Payment for Ecosystem Services in the Bolivian Sub-Andean Humid Forest

• Published date: 01 September 2016
• Author: Roberto Ponce Oliva,Felipe Vásquez-Lavín,Veronica Ibarnegaray,José Hernández Hernández
• Date: 01 September 2016
• DOI: 10.1177/1070496516655838
• Subject Matter: Articles

Article

Payment for Ecosystem

Services in the Bolivian

Sub-Andean Humid Forest

Felipe Va

´squez-Lavı

´n

1

, Veronica Ibarnegaray

2

,

Roberto Ponce Oliva

3

, and

Jose

´Herna

´ndez Herna

´ndez

4

Abstract

The adoption of good practices for the economic valuation of environmental services

(ES) has strong implications in the evaluation and design of a Payment for

Environmental Services program. People’s willingness to pay for an ES is useful to

evaluate whether money collected from users will be enough to cover both the

providers’ opportunity costs and other costs generated by the institutional arrange-

ments required for implementation. In this article, we use a numerical certainty scale

to adjust answers to a valuation question aiming to correct for hypothetical bias

associated with stated preference methods. Following this approach, the mean will-

ingness to pay decreases by approximately 70%. Values that are more conservative

could assure greater political and social support for the program because more ES

users would want to participate in the program; simultaneously, however, it might

suggest that the project is not completely funded.

Keywords

ecosystem services, economic value, water resources, payment for ecosystem

services, contingent valuation

Journal of Environment &

Development

2016, Vol. 25(3) 306–331

!The Author(s) 2016

Reprints and permissions:

sagepub.com/journalsPermissions.nav

DOI: 10.1177/1070496516655838

jed.sagepub.com

1

School of Business and Economics, Universidad del Desarrollo, Concepcio

´n, Chile; Research Nucleus on

Environmental and Resource Economics-MSI (RS 130001), Departamento de Economı

´a, Universidad de

Concepcio

´n, Concepcio

´n, Chile

2

Fundacio

´n Amigos de la Naturaleza (FAN), Doble Vı

´a La Guardia, Bolivia

3

School of Business and Economics, Universidad del Desarrollo, Concepcio

´n, Chile

4

Department of Economics, Universidad de Concepcio

´n, Concepcio

´n, Chile

Corresponding Author:

Roberto Ponce Oliva, School of Business and Economics, Universidad del Desarrollo, Ainavillo,

Concepcio

´n, Chile.

Email: robertoponce@udd.cl

A lack of social and political recognition of the economic value of environmental

services (ES) has contributed to the degradation of ecosystems (The Economics

of Ecosystems and Biodiversity [TEEB], 2010); in certain contexts, the establish-

ment of a Payment for Environmental Services (PES) program represents a

promising market solution to environmental degradation. A PES program is a

voluntary transaction in which users of a well-def‌ined ES buy from a provider of

the ES, and the transaction occurs only if the provider can assure the provision

of the service (Engel, Pagiola, & Wunder, 2008). In other words, in a PES

program, ES benef‌iciaries contribute monetarily to make the necessary invest-

ments for a conservation program. This money is used to compensate for the

pecuniary losses of individuals who must abandon certain economic activities or

change their production processes to protect the environment (Pagiola, 2008;

Sierra & Russman, 2006; Van Hecken, Bastiaensen, & Va

´squez, 2012; Wunder,

Engel, & Pagiola, 2008; Wu

¨nscher, Engel, & Wunder, 2008).

Accordingly, a demand analysis for these ES is important for evaluating the

feasibility of a PES program (Ortega-Pacheco, Lupi, & Kaplowitz, 2009;

Southgate & Wunder, 2007) because it allows us to estimate people’s willingness

to pay (WTP) for the ES. Because it is impossible to observe market behavior for

the ES (they are public goods, meaning that there is no rivalry or exclusion in the

consumption of these services), researchers rely on nonmarket valuation techni-

ques to estimate WTP.

In recent decades, various economic valuation methods have contributed to

making ecosystem services more visible from an economic perspective. These

techniques include both revealed preference methods (production function,

travel cost, hedonic prices) and stated preference methods (contingent valuation,

CV, and choice experiments; Champ, Boyle, & Brown, 2003). These methods are

based on the theoretical principles of welfare economics and measure changes in

people’s well-being by estimating their WTP for changes in the quantity or

quality of a particular service (Secretariat of the Convention on Biological

Diversity, 2009).

In this article, we conduct a CV study to evaluate the feasibility of a PES

scheme in the Bolivian Sub-Andean Humid Forest. We believe that PES propo-

nents must properly address the long-standing problem of hypothetical bias

(Hausman, 2012) presented in CV studies in which the estimation of WTP

using a hypothetical market is signif‌icantly greater than the WTP using either

a real market or a simulated market (Bishop & Heberlein, 1979; Loomis, Brown,

Lucero, & Peterson, 1996).

Hypothetical bias has been identif‌ied in several studies comparing hypothe-

tical and real markets, and researchers conclude that applications of CV need to

adopt a method to reduce this bias (Carson & Groves, 2007; List, 2001; List &

Gallet, 2001; Little & Berrens, 2004). Therefore, unlike previous studies that use

CV in a PES context, we use a numerical certainty scale (NCS) to correct for the

hypothetical bias associated with stated preference methods. Our results show

Va

´squez-Lavı

´n et al. 307