Calibrating payment for ecosystem services: a process-oriented policy design approach

Recent empirical research in policy design has shown the relevance of micro-level components, particularly specification and calibration, in shaping policy outcomes. Additionally, research highlights the importance that understanding the mechanisms underlying the policy process has for effective policy design. Yet, a gap persists in how to effectively calibrate and specify policies for specific cases, with a theoretical grounding and guidance for practitioners. This paper addresses this need by applying a process theory of change to delineate the key episodes that constitute the mechanisms of a plausible pathway for an effective Program for Ecosystem Services (PES), an incentives-based instrument focused on conserving forests producing carbon sequestration, biodiversity protection, and water infiltration, among other services. Specifically, the paper uses the well-documented Mexican PES to illustrate how to derive the mechanisms and use them for calibration and specification. The paper provides valuable theoretical insights drawn from the case study, contributing to the field of micro-policy design with a mechanistic approach.