Article

Marketed outputs and non-marketed ecosystem services: The evaluation of marginal costs

Authors:
To read the full-text of this research, you can request a copy directly from the authors.

Abstract

We provide a new approach for assessing the cost effectiveness of green payment schemes. We allow for complementary, supplementary and competitive relationships between agricultural production and non-marketed ecosystem services generation. Our theoretical model distinguishes three theoretical cases depending on the minimum level of the non-marketed ecosystem services. These cases are empirically investigated using a flexible transformation function and farm-level panel data from the UK. We find that the biophysical connections between the non-marketed ecosystem services and market activities have important implications for marginal costs.

No full-text available

Request Full-text Paper PDF

To read the full-text of this research,
you can request a copy directly from the authors.

... This requires to approximate the frontier by specifying a functional form and estimating parameters, in order to get an differentiable equation of the frontier. Sauer and Wossink (2013) estimate a production possibility frontier with multiple inputs and multiple outputs, and look at the sign of partial derivatives to know if the agricultural output's value and the ecosystem service value (the payment for ES) show a trade-pff or a synergy. Bostian and Herlihy (2014) estimate the production possibility frontier of agricultural production and wetland condition and apply the duality theory to value improvements of wetland condition from the market value of agricultural production. ...
... A fifth objective, related to the estimation of opportunity costs, is to use the slope of the frontier to assess which types of regulation instruments are needed to encourage the provision of non-marketed ES. Whether with theoretical developments or with estimated frontier (Sauer and Wossink, 2013), the idea is rather simple: where increasing non-marketed ecosystem services translates into no loss, or a rather small loss of profit, information campaigns or technical advice may be enough to achieve an increase in ecosystem services. However, if the increase in ecosystem services comes with a sharp decrease in marketed commodities or a significant increase in costs, financial incentives are needed, which compensate for the (opportunity) cost of providing non-marketed ES. ...
... More recently, a less theoretical literature has emerged which considers the problem of joint production of ecosystem services in agriculture via production possibility sets and production possibility frontiers Bekele et al., 2013;Ruijs et al., 2013;Sauer and Wossink, 2013;Bostian and Herlihy, 2014). Production possibility sets and frontiers are a way to represent all the possible bundles of outputs together, without necessarily specifying a functional form for the joint supply of outputs. ...
Thesis
Agroecosystems show a decline in regulating, non-marketed ecosystem services (ES). We interpret this decline through two economic concepts: public goods, which call for regulation, and joint production, which underlines the role of interactions among ecosystem services in their regulation.This thesis studies how to increase the provision of non-marketed ES through the implementation of economic incentives, while accounting for their multiplicity and the complex interactions among them.We first study the regulation of joint public goods with microeconomic theory. We then carry an applied analysis with simulated agroecological data and numerical methods to define cost-efficient solutions and simulate the implementation these solutions with economic incentives. We especially compare result-based and action-based incentives.We show theoretically that interactions among ES make their regulation more complex, especially with result-based incentives and when the production cost varies among bundles of ES. In the applied analysis, we show that accounting for the cost is crucial to maximise ES with a limited budget. We show that result-based incentives select cost-efficient bundles of ES but lead to higher policy budgets than action-based ones, due to interactions among ES. Eventually, we show that considering the landscape scale and heterogeneity plays on the solutions maximising ES, but not on the comparison between result-based and action-based incentives.Our results underline that agri-environmental policies need to target ES in a integrative way, at the farm or landscape scale, and consider the cost of providing non-marketed ES. Result-based incentives don’t solve all issues of agri-environmental policies.
... Firstly, the joint production of agricultural commodities and non-marketed goods and services (NMS), which in general underlies the design of AEMs (Wossink and Swinton, 2007), implies that changes in agricultural markets as well as in concomitant commodities programmes affect the provisioning of ecosystem services (Duke, 2004;Laukkanen and Nauges, 2014;Sauer and Wossink, 2013). Higher market prices or competing payments increase the opportunity costs, i.e., the revenue foregone through providing NMS (e.g. ...
... The results of our simulations in an Alpine case study show that there are considerable interaction effects between agrienvironmental policy measures, other direct payments, the market environment, i.e., prices and production costs as well as the spatially explicit natural production conditions. This is in line with empirical research that shows interactions between marginal provision costs of different agri-environmental measures (Sauer and Wossink, 2013), crop and livestock related payments and AEMs (Dobbs and Pretty, 2008), commodity and land preservation programs (Duke, 2004) or between higher land profitability and set-aside programs (Laukkanen and Nauges, 2014). In addition, the simulation results imply that there are also important interactions between different ecosystem services as shown by the significant effect of payments for biodiversity conservation on land-use diversity. ...
Article
Full-text available
Targeting of agri-environmental measures (AEMs) is a key to increasing the cost-effectiveness of governmental support for biodiversity conservation and the provision of ecosystem services from agriculture. Existing literature, however, often focuses on single measures without considering that policies are usually bundles of different measures addressing multiple non-marketed goods and services. Thus, interaction effects of a set of policies in a given policy mix may influence the cost-effectiveness of single measures. Recently, Swiss agricultural policy was redesigned using the Tinbergen rule as its basis, i.e., a single measure for each policy goal, including additional targeted direct payments. This facilitates testing for interaction effects of multiple targeted AEMs. Here we use a social-ecological, agent-based modelling framework to assess interaction effects of these agricultural policies while accounting for climate change impacts in our analysis. The results from our case study in a mountain region show that ecosystem service provision increases with targeted payments. However, interaction effects of the different targeted policies affect the provision levels of all goods and services. In particular, changes at the extensive margin, i.e., the total amount of land that is under production, largely determine the amount of ecosystem services provided. Thus, climate change driven productivity increases and policies that keep land in production may substantially support the provision of non-marketed goods and services in marginal agricultural production regions with a high potential for land abandonment. Consequently, the effectiveness of targeted policy measures should also consider changes at the extensive margin and be assessed in the context of bundles or portfolios of different policy measures.
... Peerlings and Polman (2004) used good data on financial information, but ecological data were lacking so the variable they used as a proxy for biodiversity outcomes was the revenue farmers obtained from providing wildlife and landscape services. used the proportion of rough grassland on farms (hereafter "properties") as a proxy variable for biodiversity outcomes, whilst Sauer and Wossink (2012) used the revenues obtained from providing environmental services such as buffer strips and hedgerows. To the best of our knowledge, the only researchers looking for co-benefits or trade-offs between agricultural production and biodiversity to have used a direct biophysical indicator of biodiversity are Armsworth et al. (2012), who conducted economic and ecological surveys on 44 farms in northern England. ...
