Negotiating over payments for wetland ecosystem services

This paper proposes and examines the economic efficiency of novel payment schemes for provision wetland ecosystem services. By definition, payments services typically involve voluntary transactions between beneficiaries providers We develop a theoretical model that addresses role third party—such as social planner or government agency, acting in interest society—can play to ensure optimal consider different regulatory frameworks combining with subsidy party grants compare outcomes policy mixes characterized by levels involvement party. Of particular is comparison arrangements which plays decentralized centralized roles. Our results show, among other things, indifferent negotiated combined scheme constrained first-best scheme, presence transaction administrative costs. However, may have conflicting preferences over two schemes. Négociation des paiements pour écosystémiques zones humides. Cet article propose et examine l'efficience économique de systèmes paiement novateurs le Par définition, les consistent généralement en volontaires entre bénéficiaires prestataires écosystémiques. Nous mettons au point un modèle théorique qui aborde rôle qu'un tiers, comme planificateur ou organisme gouvernemental, agissant dans l'intérêt la société, peut jouer afin garantir prestation optimale examinons différents cadres réglementaires combinant à une subvention accordée par tiers aux comparons résultats différentes politiques, sont caractérisées degrés participation part du tiers. La comparaison configurations où joue décentralisé celles il centralisé revêt intérêt particulier. Nos révèlent, autres, qu'en présence coûts d'administration, n'a pas préférence système négocié est combiné contraint Cependant, pourraient avoir préférences contradictoires deux Wetlands are extremely fragile ecosystems important not only private goods (fish reed) they produce but also unique complex functions provide. These valuable (ESs), most public nature, include life-support (water filtration provision), cultural recreational directly benefit human beings well hydro-ecological flow regulation, climate water quality regulation) support protect activities indirectly. Canada globally, highly threatened both excessive pressure change.11 In Canada, up 70% wetlands been destroyed degraded urbanized watersheds (Branton Robinson 2020). Globally, an estimated 64% 71% lost (Davidson 2014). light these threats, (PES) attracted attention appropriate mechanism what remains restore them wherever possible. PES ESs. The standard definition highlights objective internalize would otherwise be positive externality (Pagiola Platais 2007). It emphasizes bargaining interactions at least one ES buyer provider, accordance Coase theorem (Coase 1960, Wunder 2005, Engel al. 2008). necessary conditions do pertain ESs,22 include, amongst others, well-defined enforceable property rights low costs 1960). this fact casts serious doubt on new promising instrument. particular, order magnitude associated solutions environmental externalities quite substantial (Falconer Saunders 2002, Phan 2017, Alban 2008, 2008).33 For example, Falconer (2002) report case wildlife enhancement were 110% payment. Moreover, ESs exhibit characteristics goods. incentivize creation, therefore, require intermediary implementation mechanisms balance benefits against incurred creation (Wunder From perspective, we setting agency—acting society playing some active design achieve ESs.44 Non-governmental organizations can act process, long end users supplied. A good example Ducks Unlimited managed contracts conservation Canadian prairie provinces (Hill 2011, Brown Adamowicz Olewiler 2015). thank anonymous referee pointing out. line Vatn (2010), who practice intermediary, dominant agent.55 (2010) distinguishes concept PES, often requires core market (MES). implementation, ESs, instrument mix.66 practical relevance instruments supported Pagiola (2007), note World Bank broader mix. characterizes Pigou. roles mechanisms. economics literature has justified straightforward application second-best theory (see, e.g., Bennear Stavins 2007, Bouma 2019, Braathen Fankhauser 2010, Johnstone 2003, Lehmann 2012). As argued (2008), programs seen user fee beneficiaries. corresponds our benchmark whereby chooses mix payment–subsidy solution refer approach. scenarios wherein while intervenes various ways take into account indirect (2008) regulation structure government-financed program, contrast user-financed program bargain pay key distinguishing feature programs, mode worldwide 2013), compulsory instead voluntary. Many researchers Schomers Matzdorf 2013) argue relative dominance caused mostly high latter. Krutilla (1999) Alexeev (2014) caution significant, sometimes neglected, programs. manifest themselves form related administration, monitoring enforcement rent-seeking tax revenues (Medema carefully prevalent costs, when comparing What efficient regime? find approach, combines same optimum consists price subsidy. it does matter whether goes providers. One main result played Both agents prefer assigns more party, whenever their negotiation rents (or net payoffs from negotiation) low. depend rate change marginal cost powers Finally, show planner, negotiations, additional there many involved negotiations. Even no amenities, ensures preventing free-riding. mentioned above, modelled Coasean formalization departs considering PES. (1960) argues side parties solve problems prevent attaining Pareto-efficient outcomes. Although claims holds generally, players, literature, using alternating-offer Rubinstein (1982), focused