Economics of payments for environmental services: Three essays on Kenya, Tanzania, and Mozambique

The present study reviews important aspects of payments for environmental services (PES). In particular, it focuses on three important questions around application of the PES approach in developing countries: (i) how to assess the feasibility of PES projects on the ground, (ii) how to estimate payments when markets for environmental services are missing, and (iii) what kinds of local impacts can we realistically expect after PES projects have been functional in the field? These questions are answered through field work on actual PES sites in Kenya, Tanzania, and Mozambique by combining theory from environmental and resource economics, information economics and microeconomics with econometric methods. Research methods include field transects, exploratory interviews, focus groups, household survey, and field experiments in the form of auctions to allocate tree planting contracts. The total sample size of the study is more than 1,000 households in three different countries. The overall study consists of three separate papers, each focusing on a specific question. Together, they present a comprehensive review of PES in developing countries, including its entire project cycle.