... The key policy implication seems to be that encouraging farms to diversify their market production systems may generate positive market outcomes. Interestingly, this has also been shown to improve environmental outcomes; diversified farming systems tend to produce fewer negative externalities and may enhance ecosystem services relative to less diversified farms (Laiolo, 2005;Chavas and Di Falco, 2012;Sauer and Wossink, 2012). 5 Formally, economies of scope are said to exist if the cost of producing two goods separately (e.g. ...
... The baseline produces interdependent ecosystem services (Sauer and Wossink 2013). $ becomes the input to a land use security that can represent an indirect-use cash flow. ...
Article
Full-text available
Existing markets for natural resources commonly trade precious metals, energy, and minerals. More recently, the development of ecosystem service markets has begun, including for the resources of land carbon, species habitats, streams, watersheds, and wetlands. We introduce a sustainable forestry bond that is composed of wood products and ecosystem services. The security represents a specific forested land quality and quantity for the production of natural resources and ecosystem services. An investment decision is based on the Net Resource Value (NRV) of a series of cash flows produced from trees and benefits provisioned by the ecosystem services in a forest. This combination of inputs and outputs represents the value created over the lifetime of a forest project and is equal to the monetized difference between the forest natural resources and ecosystem service outputs and the capital invested to produce them. For investment decision making, an Average Internal Rate of Return or AIRR is calculated, which is Net Present Value-consistent (NPV-consistent).
... Havlik (2005) finds evidence of a complementary competitive relationship between grassland biodiversity and cattle production. Sauer and Wossink (2013) approximate a 'bundled' environmental good as the total green payments provided by the CAP. They apply a flexible transformation function and obtain a complementary relationship for most farms and a competitive relationship for a minority of farms. ...
Chapter
Full-text available
This chapter theoretically discusses existing methodologies to model environmental adjustments of technologies. We elaborate on the limitations of treating pollution as an input or weakly disposable output, as commonly occurs in the literature. Moreover, we discuss the drawbacks of models that rely on the materials balance principle. We advocate the use of multi-equation modelling, which explicitly models the subprocesses of the production technology. Applied to the context of pollution, such an approach separately models the conventional technology, on the one hand, and the pollution-generating technology, on the other. Finally, we discuss abatement options as well as the possibility of adjusting for good environmental outputs (e.g. carbon sinks).
... Most agricultural policies are decided by the European Union and at the national level, but there are also regional agricultural policies at the level of Germany's federal states. Most important in our context are agri-environmental payment schemes (Chabé-Ferret & Subervie 2013, Sauer & Wossink 2013). The most important environmental factors are soil erosion risk, rainfall, and topography. ...
Research
Full-text available
We investigate the effects of small family farming on the use of sustainable management practices. For identification, we exploit the historical inner German border, which abruptly changes the farming structure. We find small family farms to be more diversified spatially (more production diversification), more specialized temporarily (a higher share of monocultures), to have a higher share of bare soils during winter, and less likely to have structural elements. Overall, small family farms seem more sustainable in some dimensions, less sustainable in others, and in some, the distinction is not economically significant.
... Negative opportunity costs could not have been obtained by exploiting the distance function's dual relationship to the value function as commonly done in the literature. Our results are in line with the conceptual and empirical work of, respectively, Wossink and Swinton (2007) and Sauer and Wossink (2013), who argue that many farms would be willing to pay to increase the provision of environmental goods as its relationship with conventional production is not purely competitive. This coincides with the ecological perspective that environmental measures may be needed for long-term economic benefits. ...
Article
Distance functions are increasingly being augmented, with environmental goods treated as conventional outputs. A common approach to evaluate the opportunity cost of providing an environmental good is the exploitation of the distance function's dual relationship to the value function. This implies that the opportunity cost is assumed to be non‐negative. This approach also requires a convex technology set. Focusing on crop diversification for a balanced sample of 44 cereal farms in the East of England for the years 2007–2013, this paper develops a novel opportunity cost measure that does not depend on these strong assumptions. We find that the opportunity cost of crop diversification is negative for most farms.
... Because the inputs on the right-hand side of equation 4 appear as ratios, they are likely to suffer less from endogeneity (Brümmer, Glauben, and Thijssen 2002). Additionally, outputs are assumed to be exogenous to the farm's input choice to the extent that farms are cost minimizers, and panel data estimators control for farmers' input adjustment due to unobserved time-invariant conditions (Sauer and Wossink 2013). ...
Article
Full-text available
New wheat-breeding techniques, such as hybridization and genetic modification, show increasing yield potential. This study involves estimating multi-output multi-input production technology by stochastic frontier techniques to evaluate the economic value of this yield potential. An input-oriented distance function is formulated and applied to European Farm Accountancy Data of 23 European countries. Based on the analysis, an average shadow value is derived for the increase in the marginal yield of wheat that corresponded to 18.87 €/ha. Further, technical change, technical efficiency, and returns to scale are measured for different European regions.
... It is important to convey that expanding the responses is important and by no means does this represent the full breadth of the impacts of a stressor. The concept of multiple pathways impacting a single ecosystem service can be evaluated through joint valuation where, in the case of the STEPS Framework, multiple chains could be valued together where similar impacts occur (Farber et al. 2006, Sauer andWossink 2012). ...
Article
Full-text available
Anthropogenic stressors such as climate change, increased fire frequency, and pollution drive shifts in ecosystem function and resilience. Scientists generally rely on biological indicators of these stressors to signal that ecosystem conditions have been altered. However, these biological indicators are not always capable of being directly related to ecosystem components that provide benefits to humans and/or can be used to evaluate the cost-benefit of a change in health of the component (ecosystem services). Therefore, we developed the STEPS (Stressor–Ecological Production function–final ecosystem Services) Framework to link changes in a biological indicator of a stressor to final ecosystem services. The STEPS Framework produces “chains” of ecological components that explore the breadth of impacts resulting from the change in a stressor. Chains are comprised of the biological indicator, the ecological production function (EPF, which uses ecological components to link the biological indicator to a final ecosystem service), and the user group who directly uses, appreciates, or values the component. The framework uses a qualitative score (high, medium, low) to describe the strength of science (SOS) for the relationship between each component in the EPF. We tested the STEPS Framework within a workshop setting using the exceedance of critical loads of air pollution as a model stressor and the Final Ecosystem Goods and Services Classification System (FEGS-CS) to describe final ecosystem services. We identified chains for four modes of ecological response to deposition: aquatic acidification, aquatic eutrophication, terrestrial acidification, and terrestrial eutrophication. The workshop participants identified 183 unique EPFs linking a change in a biological indicator to a FEGS; when accounting for the multiple beneficiaries, we ended with 1104 chains. The SOS scores were effective in identifying chains with the highest confidence ranking as well as those where more research is needed. The STEPS Framework could be adapted to any system in which a stressor is modifying a biological component. The results of the analysis can be used by the social science community to apply valuation measures to multiple or selected chains, providing a comprehensive analysis of the effects of anthropogenic stressors on measures of human well-being.
