04. May 2023 : Do financial incentives undermine motivation to protect the environment in the long term?

Study by the University of Osnabrück examines the effects of cash incentives for environmentally friendly business practices.

To combat climate change and biodiversity loss, environmental protection is more important than ever. In this context, the preservation of forests plays a central role. One way to promote the protection of forests worldwide is through payments for ecosystem services (PES). Forest owners receive money for not cutting down their forests or even reforesting them. Critics fear negative consequences: Because monetary payments provide an external incentive, they could crowd out environmentally conscious beliefs. If the payments then cease at some point, individual initiative would also fail to materialize. In the long term, such financial incentives could even be counterproductive. A study conducted by the University of Osnabrück under the leadership of environmental economist Dr. Tobias Vorlaufer has investigated the actual effects of payments for ecosystem services. The results of the study now appear in the Proceedings of the National Academy of Sciences (PNAS), one of the most renowned scientific journals in the world.

In a wide-ranging study, the team was able to speak with more than 750 landowners in western Uganda and explore their environmental behaviors. "Our results show that short-term financial incentives do not undermine motivation to protect forests - and this is true even when payments have been discontinued for some time," says Dr. Tobias Vorlaufer, lead author of the study, adding, "Thus, we find no evidence for the frequently expressed fear that financial payments do more harm than good in the long term."

Deforestation is a major cause of greenhouse gas emissions and biodiversity loss. To counteract this, governments and non-governmental organizations around the world rely on so-called payments for ecosystem services (PES). Forest owners are thus remunerated for protecting their forests. PES therefore represent an additional source of income, thus reducing the attractiveness of alternative land use and the associated deforestation.  

However, there are also criticisms of this approach, as monetary incentives could potentially undermine motivation for conservation in the long term. Such crowding-out effects have already been discussed and observed in behavioral economics and psychological research for diverse behavioral domains. Björn Vollan, professor of sustainable use of natural resources at Philipps University in Marburg, Germany, and co-author of the study, comments, "Such a crowding-out effect can lead to economic incentives being less effective and, in the worst case, even counterproductive, especially once payments are stopped."

Landowners surveyed for the study had received payments for two years for not deforesting or even reforesting the forest land they used. Within this period, deforestation decreased by half. After that, the payments were stopped. Now, six years later, the team led by Prof. Dr. Engel and Dr. Vorlaufer has studied the environmental behavior of landowners using surveys and economic experiments. The researchers were able to prove that the feared negative consequences did not materialize: Landowners who had received cash incentives behaved just as environmentally conscious as the control group, showed the same level of initiative and were just as convinced of the benefits of forest conservation. "These positive results give us hope. We were able to show that economic incentive instruments do not negatively influence landowners' willingness to participate in nature conservation and can thus make an important contribution to the protection of biodiversity and the climate," says study author Prof. Dr. Stefanie Engel.

The study is thus pioneering work in the field of behavioral and environmental economics, as it is the first time that long-term effects of monetary benefits for environmentally friendly behavior have been studied at the individual level and under realistic conditions.

The results of the study can be found at: https://www.pnas.org/doi/10.1073/pnas.2215465120.

Further information for editors:
Dr. Tobias Vorlaufer
Postdoctoral Researcher, Leibniz-Centre for Agricultural Landscape Research (ZALF)
Phone: +49 (0) 33432 82 - 417
E-mail: tobias.vorlaufer@zalf.de