Rural Development Policy and the Provision of Public Goods: Challenges for Evaluation

1. Rural Development Policy and the Provision of Public Goods: Challenges for Evaluation 122nd EAAE Seminar "Evidence-based Agricultural and Rural Policy Making“, Ancona, 17-18 Feb. 2011 Bill Slee Ken Thomson

2. The structure of our presentation • The overarching challenges • The policy context • Public goods - what they are • Ecosystem services as an organising concept • Payments for ecosystem services • Some specific challenges posed for evaluation and policy • Some interim conclusions

3. The core challenges: • To support the provision of public goods at a socially desirable level • To facilitate entrepreneurial activity in rural Europe, thereby addressing the Lisbon Agenda • To avoid ‘crowding out’, whereby public expenditure inhibits private sector economic activity • To better evaluate the contribution of public-good-related policy to sustainable rural development and wellbeing

4. Rural Development Programmes: three types of measures for ‘public goods’ • Area-based payments incentivising land management practices benefiting soils, water quality, habitats/species, carbon management and/or landscape maintenance ( e.g. measures for agri-environment, natural handicaps, Natura 2000) • Support for capital investments to assist: • introduction of environmentally sustainable technologies and infrastructure (e.g. measures for farm modernisation, infrastructure development, and adding value to agricultural products) • creation of new business opportunities, services and other activities in rural areas (e.g. measures for farm diversification, basic rural services, conservation and upgrading of rural heritage and investment in tourism); • Investments in advice and training for as well as capacity building for land managers and rural communities (e.g. measures for advice and training, Leader) European Network for Rural Development (2010)

5. “Public Benefits” vs. “Public Goods” • “public benefits”: the values (economic or other?) of goods or services (marketed or non-marketed) potentially available to all citizens • “goods”: products or services which are valued , i.e. not “non-bads” avoided, e.g. pollution • “private goods”: excludable and rivalrous, i.e. marketable • “public goods”: non-excludable and non-rival (hence non-marketable) • “mixed goods”: • “common goods”: non-excludable but rivalrous, e.g. berry-picking, sea fishing • “club goods”: excludable but non-rivalrous, e.g. entry-fee parks • the “public”(s): local residents, visitors, national/EU citizens, world population?

6. Public Goods from European Land Use • biodiversity (wildlife) e.g. in fringe habitats in areas of non-provisioning land and field boundaries or within low-intensity land use systems • visual landscapes of fields, woodlands, rural buildings • cultural values associated with farming etc. in particular places • food security? • rural employment?? • Only “goods” if additional value beyond legal minimum (or GAEC)? • Higher values (per hectare) in more populated regions and/or more accessible areas?

7. The Ecosystem Approach and Services • Ecosystem Approach (EA) • ‘a strategy for the integrated management of land, water and living resources that promotes conservation and sustainable use in an equitable way’ (Convention on Biological Diversity ) • Millennium and National Ecosystem Assessments (MA, NEAs) • Ecosystem Service Categories • Provisioning: e.g. food, water, wood, biofuel • Regulating: floods, climate, disease, erosion, C sequestration • Cultural: aesthetic, spiritual, educational, recreational • Supporting: soil/habitat formation, nutrient/water cycling

8. Payments for Ecosystem Services (ESSs) • Beneficiaries (e.g. consumers, citizens, residents, visitors) purchase ESSs from suppliers (e.g. farmers, landowners), often via buyers/intermediaries (e.g. governments, water companies, clubs, agencies) • ESSs a mixture of private goods (e.g. food, fibre), mixed goods and public goods • Some supplied as unrewarded by-/co-products, i.e. positive externalities • Suppliers balance (trade-off) production incentives between and within ESS categories (e.g. food vs. C seq. vs. biodiversity)

9. The CAP, RDPs and PESs • Non-private ESSs may be purchased by govts. (as discriminating monopsonists?) on behalf of local, regional/national and/or global consumers • ESSs sometimes multiple, e.g. non-intensive farming, landscape and wildlife: e.g. RDP agri-environmental measures • CAP payment rates based on “additional costs and income foregone” (plus up to 20% transaction costs), i.e. not on social values of environmental benefits • Rates (should/must) vary according to farm product returns • Recent proposals to widen this basis, e.g. to include fixed costs, and/or diversification options foregone • Green Box (non-trade-distorting) constraints?

10. Comments on Commission proposals • No (or minimal) changes to: • Structure: two Pillars, three/four-Axes • GAEC: baselines and application but • Pillar 1 made optionally “multi-purpose” (and “tiered”?), for (i.a.): • “Basic” income support • Widespread agri-environmental payments (why not Pillar 2?) • Area payments for “constrained” regions (why not Pillar 2?) • Pillar 2 to include risk management toolkit (why not Pillar 1?) • Little or no specific mention of Health Check “new challenges” of water management and climate change

11. EU Rural Development Policy post-2013 • size of overall EU budget? • CAP’s share of overall EU budget? • Pillar 2’s share of CAP budget (in EU, and in MSs)? • Pillar 2 “Axes” or equivalents: reduced (e.g. “losing” LFAs and/or Axis 3) or expanded (e.g. to include risk mngt. tools) • relationship of current Axes 1 and 2 to a reformed Pillar 1, i.e. how the “green” and “specific natural constraints” components of direct payments fit with “additional” Pillar 2 schemes