... The implementation progressed rapidly and agrienvironmental schemes now constitute a central element of the Common Agricultural Policy in terms of agricultural area covered and expenditures 1 . Despite many reviews and changes made, there is ample evidence that the ecological results from these schemes are largely underwhelming which puts into question the cost-effectiveness (e.g., De Snoo et al., 2013; Sauer and Wossink, 2013; Batáry et al., 2015). Intriguingly, at the same time there is increasing evidence that a large percentage of farmers (also) engage in voluntary biodiversity conservation activities for which they do not receive payment 2 . ...
Working Paper
We examine how endogenous social preferences could affect economic incentive design to encourage biodiversity protection on private land. A ‘green’ farmer may enjoy esteem from leading by example if there are few farmers who do the right thing. In contrast a farmer without social preferences (‘brown’ farmer) might merely tick the boxes and is expected to shirk from the desired environmental actions whenever possible unless this affects their reputation. We analyze the design of an incentive scheme that takes into account both types of farmers (‘green’ or ‘brown’) under asymmetric information about their true motivation. It follows that under perfect Bayesian equilibrium, the regulator can separate out the farmer types in a two-period setting by monitoring their voluntary conservation actions in response to payment in the first period. The optimal mechanism would be a mixture of a facilitation contract with small monetary incentive but high visibility to keep ‘green’ farmers interested and a higher monetary-incentive contract to attract the brown farmers. Key Words: Mechanism Design, Social Norm, Esteem, Motivation Crowding, Signalling, Public goods, Agriculture.
... The research team have established that an integrated analysis has never been done in Australia and internationally only one group of researchers ) have used biophysical data in their analysis of agricultural/natural systems -(they used an indicator of bird diversity in conjunction with data collected by themselves on 44 properties in the UK). Other international studies have instead been forced to use financial proxies such as the revenue which farmers have obtain from providing environmental services (Peerlings & Polman 2004;Sauer & Wossink 2012) or the proportion of property that was 'rough grass-land' (Fleming et al. 2010). No one has been able to assess costs, while controlling for a variety of biophysical and social factors (such as soil type, rainfall, farmer attitudes). ...
Technical Report
Full-text available
The overarching aim of this project was to provide information that would help improve the efficiency of biodiversity investments in northern Australia. We collected social and financial data from land managers across northern Australia, combined it with publically available biophysical data and analysed it using several different techniques. Controlling for a range of factors (e.g. size of property, rainfall), we found little evidence of a trade-off between biodiversity and agriculture, suggesting that conservation need not occur at the expense of agriculture in this region. We have also established that there are significant co-benefits (to agriculture) from programs that mitigate threats to biodiversity by controlling weeds. These programs represent more efficient investments than those which do not generate co-benefits. Our analysis also indicated that programs which promote on-farm diversification, improve land management practices and/or promote conservation-friendly attitudes could generate improvements in biodiversity without imposing costs on the agricultural industry, and that those who seek to promote biodiversity using financial rewards or penalties could increase the effectiveness of their programs by also using social rewards and penalties.
... Pilgrim et al., 2010;Swinton et al., 2007: 251;Zhang et al., 2007: 258) have, however, noted the lack of studies that quantify the trade-offs that exist between production of alternative ESS and marketed farm products. Sauer and Wossink (2013) and Cong et al. (2014) recently noted the lack of empirical studies that have quantified the joint provision of ESS on farms. Such analyses are needed to estimate how ESS can be jointly produced in agricultural systems and to aid the development of agri-environmental management policies (Balmford et al., 2012;Turpin et al., 2010;Wossink and Swinton, 2007). ...
Article
Full-text available
The concept of ecosystem services (ESS) is widely used to highlight the interdependencies between agricultural and environmental systems. However, few studies have attempted to quantify the potential of agriculture to produce multiple ESS, and to estimate the possibilities for joint production of marketed and non-marketed ESS. A quantification of the trade-offs between non-marketed ESS and production of farm commodities (marketed ESS) may help to better target agricultural policies. We use a well-established biophysical farm-systems model (APSIM) to estimate how alternative farm management practices affect the joint production of ESS on mixed crop-livestock farms in the wheatbelt of Western Australia. Our analysis quantifies the trade-offs between the supply of agricultural commodities (crop yields and livestock weight gain) and non-marketed ESS (groundcover, soil carbon, nitrogen supply, and water regulation). Win–win trade-offs between marketed and non-marketed ESS become apparent when the value of agricultural commodity production is monetised. This study shows that, in our study regions, increasing crop residue retention can jointly increase production value and improve ESS provision of groundcover, soil carbon and nitrogen supply. Conversely, increasing the use of perennial pastures in the farming mix results in negative trade-offs between production values and non-marketed ESS.
... Most directly related to our work are recent studies at the micro level (e.g. Macpherson et al., 2010;Bostian and Herlihy, 2012;Sauer and Wossink, 2013). We are not aware of studies that use a non-parametric methods to estimate transformation functions for the analysis of ecosystem services and apply this to analyse supply at sub-national to global levels. ...
Article
Full-text available
Sustainable Intensification (SI) practices offer adopters exploiting improvement potentials in environmental performance of farming, i.e. enhance ecosystem functionality, while maintaining productivity. This paper proposes a directional meta-frontier approach for measuring farms’ eco-efficiency and respective improvement potentials in the direction of farms’ ecological output for SI evaluation. We account for farms’ selection processes into SI using a behavioural model and rely on a matched sample for adopters and non-adopters of agronomic SI practices from the northern German Plain. We conclude that the SI adopters determined the sample’s system frontier and showed higher mean eco-efficiency, but that most farms in our sample did not fully exploit the improvement potentials in biodiversity as ecological outcome.
Article
Ecological compensation has been widely used in the field of environmental protection, but its application in land resources is relatively insufficient. To scientifically and comprehensively understand the research characteristics of ecological compensation, the bibliometric method was used to analyze ecological compensation-related publications between 2000 and 2019 in the Web of Science database. A total of 1208 records were collected, distributed among approximately 100 journals and 26 disciplines. The analysis indicated that research intensity in this field has been increasing, especially after 2016. “Environmental Sciences”, “Ecology”, and “Environmental Studies” are the three major disciplines that have contributed most to studies of ecological compensation. Due to the scarcity of relevant research on land resources and its importance to ecology, the application of ecological compensation in land resources is discussed and future research directions for land-based ecological compensation are outlined.
Article
The concept of sustainable intensification (SI) unifies ecologically and socially sustainable agricultural practises while preserving economically viable farm businesses. To fully exploit their ecological advantages, smart mixes of SI measures at both the farm and local scale are required. This paper investigates farmers' adoption decisions using a mixed-methods approach for the northern German Plain. Based on focus group discussion, we first identify the study region's relevant SI measures. Using an existing data set, we then quantitatively assess the complementarity of the locally relevant measures using a multivariate probit model. Finally, we use a path modelling approach to explore how the perceived economic and environmental benefits of farmers' applied measures relate to their intentions to broaden their SI portfolios through complementary practices. We find support for complementary use of measures and positive reinforcements of current and intended use of measures. We conclude that such paths are relevant for analysing adoption behaviour. Such expanded and contextualised behavioural approaches are necessary to develop intervention schemes for upscaling sustainable farming practices.
