Exploring the links between equity and efficiency in payments for environmental services: A conceptual approach

This paper addresses the relationship between equity and efficiency in PES schemes from a conceptual point of view. Emphasis is placed on the role of the institutional setting, social perceptions about economic fairness (or distributive justice of the payments), uncertainty and interactions between agents, including power relations. We introduce the heuristic concept of the 'efficiency-equity interdependency curve' to illustrate potential combinations between equity and efficiency that may be theoretically possible. The paper argues that different types of institutional factors determine which equity-efficiency combinations may be potentially feasible, influence the actual combination that will be achieved on the ground, and condition possible changes in that combination due to exogenous factors. By stressing the role of institutional aspects in shaping the equity-efficiency relationship, the paper attempts to go beyond the dominant Coasean vision of PES.