Payments for environmental services and economic growth: A theoretical model
-
DOIhttp://dx.doi.org/10.21511/ee.15(1).2024.06
-
Article InfoVolume 15 2024, Issue #1, pp. 70-81
- 396 Views
-
123 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Given the global climate emergency and the complex financing problems facing developing countries, some economists are advocating the introduction of payments for environmental services. The question is whether payments for environmental services will enable developing countries to make the ecological transition compatible with the economic growth they need to develop. This study presents a theoretical analysis of the economic and ecological efficiency of such a mechanism, and aims to determine whether it has any recessionary or disincentive effects. In other words, it determines whether, from a theoretical point of view, the environmental services provided by developing countries are compatible with continued growth. The study introduces a “payments for environmental services” procedure into a general equilibrium model (with involuntary unemployment) composed of multinational firms in developed and developing economies. This theoretical model yields the following results. Firstly, higher ecological taxes can directly increase environmental services without any recessionary effect. The system of payments for environmental services means that green investment is not necessarily incompatible with growth and development in developing countries. On the other hand, services in return for environmental payments can lead to a rebound effect from polluting activities, which is why such programs need to be accompanied by more radical environmental policies. In conclusion, while payments for environmental services can promote both ecological transition and growth in developing countries, it is necessary to control the rebound effect arising from the development of economic activity.
- Keywords
-
JEL Classification (Paper profile tab)Q52, Q54, D50, O10
-
References54
-
Tables0
-
Figures0
-
- Alix-Garcia, J. M., Shapiro, E. N., & Sims, K. R. E. (2012). Forest conservation and slippage: Evidence from Mexico’s national payments for ecosystem services program. Land Economics, 88(4), 613-638.
- Arriagada, R. A., Ferraro, P. J., Sills, E. O., Pattanayak, S. K., & Cordero-Sancho, S. (2012). Do payments for environmental services affect forest cover? A farm-level evaluation from Costa Rica. Land Economics, 88(2), 382-399.
- Arriagada, R. A., Sills, E. O., Ferraro, P. J., & Pattanayak, S. K. (2015). Do payments pay off? Evidence from participation in Costa Rica’s PES program. Plos One, 10(7), e0131544.
- Blundell, R., & Macurdy, T. (1999). Labor supply: A review of alternative approaches. In O. C. Ashenfelter & D. Card (Eds.), Handbook of Labor Economics (pp. 1573-1695). Amsterdam: Elsevier Science.
- Bovenberg, A. L., & Goulder, L. H. (1996). Optimal environmental taxation in the presence of other taxes: General equilibrium analysis. The American Economic Review, 86(4), 985-1000.
- Bovenberg, A. L., & Goulder, L. H. (1997). Costs of environmentally motivated taxes in the presence of other taxes: General equilibrium analysis. National Tax Journal, 50(1), 59-88.
- Burke, M., Hsiang, S., & Miguel, E. (2015). Global non-linear effect of temperature on economic production. Nature, 527, 235-239.
- Cartelier, J. (1995). L’économie de Keynes [Keynes’ economics]. Paris: De Boeck Université. (In French).
- Cayla, D. (2023). Peut-on financer la transition écologique par l’émission de monnaie sans dette [Can we finance the ecological transition by issuing debt-free money?]. Le temps des ruptures. (In French).
- Coase, R. (1960). The problem of social cost. The Journal of Law and Economics, 3, 1-44.
- Cole, R. J. (2010). Social and environmental impacts of payments for environmental services for agroforestry on small-scale farms in southern Costa Rica. International Journal of Sustainable Development & World Ecology, 17(3), 208-216.
- Dafermos, Y., Nikolaidi, M., & Galanis, G. (2017). A stock-flow-fund ecological macroeconomic model. Ecological Economics, 131, 191-207.
- Dietz, S., & Stern, N. (2015). Endogenous growth, convexity of damage and climate risk: How Nordhaus’ framework supports deep cuts in carbon emissions. The Economic Journal, 125(583), 574-620.
- Duong, N. T., & De Groot, W. T. (2020). The impact of payment for forest environmental services (PFES) on community-level forest management in Vietnam. Forest Policy and Economics, 113, Article 102135.