Article
How to break the vicious cycle of poverty and ecological degradation is widely concerned and discussed. In the poverty alleviation practices in China, ecological poverty alleviation (EPA) is regarded as an important way to synthesize the dual goals of poverty reduction and environmental protection and to achieve the win-win outcomes. Many Chinese researchers have fruitful research achievements on EPA yet they do not recognize that EPA is not a simple combination of various policies, but a complex system involving multiple policy instruments, governmental agencies, social forces, and agents. However, few studies abroad illustrate EPA in detail. They focus more on specific components of EPA such as payment for ecosystem services while overlooking the integral concept of EPA and practices from China. Based on field research in Guizhou Province, China, this paper proposes a framework of EPA with an effective multi-agent and co-government system, for demonstrating the concept and practice of EPA. With case analysis, we illustrate key elements in this system and their relationships, and how they play a vital role in pursuing win-win outcomes in environmental protection and poverty alleviation. The three dimensions of this EPA system have been discussed. The first is to strengthen the interaction among the agents. Many efforts should be made for establishing an efficient communication routine and a stable relationship among their interests. The second is to reinforce the connection between diverse elements in each policy subsystem, such as the systematization and coordination of the ecological industry development, the systematization of the links before, during, and after the relocation of ecological immigrants, etc. The third is to promote the interactions between the three subsystems, so that ecological enhancement, ecological compensation, and industrial development, and migration and relocation can promote each other, and ultimately promote the coordination of poverty alleviation and ecological protection in poverty-stricken areas. Thus, this paper analyzes how to establish the communication routine among the relevant agents of EPA, the interaction among the internal elements of the subsystems, and the relationship between the subsystems in series, trying to reveal the basic operating mechanism of the system.
Article
Full-text available
The concept of ecosystem services (ES) has risen to prominence based on its promise to vastly improve environmental decision‐making and to represent nature's many benefits to people. Yet the field has continued to be plagued by fundamental concerns, leading some to believe that the field of ES must mature or be replaced. In this paper, we quantitatively survey a stratified random sample of more than 1,000 articles addressing ES across three decades of scholarship. Our purpose is to examine the field's attention to common critiques regarding insufficient credible valuations of realistic changes to services; an unjustified preoccupation with monetary valuation; and too little social and policy research (e.g. questions of access to and demand for services). We found that very little of the ES literature includes valuation of biophysical change (2.4%), despite many biophysical studies of services (24%). An initially small but substantially rising number of papers address crucial policy (14%) and social dimensions, including access, demand and the social consequences of change (5.8%). As well, recent years have seen a significant increase in non‐monetary valuation (from 0% to 2.5%). Ecosystem service research has, we summarize, evolved in meaningful ways. But some of its goals remain unmet, despite the promise to improve environmental decisions, in part because of a continued pre‐occupation with numerical valuation often without appropriate biophysical grounding. Here we call for a next generation of research: Integrative biophysical‐social research that characterizes ES change, and is coupled with multi‐metric and qualitative valuation, and context‐appropriate decision‐making. A free Plain Language Summary can be found within the Supporting Information of this article. A free Plain Language Summary can be found within the Supporting Information of this article.
Article
Full-text available
Observed trade-offs between environmental conservation and poverty alleviation objectives continue to divide scholars on the ability of Payment for Ecosystem Services (PES) programs to simultaneously meet both objectives. The success of some PES programs shows it can attain “win-win” outcomes. Combining quantitative regression tools and narrative reviews, we synthesize the outcomes of 56 PES programs found in 69 studies conducted in 3 different continents to identify key factors that inform the “win-win” performance of PES programs. In addition to investigating PES in a “win-win” context, combining quantitative and qualitative methods underlines the novelty of our paper. We discovered that monitoring of program activities to ensure ecosystem services are supplied, and providing sufficient payments to ecosystem services providers enhance the performance of PES programs. Furthermore, programs become less effective with age, raising concerns about the long-term viability of PES programs. Our results underscore the need for payment incentives that covers costs and address location-specific constraints. The main lesson from our review is the importance of ex-ante assessments of prospective PES locations and the prior engagement with ES providers. This allows program developers to identify the interest of participating stakeholders in order to design cost-effective programs that capture local needs and interests.
Article
Full-text available
Many previous analyses of multifunctionality in agriculture claim there is positive jointness between the production commodities and nonmarket goods and services. Those analyses have not treated acreage as an endogenous variable. This leads to several errors in terms of the analysis of policy impacts, and hence also the policy advice. The main contribution of this paper is the development of an analytical framework where acreage is endogenously determined. This framework is then used to demonstrate that any policy that influences resource allocation also affects agricultural commodity production. Hence, there is no such thing as a fully decoupled support. The impacts on commodity markets from direct payments to environ-mental goods and services are, however, smaller than the distortions from policies that inflate commodity prices.
Article
Full-text available
This paper investigates the productive value of crop biodiversity, with an application to a farming system in the Tigray region in the highlands of Ethiopia. We examine a general measure of the productive value of crop biodiversity and its components. Using Ethiopian farm-level data, agroecosystem productivity is investigated empirically. The analysis gives estimates of the value of diversity and its components. The value of crop biodiversity is estimated to be positive. The complementarity component is found to be large and statistically significant: it is the main source of crop biodiversity value in this agroecosystem of Ethiopia. However, the convexity component is negative, indicating that nonconvexity contributes to reducing the value of crop biodiversity.
Article
Full-text available
Agricultural ecosystems are actively managed by humans to optimize the provision of food, fiber, and fuel. These ecosystem services from agriculture, classified as provisioning services by the recent Millennium Ecosystem Assessment, depend in turn upon a web of supporting and regulating services as inputs to production (e.g., soil fertility and pollination). Agriculture also receives ecosystem dis-services that reduce productivity or increase production costs (e.g., herbivory and competition for water and nutrients by undesired species). The flows of these services and dis-services directly depend on how agricultural ecosystems are managed and upon the diversity, composition, and functioning of remaining natural ecosystems in the landscape. Managing agricultural landscapes to provide sufficient supporting and regulating ecosystem services and fewer dis-services will require research that is policy-relevant, multidisciplinary and collaborative. This paper focuses on how ecosystem services contribute to agricultural productivity and how ecosystem dis-services detract from it. We first describe the major services and dis-services as well as their key mediators. We then explore the importance of scale and economic externalities for the management of ecosystem service provision to agriculture. Finally, we discuss outstanding issues in regard to improving the management of ecosystem services and dis-services to agriculture.
