Do economic incentives work?


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DURING the 1990s, the use of economic incentives in conservation programmes became the favoured mantra throughout the world. Introduced in response to the perceived failure of conventional approaches based on protected areas that advocated barbed wire and barricade policies, economic incentives were seen as a panacea for the ills that afflicted conservation efforts, especially in the developing regions of the world. The integration of economic incentives with conservation appealed both to left-minded conservationists who advocated community rights and empowerment of the disenfranchised, and to proponents of neoclassical economics who privilege markets as the solution to conservation problems.1

The logic of using economic incentives was simple and drew on the increasingly fashionable mantra of the poverty-environment nexus: poor people will only save biodiversity if in so doing they enhance rather than harm their economic position, and the environment will only improve if the livelihoods of the poor are secured.2

In practice, this message has acted as a double-edged sword. On the one hand the simplicity of the rationale seems unassailable – after all who could argue against improving the livelihoods of the less powerful. On the other hand, it is precisely this simplicity that leads to a neglect of the complexity of ecosystems and a misunderstanding of the poverty-environment nexus.3 In this essay I briefly describe the case of a conservation project which solely relied on the use of economic incentives for conservation efforts, ultimately to the detriment of the local biodiversity and arguably the disempowerment of local people in the long run.


Before describing the project in detail, I would like to make three important, and related, points. First, the power asymmetry, institutional and financial, that exists between the ‘local communities’ and the outside conservation projects (experts) means that the latter are able to dictate their terms to the local communities. This aspect of the skewed structural relationship between the two ‘partners’ is hardly mentioned in the project documents; rather it is cleverly obfuscated by such remarks as the ‘consultative process’ or the ‘participatory approach’. But when it comes to project evaluation (read assessment of failures), the explanation (read blame) is put on the weaker side, usually expressed in pseudo-technical language as internal ‘social conflict’ in the community, or ‘lack of capacity’.

It is seldom pointed out that the project itself may have had design flaws. More specifically, it is rarely understood, or at least acknowledged (and this is my second point) that an approach based on economic incentives, modelled after the market system and based on single and discrete commodities, can lead to a fragmentary conservation strategy, systematically ignoring biodiversity conservation at the ecosystem level.4 Third, once economic incentives are created, more powerful institutions, especially those belonging to the state, appropriate those incentives for their personal advantage leaving the community and its resources even more threatened rather than secured.5 In order to illustrate my two points, I will briefly describe a conservation project in northern Pakistan that ran from 1996 to 2006.


The Mountain Areas Conservancy Project (MACP) was started in selected valleys of the Northern Areas (NAs) and North West Frontier Province (NWFP) of Pakistan in 1999. The project was funded by the Global Environment Facility (GEF) and the United Nations Development Programme (UNDP) and was implemented by IUCN-The World Conservation Union and the governments of NWFP and the NAs. The MACP aimed at addressing threats to biological diversity in the high mountain environments of the Western Himalaya, Karakoram and Hindu Kush ranges – an ecologically fragile area of high conservation value. The region is an important species mixing zone, its zoogeography characterized by a blending of the Palearctic and Oriental realms. The species tally includes 45 species of mammals,6 222 species of birds,7 32 of reptiles, 6 of amphibians, and some 1000 species of vascular plants.8 Approximately 80% of the 300 or so species of plants known to be endemic to Pakistan are found in the northern mountains.


For the purpose of this essay, I will mainly focus on the impact of the project in the Northern Areas of Pakistan. The total area of the NAs is approximately 72,000 sq km, comprising three main regions: Gilgit, Astor and Baltistan. The total population of the Northern Areas is about one million. The NAs is part of the disputed territory of Kashmir and so is federally administered from Islamabad, the capital. About 95% of the population engages in some form of farm activity. Due to climatic conditions land under cultivation is scarce, and of poor soil quality. Three major components of farming are crop production, livestock raising and fuelwood collection, and timber production. Natural pastures provide the grazing grounds for livestock, while natural, albeit scattered and scarce, clumps of junipers, birch and wild willow fulfil the fuelwood collection needs of local people. Additional resources for livestock raising and fuelwood collection are obtained from within the village. The main limiting factor for human settlement is water. Traditionally people constructed irrigation channels by diverting rivers, nallahs, streams and springs to bring barren land under cultivation. On average, a household has about one acre of arable land.

