Effects of Payment for Environmental Services (PES) on Deforestation and Poverty in Low and Middle Income Countries (systematic review)


We conducted a systematic review of studies on the impact of payments for environmental services (PES) that set natural forest conservation as the goal on deforestation and poverty in developing countries. The review is motivated by debates over whether the pursuits of conservation and poverty reduction in developing countries tend to conflict or whether they might be complementary. A search for rigorous impact evaluation studies identified eleven quantitative and nine associated qualitative evaluation studies assessing the effects of PES. The methodological rigor of these studies varied widely, meaning that the evidence base for the impact of PES policies is limited in both quantity and quality. Given the evidence available, we find little reason for optimism about the potential for current PES approaches to achieve both conservation and poverty reduction benefits jointly. We call for the production of high quality impact evaluations, using randomisation when possible, to assess whether the apparent incompatibility of conservation and poverty reduction might be overcome through programming innovations.


This systematic review will study the impact low- and middle-income countries of payment for environmental services (PES) and decentralized forest management (DFM) programs on deforestation and poverty in forest communities in low- and middle-income countries. Such programs find wide application around the world as part of government strategies to manage forest loss and climate change. PES programs allow for direct exchange between those demanding “environmental services” such as protection or rehabilitation of natural forests and those in a position to provide them locally (Forest Trends, Katoomba Group and UNEP, 2008; Wunder, 2005). DFM programs relocate decision-making authority on forest use in the direction of forest communities, although the extent to which this empowers forest community members depends on the institutional context (Tacconi, 2007). PES and DFM exist alongside “community-based forest management” and “protected areas” (that is, parks and reserves) as core components of government and privately-led forest management efforts around the world (Angelsen, 2009). Governments have applied PES and DFM strategies domestically for decades to manage forests and prevent irredeemable loss of valuable endemic forest resources.

Both PES and DFM have recently been considered in the context of global efforts to manage climate change. Since 2007, governments have coordinated such efforts through the Reducing Emissions from Deforestation and Forest Degradation (REDD) initiative, which consists of inter-governmental framework agreements to facilitate the protection of forests around the world. The goal of REDD is both to reduce carbon emissions resulting directly from deforestation (accounting for about 17 per cent of emissions and arising from processes such as peat soils decay or burning) and to preserve natural forests as carbon sinks so as to mitigate the effect of other carbon emissions on climate change (Intergovernmental Panel on Climate Change, 2007). In an essay that helped to inspire the REDD initiative, Santilli et al. (2005) noted the importance of forest protection for climate change, indicating that “current annual rates of tropical deforestation from Brazil and Indonesia alone would equal four- fifths of the emissions reductions gained by implementing the Kyoto Protocol in its first commitment period [i.e., 2008-2012]” (267). Gullison et al. (2007) estimate that “[r]educing deforestation rates by 50% by 2050 and then maintaining them at this level until 2100” would have a net impact of reducing global carbon emissions by an amount “equivalent to nearly 6 years of recent annual fossil fuel emissions” (985). Furthermore, Gullison et al. estimate that per unit costs of emissions reduction through forest protection may be substantially less than other approaches to emissions reduction. This review contributes to current knowledge on effective natural forest management strategies.

An important goal of this review is to inform the debate on how welfare concerns should be included in the analysis of conservation strategies. It is natural to consider adverse welfare impacts of PES or DFM. Beyond that, the issue of whether PES or DFM mechanisms should attend to poverty is debated. For PES, there could be risks to first-order conservation objectives if PES is allowed to deviate from a simple transaction for environmental services. Pagiola et al. (2005) argue that coupling poverty goals with environmental protection goals in conservation programming may be inefficient for reaching either type of goal, and that in many instances the two objectives are orthogonal to each other, if not in direct conflict. For example, it is not apparent that poorer members of forest edge communities, who stand to gain the most from poverty alleviation programming, are necessarily the ones who constitute the greatest deforestation threat. Such individuals may have relatively little means or incentive to engage in deforestation relative to larger scale farmers or logging operations. If this were the case, then making a priority of poverty alleviation in forest edge communities would imply that programs are not targeting those whose change in behavior has the biggest conservation payoff (Wunder, 2005, p.12-14). Political imperatives to attend to distributional issues may thus undermine PES as a conservation instrument. For DFM, while some research demonstrates that local administration may be better for administering policies affecting welfare of the poor (Bardhan and Mookherjee, 2005), it is not clear that this necessarily puts it at a comparative advantage in forest management.

There are potential moral and practical counterarguments to this conclusion however (Agrawal and Benson, 2011; Porras, 2010). A moral counterargument is based on the fact that forest communities may be vulnerable to livelihood disruption due to forest protection interventions. The point is especially relevant for tropical forests. Tropical forests are appealing as targets for conservation for global climate change mitigation because of their high carbon storage density and lower local-level implementation and (in absolute terms) opportunity costs of conservation; however, tropical forests also host communities exhibiting high levels of poverty (Deveny et al., 2009; Kremen et al., 2000; Van Kooten and Sohngen, 2007). This motivates an imperative to tie PES directly to poverty relief to compensate for livelihood disruption, especially when forest protection initiatives limit poor community members’ ability to exploit resources for productive purposes, whether by themselves or as hired labor (Angelsen and Wunder, 2003; Chomitz, 2007, Ch. 3; Edwards et al., 2011).

A practical counterargument is that the political sustainability of conservation strategies may be enhanced when conservation programs are shown to be coincident with poverty alleviation. If protection goals are not legitimized in this way, we might expect high potential for local level subversion, if not open confrontation. For PES arrangements, this undermines the credibility that service commitments can actually be implemented on the ground. For DFM, this raises the risk that state-mandated conservation goals will be ignored, as local officials may have neither the capacity nor incentive to implement them. Indeed, subversion risks have been demonstrated by rampant increases in deforestation in protected areas after DFM in Indonesia (Burgess et al., 2011), in the substantial discounts applied to offsets in PES schemes based on services from developing countries (Conte and Kotchen, 2010), and the regularity with which local corruption has lead to higher rates of deforestation following DFM around the world, as discussed by Ostrom (1990, p. 23). Such political concerns are especially salient in government-mediated service arrangements. When host governments offer environmental service contracts, there is the potential for abuse of power, as with a case in Uganda documented by Oxfam (Grainger and Geary, 2011). If only wealthier members of forest communities may be in a position to supply environmental services, PES may exacerbate local inequality both by increasing the wealth of service providers and reducing employment opportunities in enterprises involving deforestation (Wunder, 2005). Poverty alleviation might be an appropriate condition to minimize risks of such harm and the potential for hostilities between poor forest community members on the one hand and governments or wealthier members of forest communities on the other (Mapedza, 2006). To the contrary of the efficiency argument, poverty alleviation may be essential for realizing the potential of PES and DFM programs. Such benefits may arise through the conduct of the programs themselves or as add-ons to the conservation-focused aspects of the programs. As Pagiola et al (2004) demonstrate, the extent of poverty reduction benefits will depend on how well the program design captures potential synergies.

Theory alone cannot settle such a debate: evidence should be marshalled to assess the relative merits of the efficiency claim versus the counterarguments discussed above. This would involve synthesizing evidence on (i) how PES and DFM programs affect local poverty and in turn (ii) what consequences these poverty effects have for success in forest protection. The theory of change that our review will test is one that hypothesizes poverty impacts as mediators of environmental impacts. We also analyze any incidental poverty impacts that might be associated with PES and other decentralized forest management arrangements.