Cost-benefit distribution of ecosystem services and contracting under a PES scheme: the case of the Güisayote Biological Reserve, Honduras

This thesis assessed the costs and benefits distribution of improving drinking water quality through a land set-aside payment for ecosystem services (PES) scheme in a watershed of Honduras. The benefits of improving drinking water quality were determined using a contingent valuation survey for a stated willingness-to-pay (WTP) for improved drinking water quality through a PES scheme; and a revealed WTP was determined as the sum of averting expenditure and illness damage costs. Likewise, the costs of water conservation were determined through two approaches, the flow and rent opportunity costs of upstream landholders.
Both WTP measures evidenced that beneficiaries could afford and were willing to pay for improved drinking water quality. The two WTP measures were not correlated, but this could be due to biased estimates or context-dependent preferences for each approach. Conversely, the cost of water conservation came to an overall flow net return of US$ 1,410 ha-1, with coffee exhibiting the highest returns. However, the median positive returns without coffee, US$ 140, are used and they are correlated to the rent opportunity costs. Identifying a reliable, accurate and cost-effective method to determine opportunity costs is challenging, but the two methods employed provided valid estimates. This study identifies and discusses several distributional issues for PES schemes; these are the upstream-downstream externality framework, peoples’ perceptions, unequal water governance, and fair targeting of payments to service providers.
The WTP for improved drinking water quality is not sufficient to compensate the opportunity costs of landholders. The WTP would only cover 6% to 10% of the estimated cost of the water conservation. Thus, a user-based PES scheme at the study site is not feasible. Water conservation is more likely to be possible if substantial external support is obtained or through a sustainable land management-based scheme.