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Green Subsidies a Double-Edged Sword in Impoverished Countries

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In Kenya’s Ambolesi National Park, vegetable growers are paid to allow elephants access to food sources on their farms. Programs such as this seem like a win-win for the environment and for farmers who want to earn a living. But David Zilberman, professor of agricultural and resources economics, has shown that increasingly popular policies that offer “payments for environmental services,” or PES, are a double-edged sword.

In a working paper entitled “Payments for Environmental Services: Who Gains and Who Loses?” Zilberman breaks down PES into three categories: pollution control, conservation, and creation of services (for instance, planting trees for the public good). While many PES programs have been successful in the United States, he says, their effects on impoverished countries are more complex.

PES can help alleviate poverty if poor farmers are given subsidies for environmental projects. For example, a farmer could be paid to let a field lie fallow to prevent soil erosion. However, if land targeted for environmental projects is owned by the wealthy, the poor receive no benefit.

Additionally, taking land out of production will lead to fewer crops and higher food prices, and this could result in farmers using more pesticides and farming erodible, marginal land—thus negating the benefits of the subsidy.

Along with potentially contributing to poverty on a regional level, PES programs can be a drain on government resources.

“They may be abused as subsidies, and have minimal environmental value,” says Zilberman. “There are cases where political pressure and bad design resulted in PES programs that spent large amounts of public money on questionable activities.”

The key to avoiding the negative consequences of PES may be safety net policies to ensure that the poor don’t slip through the cracks.

“Impacts of PES programs have to be monitored on the ground,” says Zilberman. “If PES may negatively affect landless or poor consumers, some of the resources may be aimed to protect them. PES is easier to implement in countries with a safety net like food stamps or welfare.”

-Stephanie Ludwig

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