Article
Full-text available
Heterogeneity of agricultural landscapes may necessitate the use of spatially targeted instrument combinations to implement the social optimum. But compliance with these policies may require costly enforcement. This paper examines the design of agri-environmental policies featuring two of the most commonly used instruments, reductions in fertilizer application rates and installation of riparian buffers. While compliance with buffer strip requirements is verifiable at negligible cost, fertilizer application is only verifiable through costly monitoring. We derive optimal subsidies for fertilizer reduction and buffer strip set-asides and enforcement strategies for the cases of low and excessive monitoring costs. An empirical simulation model suggests that enforceable policies can come close to replicating socially optimal crop production, nitrogen runoff, and overall welfare without requiring increases in overall subsidy expenditures, at least under conditions characteristic of Scandinavia. Sensitivity analysis suggests that these conclusions may carry over to areas with higher overall land quality as well.
Article
Full-text available
Land use has generally been considered a local environmental issue, but it is becoming a force of global importance. Worldwide changes to forests, farmlands, waterways, and air are being driven by the need to provide food, fiber, water, and shelter to more than six billion people. Global croplands, pastures, plantations, and urban areas have expanded in recent decades, accompanied by large increases in energy, water, and fertilizer consumption, along with considerable losses of biodiversity. Such changes in land use have enabled humans to appropriate an increasing share of the planet's resources, but they also potentially undermine the capacity of ecosystems to sustain food production, maintain freshwater and forest resources, regulate climate and air quality, and ameliorate infectious diseases. We face the challenge of managing trade-offs between immediate human needs and maintaining the capacity of the biosphere to provide goods and services in the long term.
Article
Full-text available
The optimal provision of agri-environmental externalities is studied in a model of endogenous input use and land allocation augmented by their effects on biodiversity, landscape diversity and nutrient runoffs. Whereas biodiversity and landscape diversity are public good aspects of agriculture, nutrient runoffs are negative externalities. We show that fertiliser use is higher and the size of buffer strips lower at the private optimum than at the social optimum. The socially optimal land allocation differs from the private solution as a result of the valuation of diversity benefits and runoff damages. The socially optimal policy under heterogeneous land quality involves a differentiated fertiliser tax and a differentiated buffer strip subsidy. We use Finnish data to characterise empirically the socially optimal design of policy instruments. Copyright 2003, Oxford University Press.
Article
Full-text available
The possibility of encouraging the growth of forests as a means of sequestering carbon dioxide has received considerable attention because of concerns about the threat of global climate change due to the greenhouse effect. Would this approach be as inexpensive as studies have suggested? We develop a method for estimating the costs of carbon sequestration by estimating the opportunity costs of land on the basis of econometric evidence of landowners' behavior. The model incorporates intertemporal linkages between deforestation and carbon emissions, and between forestation and carbon sequestration. We find that the marginal costs of carbon sequestration are highly non-linear and that those costs may be greater than previous studies have found, particularly at higher levels of sequestration. We estimate that U.S. marginal carbon sequestration costs will probably be somewhat greater than carbon abatement costs at low levels of control, and that the difference between the two will likely increase as targets increase.
Article
List of figures Preface Notation Introduction 1. The production function 2. Cost functions 3. Structure of cost functions and short-run cost functions 4. The profit function 5. Flexible forms and aggregation 6. Technical change and its measurement 7. Multioutput technologies Appendix Bibliography Index.
Article
Allocatable fixed inputs, such as land, are a potentially important source of jointness in agriculture. As with other causes of jointness, they necessitate multiple-product systems for modeling product supply and input demand. In other important ways, however, their analytical implications are very different from other causes of jointness. Model specification differs. Demand functions for the quantities of each input used in the production of individual commodities can be derived if a primal approach is used, but such allocation equations cannot in general be identified from a dual specification. Available allocation data are not even useful in such dual estimations.
Article
The impact of various policy instruments on the production of environmental goods that are complementary to or competing with agricultural commodities is analysed in the light of the uncertainty in output prices and farmers' risk aversion. Some theoretical assessments are first summarised and then tested on a case study concerning beef and grassland biodiversity production in Monts du Cantal, France. The results of simulations carried out by mathematical programming farm-level models show that joint commodity and non-commodity production is nearly independent of the degree of farmers' risk aversion, and that commodity-linked policy instruments are not suitable for the production of environmental goods even under uncertainty.
Article
When different technologies are present in an industry, we assume that a homogeneous technology will lead to misleading implications about technical change and inefficient policy recommendations. In this article a latent class modelling approach and flexible estimation of the production structure is used to distinguish different technologies for a representative sample of EU dairy producers, as an industry exhibiting significant structural changes and differences in production systems in the past decades. The model uses a transformation function to recognize multiple outputs; separate technological classes based on multiple characteristics, a flexible generalized linear functional form, a variety of inputs and random effects to capture firm heterogeneity; and measures of first- and second-order elasticities to represent technical change and biases. We find that if multiple production frontiers are embodied in the data, different firms exhibit different output or input intensities and changes associated with different production systems that are veiled by overall (average) measures. In particular, we find that farms that are larger and more capital intensive experience greater productivity, technical progress and labour savings, and enjoy scale economies that have increased over time.
Article
Agri-environment schemes were introduced in the mid-1980s. Their primary objectives have developed from initially aiming to hold back intensification towards stimulating environmental enhancement. The introduction of Entry Level Stewardship (ELS) in England represents a third stage in seeking to extend the coverage of schemes across the majority of agricultural land. This aims to influence land use along the whole of the intensive margin. The ELS offers a wide range of options for which farmers are awarded points. Selection of options equivalent to 30 points per ha in lowland areas entitles farmers to a payment of £30 per ha. By September 2007, 4.4 million ha had been entered into the scheme, equivalent to 47% of the agricultural area. From amongst the options on offer, 34% of points were for boundary options, 20% for intensive grass options, 16% for management plans and 13% for options taking arable land out of production. The choice of options varies across the country with a higher proportion of the agricultural area entered in the East. Entry into the scheme is associated with total agricultural area, cereals farming, larger farms, a lower proportion of area in Environmentally Sensitive Area and Countryside Stewardship schemes and grazing livestock numbers. While the ELS has introduced a large number of new entrants into agri-environment schemes, the extent of the environmental impact is uncertain. Given the large number of options available, it is likely that farmers will have chosen options that involve relatively little change and incur limited cost. At the same time, it would be surprising if the environmental gains were of the types most valued within local areas. The ELS approach implies that public goods provided from agricultural land should be paid for irrespective of what would have happened in the absence of the scheme. While this may be a fairer approach, it may also undermine the idea of land stewardship and imply that payments will continue to be required in the long term in order to sustain provision. The ELS does establish a framework within which incentives could be targeted to deliver specific benefits within particular contexts and suggestions are made as to how policy might be developed for this.