The project region embraces some of the world’s highest mountains, with several peaks over 8,000 metres. These mountains are cut by narrow valleys, carved by rivers and streams (including the Indus and its tributaries). Much of the area lies in a rain shadow. However, higher elevations may receive up to 2,000 mm of snowfall annually and snow melt provides a permanent water source, feeding rivers and streams. The main habitats include the dry alpine and permanent snowfield zone, the Himalayan moist alpine zone, and dry temperate coniferous forests. The wildlife of the region is diverse with several globally significant species represented, including the snow leopard (Uncia uncia), wolf (Canus lupis), fox (Vulpes vulpes), brown bear (Ursus arctos), markhor (Capra falconeri), Himalayan ibex (Capra ibex siberica), blue sheep (Pseudois nayaur), musk deer (Moschus moschiferus), and a range of avifauna.9


During different points in history, the NAs have been under the influence of the Scythians from Central Asia, the Huns, and the Kushans, all referred to as Turkish tribes. Historically, there were different forms of animistic religions in different parts of the mountain region which were later replaced (although not completely) by Buddhism.10 Today, the population is Muslim, though cultural beliefs and practices retain elements of both the animist and Buddhist past. Islam came to the mountain environment from different places and at different times. The region was divided into a number of princely states, ruled by the local raja, until the early 1970s.

Using a standard neoclassical narrative about the lack of economic incentives and the resulting degradation of the environment, the MACP project document stated that the erosion of communal property rights over the natural environment had rendered most wild resources as de facto open access resources. In order to overcome this situation the document stated that communities should be given some legal rights, giving local people appropriate economic benefits as incentives to sustainably manage biodiversity.11


In the Northern Areas the MACP covered an area of about 7,000 square km (about 10% of the total Northern Areas) representing about 55,000 people (about 5% of the total population). The project established about 47 village conservation committees (VCCs) across the project area. Each VCC is a cluster of, on average, three villages in which people come together to protect biodiversity collectively on a larger scale. From the outset the project focused on two species of wild goat, the Himalayan ibex and the markhor as a means of demonstrating the efficacy of economic incentives in conservation.

Baseline surveys conducted in 1997 and 1998 showed a declining trend and threatened status of the ungulate population. Only a handful of markhor, restricted to the valleys in the Rondu Gorge and Astor valleys, numbering a few hundred had survived.12 Ibex, found at higher altitudes, had a larger population reaching about 3000 animals. These estimates were however lower than the NAs forest department figures which claimed the presence of almost twice the number in the project area. The proximate threat to these wild goats was identified as hunting by local people and outsiders for both meat and trophy. The underlying cause for these threats was identified as a lack of appropriate economic incentives for the villagers to conserve the species. The project concluded that in order for the communities to be interested in ibex and markhor conservation their economic value must be increased.13 In 2000, the project thus introduced a regulated trophy hunting programme, mainly for foreign hunters. US $5,000 and US $25,000 were set as the license fees for the ibex and markhor respectively. Of this amount 80% went to the participating community and 20% to the government. The community was responsible for carrying out annual surveys and presenting a report to the District Wildlife Officers who would then issue a quota to each participating community.14


Despite the rhetoric of devolution and co-management of the project, the authority to issue licences and give hunting quotas rested with the District Wildlife Officer. IUCN, as an implementing partner in the project, financially and technically helped a local private commercial outfitter to market these hunts in the US and Europe. Subsequently the outfitter became well established and dealt directly with the communities and the District Wildlife Officer for organizing the hunts.

On the face of it, the trophy hunting activity was successful. There is no doubt that trophy hunting increased the value of the ibex as far as villagers were concerned and that they received concrete monetary benefits. In the Northern Areas, each participating household in the hunting programme was made richer by PK Rs 6,000 to 15,000 a year. But this benefit has been received by only a handful of VCC – only eight out of 47 VCCs had participated in the trophy hunting activity. Project survey reports between 2000 and 2006 show stabilization of ibex and markhor populations in those VCCs where trophy hunting programme had been introduced.15 The final evaluation of the project, carried out by independent consultants, was doubtful about the project’s claim of increased ungulate population. While trophy hunting activity seems to be benefited only a few people, some disturbing ‘fall out’ effects also became apparent.


