A Qualitative Analysis of Effectiveness, Efficiency and Equity of Payment for Ecosystem Services in a User-financed and a Government-financed Program

Payment for Ecosystems Services (PES) programs which are considered as incentivized mechanisms has been implemented in Latin America as a strategy to reduce deforestation by rewarding landowners (sellers) to protect forests and to provide ecosystem services to ecosystem users/beneficiaries (buyers). Two common management structures for PES programs have been implemented in Latin America: Government-financed and User-financed. User-financed PES programs are promoted as being more environmentally effective and cost-effective compared with Government-financed programs. Government-financed PES programs are perceived as less effective than User-financed PES due to the inclusion of equity as a critical policy outcome of PES. In this thesis, an analysis is conducted of the program structure of two PES programs in the program’s ability to support environmental effectiveness, equity, and cost-effectiveness. Two case studies were used in the analysis: the Costa Rica National PES Program, a Government-financed program and the Los Negros Valley, Bolivia Reciprocal Watershed Agreements (RWA), a User-financed Program. This thesis also investigates the role of the type PES program structure in the inclusion of equity in PES design and implementation. The analysis indicated that the Government-financed PES program was better structure to support higher indicators of environmental effectiveness, equity and cost-effectiveness. The findings of the study showed that the program structure of PES is likely to influence whether equity is included in the design of the PES. A Government-financed PES is more likely to include equity as a policy outcome