Article
The delta method is an intuitive technique for approximating the moments of functions of random variables. This note reviews the delta method and conditions under which delta-method approximate moments are accurate.
Article
Nature provides a wide range of benefits to people. There is increasing consensus about the importance of incorporating these “ecosystem services” into resource management decisions, but quantifying the levels and values of these services has proven difficult. We use a spatially explicit modeling tool, Integrated Valuation of Ecosystem Services and Tradeoffs (InVEST), to predict changes in ecosystem services, biodiversity conservation, and commodity production levels. We apply InVEST to stakeholder-defined scenarios of land-use/land-cover change in the Willamette Basin, Oregon. We found that scenarios that received high scores for a variety of ecosystem services also had high scores for biodiversity, suggesting there is little tradeoff between biodiversity conservation and ecosystem services. Scenarios involving more development had higher commodity production values, but lower levels of biodiversity conservation and ecosystem services. However, including payments for carbon sequestration alleviates this tradeoff. Quantifying ecosystem services in a spatially explicit manner, and analyzing tradeoffs between them, can help to make natural resource decisions more effective, efficient, and defensible.
Article
The Environmental Stewardship Scheme (ESS) provides payments to farmers for the provision of environmental services based on forgone agricultural income. Consequently, farmers with a relatively low opportunity cost of agricultural land will be particularly attracted to apply for entry into the ESS within a given payment region. This article tests whether there exists a significant relationship between Higher Level Stewardship (HLS) Scheme entry and agricultural yields. Empirically, HLS participation is found to be negatively related to cereal yields at the farm level. This could be associated with ‘auspicious selection’ of land into the Scheme, with greater ‘value for money’ provided by the higher entry of land with lower agricultural forgone income but higher environmental benefit within the region.
Article
This paper discusses both the opportunities for and the challenges associated with integrating economics and ecology in the study of ecosystem services. We distinguish between integration in positive versus normative analysis. There is rapid growth in positive research that combines the two disciplines to provide insight and better understanding of the bidirectional linkage between economic and ecological systems. This research is a crucial part of addressing growing large-scale environmental challenges. This integration is equally important, but potentially much more difficult, in normative analysis, especially when interdisciplinary groups include individuals with different views regarding appropriate normative criteria. In such cases, reaching consensus can be difficult and slow, even when the practical implications of the different perspectives (i.e., the general policy prescriptions they imply) are the same. We suggest an approach for increasing the scope for collaboration among economists and ecologists in normative analysis.
Article
Agricultural lands, primarily managed for crops and livestock production, provide various ecosystem services (ES) to people. In theory, the economic value of the service flows that can be captured privately is capitalized into land prices. This study proposes an integrative framework to characterize the ecosystem services associated with agricultural lands. Using that framework, we demonstrate how hedonic analysis of agricultural land prices can be used to estimate the private values of land-based ES. The model is estimated with data from southwestern Michigan, USA. Results suggest that ES values are associated with lakes, rivers, wetlands, forests and conservation lands in rural landscapes. Ecosystem services that support direct use values, such as recreational and aesthetic services, are likely to be perceived by land owners and capitalized in land prices. Some regulating services that provide indirect use values may be partially capitalized in a land parcel's relationship to natural resources and landscapes. Other ES from the land parcel and its surroundings are unlikely to be capitalized due to lack of private incentives, unawareness, or small perceived value. The private ES values measured in this study highlight opportunities to design cost-effective public policies that factor in the value of private benefits from agricultural lands.
Article
Despite an overall budget increase for rural development in the new programming period (2007-2013), most older Member States in the now expanded European Union are facing a substantial reduction in their budget for rural development and thus for agri-environmental schemes (AESs). It can be assumed that, in most countries, none or at best only part of this loss can be offset by national funds. Therefore the design of more efficient national governance structures for AESs, which decrease public transaction costs (TCs), would be an appropriate solution to this problem. The objective of this paper is to define the factors that influence these public TCs, so that appropriate action can then be taken to reduce them. A statistical analysis, with a proxy for public TCs, is combined with an analysis of stakeholder perceptions (excluding farmers) concerning public TC influencing factors. The research showed that it is mainly scheme related factors that are perceived to be important, although the governance structure, institutional environment and level of trust also play a role. Finally, the analysis of perceptions concerning TCs also showed that AES related actors have a limited knowledge of TCs.
Article
Voluntary agri-environmental schemes based on management agreements characterise much agri-environmental policy across the EU at present, and have expanded following the implementation of Regulation 2078/92 in all member states. Schemes generally motivate individual farmers to contract with government agencies to produce countryside goods in return for compensatory payments. Hence, farmers’ decisions to participate are central to achieving policy objectives. An enhanced understanding of farmers’ attitudes to and perceptions of schemes and their implementation would be of value for policy development. Recent transactions-cost research has observed that such schemes involve potentially heavy transactions costs, for both the state and farmers. In addition to reducing scheme cost-effectiveness, the transactions costs incurred by farmers can form a significant constraint on participation in schemes, with adverse effects on the supply of conservation goods. This paper considers behavioural and transactional perspectives on scheme participation. Some new data on the transactional burdens experienced by farmers when participating in schemes is examined from the perspective of identifying ways to improve policy transacting to ease constraints on participation where these exist. At the level of the individual participant, the development of agri-environmental one-stop-shops in member states for all schemes would allow transactions-cost economies, saving on the overhead costs of applying to different schemes with different objectives, as well as allowing a more integrated, less confused approach to participation. The longer-term value of farmer networks and capacity-building for agri-environmental management is important too.
Article
Given that the Common Agricultural Policy (CAP) of the European Union has imposed milk marketing quota on producers, the fact that they are tradeable in the UK increases economic efficiency. Nevertheless, significant inefficiencies remain. Modelling work reported here suggests that significantly more quota needed to be transferred from less to more efficient producers in 1996/97 for industry efficiency to be maximised, and that a large number of vulnerable inefficient producers remained in milk production. It is also shown that, despite tradeable quotas, a significant number of dairy farmers still achieve a poor match between available quota and production. It is argued that the rules on quota trading could be changed to increase efficiency. Finally, it is argued that UK milk producers are incurring costs for acquiring quota which add at least 12.5% to production costs: a high price to pay for the market stability which quotas have brought.
Article
This study examines the value of fallow ecosystem services in shifting cultivation, including hydrological externalities that may affect other farms. Using farm-level survey data from the Brazilian Amazon, I estimate a production function to assess the value of forest fallow and test whether it provides local externalities to agricultural production. Soil quality controls, instrumental variables, and spatial econometric approaches help address endogeneity issues. I use GIS data on external forest cover at the farm level and model the hydrological externality as an upstream-to-downstream process. The estimated parameters indicate that fallow contributes significantly to productivity both on farm and downstream. In addition, most farms allocate sufficient land to fallow, accounting for both the value of hydrological spillovers and the opportunity cost of land left out of cultivation. These results suggest that farming communities may have some self-interest in preserving forest cover locally—a finding that may bolster policy efforts aimed at conserving tropical forests for their global public goods.