First, the increased valuation of the ibex had a negative effect on the conservation of large carnivores such as the snow leopard (Uncia Uncia) and the wolf (Canis lupes). Local communities in the NAs and NWFP, and indeed pastoral communities throughout the world, generally dislike wild carnivores, mainly because they kill domestic livestock, threatening people’s livelihoods. On average, the estimated annual domestic livestock loss rate amounts to 2-5% of the total herd size in some areas.16 This type of killing is identified as one of the biggest threats to wild carnivores in the Himalayas.17 Carnivores are especially important for conservation at the ecosystem level as they are often the top predator and thus regulate the food chain dynamics of a system. The snow leopard and wolf have been identified as the indicator species of the Himalayas; their presence confirms the health of the ecosystem.

Since the inception of the project in 1999, the attitude of the communities towards the snow leopard and the wolf have become markedly negative. There is a particularly strong anti-carnivore sentiment among communities where the trophy hunting programme exists in contrast to non-project communities. Despite project staff urging people to be concerned about conservation of all species, communities from the project area have persistently demanded that all carnivores be translocated out of their environment.


Although project staff often consider the behaviour of local communities as irrational and infuriating, it should make sense to them, as the reasons communities give for removing carnivores from their environment is based on the same economic rationale that is used by the project to justify its activities. The communities claim that snow leopards and wolves prey on ‘their’ ibex and markhor, thus inflicting heavy economic damage to ‘their’ resource. They, therefore, want to eliminate these carnivores from the ecosystem to protect their (newly found valuable) resource.

Such behaviour and reasoning on the part of the communities clearly shows the adverse impact of the project policy of focusing on a single species (okay, two species!) for revenue generation. Again what is ironic is that throughout the project document, it claims to be managing ‘biodiversity’ at the ‘ecosystem level’. The document further makes the claim that ‘...the project will stem the erosion in ecosystem functions and maintain use, option, amenity and other values for the benefit of future generations.’


Conservation projects based on economic incentives typically tend to have a narrow focus on one particular component of biodiversity, in this case the ibex and markhor, as it is easier to increase the economic value of a single species through marketing, rather than trying to ‘sell’ an entire ecosystem. As we see, however, increasing the value of a single species introduces forces that favour one component of biodiversity over the rest, which upsets the balance in the ecosystem. The snow leopard and the ibex are two important components of the local ecosystem, and like all biodiversity in that ecosystem they depend on each other for survival. The trophy hunting activity, which creates incentives to conserve the ibex, may in fact at the same time be creating disincentives to conserve the snow leopard.

Second, there are serious problems of transparency in the allocation of hunting quotas, the sale of licences to individuals and disbursement of the community share of the hunting fee. Since 1999, up to 30 licences are issued annually by the local government forest department to national and international hunters. Of these 30 licences, between 22 and 25 are for ibex and the rest for markhor and blue sheep. The number of applications, both national and international, far exceed the total 30 permits that are available for sale in the NAs each year. There is, therefore, intense political pressure on the forest department to issue licences to influential individuals.

The MACP has unwittingly established a strong incentive for the government to control the allocation of hunting quotas. During the initial years of the project hunting quotas were allocated by a district level conservation committee (DCC), comprising the local District Wildlife Officer, members of the local community, IUCN and the Deputy Commissioner, which was set up as part of the project. The system was relatively transparent and there was potential for equitable distribution of benefits from trophy hunting through the DCC structure.


By the end of 2003 that system slowly died away, apparently without anyone noticing, and the allocation of hunting quotas is now decided by the forest department without consulting any of the other players. The forest department then sells these licences to the outfitters. Rumours abound that in some cases the outfitter sold a hunting permit to a foreign hunter at three times the price of the license fee. Unconfirmed reports from Astor claim that in 2004 one outfitter sold a hunt for US $74,000 when the actual license fee is US $25,000. Naturally, one would expect an outfitter to make a profit by keeping a mark-up, but three times as much is not acceptable and leaves room for suspicion that funds are being channelled elsewhere.

The criteria for issuing a hunting quota to a particular community are twofold: the first and most important one is the ease with which a hunt can be carried out. For example, there are two valleys in the NAs where hunters can shoot an animal while literally sitting in their vehicle. The second criterion is the existence of a healthy population of ungulates in the area. The outfitters would like to get a license in a valley where the hunt is easy and there are trophy size animals in the area. This priority of the outfitter has taken precedence over the priority of MACP to organize hunts in new valleys so as to make them interested in the conservation efforts. Driven by the commercial imperative of the outfitter as well the need to generate revenues from license fees, the forest department has continued to issue hunting quotas for those valleys which have already received quotas for the last 10 years of the project, ignoring new valleys. As mentioned above, only eight out of 47 VCCs have benefited from this programme.


