Conservation Auctions in Manitoba: A Summary of a Series of Workshops

Currently, the effect of human impact on the environment is becoming increasingly apparent. The encroachment of human activity has inevitably resulted in the loss or impairment of ecological goods and services (EG&S) around the globe as well as in our own backyard. EG&S include features such as wildlife habitat, biodiversity, soil renewal, or nutrient cycling. The loss of such features has become a sobering reality for Manitobans in the face of the utrophication of Lake Winnipeg as a result of practices contributing to nutrient loading into the lake. Since EG&S are very important to Manitobans, efforts are being made to explore different vehicles to encourage their provision. In order to address some of the environmental issues transpiring in Manitoba, there has been discussion on the usefulness of Market Based Instruments (MBIs). In the past, a number of programs focused on the environment in agriculture have been put forward and administered, however these have not been overly successful in incenting producers or providing significant levels of EG&S. This report will provide a summary of a series of workshops developed to bring awareness to stakeholders on an MBI known as a conservation auction (which may also be referred to as reverse auction, procurement auction, or tender).Market based instruments, Conservation auction, Tender, Wetland restoration, Environmental Economics and Policy, D44, Q20, Q57,

Catchment Care - Developing an Auction Process for Biodiversity and Water Quality Gains. Volume 1 - Report

This report describes the design, development and trial of catchment care. Catchment Care is an auction-based system which aims to increase the cost effectiveness of funds for private on-ground natural resource management actions.Water;Australia;Natural Resource Management;Catchment Care; auction.

The transferability and performance of payment-by-results biodiversity conservation procurement auctions: empirical evidence from northernmost Germany

Managed grasslands contribute in a number of ways to the biodiversity of European agricultural landscapes and provide a wide range of ecosystem services that are also of socio-economic value. Against the background of a rapid biodiversity loss in agricultural landscapes, increasing attention is being paid to farming practices that enhance ecosystem services. Therefore developing cost-effective conservation payment schemes is the main challenge facing present European agri-environmental policy. This paper deals with the transferability of a payment scheme that combines a payment-by-results approach with the use of discriminatory-price conservation procurement auctions in order to improve the cost-effectiveness of conservation schemes for grassland plant biodiversity. Hence the design, implementation and results of the adapted case-study payment scheme in the county Steinburg in the northernmost federal state of Germany (Schleswig-Holstein) will be focussed. Results concerning the ecological-effectiveness of the payment-by-results approach as well bid-prices and potential cost-effectiveness gains by the use of conservation procurement auctions point out that it was possible to transfer the payment scheme successfully to another region, whereby the adapted case-study even outperforms the original case-study.agri-environmental policy, discriminatory-price auction, ecological services, experimental economics, multi-unit auction, payment-by-results, plant biodiversity, rural development.

Results from the Farm Behaviour Component of the Integrated Economic-Hydrologic Model for the Watershed Evaluation of Beneficial Management Practices Program

