Sven Wunder, a researcher with the Center for International Forestry Research (CIFOR), notes the following trade-off [PDF] for the kind of environmental charity where people are paid not to pollute. His conclusion: we are better off paying the moderately bad guys than the really bad guys or the good guys. I’m going to post this without further comment, because either you see hidden assumptions and problems with this, or you don’t:

From the February 2007 issue of Conservation Biology:

Consider a hypothetical example from the Brazilian Amazon. Assume a global biodiversity fund sets aside US$100,000 for a pilot PES scheme and receives three applications from potential PES suppliers. The first is from a large farmer in Mato Grosso in the so-called arc of deforestation. This farmer is rapidly clearing land because of the high profitability of soybeans, which has been facilitated by the government’s road-building program. The farmer acknowledges the biological value of the forest and would prefer to preserve it, if only someone would cover his considerable conservation opportunity costs — the forgone high profits of not putting the land under soybeans.

The second application is from a group of cattleranching smallholders at the biodiversity-rich Andean foothills of the Amazon Basin, who are slowly enlarging their farms by clearing forestland for pasture. The economic returns to ranching on the sloped land are poor, but gradual deforestation is still improving their livelihoods. Nevertheless, if someone would pay for their opportunity costs (i.e., forgone future cattle-ranching profits), they would rather halt the expansion of the agricultural frontier.

The third application is from an indigenous community in a highly remote area of the interior of Amazonas state. Over centuries they have lived in isolation from modern society and in relative harmony with the forest. Their forest clearing does not exceed regrowth because population density is low, human mortality is high, production technology is rudimentary, and because they treasure the forest for its cultural values. External threats from loggers and ranchers still remain remote because access to the area is extremely costly. Visiting anthropologists informed the community about the new biodiversity fund, and helped them write an application to claim their just reward for being good environmental stewards who contribute to global biodiversity conservation.

All three areas are equally valuable for biodiversity, but unfortunately restricted funding will only make it possible to fund one initiative. From a fairness point of view, the indigenous community would seemingly have the strongest case. But no credible internal or external threat to their biodiversity exists, so there would be no additionality — PES would not make any tangible difference. Rewarding them might help build an alliance to meet potential longterm environmental threats, but this is a hard case to argue in the presence of multiple here-and-now threats elsewhere.

The large soybean farmer clearly is at the opposite end of the threat and opportunity-cost scales. Through his aggressive continuous forest clearing, he constitutes a real threat to biodiversity — and making him a conservationist would clearly be “additional.” But because net yearly per-hectare profits from soybean-cultivated land are in four-digit figures, using the US$100,000 to cover his opportunity cost would effectively only buy a tiny piece of land for conservation. The largest conservation “bang for the buck” would be achieved in the cattle-rancher setting. Ranching returns from deforestation would be far lower than for soybeans, so only modest per-hectare compensation is required. The cattle ranchers are thus probably the most attractive conservation option to achieve relatively large extra protection, rather than zero or low current additionality.

There are practical lessons to learn from this simplified example. For biodiversity buyers it may be best to keep a diversified portfolio, acting on both current and projected threats. A PES scheme needs to strike some balance between short-term efficiency and fairness, the latter influencing long-run conservation viability. But it seems certain that neither the community that fully safeguards its environment nor the impoverished farmer too poor to do much damage will emerge on the scene as major sellers of environmental services. These groups do not constitute a credible threat, so paying them creates zero additionality (payment has no impact). Is this unfair?

Perhaps it is not because they also do not suffer conservation opportunity costs from forgone development. The ideal seller of environmental services is, if not outright environmentally nasty, then at least at the edge of becoming so.