12. The Evaluation Challenge for Environmental Public Goods (EPGs) • Unit values of EPGs vary by: • “unit” – hectare, litre, animal/plant, “view”? • base (regulated) level(s) • location, e.g. peri-urban vs. remote • consumers • general or self-selected, e.g. incoming residents • users and “non-users” • Amounts of EPGs vary by: • Region, e.g. peri-urban (limited) vs. remote (widespread)

13. Challenge 1: Accurate estimation of values (i) • Disaggregating the land use component from landscape structure • Estimating the incremental value of publicly funded schemes

14. Challenge 1 : Accurate estimation of values (ii) • Use and non-use components • Valuing the visitor/user experience • Valuing the non-use component of value Methods have improved but no real belief in the scientific community that aggregate values can be estimated accurately

15. Challenge 1: Accurate estimation of values (iii) • The issue is not just what it is but where it is • Peri-urban forestry very heavily used, even where not especially attractive • … and values depend on availability/quality of substitute sites

16. Challenge 1 : Accurate estimation of values (iv) • ‘Culture’ is not easy to value in terms of public good values • …..But certainly has value which is embodied in land management practices and products

17. Challenge 2: Delivering landscape-scale effects Isolated habitats cannot deliver full biodiversity Habitat connectivity is needed to maximise biodiversity benefits Voluntary schemes with individual landowners may not deliver optimal levels of biodiversity Prioritise joint applications

18. Challenge 3: Secondary marketisation (i) But: can govt. payments for public goods crowd out private entrepreneurship? Agritourism can internalise externalities Car parking can generate fees for access to high-quality environments

19. Challenge 3: Secondary marketisation (ii) Considerable scope for creation of new ancillary markets: • In leisure enterprises: • Recreation • Tourism • Social care? • In local and regional food: ‘eat the view’

20. Challenge 3: Secondary marketisation (iii) Property rights differ: the case of Girolles (the golden chanterelle) • in Nordic countries: a free good • in Italian community forests: a club good • in France: a private good

21. Challenge 4: Getting Governance Right • How farmers are engaged to undertake environmental practices may be critical to their effective delivery • This may also apply to the demand side, in eliciting local community values

22. CMEF 2007-2013 and beyond (i) • “continuity and adaptation” of 2000-2006 guidance; “few additional data collection requirements”; “clear and robust”; common and quantified indicators • “Ongoing” as well as ex ante, mid-term and ex post evaluation • A hierarchy of objectives and (“SMART”) indicators, viz.: • Inputs, i.e. reported expenditures (not transaction costs, e.g. admin time) per Measure, i.e. Axis 1 = 16, Axis 2 = 13, Axis 3 = 8, Axis 4 = 5; total <= 42 • Outputs (1 to 5 per RDP measure), e.g. no. of training sessions or farms • Results (Axis 1 = 5, Axis 2 = 1 (managed area), Axis 3 = 6), e.g. investment • Impact (7, i.e. growth, jobs, productivity, biodiversity, high nature value areas, water, climate change) • Baseline (measurements) • Objective: horizontal = 3, Axis 1 = 13, Axis 2 = 12, Axis 3 = 9, Leader = 1 • Context-related: horizontal = 5, Axis 1 = 10, Axis 2 = 13, Axis 3 = 7 • Additional: specific to national priorities or areas/sites

23. CMEF 2007-2013 and beyond: (ii) • Simplify a complex and high-cost CMEF system • Add M&E for: • RDP delivery, e.g. Axis 2 landscape , Axis 3 community • Evaluation feedback, e.g. consequent RDP and RDP admin revisions • Better understand the economic impact of the green infrastructure role of attractive rural areas • Review the ‘rules of the game’ (opportunity foregone as a reward principle) which currently militate against positive rural development • Recognise that post 2013 both Pillar 1 and Pillar 2 contain public good elements that will require evaluation - separately?

24. Conclusions: General • Environmental public goods (EPGs) vary widely by type (ecological or economic), location, value, etc. • Some EPGs are by/co-products of commercial land use, e.g. food or wood production, or excludable sport e.g. hunting – but unlikely that quantity and quality will be optimal • Reformed CAP (and future agricultural markets, and technology) may alter base levels of EPG “production”, and relative private/public values

25. Conclusions: Environmental Public Goods (EPGs), Rural Development Policy and Evaluation Future RD policy should attempt/continue to: • Identify and target EPGs (possibly “packaged”, e.g. by land use) • A role for the “strategy” phase? • At what spatial/regional level(s)? • Consider trade-offs of EPGs, e.g. climate-related and other EPGs, e.g. landscape quality vs. C sequestration • Recognise and measure wider-economy values of EPGs (to incoming residents, businesses, visitors, tourists) • Where possible, encourage “commoditisation” of EPGs via (non-central govt.) Payments for Ecosystem Services schemes

26. Thank you for your attention! • Useful readings and further links: • ENRD (2010): “Conceptual Framework On Public Goods”. http://enrd.ec.europa.eu • European Evaluation Network for Rural Development (2010): “Working paper on Approaches for assessing the impacts of the Rural Development Programmes in the context of multiple intervening factors”. http://enrd.ec.europa.eu/evaluation • European Evaluation Network for Rural Development (2010): Working Paper on “Capturing impacts of Leader and of measures to improve Quality of Life in rural areas“. http://enrd.ec.europa.eu/evaluation