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Publication Details

Journal Article
JA0299-08
Article TitleA Revealed Preference Approach to Estimating Supply Curves for Ecosystem Services: Use of Auctions to Set Payments for Soil Erosion Control in Indonesia
AuthorBroke Kelsey Jack, Beria Leimona and Paul J Ferraro
Year2008
Journal TitleConservation Biology
Call NumberJA0299-08
Keywordsconservation auction, conservation planning, payments for ecosystem services, poverty alleviation, program design, revealed preferences, supply curves
Abstract:
To supply ecosystem services, private landholders incur costs. Knowledge of these costs is critical for the design of conservation-payment programs. Estimating these costs accurately is difficult because the minimum acceptable payment to a potential supplier is private information. We describe how an auction of payment contracts can be designed to elicit this information during the design phase of a conservation- payment program. With an estimate of the ecosystem-service supply curve from a pilot auction, conservation planners can explore the financial, ecological, and socioeconomic consequences of alternative scaled-up programs. We demonstrate the potential of our approach in Indonesia, where soil erosion on coffee farms generates downstream ecological and economic costs. Bid data from a small-scale, uniform-price auction for soilconservation contracts allowed estimates of the costs of a scaled-up program, the gain from integrating biophysical and economic data to target contracts, and the trade-offs between poverty alleviation and supply of ecosystem services. Our study illustrates an auction-based approach to revealing private information about the costs of supplying ecosystem services. Such information can improve the design of programs devised to protect and enhance ecosystem services.
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GRP 6: Developing policies and incentives for multifunctional landscapes with trees that provide environmental services
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