Calculating Incentives for Watershed Protection. A Case Study In Guatemala

Summary

The research is conducted in the River Basin Mestelá (Macizo de Cobán, Alta Verapaz — Guatemala), where the principal causes of threat of the biological diversity are the expansion of the exploited surfaces for agriculture and the prevalence of crops with a high dange The integration of strategies that promote watershed protection into peasants' production systems is typically associated with increased costs at the farm-household level. Against this background, the paper deals on one hand with the quantification of these costs, and on the other hand with the possibilities to compensate the peasants for these costs by introducing the policy instrument of payment for environmental services (PES). The paper focuses on payments for water supply, which is increased by environmentally friendly farming techniques that also aim to protect biodiversity. A linear programming model, which is based on empirical household data, will be used to calculate the income of farm households that differ with regard to the environmental services they generate. The income losses experienced by the farmer as a consequence of adopting systems, which provide more environmental services, will be the guideline for determining the amount of the compensation. Through the creation of different scenarios that reflect different payment schemes for environmental services and varying frame conditions, the paper shows whether the application of the PES instrument is feasible.