A dynamic approach to PES pricing and finance for interlinked ecosystem services: Watershed conservation and groundwater management

Abstract

A theory of payment for ecosystem services (PES) pricing consistent with dynamic efficiency and sustainable income requires optimized shadow prices. Since ecosystem services are generally interdependent, this requires joint optimization across multiple resource stocks. We develop such a theory in the context of watershed conservation and groundwater extraction. The optimal program can be implemented with a decentralized system of ecosystem payments to private watershed landowners, financed by efficiency prices of groundwater set by a public utility. The theory is extended to cases where land is publicly owned, conservation instruments exhibit non-convexities on private land, or the size of a conservation project is exogenous. In these cases, conservation investment can be financed from benefit taxation of groundwater consumers. While volumetric conservation surcharges induce inefficient water use, a dynamic lump-sum tax finances investment without distorting incentives. Since the optimal level of conservation is generated as long as payments are correct at the margin, any surplus can be returned to consumers through appropriate block pricing. The present value gain in consumer surplus generated by the conservation-induced reduction in groundwater scarcity serves as a lower bound to the benefits of conservation without explicit measurement of other benefits such as recreation, biodiversity, and cultural values.

The Role of Groundwater‐dependent Ecosystems in Groundwater Management

“…Other studies focus on the existence of additional environmental costs (Esteban and Albiac []) or additional costs related to interactions between groundwater and surface water (Young et al. [], Kuwayama and Brozovic [], or Roumasset and Wada []).…”

“…Part of the literature analyzes groundwater management when a negative externality exists in the form of groundwater quality deterioration due to large extractions (Tsur and Graham-Tomasi [1991], Dinar [1994], Dinar [1997], Yadav [1997], Dinar and Xepapadeas [1998], Koundouri [2000], Roseta-Palma [2002], Shah et al [2000], or Konikow and Kendy [2005]). Other studies focus on the existence of additional environmental costs (Esteban and Albiac [2011]) or additional costs related to interactions between groundwater and surface water (Young et al [1986], Kuwayama and Brozovic [2013], or Roumasset and Wada [2013]).…”

Integrated Groundwater Resource Management

“…An analogous efficiency condition can be derived for the conservation of natural capital (Roumasset and Wada, 2013b). Since the conservation capital stock enters the MUC of groundwater through the recharge function, independent management of the aquifer and watershed would clearly yield different results.…”

Aplicação do método Delphi na prática de serviços ambientais em mananciais

“…Na maior parte dos casos, florestas podem adicionar mais valor se incorporadas dentro de estratégias mais amplas de manejo de bacias, incluindo outros usos de solo, e outras medidas conservacionistas (LANDELL-MILLS;PORRAS, 2002;ROUMASSET, 2013). Os impactos das florestas dependem muito de características próprias do local, do uso alternativo do solo e do manejo adotado.…”