Valuation of Biodiversity Benefits (OECD)

Paying for Environmental ServicesConcern over the loss of valuable ecosystem services and the increase in problems such asreservoir siltation and downstream flooding, has led many governments to attempt to encourage landuses that preserve these services. Some governments adopted legislation and regulations intended toprevent land users from undertaking degrading activities or to compel them to adopt conservationpractices, while others opted to subsidise the adoption of particular practices. The results of theseefforts have often fallen far short of expectations. Land use rules have proven exceedingly difficult toenforce because of the vast spatial dispersion of agricultural activities and the often weak enforcementpowers available to developing country governments. Subsidies have often succeeded in stimulatingthe adoption of conservation measures, but farmers frequently abandon their use – and sometimesactively destroy conservation structures – once subsidies cease [Pagiola (1999) and Lutz, Pagiola, andReiche (1994)]. At other times, efforts to encourage conservation have achieved only tokenco-operation by farmers [Enters (1997)].In recent years, recognition of the problem and of the failure of previous approaches to dealwith it has led to efforts to develop systems in which land users are compensated for theenvironmental services they generate. In this way, land users would have a direct incentive to includethese services in their land use decisions, resulting in more socially optimal land uses. The logicbehind this approach is shown in Figure 3.3: by paying local land users for the environmental servicesthey generate, the overlap between land uses that maximise local and national benefits is increased (asseen by the increased area found in LN and LNG in Figure 3.3).Figure 3.3 Using Payments for Environmental Services to IncreaseLocal Incentives to Conserve Biodiversity51