Article
Standard economic theory is built on key assumptions regarding concavity and convexity, particular with respect to the production possibility frontier. Non-convexity is readily demonstrated using a two species conventional model. Now that ecosystem services are growing in prominence it is important to confirm that typical natural resource production relations obey these conditions. If not, innocently prescribing price or allocation policies can lead to a minimum rather than a maximum or to wrong equilibrium solutions in general. This is a particular danger in decentralized pricing systems.
Article
The concept of ecosystems services has become an important model for linking the functioning of ecosystems to human welfare. Understanding this link is critical for a wide-range of decision-making contexts. While there have been several attempts to come up with a classification scheme for ecosystem services, there has not been an agreed upon, meaningful and consistent definition for ecosystem services. In this paper we offer a definition of ecosystem services that is likely to be operational for ecosystem service research and several classification schemes. We argue that any attempt at classifying ecosystem services should be based on both the characteristics of the ecosystems of interest and a decision context for which the concept of ecosystem services is being mobilized. Because of this there is not one classification scheme that will be adequate for the many contexts in which ecosystem service research may be utilized. We discuss several examples of how classification schemes will be a function of both ecosystem and ecosystem service characteristics and the decision-making context.
Article
Agriculture produces more than just crops. Agricultural practices have environmental impacts that affect a wide range of ecosystem services, including water quality, pollination, nutrient cycling, soil retention, carbon sequestration, and biodiversity conservation. In turn, ecosystem services affect agricultural productivity. Understanding the contribution of various agricultural practices to the range of ecosystem services would help inform choices about the most beneficial agricultural practices. To accomplish this, however, we must overcome a big challenge in measuring the impact of alternative agricultural practices on ecosystem services and of ecosystem services on agricultural production. A framework is presented in which such indicators can be interpreted as well as the criteria for selection of indicators. The relationship between agricultural practices and land-use change and erosion impact on chemical use is also discussed. Together these ideas form the basis for identifying useful indicators for quantifying the costs and benefits of agricultural systems for the range of ecosystem services interrelated to agriculture.
Article
This paper advocates consistently defined units of account to measure the contributions of nature to human welfare. We argue that such units have to date not been defined by environmental accounting advocates and that the term “ecosystem services” is too ad hoc to be of practical use in welfare accounting. We propose a definition, rooted in economic principles, of final ecosystem service units. A goal of these units is comparability with the definition of conventional goods and services found in GDP and the other national accounts. We illustrate our definition of ecological units of account with concrete examples. We also argue that these same units of account provide an architecture for environmental performance measurement by governments, conservancies, and environmental markets.
Article
In many parts of Europe, decades of production subsidies led to the steady intensification of agriculture in marginal areas. The recent decoupling of subsidies from production decisions means that the future of farming in these areas is uncertain. For example, in the uplands of the United Kingdom, an area important both for biodiversity conservation and ecosystem service provision, hill farmers steadily increased stocking densities in response to headage payments but must now reconfigure farm businesses to account for the shift to the Single Farm Payment scheme. We examined hill farming in the Peak District National Park as a case study into the future of marginal agriculture after decoupling. We surveyed 44 farm businesses and from this identified six representative farm types based on enterprise mix and land holdings. We developed linear programming models of production decisions for each farm type to examine the impacts of policy changes, comparing the effects of decoupling with and without agri-environment and hill farm support, and evaluating the effects of removal of the Single Farm Payment. The main effects of decoupling are to reduce stocking rates, and to change the mix of livestock activities. Agri-environmental schemes mediate the income losses from decoupling, and farmers are predicted to maximise take up of new Environmental Stewardship programmes, which have both positive and negative feedback effects on livestock numbers. Finally, removal of the Single Farm Payment leads to negative net farm incomes, and some land abandonment. These changes have important implications for ongoing debates about how ecological service flows can be maintained from upland areas, and how marginal upland farming communities can be sustained.
Article
If the United States chooses to implement a greenhouse gas reduction program, it would be necessary to decide whether to include carbon sequestration policies—such as those that promote forestation and discourage deforestation—as part of the domestic portfolio of compliance activities. We investigate the cost of forest-based carbon sequestration by analyzing econometrically micro-data on revealed landowner preferences, modeling six major private land uses in a comprehensive analysis of the contiguous United States. The econometric estimates are used to simulate landowner responses to sequestration policies. We treat key commodity prices as endogenous and predict carbon storage changes with a carbon sink model. Our estimated sequestration costs exceed those from previous engineering cost analyses and sectoral optimization models. Our estimated sequestration supply function is similar to the carbon abatement supply function from energy-based analyses, suggesting that forest-based carbon sequestration merits consideration in a cost-effective portfolio of domestic US climate change strategies.
Article
In this paper we develop methods to investigate the efficiency of alternative contracts for Carbon (C) sequestration in cropland soils, taking into account the spatial heterogeneity of agricultural production systems and the costs of implementing more efficient contracts. We describe contracts being proposed for implementation in the United States and other countries that would pay farmers for adoption of specified practices (per-hectare contracts). We also describe more efficient contracts that would pay farmers per tonne of soil C sequestered, and we show how to estimate the costs of implementing these more efficient contracts. In a case study of a major agricultural region in the United States, we confirm that the relative inefficiency of per-hectare contracts varies spatially and increases with the degree of spatial heterogeneity. The results also show that per-hectare contracts are as much as five times more costly than per-tonne contracts—a degree of inefficiency similar to that found in assessments of command-and-control industrial emissions regulations. Measurement costs to implement the per-tonne contracts are found to be positively related to spatial heterogeneity but are estimated to be at least an order of magnitude smaller than the efficiency losses of the per-hectare contract for reasonable error levels. This finding implies that contracting parties could afford to bear a significant cost to implement per-tonne contracts and achieve a lower total cost than would be possible with the less efficient per-hectare contracts.
Article
Agri-environmental measures (AEM) are the central area-based measures of the second pillar of the Common European Agricultural Policy. Cost-effectiveness of AEMs has to be improved. In this paper a newly designed AEM called result-oriented incentive is empirically analysed for the first time concerning its impacts on environmental effects and cost.Result-oriented financial incentives are linked directly to the desired environmental objectives and allow farmers to choose the most efficient way of management to reach them on their own. In this paper, we present the results of 90 interviews with farmers who have participated in a result-oriented AEM in Baden-Wuerttemberg (Germany). We investigated potential advantages (flexibility, innovation, higher intrinsic motivation and improved continuous adaptation). In addition, we researched disadvantages (transaction costs involved in control efforts, risk for farmers). Our results show that such kind of AEM has a positive impact on cost-effectiveness. However, the concrete design and the implementation process of these AEMs play a crucial role for their successful application.
