Paying for Biodiversity Conservation Services in Agricultural Landscapes

Adoption of improved silvopastoral practices in degraded pasture areas is thought to provide valuable local and global environmental benefits, including biodiversity conservation, However, these practices are insufficiently attractive to individual land users for them to adopt them spontaneously, particularly due to their high initial costs. This paper describes the contract mechanism developed for the Regional Integrated Silvopastoral Ecosystem Management Project, which is being implemented with financing from the Global Environment Facility (GEF). The project is testing the use of the payment-for-service mechanism to encourage the adoption of silvopastoral practices in three countries of Central and South America: Colombia, Costa Rica, and Nicaragua. The project has created a mechanism that pays land users for the global environmental services they are generating, so that the additional income stream makes the proposed practices privately profitable. Designing the mechanism required addressing issues such as (1) measuring the actual amount of environmental services being provided, so that appropriate payments can be made; (2) providing payments in a way that resulted in the desired change in land use; and (3) avoiding the creation of perverse incentives (for example, for land users to cut down existing trees so as to qualify for additional payments for tree planting). Two variants of the proposed payment mechanism are being tested, with participating land users assigned randomly to one or the other. The project also includes extensive monitoring of the effectiveness of each mechanism in stimulating adoption of the proposed measures and of the resulting impact on environmental services and on household welfare. These features, together with the three-country approach, will provide in the coming years a very rich dataset for testing the use of contract mechanisms for biodiversity conservation.