Incentive programs to encourage farmers and other landowners to protect the environment are key to conservation, but new research from the University of Waterloo indicates that issues such as lack of enforcement undermine their effectiveness on a global scale.

These environmental incentive programs, called Payments for Environmental Services (PES), are a way to improve environmental management and livelihoods by attaching a dollar value to the benefits nature provides, such as clean water and air. They have been in place for decades, but their design and cost-effectiveness are a concern for experts.

Roy Brouwer, professor of economics at the University of Waterloo, co-authored the study with researchers from Peru, Brazil, France, Germany and Spain. They analyzed data from programs on six continents aimed at preserving watersheds, forests and biodiversity.

“Besides monitoring issues and prohibitive transaction costs, limited sanctioning and enforcement such as fines and penalties for not meeting agreed goals may be another important factor undermining the effectiveness of PES,” said Brouwer, also executive director of the Water Institute at Waterloo. “Many of the schemes, especially in the developing world, have multiple objectives, environmental and social ones such as poverty alleviation. There often exists a trade-off between these objectives.”

The researchers argue that payment differentiation, spatial selection criteria to identify for example biodiversity hotspots and enforcement are key to their success. Difficulties arise when compensation is less than the landholder expects, is for a limited amount of time only, or when the institutional framework for introducing and administering PES is lacking.

“Ultimately, PES will only be successful if they actually change the behavior of landowners and other land users that in turn enact the environmental change we are looking for,” said Brouwer. “This requires monitoring both the behavioral and environmental change to improve our understanding of what drives land-use behavior and assess the cost-effectiveness of PES compared to traditional methods.”

The Water Institute is an interdisciplinary hub for more than150 faculty members and 400 graduate students at the University of Waterloo who use research and education to address complex water problems.

To read the report, visit: Nature Sustainability

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