Forest cover effects of payments for ecosystem services: Evidence from an impact evaluation in Brazil

Abstract We evaluate the effects of “Water and Forest Producers” (PAF), a payment for ecosystem services project, on forest cover outcomes in a watershed serving the Rio de Janeiro region of Brazil. We apply propensity score matching and regression to 81 beneficiary properties on 8848 ha and 398 control properties on 33,748 ha. We estimate the average treatment effect on the treated for changes in rates of reforestation and deforestation, and the resulting change in forest cover. Over the first 7 years of PAF (2010–2016), our results indicate that the project increased forest cover on participating properties by only 136 ha (95% confidence intervals of 8–265 hectares), or 1.5% relative to our estimate of the counterfactual scenario without PAF. Impacts on forest cover were caused mostly by reduced deforestation rather than reforestation. “Placebo” impact tests estimated using pre-intervention data indicate that our results are robust. The observed forest cover benefit came at the per-hectare cost of $32,963 ($16,917-$560,367) paid mostly with off-site mitigation funds. Semi-structured interviews with PAF beneficiaries suggest that the limited impacts of PAF may be the result of mostly enrolling properties that likely would have remained forested even without the project.