two-player (Caparros Pereau 2021). Other work incentives (Crépin 2005) considers take-it-or-leave-it contracts. Crépin (2005) shows choice produces larger than those uniform contract yields distribution groups.77 contract, authority offers proportional surface created allows farmers choose size. sets size transfer. relaxes assumption assuming procedure. applied addressing multilateral negotiations upstream–downstream crucial. To capture use Nash-in-Nash (Collard-Wexler 2019). procedure Nash equilibrium computed implies simultaneous bilateral types players importance disagreement points during engaged multiple need specify will failure players. suggests payoff based agreements reached all even if don't agreements. aim general framework able encompass providers, one-to-one many-to-many variables: formalized (Austen Hanson Ferraro Mann information asymmetries characterize contractual relationships Because asymmetric information, contracts, defined either give rise inefficient Smith Medema 2020, etc.). reduce informational asymmetry authorities could reverse auctions Reverse already proven effectiveness Europe, Australia United States (Reichelderfer Boggess 1988, Latacz-Lohmann Hodge Stoneham White Burton Selman few implemented so far. experimented four sites prairies: Torlea Alberta, Lake Alma Yorkton Saskatchewan Killarney Manitoba On basis assessment pilot auction conducted Duck Assiniboine River Watershed East Central 2009, Hill (2011) suggest effective tool protection restoration Canada. remainder structured follows. Section 2 presents model, situations derives section 3, then turn three special cases observed empirically: (i) beneficiary (ii) (iii) provider. 4 concludes analysis. appendix provides proofs included text. agents: direct identical beneficiaries, denoted B i $$ {B}_i = 1 , . n i=1,\dots, enjoy (ESs) created, (i.e., farmers), P j {P}_j m j=1,\dots, ( S SP ). assume perfect knowledge relevant required make decisions.88 identifies potential sources i.e., hidden (adverse selection) action (moral hazard). discuss conclusion how relaxing alter results. recreation services, conservation, research They provide benefit, denote Q ) B(Q) where beneficiaries.99 Contrary (2005), function surplus. refers wetlands. distinguish planner. latter acts behalf maximizes welfare including surplus (the less cost) creation. concave function: ? b B(Q)= aQ-\frac{b}{2}{Q}^2 ? ? 0 {B}^{\prime }(Q)=a- bQ\gtreqless ? / Q\lesseqgtr a/b < \prime }(Q)=-b<0 coefficient interpreted beneficiaries' maximum willingness proxied schemes, land-use lack activities) rather quantity provided (Ferraro fact, analyses shown effect delivery (Mitsch Gosselink 2015, Tiner Finlayson 2018). recent meta-analysis valuation China's wetlands, Zhou (2020) estimate value area material production, soil carbon sequestration oxygen release, biodiversity habitat option value, existence bequest value. contrast, convex appears values flood control purification. Nevertheless, through deliver -such accrue amenities represented A(Q) model. clearly and, might albeit willing contribute towards insofar add utility. Therefore, utility, factored Put another way, represents relationship (Zhou 2020), amenity function, convex: e A(Q)=\frac{e}{2}{Q}^2 > {A}^{\prime }(Q)= eQ>0 }(Q)=e>0 benefit.1010 Note concave. analyzed robustness analysis confirmed qualitative paper. completes description basic arrangements. further highlight impact number providers.1111 editor us direction. empirically are: beneficiary, provider (iv) will, without doubt, too little respect corresponding socially correct target, rely variety mixes. following sections, specific alternative amount start assumes simultaneously p ought s grant each unit created. such program) Greencover Canada's Land Conversion progrqam, was run federal 2003 2009 (Renzetti Dupont Knight 2010).1313 replaced Growing Forward 2, five-year involving cost-sharing Worldwide, largest arguably, successful Conservation Reserve Program (Murray 2016).1414 Another Mexico's Payments Hydrological Environmental Services (PSAH) program. details about PSAH, see Munoz-Pina (2008). outcome, anticipates behaviours equalize {Q}^B {Q}^P O {Q}^{SO} obtain proposition. Proposition 1.The PES-subsidy established proposition intuitive. received greater paid {s}^{SO}>{p}^{SO} ), e=0 Also, analyze influence changes parameters {p}^{SO} level {s}^{SO} U {U}_{B_i}^{SO} {U}_{P_j}^{SO} W {W}^{SO} summarized table 1, signs indicate parameter top column row variable. increase decrease always increases c decreases When increases, under condition c> me get condition. Under bn>e consequence, turn, implement combination however, transfer) (Krutilla 1999, 2014), preclude achievement outcome. due budget fights within governments difficulties targeting.1515 side, lower participants large economies scope. significance intervention context policymaking. Krause MacKenzie Ohndorf (2012) exceed policy. Considering transfer gives 2.In index superscript CFB worthwhile {Q}^{CFB} {p}^{CFB} {s}^{CFB} respectively correspond ? ? \mu =\delta =0 {U}_{B_i}^{CFB}<{U}_{B_i}^{SO} {U}_{P_i}^{CFB}<{U}_{P_i}^{SO} total welfare, {W}^{CFB}<{W}^{SO} {W}^{CFB}>{W}^{PS} + {W}^{SO}-{W}^{CFB}=\frac{1}{2}m\left(\mu +\delta \right)\frac{an-\mu -\delta }{c+m\left( bn-e\right)}>0 {W}^{CFB}-{W}^{PS}=\frac{1}{2}m\frac{{\left(\mu \right)}^2}{c+m\left( Here, sum exceeds an>\left(\mu \right) payoffs. Now, let negotiate agreement buyers referred closest Coasian environment According Salzman (2018), entity, NGO actor, given User-financed common, Vittel watershed France (Depres 2008) example.1616 There examples Ecuador Albán 2008), Bolivia (Asquith, Vargas,