Interesting new NBER paper (ungated version here), of an RCT on a PES.
That’s National Bureau of Economic Research, Randomized Control Trial, and Payment for Ecosystem Services for any normal humans out there who may be reading.
Anyway in western Uganda, the authors choose 121 villages, and randomly selected 60 for the treatment, which was paying forest owning households in that village not to cut down trees.
“The PES program reduced deforestation and forest degradation: Tree cover, measured using high-resolution satellite imagery, declined by 2% to 5% in treatment villages compared to 7% to 10% in control villages during the study period.”
The authors also attempt some cost benefit analysis (which necessarily requires assumptions about how fast the treated households will start cutting trees once the program was over (it lasted 2 years)).
“Our base case scenario assumes PFOs deforest at a 50% higher rate than usual after the program ends, converging to the control group after four years. The social benefit of the delayed CO2 emissions is then $1.11 per ton, or roughly 2 times the $0.57 program cost.We repeat the calculation for a range of assumptions. At one extreme, if PFOs catch up on their backlog of avoided deforestation the moment the program ends, the benefit- cost ratio falls to 0.7. At the other extreme, if PFOs pause their deforestation during the intervention and then resume deforesting at their typical rate, not an accelerated rate, after the program ends, then the benefit cost-ratio rises to 12.3. ”
Very cool and relevant study as the 2015 Paris climate agreement pushes for more use of PES.
I’ll just remark on one weird anomaly and one seemingly unavoidable issue.
The anomaly is that only 32% of the households eligible for treatment signed up. This is especially weird because there were no penalties for cutting down all your trees after signing up.
The weird issue is high overhead costs. For every $570 of expenditure only $250 were actual payments to treated households. The rest (over half!!!) was overhead.
I have to wonder if giving $400 of every $570 unconditionally would have had an equal or even greater effect on deforestation. Give Directly claims that 91% of your contribution goes directly to payments, so maybe the number could be closer to $500 out of every $570.
Would have enjoyed seeing that as an additional treatment arm, though Robin tells me folks might just use the money to buy a chainsaw!