Modeling farmer participation in agri-environmental nitrate pollution reducing schemes

Why do farmers choose to participate in agri-environmental programmes and how do they choose the amount of land they allocate to such programmes? This paper examines the determinant factors influencing farmers' adoption of the EU-financed agri-environmental Nitrate Reduction Programme (NRP) in Greece and the extent of the programme's adoption, in terms of land allocation. The decision to adopt the NRP is modeled as a two-step procedure. First, farmers decide whether to participate in the agri-environmental programme and second, the extent of participation is determined. We employ Heckman's self-selection bias correction model to derive unbiased estimates. Based on farm level data, we develop the profile of farmers who choose to adopt the agri-environmental programme and the characteristics of their farms. The results of the analysis provide valuable policy insights decomposed into the main factors determining first, the adoption of the agri-environmental programme and second, the extent of adoption. By decomposing the determining factors, policy makers can employ this information to design effective agri-environmental programmes, desirable to farmers and more targeted towards specific environmental and agricultural development goals.     

Spatial incentives to coordinate contiguous habitat

This paper discusses a series of economic experiments designed to explore whether a set of conservation subsidies—called the agglomeration bonus—can induce a socially optimal spatial pattern of conservation given landowner land retirement decisions are voluntary. The novelty of our approach is the use of the agglomeration bonus idea which depends on explicit topological relationships between a unit of conserved land and its neighboring conserved land; specifically, subsidies paid when one conserved land unit borders other conserved units. The agglomeration bonus approach is refined by providing a menu of subsidies and penalties that can used to encourage particular patterns of land preservation voluntarily. Our results suggest the agglomeration bonus—once our subjects gain experience with coordination—can achieve the specific contiguous land preservation pattern that was targeted.     

Compensation payments for habitat heterogeneity: Existence, efficiency, and fairness considerations

Compensation payments for voluntary conservation measures have become an important tool for biodiversity conservation worldwide. Each year substantial financial resources are spent on such measures, particularly in the context of agri-environmental schemes. In Europe, a debate has started on whether this money is spent effectively. In response to this debate it has been suggested that a portfolio of measures leading to habitat heterogeneity be implemented. Although payments for heterogeneous conservation measures have been analysed in the literature, it has never been questioned that payments can be designed in a way that encourages enough land users to carry out each conservation measure within a portfolio of measures. The purpose of this paper is to demonstrate that such payments do not always exist. Moreover, in cases where payments for habitat heterogeneity exist the payment scheme may require overcompensation of the land users, posing a limit to both efficiency and fairness considerations.     

Implementation of land and ecosystem accounts at the European Environment Agency

The European Environment Agency has started the implementation of a programme of land use and ecosystem accounts, following the System of Environmental and Economic Accounts (SEEA) guidelines of the United Nations. The purpose is to integrate information across the various ecosystem components and to support further assessments and modelling of these components and their interactions with economic and social developments. This programme reflects the increasing demand for environmental policy integration in Europe, both vertically through thematic policies as well as horizontally across policies in those sectors that contribute most to environmental impacts. The construction of land and ecosystem accounts is now feasible due to continuous improvements in monitoring, collecting and processing data and progress with the development of statistical methods that facilitate data assimilation and integration. The accounts are based on explicit spatial patterns provided by comprehensive land cover accounts that can be scaled up and down using a 1 km² grid to any type of administrative region or ecosystem zone (e.g., river basin catchments, coastal zones or bio-geographic areas). Land cover accounts have been produced for 24 countries in Europe and first results published in the European Environment State and Outlook2005 report of the EEA.¹     

Using a Choice Experiment to Estimate Farmers’ Valuation of Agrobiodiversity on Hungarian Small Farms

Agrobiodiversity is a crucial environmental resource. Much of the agrobiodiversity remaining in situ today is found on the semi-subsistence farms of poorer countries and the small-scale farms or home gardens of more industrialised nations. The traditional farms of Hungary are an example. Labelled “home gardens” as a reflection of their institutional identity during the collectivisation period, they are micro-agroecosystems that provide important functions such as food security and diet quality. This paper applies the choice experiment method to estimate the private benefits farmers derive from four components of the agrobiodiversity found in Hungarian home gardens: richness of crop varieties and fruit trees; crop landraces; integrated crop and livestock production; and soil micro-organism diversity. The analysis is based on primary data collected in three environmentally sensitive areas where pilot agri-environmental programmes have been initiated as part of the Hungarian National Rural Development Plan. Findings demonstrate variation in the private values of home gardens and their attributes across households and regions, contributing to understanding the potential role of home gardens in these agri-environmental schemes. This study has implications for sustaining agrobiodiversity in transitional economies.     

