The cost of policy simplification in conservation incentive programs

1. The cost of policy simplification in conservation incentive programs Amanda Luna Mera ECL 212 B Spring 2014

2. 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

3. 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. • SzvetlanaAcs – 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

4. 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

5. 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. Indicator of biodiversity bird species • Profit maximizing farm management plans

6. Methods

7. Methods

8. They gathered information from socioeconomic and biodiversity surveys in farms across the UK. • 44 extensive farms in the UK • Sheep, dairy or beef cattle • Biodiversity measured twice in 2007 • Density (based on bird counts) • Richness Dark Peak • Surveys included: • Land area • Land type use • Production activities • Commodity produced (crops,livestock) • Inputs (fertilizer, labor) • Subsidy payments received. Eastern Moors Southwest Peak

9. The profit maximization condition included the production and the biodiversity constraints. Gross margins max V = p . x Net farm income Farming activities Non-linear biodiversity Constraints Linear Production Constraints Cj(x) = dj Density of birds Diversity constraint Technical coefficients Resource endowments Ax ≤ b xi≥0 relates the response of a given biodiversity indicator to the farm management variables Farming activities

10. 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

11. Results

12. The sources of failure were simplifying spatial and farm income variation. Cost-effective policies Maximum farm income reduced = incentive Farm income forgone= incentive Farms go out of business Non cost-effective policies Loss of efficiency when targeting enhancements in spp richness Fixed incentive payments

13. 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 • Eurasian curlew • Skylark • Requiring simultaneous enhancement in density of both spp. • Total density of birds • Total richness of birds • Requiring simultaneous enhancements in total density and total richness.

14. 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 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. 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.

15. Inefficiencies stem from not dealing with spatial heterogeneity in the PC of producing biodiversity benefits. Conceptually, does the proposed payment to landowners reflect the supplier’s  (landowner’s) WTA or the demander’s (public’s) WTP?  Demander’s WTP What are the implications for surplus from the transaction? -Inefficient outcome -It is not cost-effective from the perspective of maximizing budget 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

16. Critique and discussion

17. The nonlinear regression focused on common farm management variables. Cj(x) = dj • Management variables: • The sample size preclude to include the covariates. • Underestimate how inefficient policy simplifications can be • number of sheep • number of cattle • tons of fertiliser • number of cuts

18. 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

19. 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?