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The cost of policy simplification in conservation incentive programs

Amanda Luna MeraECL 212 BSpring 2014

The cost of policy simplification in conservation incentive programs Ecology Letters (2012)

Journal in Ecology Keywords: Ecological Letters, community ecology, microbial ecology,

evolutionary ecology, population ecology, molecular ecology, infectious disease ecology, conservation ecology

The authors examine how ecology and socioeconomic sciences can be integrated more effectively to inform conservation strategies Paul Armsworth, Ecology and Evolutionary Biology, University of

Teneessee B.S. in Mathematics and PhD in Mathematics and Biological Sciences analyzed the integrated models.

Szvetlana Acs – University of Stirling analyzed the integrated models.

Martin Damiller- PhD in Biology Conducted and analyzed ecological surveys

Kevin Gaston –PhD in Biology Nick Hanley - Economics Paul Wilson – Agricultural and Environmental Sciences

Coordinated the farm surveys

The design of incentive payment programs for biodiversity conservation must be cost-effective Evaluations have given

mixed results. Cost-effectiveness

evaluations have been limited because the cost to farmers is private information.

Other variables are landscape, taxonomic group (biodiversity indicator),

Incentive payment

Farmers take management

actions to provide

environmental benefits

Objective

They built an integrated model of biodiversity change and farm production choices to evaluate cost-effectiveness of AE.

It examined the effectiveness of different payment schemes using field parameterized, ecological economic models of extensive grazing farms.

Biodiversity Production

Agricultural outputs Profit

maximizing farm management plans

Indicator of biodiversity bird species

+Methods

Methods

• They estimated farmers’ marginal private costs of enhancing a biodiversity target

Farmers’ MAC

•Costs relating improvements in a biodiversity target to associated foregone farm profits

Tradeoff curves

• Purchasing the maximum possible improvement for a fixed budget. Optimal

Policy characteristic

s

• Benchmark to estimate the efficiency cost of policy simplifications common in AES programs.

Cost of policy simplificaton

44 extensive farms in the UK Sheep, dairy or beef cattle

Biodiversity measured twice in 2007 Density (based on bird counts) Richness

They gathered information from socioeconomic and biodiversity surveys in farms across the UK.

Surveys included:• Land area• Land type use• Production activities

• Commodity produced (crops,livestock)

• Inputs (fertilizer, labor)• Subsidy payments received.

Dark Peak

Eastern Moors

Southwest Peak

The profit maximization condition included the production and the biodiversity constraints.

max V = p . xNet farm income

Gross margins

Farming activities

Ax ≤ b

xi≥0

Cj(x) = djTechnical coefficients

Resource endowments

Density of birds

Diversity constraint

Farming activities

Linear Production Constraints

Non-linear biodiversity Constraints

relates the response of a given biodiversity indicator to the farm management variables

The variation in the tradeoff curves was explained by comparing the elasticities between levels of diversity targets. Elasticity: how responsive an economic variable is to a change

in another

Tradeoff between maximum farm

income and biodiversity

improvement.

Negative elasticities

Change in Net farm income

Change in conservation

target

+Results

The sources of failure were simplifying spatial and farm income variation.

Cost-effective policies

Maximum farm income reduced =

incentive

Non cost-effective

policies

Farm income forgone= incentive

Farms go out of business

Fixed incentive payments

Loss of efficiency when

targeting enhancements in spp richness

The tradeoff curves relate the percentage reduction in farm income that results from a given percentage increase in biodiversity target.`

Each curve correspond to the farm types:• Solid- Dark Peak• Dashed –Eastern Moors• Dot-dashed –Southwest

Peak

a) Eurasian curlewb) Skylarkc) Requiring simultaneous

enhancement in density of both spp.

d) Total density of birdse) Total richness of birdsf) Requiring simultaneous

enhancements in total density and total richness.

The policy simplifications result in a 49–100% reduction in biodiversity relative to the maximum through the optimal policy

Simplifications:

Not including nonlinear costs of farmers (fixed costs)

Not including spatial variation in target allocation

Spatially uniform pricing

It is worth expending 70% or more to implement policies that recognize the regional variation in costs of enhancing biodiversity and that allocate incentive

contracts accordingly.

Ecological Costs of policy simplifications as the proportion of the maximum biodiversity gain available for a given budget with the optimal policy that is achieved with each simplified policy.

Inefficiencies stem from not dealing with spatial heterogeneity in the PC of producing biodiversity benefits.

Spatial differentiati

on

Conservation targets•Species richness

•Species density

Environmental variation

Private costs of farmers

Purchasing conservation improvements at a fixed cost rather than employing a sliding payment rate only incurs a comparable loss of efficiency when targeting enhancements in species richness

Conceptually, does the proposed payment to landowners reflect the supplier’s  (landowner’s) WTA or the demander’s (public’s) WTP? Demander’s WTPWhat are the implications for surplus from the transaction? -Inefficient outcome -It is not cost-effective from the perspective of maximizing budget

+Critique and discussion

r2 was relatively low (0.08–0.31).

Sensitivity of results to

uncertainty in the

regression

Covariates describing

habitat increase r2

Excluded not included

in farm managemen

t

The nonlinear regression focused on common farm management variables.

Management variables:

The sample size preclude to include the covariates. Underestimate how inefficient policy simplifications can be

Cj(x) = dj

• number of sheep• number of cattle• tons of fertiliser• number of cuts

Incentive payment programs aim to deliver biodiversity benefits cost-effectively. Which definition of cost-effectiveness do incentive payment

programs match? Minimizing costs Maximizing budget use

The implementation cost of complex policies are worth bearing when benefits are larger

The evaluation of different payment schemes must consider distributional impacts.

Do you agree that what they identify as most cost-effective will deal with the distributional implications?

What exactly are landowners paid for in this analysis?  By what metric would we verify that the landowner has met the

obligation?