Biological conservation in dynamic agricultural landscapes: Effectiveness of public policies and trade-offs with agricultural production

Land use change and land management intensification are major drivers of biodiversity loss, especially in agricultural landscapes, that cover a large and increasing share of the world's surface. Incentive-based agri-environmental policies are designed to influence farmers' land-use decisions in order to mitigate environmental degradation. This paper evaluates the effectiveness of agri-environmental schemes for biological conservation in a dynamic agricultural landscape under economic uncertainty. We develop a dynamic ecological economic model of agricultural land-use and spatially explicit population dynamics. We then relate policies (subsidies to grassland, taxation of agricultural intensity) to the ecological outcome (probability of persistence of a species of interest). We also analyze the associated trade-offs between agricultural production (in value) and biological conservation (in probability of persistence) at the landscape scale.     

A dynamic approach to PES pricing and finance for interlinked ecosystem services: Watershed conservation and groundwater management

A theory of payment for ecosystem services (PES) pricing consistent with dynamic efficiency and sustainable income requires optimized shadow prices. Since ecosystem services are generally interdependent, this requires joint optimization across multiple resource stocks. We develop such a theory in the context of watershed conservation and groundwater extraction. The optimal program can be implemented with a decentralized system of ecosystem payments to private watershed landowners, financed by efficiency prices of groundwater set by a public utility. The theory is extended to cases where land is publicly owned, conservation instruments exhibit non-convexities on private land, or the size of a conservation project is exogenous. In these cases, conservation investment can be financed from benefit taxation of groundwater consumers. While volumetric conservation surcharges induce inefficient water use, a dynamic lump-sum tax finances investment without distorting incentives. Since the optimal level of conservation is generated as long as payments are correct at the margin, any surplus can be returned to consumers through appropriate block pricing. The present value gain in consumer surplus generated by the conservation-induced reduction in groundwater scarcity serves as a lower bound to the benefits of conservation without explicit measurement of other benefits such as recreation, biodiversity, and cultural values.     

The geography of market failure: Edge-effect externalities and the location and production patterns of organic farming

Perceptions of increasing land scarcity and negative impacts of chemical-based agriculture have led to increasing concern regarding the sustainability of food systems. Incompatible production processes among farming systems may lead to spatial conflicts and production losses between neighboring farms, and the magnitude of such losses may depend not only on the scale of each activity, but also on patterns of land use. Such conflicts can be classified as “edge-effect externalities”—spatial externalities whose marginal impacts decrease as distance from the border generating the negative impact increases. This paper tests the hypothesis that edge-effect externalities have influenced the location and production patterns of certified organic farms, using data from California Central Valley certified organic farmers. Using concepts from landscape ecology and spatial statistics, we investigate difference in parcel geometry and surrounding land uses between organic and non-organic parcels. Using a generalized method of moments (GMM) spatially autoregressive econometric model, we demonstrate that both parcel geometry and surrounding land uses influence the probability of a given parcel being certified organic. We conclude with suggestions for policies to encourage development of organic farming regions.     

