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  5. Money (Not) to Burn: Payments for Ecosystem Services to Reduce Crop Residue Burning

American Economic Review: Insights

ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)

Money (Not) to Burn: Payments for Ecosystem Services to Reduce Crop Residue Burning

  • B. Kelsey Jack
  • Seema Jayachandran
  • Namrata Kala
  • Rohini Pande
American Economic Review: Insights (Forthcoming)

Abstract

We test whether payments for ecosystem services (PES) can curb the highly polluting practice of crop residue burning in India. Standard PES contracts pay participants after verification that they met a pro-environment condition (clearing fields without burning). We randomize paying a portion of the money upfront and unconditionally to address liquidity constraints and farmer distrust, which may undermine the standard contract’s effectiveness. Incorporating partial upfront payment into the contract increases compliance by 10 percentage points, which is corroborated by satellite-based burning measurements. The cost per life saved is $3600 to $5400. The standard PES contract has no effect on burning.

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