- Engel, S., Pagiola, S., & Wunder, S. (2008). Designing payments for environmental services in theory and practice: An overview of the issues. Ecological Economics, 65(4), 663-674.
- Farley, J., & Costanza, R. (2010). Payments for ecosystem services: from local to global. Ecological Economics, 69(11), 2060-2068.
- Fullerton, D., & Heuel, G. (2007). The general equilibrium incidence of environmental taxes. Journal of Public Economics, 91(3), 571-591.
- Graff-Zivin, J., & Lipper, L. (2008). Poverty, risk, and the supply of soil carbon sequestration. Environment and Development Economics, 13(3), 353-373.
- Hayes, T., Murtinho, F., & Wolff, H. (2017). The impact of payments for environmental services on communal lands: An analysis of the factors driving household land-use behavior in Ecuador. World Development, 93, 427-446.
- Hegde, R., & Bull, G. Q. (2011). Performance of an agro-forestry based payments-for environmental-services project in Mozambique: A household level analysis. Ecological Economics, 71(1), 122-130.
- Izquierdo-Tort, S., Ortiz-Rosas, F., & Vázquez-Cisneros, P. A. (2019). Partial participation in payments for environmental services (PES): Land enrolment and forest loss in the Mexican Lacandona Rainforest. Land Use Policy, 87, Article 103950.
- Jagger, P., Sills, E. O., Lawlor, K., & Sunderlin, W. D. (2010). A guide to learning about livelihood impacts of REDD+ projects (Occasional paper No. 56). Center for International Forestry Research.
- Kalunda, P. N. (2016). Payments for forest environmental services in sub-Saharan Africa: A practical guide. Accra: Food and Agriculture Organization of the United Nations.
- Kanchanaroek, Y., & Aslam, U. (2018). Policy schemes for the transition to sustainable agriculture – Farmer preferences and spatial heterogeneity in northern Thailand. Land Use Policy, 78, 227-235.
- Karsenty, A., & Ezzine de Blas, D. (2014). Du mésusage des métaphores: les paiements pour services environnementaux sont-ils des instruments de marchandisation de la nature? [The misuse of metaphors: are payments for environmental services instruments for the commodification of nature?]. In Ch. Halpern, P. Lascoumes, & P. Le Galès (Eds.), L’instrumentation de l’action publique [The instrumentation of public action] (pp. 161-189). Paris: Presses de Sciences Po. (In French).
- Karsenty, A., Aubert, S., Brimont, L., Dutilly, C., Desbureaux, S., de Bals, D. E., & Velly, G. L. (2017). The economic and legal sides of additionality in payments for environmental services. Environmental Policy and Governance, 27(5), 422-435.
- Keynes, J. M. (1936). The general theory of employment, interest and money. London: ISN.
- Krautkraemer, A., & Schwartz, S. (2021). Are additional payments for environmental services efficient? (Working Paper Series). France: Economic Research Department of the University of Orléans (LEO).
- Krautkraemer, A., & Schwartz, S. (2023). Payment for environmental services and environmental tax under imperfect competition (Working Paper Series). France: Economic Research Department of the University of Orléans (LEO).
- Locatelli, B., Rojas, V., & Salinas, Z. (2008). Impacts of payments for environmental services on local development in northern Costa Rica: A fuzzy multi-criteria analysis. Forest Policy and Economics, 10(5), 275-285.
- Manjula, M., Venkatachalam, L., Mukhopadhyay, P., & Kumar, L. (2019). Ecosystem services approach for revitalizing agriculture in India. Current Science, 116(5), 723-727.
- Mason, C. F., & Plantinga, A. J. (2013). The additionality problem with offsets: Optimal contracts for carbon sequestration in forests. Journal of Environmental Economics and Management, 66(1), 1-14.
- Moros, L., Vélez, M. A., & Corbera, E. (2019). Payments for ecosystem services and motivational crowding in Colombia’s Amazon Piedmont. Ecological Economics, 156, 468-488.
- Muradian, R., Corbera, E., Pascual, U., Kosoy, N., & May P. H. (2010). Reconciling theory and practice: An alternative conceptual framework for understanding payments for environmental services. Ecological Economics, 69(6), 1202-1208.
