Promoting conservation and public goods provision

Lecture 29.

Economics of Food Markets

Alan Matthews

What we want to learn

• The methods which can be used to value the positive environmental benefits of agriculture to help decide how much to purchase

• The range of policy instruments available to encourage the provision of positive environmental externalities from land management

The environmental reference level

• What is a benefit? What is environmental pollution?– Polluter pays concept is a social construct– Wetlands – farmers vs environmentalists– Preservation of tropical rain forests– Access to farmland for recreation– Traditional farm buildings– Animal welfare

• Good of Good Farming Practice defines the current reference level

Measuring environmental benefits

• Different kinds of value– Use value– Option value– Existence value– Bequest value

Assessing willingness to pay

• Travel cost method– Restricted to measuring use value by visitors

• Hedonic price method– Restricted to measuring use value by those

who trade in land or houses

• Contingent valuation method– Only method to measure non-use values– Potential biases

• Benefit transfer techniques

Conservation instruments

• Education and voluntary stewardship– Huge amount of environmental goods

provided as a result of sense of stewardship– Suggests potential for education as a

conservation instrument– But also suggests that compensation

payments could undermine this ethical approach

Conservation instruments

• Financial incentives– Management agreements with individual

farmers (UK Wildlife and Countryside Act)– Flat rate universal schemes (Irish REPS)– Tiered competitive tendering schemes (UK

Countryside Stewardship Scheme)

Conservation instruments

• Cross-compliance– Becomes possible with shift from market price

support to direct payments– Increases the public return from direct

payments– But may legitimise direct payments which

otherwise would be hard to justify

Conservation instruments

• Planning designation– Are farmers entitled to compensation for

restrictions? (raises the environmental reference level again)

– But what if the value of the resource depends on active management?

• Public acquisition– National Parks– Conservation easements

General principles

• Assign priority to agri-environment services which are more highly valued or which can be provided at lower cost

• Targeting is desirable, but there is a trade-off with administration and monitoring costs

• Importance of farmer participation and awareness