Case study of agri-environmental payments: The United Kingdom

The Environmentally Sensitive Areas (ESA) program, when launched in the United Kingdom (UK) in 1986, was the first agri-environmental program in the European Union (EU). This program grew to a total of 43 designated ESA schemes in the UK as a whole, 22 of which were in England. A variety of agri-environmental payments programs were created to supplement and complement the ESA schemes in years to follow. The most prominent of these in England was the Countryside Stewardship Scheme (CSS), established in 1991. The CSS was available to farmers outside the ESAs, and like the ESA program, was intended to protect valued landscapes and habitats and to improve public enjoyment of the countryside. By 2003, over 10% of England's agricultural land was enrolled in either ESA or CSS agreements. These voluntary agreements were long-term contracts (usually for 10 years) between the government and farmers to provide environmental services. Several major evaluations of the ESA program and the CSS were conducted over the years, and the results of many of those evaluations and the lessons derived are synthesized and summarized in this article. Both the ESA program and the CSS proved to be generally effective in enrolling many farmers in the entry-level contract tiers, thereby halting or slowing degradation of rural landscape and other environmental features. However, the schemes did not generally offer sufficient economic incentives to attract high levels of enrollment in the intensive farming areas. Also, the schemes were limited in their success in enrolling farmers in higher payment tiers, tiers that required more substantial changes in farming practices. The high crop and livestock-related payments received by farmers under the EU's Common Agricultural Policy (CAP) contributed to the disincentives to participate, especially in higher tiers. Following the latest (2003) reforms of the EU's CAP, England's ESA program and CSS are being replaced by a new, consolidated package of schemes that draws on lessons learned over the past 15-20 years with these two flagship programs.     

Urban Structure and Environmental Externalities

The objective of this paper is to analyze policy design for air pollution management in the spatial context of urban development. We base our analysis on the paper of Ogawa and Fujita (Reg Sci Urban Econ 12:161–196, 1982), which offers a proper theoretical framework of non-monocentric urban land use using static microeconomic theory where the city structure is endogenous. First, we show that when households internalize industrial pollution in their residential location choice, spatialization within the city is reinforced. This impacts directly the emissions of greenhouse gases from commuting. Then, we analyze policy instruments in order to achieve optimal land use pattern when the policy maker has to manage both industrial and commuting related polluting emissions, that interact through the land market.     

Using GIS-based ecological–economic modeling to evaluate policies affecting agricultural watersheds

This paper has three purposes. The first is to conceptualize agricultural watersheds as complex adaptive human ecosystems that co-produce agricultural goods and ecosystem services. The second is to demonstrate a generalizable framework for the spatial modeling of ecosystem service production in watersheds based on this conceptualization. The third is to examine the policy implications of the analysis conducted using this spatial decision support system (SDSS).Analyses using the SDSS show that restrictions on soil loss to the “tolerance level” (T) cause average farm income to decline by only 4%, a reduction that is nearly eliminated if the Conservation Reserve Program (CRP) is available to farmers as an income-generating alternative. The spatially variable response of farmers to soil loss restrictions and the CRP creates a complex pattern of winners and losers and a markedly different land use pattern and crop mix than occurs without these programs. The land use pattern associated with T restrictions and the CRP yields about 64% lower erosion rates and 43% lower sediment yields than the pattern without T restrictions or CRP. These and other results from the SDSS analysis point out that ecosystem service-based subsidies, such as CRP, improve the joint production of farm income, soil conservation and water quality in agricultural watersheds. These subsidies could perhaps receive greater funding by shifting agricultural subsidies from income supports tied to yield and price as well as other crop-based programs. In this way, public expenditures on agriculture would produce a valuable public benefit in the form of load reductions in a TMDL context, and an augmentation of ecosystem services now in decline in many agricultural watersheds. Further methodological developments now underway using evolutionary algorithms can find near-optimal solutions for farms over time and for landscape patterns over whole watersheds.     

Clusters of firms in an inhomogeneous space: The high-tech industries in Milan

Why do industrial clusters occur in space? Is it because industries need to stay close together to interact or, conversely, because they concentrate in certain portions of space to exploit favourable conditions like public incentives, proximity to communication networks, to big population concentrations or to reduce transport costs? This is a fundamental question and the attempt to answer to it using empirical data is a challenging statistical task. In economic geography scientists refer to this dichotomy using the two categories of spatial interaction and spatial reaction to common factors. In economics we can refer to a distinction between exogenous causes and endogenous effects. In spatial econometrics and statistics we use the terms of spatial dependence and spatial heterogeneity. A series of recent papers introduced explorative methods to analyse the spatial patterns of firms using micro data and characterizing each firm by its spatial coordinates. In such a setting a spatial distribution of firms is seen as a point pattern and an industrial cluster as the phenomenon of extra-concentration of one industry with respect to the concentration of a benchmarking spatial distribution. Often the benchmarking distribution is that of the whole economy on the ground that exogenous factors affect in the same way all branches. Using such an approach a positive (or negative) spatial dependence between firms is detected when the pattern of a specific sector is more aggregated (or more dispersed) than the one of the whole economy. In this paper we suggest a parametric approach to the analysis of spatial heterogeneity, based on the so-called inhomogeneous K-function (Baddeley et al., 2000). We present an empirical application of the method to the spatial distribution of high-tech industries in Milan (Italy) in 2001. We consider the economic space to be non homogenous, we estimate the pattern of inhomogeneity and we use it to separate spatial heterogeneity from spatial dependence.     

