The Success of Paying People to Not Cut Down Trees

A first-of-its-kind experiment validates a powerful way for rich countries to cost-effectively reduce carbon emissions.

A chimpanzee in Kibale National Park, Uganda (James Akena / Reuters)

The world’s tropical forests are living exemplars of the tragedy of the commons, where the needs of the world clash with those of individuals. The trees in those forests lock away so much carbon that keeping them alive is one of the most cost-effective ways of reducing global carbon-dioxide emissions and forestalling the harm of climate change. But for the people who actually own those trees, cutting them down, selling them for timber, and using their land for agriculture is a great way of making money and feeding families.

Most deforestation occurs in low-income countries. So one way of resolving these misaligned interests is for rich countries, or international funders like the World Bank, to pay people in poor countries not to chop down trees, creating an incentive to protect their forests. This approach is known as “payment for ecosystem services,” or PES. Back in 1997, Costa Rica became the first country to try it at a national scale. Since then, Mexico, China, Bolivia, and other nations have followed suit.

Still, the approach is controversial. Does it actually work? Is it cost-effective? Are the people who take the money those who were already treating their forests well? And do they simply shift their tree-cutting activities to other nearby land? Essentially, “how do you know that you really slow down deforestation?” asks Seema Jayachandran, from Northwestern University.

To answer that question, Jayachandran and her colleagues traveled to western Uganda, whose forests are home to chimpanzees and gorillas, and whose deforestation rates are the third highest in the world. In 2011, they selected 121 villages and offered a PES scheme to half of them, chosen at random. This experiment marks the first time the approach has ever been tested in a randomized trial, and its results were encouraging. Over two years, the program managed to halve the amount of fallen forest near the villages that participated in the scheme, compared to those that didn’t.

The program was also cheap and cost-effective. It took just $20,350 to pay all the enrollees, who (on average) bolstered their annual income by $56 a year—around 10 to 20 percent. “That’s the magic of the program,” says Jayachandran. “It’s enough money that there are financial pressures to not cut the forest, but cheap enough that wealthy countries can pay for it.”

“Sometimes, people ask why the government doesn’t just buy up the forests and make them into reserves,” she adds. “But people have their homes there. They’re integrated with the forests, so you have to figure out a way to let people live their lives.”

Other scientists found similar results when evaluating Mexico’s PES program after it had launched: There, payments also halved the loss of tree cover. “It is immensely useful to know that those results hold up in a fully randomized setting” and in a different continent, says Jennifer Alix-Garcia from the University of Wisconsin-Madison, who was involved in the Mexico analysis. “It suggests the existence of an effective environmental policy that can be applied in challenging institutional settings without adverse effects on households. What could be better?”

“I’m happy to see PES getting increased attention,” adds Katharine Sims from Amherst College, who was also involved in the Mexico study. “It has emerged as a key strategy for global forest conservation [and ] provide an important way of better aligning individual and social values.”

A local non-profit—the Chimpanzee Sanctuary and Wildlife Conservation Trust—designed and administered the program. Its staff traveled to the targeted villages, talked to their leaders, and offered them a contract that forbade them from cutting down mature trees, in exchange for an annual payment of $28 per pristine hectare. If they agreed, the team did on-the-ground spot-checks to make sure that that they were holding up their end of the deal, and assessed any differences in tree cover using satellite images.

On average, the team found that tree cover fell by 4.2 percent in the villages that were invited to take part in the PES scheme, and by 9.1 percent in the business-as-usual group. Best of all, the team found no evidence that the villagers were gaming the system. “You might expect that the people signing up in droves are the ones who were planning to conserve trees anyway,” says Jayachandran. But, in fact, the enrollees’ past behavior suggested that they would actually have cut down more trees than the typical landowner.

Similarly, the satellite images showed that the villagers weren’t just cutting down trees in nearby forests, or making deals with neighbors who hadn’t enrolled in the program. These “spillover effects” are often cited as possible inadvertent consequences of PES programs. But “we provide evidence that this worst-case thinking, which dampens investment in this approach, didn’t play out in this case,” says Jayachandran.

Kelsey Jack, from Tufts University, cautions that “the results might change as the program matures and people become more familiar with it, and with any weaknesses in monitoring or enforcement.” In Jayachandran’s study, only a third of the landowners who were invited to take part in the PES program accepted. The results might have been different if a larger proportion had signed up—or if the scheme had been rolled out nationally. At that scale, PES could conceivably affect a country’s agricultural industry or its timber prices—both of which could change the incentives for cutting or preserving trees.

Despite the low enrollment, the team calculated that they delayed the release of 183.5 metric tons of carbon dioxide for each eligible landowner, and paid just 46 cents for each of those tons. The social cost of all that carbon—that is, the cost of its negative influence on the environment—is around 2.4 times greater. Even if the landowners caught up on all their delayed deforestation once the payments ended, the program would still roughly break even. That makes a strong case for not only launching these schemes, but also keeping them going.

“It’s considerably cheaper than other ways of lowering carbon emissions,” says Jayachandran. For example, the cost of subsidizing electric and hybrid cars in the U.S. is anywhere from four to 24 times greater than the social cost of the carbon those vehicles avert. “Putting dollars and cents on the benefits should be helpful in nudging the policy world,” Jayachandran says.