Regarding the disbursement of the community share of hunting fee, in 2006 the members of one community claimed that during the early years of the project the community’s share was either paid on the spot or within two to three weeks of the hunt. They claim that it now takes almost a year for the community’s share to finally reach their account. Further that the forest department keeps the hunting fee in its own account and earns substantial interest on it before handing it over to the community. Clearly there is a lot of mistrust among the communities regarding how hunting procedures have slowly become more centralized and authoritarian.

It is interesting to note that those communities who have regularly received hunting quotas do not make an issue about transparency in quota allocation procedures. Instead, they rather tactfully justify the forest department policy on the grounds that it uses scientific data to determine which community should get the permit. These communities, not surprisingly, are satisfied with the current state of affairs.

Those communities which are part of the project but have not yet received any hunting quotas protest most against the existing arrangements. They claim that their areas are also full of hunting potential, but because of the difficulty of the hunt the forest department and the outfitters do not want to bring hunters into their areas. They claim, rightly, that if they do not see any tangible benefits from being part of a conservancy and the MACP, they will likely lose interest in conservation.


So in the present situation, the communities are not doing as well as they could from their involvement with the MACP. Many communities perceive that they are doing all the work simply to generate private profits for the government staff. In 2006, during my meetings with the government staff, this issue was raised with them. I even asked, rather pointedly, what they gained by keeping the sale of permits under their authority. If the government, irrespective of how much an outfitter sells the hunt for over and above the actual license fee, gets a fixed proportion of that license fee (not the price that outfitter charged to the hunter), then what difference does it make to the government who the buyer is? Obviously, I was hinting at the charges of real or perceived corruption that are levelled against the government officials by participant communities. The response I got from government was that should the authority of selling permits vest with local people, the villagers would fight among themselves and not effectively allocate or utilize the permits.

To conclude, the problem with using an approach based on economic incentives (i.e., based on the model of the market) is that the market inevitably creates winners and losers – that is how it works. For example, if we create a demand for red shirts, it will most likely have an adverse effect on demand for blue shirts. In the market system the creation of losers is socially accepted. The manufacturer of blue shirts is expected to change its strategy and manufacture, let’s say, red and blue shirts or boxer shorts, and can make this change pretty quickly. In the case of the ecosystem, while each element can adapt to changing circumstances, these adaptations, when they are successful (which is not always the case), take place over a long period of evolutionary time.


When the introduction of economic incentives creates an increased demand for one element of the ecosystem (in this case markhor and ibex), villagers will ‘increase’ the numbers of those species by trying to conserve them, but at the same time have an incentive to ‘decrease’ the number of species (in this case the snow leopard and wolf) which threatens the ‘well-selling’ species. These threatened species are like blue shirts; not attractive to buyers, and so no-one wants to ‘make’ them. Unlike the manufacturers of the blue shirts, however, these species cannot change their stripes to suit the mood of the consumer; they cannot stop killing markhor and ibex in order to reduce threats to their own survival. It is we humans who must take into consideration the complexity of the natural system when devising our interventions.

Corruption by government officers and lack of equity in project design should be tackled through meaningful decentralization in the project decision-making structure. The project should carry out long awaited legal reforms in which the local communities are given legal rights to sell hunting licenses to the highest bidder. The role of the NAs forest department should be limited to overall monitoring of the project. Regarding the problem of predation of livestock by the snow leopard and wolf, it is suggested that the project make it mandatory for the communities to set aside part of the revenues from the sale of trophy hunting license in a compensation fund which could be used to pay out compensation to the affected farmers.


This case study shows that using economic incentives as a conservation tool is extremely complex, and the outcomes not as straightforward as some conservationists might have thought. This is not to say that it shouldn’t be done; clearly economic incentives can play an important role in achieving conservation and human development objectives. It is necessary for the project staff to give a clear message to the local communities about the interconnectivity and interdependence of components of the ecosystem.

The project should introduce other policy instruments, besides economic incentives, to impart its message of protecting biodiversity at an ecosystem level. The project should take a more holistic approach, targeting other non-material utility values of the local communities, as it claimed it would in its documentation. Kellert and Clark,18 recognizing the importance of inclusion of diverse functional values in human perception, state that ‘one of the most important challenges facing the wildlife profession today is developing the means for effectively expressing the full range of wildlife values to people and society. The significant contributions of wildlife to the human spirit, imagination and condition, suggest the importance of moving beyond the merely economic in measuring its worth in various competitive decision- making.’