Patterns of multi-agent land conservation: Crowding in/out,agglomeration, and policy

Private agents make large contributions to networks of conserved land, but little is known about how private agents’ decisions might be altered by government actions. This paper explores the impact of public conservation and public policy on the quantity and configuration of private land conservation and the extent to which the social optimum is reached. Because land conservation benefits often have thresholds and spatial characteristics, we consider the impact of different land conservation benefit functions on the patterns of conservation created by the interaction of private and public agents. We find that public conservation crowds private conservation in or out depending on whether marginal conservation benefits increase or decrease with total acreage, and crowding out is mitigated by the presence of budget constraints. We show how land conservation agents might interact strategically in space depending on preferences over fragmentation, and we explore that spatial strategic interaction in a case with a regional land trust and a case with hot-spot parcels. We identify when government policies, such as agglomeration bonuses and mitigating coordination costs, are most likely to increase the social benefits provided by private land conservation agents.     

The conservation against development paradigm in protected areas: Valuation of ecosystem services in the Doñana social-ecological system (southwestern Spain)

The ecosystems of the Doñana social-ecological system (southwestern Spain) provide numerous ecosystem services to society. We valued the most important ecosystem services through a market-based approach, revealed-preference and stated-preference methods to assess the conservation effectiveness of the Doñana Protected Area, with consideration of existing human activities in surrounding lands. We also analysed the spatial distribution of the ecosystem services beneficiaries and the scale of their related markets. We found a clear trade-off between the local and global market values of ecosystem services because landscape management outside of the Doñana Protected Area promotes the provision of ecosystem services associated with international markets. Our results suggest that a conservation against development model occurs in the Doñana social-ecological system, in which land use intensification takes place outside of the Protected Area borders as a result of promoting marketed ecosystem services, while biodiversity conservation is the main activity inside the Protected Area. We conclude that protected areas should be part of a larger-scale, adaptive landscape management strategy in which conservation planning should be the focal element in coordinating sectoral policies in the context of social-ecological systems.     

The working for water programme: Evolution of a payments for ecosystem services mechanism that addresses both poverty and ecosystem service delivery in South Africa

A payments for ecosystem services (PES) system came about in South Africa with the establishment of the government-funded Working for Water (WfW) programme that clears mountain catchments and riparian zones of invasive alien plants to restore natural fire regimes, the productive potential of land, biodiversity, and hydrological functioning. The success of the programme is largely attributed to it being mainly funded as a poverty-relief initiative, although water users also contribute through their water fees. Nevertheless, as the hydrological benefits have become apparent, water utilities and municipalities have begun to contract WfW to restore catchments that affect their water supplies. This emerging PES system differs from others in that the service providers are previously unemployed individuals that tender for contracts to restore public or private lands, rather than the landowners themselves. The model has since expanded into other types of ecosystem restoration and these have the potential to merge into a general programme of ecosystem service provision within a broader public works programme. There is a strong case for concentrating on the most valuable services provided by ecosystems, such as water supply, carbon sequestration, and fire protection, and using these as ‘umbrella services’ to achieve a range of conservation goals. The future prospects for expansion of PES for hydrological services are further strengthened by the legal requirement that Catchment Management Agencies be established. These authorities will have an incentive to purchase hydrological services through organisations such as WfW so as to be able to supply more water to their users.     

Agri-environmental policies for biodiversity when the spatial pattern of the reserve matters

The aim of this paper is to compare different environmental policies for cost-effective habitat conservation on agricultural lands, when the desired spatial pattern of reserves is a random mosaic. We use a spatially explicit mathematical programming model which studies the farmers' behavior as profit maximizers under technical and administrative constraints. Facing different policy measures, each farmer chooses the land-use on each field, which determines the landscape at the regional level. A spatial pattern index (Ripley L function) is then associated to the obtained landscape, indicating on the degree of dispersion of the reserve. We compare a subsidy per hectare of reserve with an auction scheme and an agglomeration malus. We find that the auction is superior to the uniform subsidy for cost-efficiency. The agglomeration malus does better than the auction for the spatial pattern but is more costly.     

