create a known dilemma: compensating every constrained land user is unaffordable, while paying only wealthier landholders to obey the law is inequitable. Karsenty, Aubert, Brimont, Dutilly, Desbureaux, Ezzine de Blas and Le Velly (2017) proposed to resolve it with a spatially and socially targeted, chronologically phased policy mix: within land-use-restricted territories, only poor or resource-dependent households would be eligible for 'asset-building' PES — a hybrid of conditional conservation payments and integrated conservation-and-development-style co-investment in alternative livelihoods — intended to be time-limited, so that payments can eventually be terminated and the legal restriction uniformly enforced. The open problem is that the conditions under which such hybrid arrangements actually achieve lasting poverty reduction, keep payments genuinely conditional on environmental services, and survive the transition from incentives to enforcement — including whether in-migration can be prevented from undermining the phased withdrawal — have never been empirically demonstrated.

Background

Payments for environmental services (PES) are voluntary, conditional transfers to land users: payment is made only if a verified land-use requirement — typically conserving or restoring forest, water sources, or grazing land — is met ('conditionality'). The efficiency rationale for PES, often called economic additionality, is that payments should buy behavior change that would not have happened otherwise, ideally matched to the provider's opportunity cost, the income forgone by not converting the land. This efficiency logic conflicts with a social-equity rationale in which payments reward poorer households for environmentally friendly practices regardless of whether their behavior would have changed. A third, legal dimension arises because PES in many countries are layered on top of environmental regulations (for example, deforestation bans) that exist on paper but are not coercively enforced. Karsenty et al. (2017) crossed the economic nature of the transfer — compensation when it targets opportunity cost, reward when it pays for ongoing 'virtuous' practices without reference to opportunity cost, alleviation when it accompanies coercion — with the legal situation of the land, and showed that national programs in Mexico, Costa Rica, and Ecuador drifted from a compensation logic toward reward and alleviation, yielding low additionality. They articulated a resulting 'politicians' dilemma': where opportunity costs are high and enforcement is weak, full compensation is unaffordable, while in strictly enforced areas, rewarding wealthier landholders for merely obeying the law is politically unacceptable. Their proposed way out combines land sparing (spatial segmentation of the territory into incentive-target areas and land-use-restricted areas of high environmental value), social targeting (PES eligibility inside restricted territories only for households below a revenue threshold, or communities selected by their measured dependence on the restricted natural resources), and a chronological combination: a time-limited 'asset-building' PES that couples conditional payments with co-investments in alternative agro-silvo-pastoral practices and sustainable commodity chains. This instrument is explicitly a hybrid between PES and integrated conservation and development projects (ICDP), the 1990s approach of combining protected-area conservation with local livelihood development, whose joint win–win record has been widely questioned. The design's defining feature is an exit: once alternative livelihoods are established, payments are terminated and the legal restriction is enforced uniformly, ending the subsidy and restoring the rule of environmental law. The relevant prior empirical knowledge is that conditional payments can reduce deforestation while they are being paid (as in the randomized Uganda trial of Jayachandran et al. 2017), that real-world programs often soften conditionality in practice (Wunder et al. 2018), and that a permanence literature — asking whether conservation gains survive the end of payments — has begun to deliver case evidence, mostly for plain, voluntary-settings PES and mostly tracking only the environmental outcome, not the joint poverty, conditionality, and enforcement-transition objectives of the proposed hybrid.

Problem Statement

The problem, as posed by Karsenty et al. (2017) and left unresolved, is to identify the conditions under which an asset-building hybrid PES–ICDP arrangement — conditional payments for environmental services combined with co-investments in alternative livelihoods, with eligibility restricted to poor households (below a revenue threshold) or communities dependent on the restricted natural resources, inside territories subject to legal land-use restrictions — can achieve its joint, sequential objectives: (1) lasting poverty reduction among the targeted population, so that well-being gains survive the end of payments; (2) maintained conditionality, so that payments remain genuinely contingent on the provision of the environmental services rather than degrading into an unconditional subsidy; and (3) successful termination of payments followed by full and uniform enforcement of the environmental law that the payments temporarily relaxed, including whether in-migration into the area during or after the payment phase can be managed so that new settlers do not undermine the phased withdrawal and the subsequent enforcement regime. These components serve one overarching objective — a conservation policy mix in restricted, high-poverty areas whose incentive phase can credibly be brought to an end without losing either the conservation outcome or the livelihood gains. Included in the problem as stated by the source are the associated practical design questions: administratively feasible ways to implement revenue-threshold eligibility in community-managed lands and to measure dependence on natural resources, and ways to sustain co-investments over the decade or more needed to build genuine alternative livelihoods in least-developed-country settings. The conditions to be identified are those under which the arrangement achieves all three objectives jointly, together with the associated practical design questions.

References

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