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A study by the IIS published in the journal “Ecological Economics” offers an important warning for the conservation debate in Brazil: paying to conserve does not always work—especially where deforestation is more profitable. The research examines the limits and conditions for the effectiveness of financial incentives in the Brazilian Cerrado, one of the biomes under the greatest pressure from agricultural expansion.

The study, titled “Adverse selection and severe design constraints in PES: A choice experiment in a deforestation hotspot of the Brazilian Cerrado,” is the result of an IIS project that applies behavioral economics tools to the soybean supply chain, seeking to understand how producers make decisions in contexts of high economic pressure.

The results show that, in areas on the agricultural frontier, financial incentives must directly compete with the profitability of production. When this does not happen, the impacts tend to be limited.

The analysis focuses on Payment for Ecosystem Services (PES) programs in the Matopiba region, where the conversion of native vegetation is still legally permitted. Based on an experiment with 81 soybean farmers, the study estimates the compensation levels needed to incentivize conservation and assesses how different contract formats influence participation. The amount of the payment emerges as the main decision-making factor, but it also reveals a structural challenge: farmers more likely to deforest demand much higher compensation, often close to the return on agricultural activity, while those with lower risk tend to accept lower amounts.

This finding highlights a key problem for policy design: programs may appear cost-effective, but they may have little environmental impact because they primarily attract producers who would not have deforested anyway. In other words, there is a risk of creating only superficial results, without an actual reduction in deforestation.

The study also notes that stricter requirements, such as permanent conservation commitments, significantly increase the cost of participation, making the programs even less attractive to farmers with the greatest potential for impact. In addition, social factors—such as peer influence and risk perception—also affect decision-making, indicating that farmers’ behavior plays a significant role and cannot be ignored.

The findings reinforce that financial incentives are an important tool, but insufficient when used in isolation in contexts of high agricultural profitability. To be effective, they must be well calibrated, targeted at the right audiences, and combined with other strategies capable of amplifying their impact. By highlighting these limitations, the study contributes to the rethinking of the role of economic instruments in conservation and offers concrete insights for the design of more effective public and private policies to combat deforestation in the Cerrado.

 

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