Using Cost‐Effective Targeting to Enhance the Efficiency of Conservation Investments in Payments for Ecosystem Services

Abstract: Ecosystem services are being protected and restored worldwide through payments for ecosystem services in which participants are paid to alter their land‐management approaches to benefit the environment. The efficiency of such investments depends on the design of the payment scheme. Land features have been used to measure the environmental benefits of and amount of payment for land enrollment in payment for ecosystem services schemes. Household characteristics of program participants, however, may also be important in the targeting of land for enrollment. We used the characteristics of households participating in China's Grain‐to‐Green program, and features of enrolled land to examine the targeting of land enrollment in that program in Wolong Nature Reserve. We compared levels of environmental benefits that can be obtained through cost‐effective targeting of land enrollment for different types of benefits under different payment schemes. The efficiency of investments in a discriminative payment scheme (payments differ according to opportunity costs, i.e., landholders’ costs of forgoing alternative uses of land) was substantially higher than in a flat payment scheme (same price paid to all participants). Both optimal targeting and suboptimal targeting of land enrollment for environmental benefits achieved substantially more environmental benefits than random selection of land for enrollment. Our results suggest that cost‐effective targeting of land through the use of discriminative conservation payments can substantially improve the efficiency of investments in the Grain‐to‐Green program and other payment for ecosystem services programs.