Time-Related Characteristics of Tenancy Contracts and Investment in Soil Conservation Practices

We present a dynamic model that shows how different types of land tenancy contracts and their time-related characteristics influence farmers’ decisions to invest in soil improvement and productive inputs. Using recent household and plot-level data from the Brong-Ahafo Region in Ghana, we analyze the impact of land tenancy arrangements, contract duration, as well as the number of times the contract has been renewed in the past on the intensity of investment in soil conservation measures such as ditches and farmyard manure and productive inputs like chemical fertilizer. The empirical findings generally confirm the predictions of the theoretical model and reveal that the intensity of investments on different plots cultivated by a given farmer varies significantly with the type of tenancy arrangement on the plot as well as the time-related characteristics of the contract.     

Endogenous Verifiability and Optimality in Agency

This paper investigates the optimal contract design in a principal-agent model where verification of an agent's action is endogenously determined through strategic interactions between contracting parties. We derive a necessary and sufficient condition for the first best outcome to be implemented as an equilibrium. The equilibrium has the following features: (i) The action level that the agent chooses is not verified even if it is possible. (ii) Nevertheless, the first best can be attained by making a contract contingent on the unverified action. Journal of Economic Literature Classification Numbers: D20, K40.     

Factors Determining Citizen’s Attitudes Towards Agri-Environmental Property Rights

The purpose of this paper is to contribute further insights into individuals’ agri-environmental attitudes. In particular, the empirical analysis focuses on how citizens think agri-environmental property rights should be assigned. This has been done by surveying how individuals consider the environmental policy should promote the implementation of a group of agri-environmental measures, allowing us to examine the determinants of individuals’ opinions about this matter. Results indicate that higher level of income and education support the implementation of obligatory agri-environmental measures with no financial support (property rights should rest on society) except for measures to improve public access to land for leisure activities and ecological farming which are seen more of the voluntary kind (property rights should rest on farmers). Additionally, rural residency has strong significant effect on agri-environmental attitudes as rural residents are more likely to support the implementation of voluntary (with/without financial support) agri-environmental measures. On the whole, this research proves to be a valuable tool to identify factors determining individuals’ attitudes towards agri-environmental property rights which can certainly help policymakers to provide customized, better response to social demands on this matter.     

China's sloping land conversion program: Institutional innovation or business as usual?

China's Sloping Land Conversion Program (SLCP) is the largest land retirement/reforestation program in the developing world, having the goal of converting 14.67 million hectares of cropland to forests by 2010 (4.4 million of which is on land with slopes greater than 25°) and an additional “soft” goal of afforesting a roughly equal area of wasteland by 2010. Pending successful completion it could represent a 10-20% increase in China's national forest area and a 10% decrease in current cultivated area. In contrast to China's other forest-sector policies, SLCP uses a public payment scheme that directly engages millions of rural households as core agents of project implementation, and has the stated principals of volunteerism. Thus, insofar as current or future de facto program implementation involves decentralized, voluntary grassroots participation, SLCP represents an important departure from “business as usual” in how China manages its forest resources. This work draws upon current available research of the program and uses a 2003 household and village-level survey conducted by the Center for Chinese Agricultural Policy, CAS, to examine program design, implementation and outcomes to date. Results indicate that significant problems in design and implementation exist, with these including shortfalls in subsidies delivered, lack of respect of the principals of volunteerism, and insufficient technical support and budgeting for local implementation costs. More fundamentally, some program goals appear to be based on common misperceptions regarding the linkages between forests and watershed services. Overall, SLCP contains both innovative elements (volunteerism and the direct engagement of farmers) as well as components that hark back to policies and mindsets of decades past (the program's top-down, simplified contract structure, lack of sufficient consultation with local communities and rural households, and campaign-style mobilization). The paper concludes by providing four main suggestions to improve the program: 1) Increase local community input in design and implementation, and ensure that households have full autonomy in participation choice; 2) improve technical support and budgeting for local administrative costs and capacity building; 3) clarify the environmental services targeted and verify the measures needed to acquire these services; and 4) integrate SLCP into an overall package of complementary policies aimed at the rural sector.