1. A. Agrawal and C.C. Gibson, ‘Enchantment and Disenchantment: The Role of Community in Natural Resources Conservation’, World Development 27(4), 1999, 629-649.

2. J.A. McNeely, Economics and Biological Diversity: Developing and Using Economic Incentives to Conserve Biological Diversity. IUCN, Gland, 1988; M. Wells and K. Brandon, People and Parks: Linking Protected Areas Management With Local Communities. World Bank/World Wildlife Fund/U.S. Agency for International Development, Washington, DC, 1992.

3. A. Spileri and S. Nepalz, ‘Incentives-Based Conservation Programs in Developing Countries: A Review of Some Key Issues and Suggestions For Improvements’, Environmental Management 37(1), January 2006; P. Ferraro, ‘Global Habitat Protection: Limitation of Development Interventions and a Role Conservation Programme Payments’, Conservation Biology 15(4), August 2001, pp. 990-1000.

4. A. Kothari, ‘Time to Move Out of Africa: A Response to Adam and Hulme’, Oryx 35(3), 2001, 204-205; S.R. Kellert, J.N. Mehta, S.A. Ebbin and L.L. Lichtenfeld, ‘Community Natural Resource Management: Promise, Rhetoric, and Reality’, Society and Natural Resources 13, 2000, 705-715; D. Posey, Cultural and Spiritual Values of Biodiversity. UNEP, Nairobi, and Intermediate Technology Publication, 1999.

5. M. Dove, ‘So Far From Power, So Near the Forest: A Structural Analysis of Gain and Blame in Tropical Forest Development’, in C. Padoch and N. Peluso (eds.), Borneo in Transition: People, Forests, Conservation and Development (2nd edition). Oxford University Press, Kuala Lumpur, 2004, pp. 41-58.

6. T.J. Roberts, The Mammals of Pakistan. Oxford University Press, Karachi, 1997.

7. T.J. Roberts, The Birds of Pakistan. Vol I and II. Oxford University Press, Karachi, 1991.

8. R.R. Stewart, ‘An Annotated Catalogue of the Vascular Plants of West Pakistan and Kashmir’, in E. Nasir and S.I. Ali (eds.), Flora of West Pakistan. Fakhri Press, Karachi, 1972.

9. T.J. Roberts, op.cit., 1997.

10. A.H. Dani, A History of Northern Areas of Pakistan. OUP, Karachi, 2001.

11. UNDP/GoP, Mountain Areas Conservancy Project (MACP) Project Document (anon). Government of Pakistan, United Nations Development Program, Pakistan, 1999.

12. IUCN, The Status of Ungulate Population in the Northern Areas. Unpublished report. Gilgit, 1998.

13. UNDP/GoP, op.cit., 1999.

14. UNDP/GoP, op.cit., 1999.

15. IUCN, Conservancy Management Plans 2000-2006 (first draft). Unpublished report. Gilgit.

16. K.M. Oli, R.I. Taylor and E.M. Rogers, ‘Snow Leopard Predation of Livestock: An Assessment of Local Perceptions in the Annapurna Conservation Area, Nepal’, Biological Conservation 68, 1994, 63-68; D. Mallon, ‘The Snow Leopard in Ladakh’, International Pedigree Book of Snow Leopards 4, 1984, 23-37. Leif Blomqvist, Helsinki Zoo.

17. J. Fox, A Review of the Status and Ecology of the Snow Leopard. International Snow Leopard Trust, Seattle, 1989; G. Schaller, L. Hong, Talipu, R. Junrang and Q. Mingjian, ‘The Snow Leopard in Xinjiang, China’, Oryx 22, 1988, 197-204; R. Jackson, Threatened Wildlife, Crop and Livestock Depredation and Grazing in the Makalu-Baran Conservation Area. Woodland Mountain Institute, WV, USA, 1988; K. Nowell and P. Jackson, Wild Cats: Status Survey and Conservation Action Plan. IUCN/SSC Cats Specialist Group, Gland, 1996; S. Hussain, ‘The Status of Snow Leopard in Pakistan and its Conflict With Local Farmers’, Oryx 37(1), 2003, 26-33.

18. S.R. Kellert and T.W. Clark, ‘The Theory and Application of a Wildlife Policy Framework’, in W.R. Magnum (ed.), Public Policy Issues in Wildlife Management. Greenwood Press, New York, 1991.