Article
This paper is concerned with policies for the supply of public, environmental goods from the farm sector. In particular, we characterize the buying of these goods by the public from farmers using the "Provider Gets Principle." This principle is well established in OECD countries, as we demonstrate. Results from ecological-economic modeling of the conservation of heather moorland in northern Scotland, using this principle, are described. This model enables us to identify spatially differentiated ecological targets, and to calculate the minimum necessary payments needed to achieve these targets.
Article
Connected habitats are ecologically more valuable than isolated habitats for many species. A key challenge when designing payments for biodiversity in fragmented landscapes is to increase the spatial connectivity of habitats. Based on the idea of an agglomeration bonus we consider a scheme in which land-owners only receive payments if habitats are arranged in an ecologically favourable configuration. We compare the cost-effectiveness of agglomeration payments to spatially homogeneous payments on a conceptual level. Our results suggest that positive efficiency gains exist for agglomeration payments. We use Large Blue butterfly habitat in Germany as a specific case study, and find the agglomeration payments may lead to cost-savings of nearly 70% relative to homogenous payments.
Article
"This paper examines the issue of incentive compatibility within environmental stewardship schemes, where incentive payments to farmers to provide environmental goods and services are based on foregone agricultural income. The particular focus of the paper is land heterogeneity, either of agricultural or environmental value, leading to divergence between the actual and socially optimal level of provision of environmental goods and services. Given land heterogeneity, such goods and services are likely to be systematically over- or under-provided in response to a flat rate payment for income foregone." Copyright (c) 2008 The Author. Journal compilation (c) 2008 The Agricultural Economics Society.
Article
This paper investigates the joint production of milk and 'wildlife and landscape services' on Dutch dairy farms using a micro-econometric profit model of individual farm behaviour. Results show that milk, and wildlife and landscape services, are substitutes. Moreover, there are economies of scope for only relatively few farms. Both results imply that most farms would prefer specialising instead of jointly producing milk and wildlife and landscape services. Lower transaction costs increase wildlife and landscape services production by existing providers, and increase the number of farms producing wildlife and landscape services. The 2003 CAP reform has a negative effect on wildlife and landscape production because of the milk quota increase. Copyright 2004, Oxford University Press.
Article
This paper addresses the supply side of wildlife preservation and restoration in agriculture at the regional level. First, we show how network design modelling can be used for economic optimal spatial selection of unsprayed field margins creating a wildlife corridor in the landscape. Second, we analyse the compatibility of field margin management with farmers' perceptions by using the results of conjoint analysis in the spatial optimisation. The theoretical model is implemented by means of a GIS model and an empirical example is added to illustrate the approach. Copyright 1999 by Oxford University Press.
Article
Scope economies (reflecting the benefit of a multioutput firm) have been defined by Baumol, Panzar, and Willig in the context of cost functions. This paperuses Luenberger's shortage function to develop a general measure of scope economies directly from the underlying technology. The analysis applies under complete as well as partial specialization. Our primal measure of economies of scope is decomposed into four additive parts: one measuring complementarity, one reflecting economies of scale, one reflecting convexity of the technology, and one reflecting the role of catalytic outputs. This decomposition appears useful and helps generate valuable insights into the economics of specialization.
Article
This paper explores two methods for valuing ecosystems by valuing the services that they yield to various categories of user and that are not directly valued in the market, and illustrates the usefulness of these methods with an application to the valuation of mangrove ecosystems in Thailand. The first method is known as the production function approach and relies on the fact that ecosystems may be inputs into the production of other goods or services that are themselves marketed, such as fisheries. I discuss issues that arise in measuring the input into fisheries, particularly those due to the fact that the fishery stock is changing over time, and the shadow value of the ecosystem consists in its contribution to the maintenance of the stock as well as its contribution to current output. The second method is known as the expected damage approach and is used to value the services of storm protection in terms of the reduction in expected future storm damage that the ecosystem can provide. These two methods are shown to yield very different valuations of ecosystems from those that would be derived by the methods typically used in cost-benefit analyses. I argue that they represent a significant improvement on current practice. — Edward B. Barbier
Article
The main goal of international trade liberalisation is to establish a trading environment in which all firms compete on an equal footing. This includes a concern that all firms should pay the full costs of the inputs that are used in the production process. Where the production generates external costs, the Polluter Pays Principle has been widely accepted as indicating that the firm should bear the costs of environmental regulation (OECD, 1972). While for many years agriculture stood outside of most negotiations on international trade, it has taken a key role since the inception of the Uruguay Round of trade negotiations (Ingersent et al., 1995). In this context, agricultural policy has come under scrutiny to examine whether it is in conflict with trade liberalisation. This paper examines the basis for payments made to agriculture in support of the environment and their relationship to negotiations on agricultural trade. It is argued that different underlying assumptions about the relationship between agriculture and the environment can lead to different conclusions about the legitimacy of payments made to the agricultural sector.
Article
Species conservation is an important global policy issue. The design of cost-effective species conservation programs requires resource managers to choose from a suite of conservation activities and sites. This article determines cost-effective conservation strategies for waterfowl using a bioeconomic modeling framework, which is developed using a biological simulation model for waterfowl and regression analysis. The model accounts for ("a") a broad range of land-use and direct wildlife conservation activities, ("b") the effect of landscape heterogeneity, and ("c") interactions between conservation activities. Results indicate that accounting for the three factors listed above can improve the cost-effectiveness of waterfowl conservation on agricultural land. Copyright 2007 American Agricultural Economics Association.
Article
This article implements an econometric approach for generating primal capacity output and utilization measures for fisheries. In situations where regulatory, environmental, and resource conditions affect catch levels but are not independently identified in the data, frontier-based capacity models may interpret such impacts as production inefficiency. However, if such inefficiencies are unlikely to be eliminated, the implied potential output increases may be unrealistic. We develop a multi-output, multi-input stochastic transformation function framework that permits various assumptions about how output composition may change when operating at full capacity. We apply our model to catcher-processor vessels in the Alaskan pollock fishery.
Econometric Analysis of Panel Data Valuing ecosystem services as productive inputs
  • B H Baltagi
Baltagi, B. H. (1995). Econometric Analysis of Panel Data. Chichester, UK: Wiley. Barbier, E. B. (2007). Valuing ecosystem services as productive inputs. Economic Policy 49: 178 –229.
Agricultural Policies in OECD Countries 2010-At a Glance
OECD (Organisation for Economic Co-operation and Development) (2010). Agricultural Policies in OECD Countries 2010-At a Glance. Paris: OECD.
Management type environmental policy instruments-an empirical investigation
  • J Sauer
  • J Walsh
Sauer, J. and Walsh, J. (2010). Management type environmental policy instruments-an empirical investigation. Invited paper presented at the 84th Annual Conference Agricultural Economic Society, 29-31 March, Edinburgh, UK.