Tobias Wünscher, Stefanie Engel, Sven Wunder:
Determinants of Participation in Payments for Ecosystem Service Schemes

TOBIAS WÜNSCHER¹, STEFANIE ENGEL², SVEN WUNDER^3
1University of Bonn, Center for Development Research (ZEF), Germany
²ETH Zurich, Institue for Environmental Decisions (IED), Switzerland
³Centre for International Forestry Research (CIFOR), Brazil

Landholders are generally assumed to be willing to participate in payments for ecosystem service (PES) schemes if the offered payment exceeds the opportunity cost of participation. The calculation of opportunity costs (and thus the determination of payment levels) is often based on historic financial data such as net returns of the formerly practised land use. Reliable estimates of opportunity costs are required especially in flexible, cost-aligned payment schemes with differentiated payments at the farm scale. We question here whether opportunity cost estimates that do not consider personal land holder characteristics such as personal risk considerations, information access and non"=monetary values such as personal preferences (e.g. for traditional land use practices) are sufficient to explain a land holder's decision to enrol land in PES. To test these assumptions, a PES adoption model was developed for hypothetical adoption decisions by 178 landholders on the Nicoya Peninsula, Costa Rica. The model explained up to 73.5% (Nagelkerkes pseudo R²) of adoption variance. The results confirm that adoption is not determined by financial opportunity costs alone. In fact, net per hectare returns turned out to be insignificant in explaining adoption. The model stresses the importance of risk and information issues in explaining PES adoption. Trust in state institutions, for example, played a highly significant role in the model. Proxies for non"=monetary preferences, however, could not be shown to significantly explain decision making. The results call for more integrated methods of opportunity cost estimation on the farm scale. Inverse auction systems are proposed here as an alternative approach for the determination of farm level opportunity costs. Their strength lies, among others, in that all adoption determinants (including risk, information and personal preferences) are potentially expressed in the land holder`s bid.

Keywords: Adoption, auction, Costa Rica, opportunity cost, payments for ecosystem services

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Contact Address: Tobias Wünscher, University of Bonn, Center for Development Research (ZEF)Walter-Flex-Straße 3, 53113 Bonn, Switzerland, e-mail: tobias.wuenscheruni-bonn.de