Conditional transfers for poverty reduction and ecosystem management

This project will explore the potential for combining payments for ecosystem services (PES) and conditional social transfers (CST) at national and sub-national level to simultaneously alleviate poverty and address environmental problems.

2015 - 2016
Ina Porras

Ina Porras was a principal researcher (environmental economics), in IIED's Shaping Sustainable Markets research group until late 2019 

Inclusive green economy
A programme of work on increasing equity, access and agency in the green economy

Seeds collected from a farm in Chiapas, Mexico, for replanting and use in traditional medicine. (Photo: Ina Porras)

Over the past 20 years market-based instruments, such as payments for ecosystem services (PES) and conditional social transfers (CSTs), have been used to improve ecosystems and alleviate poverty. The experience of combining objectives and instruments is growing, as is our understanding of synergies and trade-offs, and what is necessary to upscale from local project to national programme.

Our project aims to harness this experience, gathering inputs from the research and academic community to inform practitioners and policymakers about what works and what doesn't; what the benefits and trade-offs of combining approaches are; and how local projects can be replicated at national level.  

We combine analysis of the latest literature in conditional transfers, consultations with leading international experts, lessons from ongoing national programmes in eight countries, and multi-stakeholder dialogues.

Our ultimate aim is to inform the design of practical solutions for tackling poverty and improving ecosystems.  

The 17 Sustainable Development Goals agreed in 2015 will require governments to tackle multiple objectives simultaneously. This provides an opportunity and increased momentum which could transform how we use economic instruments to effectively address both poverty and environment challenges.

Sending signals through economic instruments

PES are payments to farmers, landowners or communities who have agreed to take certain actions to manage their land or watershed to provide an ecological service (such as improving soil conservation). CSTs are a form of social protection, usually cash, used by governments to help poor or vulnerable people in return for meeting targets or adopting behaviours with positive social impacts or which deliver public goods.

Both PES and CST involve a reward to change behaviour. While CSTs benefit primarily the person receiving the incentive, the actions promoted through PES are expected to benefit others beyond the farmer (positive externalities).  

There is a wealth of experience and evidence from PES projects that shows PES can bring about environmental improvements, such as improved land practices in watersheds to provide cleaner water, and increased climate resilience in supply chains by planting trees in small coffee plantations.

But with a few exceptions such as China and some Latin American countries, PES remain a minor instrument in the policy portfolio – in terms of scale of implementation and political priorities — and have struggled for financial sustainability.

This lack of sufficient geographic scale and permanence beyond pilots means it is harder to measure impact. One reason could be that many PES schemes lack a focus on equity issues and poverty reduction – or add it almost as an afterthought. This makes them appear less socially acceptable and therefore less of a priority for policymakers.

In contrast, most governments already allocate funding for poverty alleviation. CSTs are often used to increase positive social outcomes: the cash element associated with the transfer can have a direct positive impact on household wellbeing, while the conditionality – such as sending children to school or having them vaccinated – boosts child health and education and contributes to household human capital. Cash injections also have multiplier effects in the economy.

What is IIED doing?

Our project examines sub-national and national programmes linking social and environmental objectives. We analyse how well they achieve these objectives and at what cost, and how they can they be adapted to local conditions and remain manageable in terms of administration and transaction costs.

Throughout our project we focus on a three-step approach that entails: 

  • Theory-driven research: We aim to carry out theory-driven research in India, Indonesia, Bangladesh, Ethiopia, South Africa, Mexico, Brazil and Costa Rica through thorough literature review and interviews with key CST and PES researchers, identifying stakeholders and case studies
  • 'Ground-truthing' through field research: we will examine where and how similar approaches have been used and to what effect, through in-depth, targeted country case studies that will explore financial sustainability, and social and environmental effectiveness at ministerial levels
  • Stakeholder engagement: we will host an international policy workshop in September 2016, as a side event to the BioEcon XVIII Conference in Cambridge. This workshop will bring together practitioners, researchers and policymakers to share lessons on what works and what does not.