- Nguyen, T. Q., Huynh, N. T., & Hsu, W. K. K. (2021). Estimate the impact of payments for environmental services on local livelihoods and environment: An application of propensity scores. SAGE Open, 11(3).
- Parry, I. W. H., Williams III, R. C., & Goulder, L. H. (1999). When can carbon abatement policies increase welfare? The fundamental role of distorted factor markets. Journal of Environmental Economics and Management, 37(1), 52-84.
- Pates, N. J., & Hendricks, N. P. (2020). Additionality from payments for environmental services with technology diffusion. American Journal of Agricultural Economics, 102(1), 281-299.
- Pattanayak, S. K., Wunder, S., & Ferraro, P. J. (2010). Show me the money: Do payments supply environmental services in developing country. Review of Environmental Economics and Policy, 4(2), 254-74.
- Piluso, N. (2023). La Macroéconomie pour tous [Macroeconomics for all]. Paris: JDH.
- Richards, M. (2008). Issues and challenges for social evaluation or impact assessment of ‘multiple-benefit’ payment for environmental services (PES) projects. Washington DC: Forest Trends.
- Scullion, J., Thomas, C. W., Vogt, K. A., Pérez-Maqueo, O., & Logsdon, M. G. (2011). Evaluating the environmental impact of payments for ecosystem services in Coatepec (Mexico) using remote sensing and on-site interviews. Environmental Conservation, 38(04), 426-434.
- Sills, E., Arriagada, R., Ferraro, P., Pattanayak, S., Carrasco, L., Ortiz, E., Cordero, S., Caldwell, K., & Andam, K. (2008). Impact of Costa Rica’s program of payments for environmental services on land use (PES Learning Paper 2008-3). Washington DC, USA: World Bank.
- Sommerville, M., Jones J. P. G., Rahajaharison, M., & Milner-Gulland, E. J. (2010). The role of fairness and benefit distribution in community-based payment for environmental services interventions: A case study from Menabe, Madagascar. Ecological Economics, 69(6), 1262-1271.
- Sommerville, M., Jones, J. P., & Milner-Gulland, E. J. (2009). A revised conceptual framework for payments for environmental services. Ecology and Society, 14(2), 34.
- Sommerville, M., Milner-Gulland, E. J., Rahajaharison, M., & Milner-Jones, J. P. (2010). Impact of a community-based payment for environmental services intervention on forest use in Menabe, Madagascar. Ecological Economics, 69(6), 1262-1271.
- Tacconi, L. (2012). Redefining payments for environmental services. Ecological Economics, 73, 29-36.
- Tacconi, L., Mahanty, S., & Suich, H. (2013). The livelihood impacts of payments for environmental services and implications for REDD+. Society & Natural Resources, 26(6), 733-744.
- Treacy, P., Jagger, P., Song, C., Zhang, Q., & Bilsborrow, R. E. (2018). Impacts of China’s grain for green program on migration and household income. Environmental Management, 62(3), 489-499.
- Uchida, E., Xu, J., Xu, Z., & Rozelle, S. (2007). Are the poor benefiting from China’s land conservation program? Environment and Development Economics, 12(4), 593-620.
- Wang, Y., Bilsborrow, R. E., Zhang, Q., Li J., & Song, C. (2019). Effects of payment for ecosystem services and agricultural subsidy programs on rural household land use decisions in China: Synergy or tradeoff? Land Use Policy, 81, 785-801.
- Wunder, S. (2005). Payments for environmental services: Some nuts and bolts (Occasional Paper No. 42). CIFOR.
- Wunder, S. (2015). Revisiting the concept of payments for environmental services. Ecological Economics, 117, 234-243.
- Wunder, S., & Albán, M. (2008). Decentralized payments for environmental services: The cases of Pimampiro and PROFAFOR in Ecuador. Ecological Economics, 65(4), 685-698.
- Yang, W., Liu, W., Viña, A., Luo, J., He, G., Ouyang, Z., Zhang, H., & Liu, J. (2013). Performance and prospects of payments for ecosystem services programs: evidence from China. Journal of Environmental Management, 127, 86-95.