A Developing Country Perspective
Edited by Pushpam Kumar and Ibrahim Thiaw
Chapter 5: Revisiting the relationship between equity and efficiency in payments for ecosystem services
This chapter addresses the relationships between the economic efficiency and distributional implications of market-based incentive mechanisms, and more specifically of payments for ecosystem services (PES). We point out that the mainstream interpretation of PES as a mere market-based instrument to internalize environmental externalities overlooks the complex interactions, including power relations, that take place between agents, and determine both equity and efficiency outcomes. We propose an approach that gives emphasis to the roles of (1) uncertainty, as perceived by agents in setting up PES schemes, (2) the institutional context required to set up the payments and services, and (3) the notions of fairness held by different agents, e.g. providers, beneficiaries of the ecosystem services and intermediaries. Some of the most important questions to be answered are the following: What are the key factors conditioning the relationship between equity and efficiency in PES schemes? What is the role of social perceptions about fairness in the performance of PES? What is the contribution of social science, and economics in particular, to our understanding of the relationship between efficiency and equity in PES?
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