This report summarizes preliminary results from the Farm Behavior component of the South Tobacco Creek Integrated Modeling Project (STC Project) which is being undertaken as part of the Watershed Evaluation of BMPs (WEBs) Program. WEBS is a partnership between Agriculture and Agri-Food Canada (AAFC) and Ducks Unlimited Canada (DUC) established to evaluate the economic and environmental performance of BMPs for water quality at the watershed scale. Water draining from South Tobacco Creek eventually enters to Lake Winnipeg which is degraded from the cumulative effects of nutrient loading, particularly phosphorous. Many jurisdictions across the world, including Canada, use payments programs to encourage land owners to change land management practices in order to reduce non-point source pollution. BMP incentive programs in Canada, such as Greencover, rely on fixed payment schemes which pay producers a set amount for BMPs, regardless of costs or benefits. In order to improve the performance of payment programs many jurisdictions have instituted auction type mechanisms. The purpose of the Farm Behavior component of the STC project is to examine the performance of various types of payment programs for BMPs relative to reducing phosphorous loads from STC. Theoretical and empirical evidence from conservation auctions suggest that the performance of auctions depends on several factors which affect the bidding behavior of producers during the auction, and therefore the cost-effectiveness of auctions over other types of payment programs. In particular, some producers actually benefit from BMPs, however under certain auction rules these producers would be paid the same amount as high cost producers; alternatively, producers with low costs of adopting BMPs may not always provide the greatest benefits in terms of pollution abatement depending on their location in the watershed, and physical features of their land. We assessed the relative performance of different payment programs by developing producer response functions for adoption of Beneficial Management Practices (BMPs). Producer adoption responses under different incentive schemes were tested using experiments with student subjects and limited trials with producers. We examined four BMPs: construction of holding ponds, riparian management, forage conversion, and conservation till. The results of the adoption response experiments conducted under WEBS were used to draw preliminary observations on BMP policy design and form the basis for recommendations for further research. The farm behavior project focuses on addressing the following two questions: 1. Does BMP adoption at a given farm make the individual farm household better or worse off from an economic perspective? 2. How much will it cost the government to get farms to adopt BMPs under different payment programs? Since producer heterogeneity is key to understanding the performance of conservation auctions, we examined the costs and benefits of BMPs at the individual farm level and developed on-farm costs for each BMP for each producer in the watershed. The basic components of the model are described below, however the details including underlying assumptions regarding baseline farm behavior, are outlined within the body of the report. We used the on-farm cost model to generate aggregate cost functions for BMPs for the watershed and to parameterize the policy experiments related to conservation auctions. Preliminary estimates of environmental benefits of individual BMP adoption were provided by Dr. Wanhong Yang using results from a SWAT model developed under a separate component of the South Tobacco Creek WEBS project. Based on this information, we were able to evaluate the performance of various auction formats in terms of cost effectiveness, distribution of payments amongst producers, and environmental benefit. The results from the Farm behavior component of the South Tobacco Creek project are preliminary, and are currently being refined. Therefore it is difficult to draw generalized conclusions at this point. Further experiments are being conducted to complete the data collection during FY 08-09 through Interim WEBS funding. Nonetheless main findings to date are summarized below: 1. The four BMPs assessed differ in terms of their cost as well as their ability to deliver environmental benefits. Unfortunately, there is no BMP that dominates across farms at all abatement levels. Farms have heterogeneous costs in terms of BMPs, and some farms are cost effective at supplying abatement using one BMP, but not another. 2. This suggests that if water quality benefits (e.g. phosphorous reduction) can be quantified through modeling by BMP and by farm, then water quality should be the contracting unit for the auction rather than the BMP. This would allow producers to select the most cost effective BMP for supplying water quality benefits, and then decision makers could allocate contracts based on ranking the costs of abatement. 3. At the next stage of the research we will test for synergies between farms – ie., whether the joint production function for water quality between farms differs from the sum of individual production functions. This will have implications for how the payment scheme should be designed. 4. Incorporating „fairness‟ types of allocation rules for conservation dollars, such as maximum participation in conservation programs is inefficient in terms of cost and environmental benefits. If fairness, or using conservation payments as a form of extension to learn about on farm costs of BMPs is the goal of the auction, then fixed payment programs which are open to everyone may be more desirable. 5. The performance of the auction depends on the shape of the cost function for BMPs and/or pollution abatement, as well as whether uniform (pay everyone the highest bid) or discriminatory pricing (pay everyone their own bid) rules are applied. In future research we will be investigating to what extent we can generalize results about the performance of uniform versus discriminatory pricing rules in this context. In conclusion, this research has allowed us to investigate individually the performance of incentive payments for individual BMPs. The results of the analysis provide us with a baseline of information by which we can begin to assess more complex conservation program issues, such as how to optimally select multiple BMPs within the watershed, and whether/how to spatially target BMPs.watersheds, South Tobacco Creek, water quality, Environmental Economics and Policy, Land Economics/Use, Resource /Energy Economics and Policy, Q12,Q52,D44,

Private ex-ante transaction costs for repeated biodiversity conservation auctions: a case study

The European Union’s Council Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development has introduced promising changes in rewarding farmers by the implementation of conservation auctions and granting farmers’ transaction costs. The paper therefore deals with the evaluation of private transaction costs within a case study using repeated auctions to reward plant biodiversity. Based on a review of the current literature the paper develops a specific definition of transaction costs as well as a methodology to measure and calculate the farmers’ private transaction costs. The case study enfolds two field experiment auctions and two corresponding surveys. The transaction costs are measured by the use of written questionnaires and will be discussed both as a first reference value of farmers’ transaction costs as well as compared to the individual payments within the case study auctions in order to investigate the real-life performance of this specific application of repeated conservation auctions in biodiversity protection efforts.agri-environmental policy, biodiversity conservation auctions, transaction costs, ecological services, plant biodiversity, experimental economics, EAFRD-Regulation

Spatial Dynamic Modeling and Urban Land Use Transformation:

Assessing the economic impacts of urban land use transformation has become complex and acrimonious. Although community planners are beginning to comprehend the economic trade-offs inherent in transforming the urban fringe, they find it increasingly difficult to analyze and assess the trade-offs expediently and in ways that can influence local decisionmaking. New and sophisticated spatial modeling techniques are now being applied to urban systems that can quickly assess the probable spatial outcomes of given communal policies. Applying an economic impact assessment to the probable spatial patterns can provide to planners the tools needed to quickly assess scenarios for policy formation that will ultimately help inform decision makers. This paper focuses on the theoretical underpinnings and practical application of an economic impact analysis submodel developed within the Land use Evolution and Impact Assessment Modeling (LEAM) environment. The conceptual framework of LEAM is described, followed by an application of the model to the assessment of the cost of urban sprawl in Kane County, Illinois. The results show the effectiveness of spatially explicit modeling from a theoretical and a practical point of view. The agent-based approach of spatial dynamic modeling with a high spatial resolution allows for discerning the macro-level implications of micro-level behaviors. These phenomena are highlighted in the economic submodel in the discussion of the implications of land use change decisions on individual and communal costs; low-density development patterns favoring individual behaviors at the expense of the broader community.

Ex-post evaluation of an environmental auction: legacy of the 2008 Lower Burdekin Water Quality Tender

This project conducts an ex-post evaluation of a water quality tender (auction) project. In 2007-08, a water quality pilot tender was trialled in the Lower Burdekin River area, funded by the Australian Government through the National Market Based Instruments and co-funded and administered by the NQ Dry Tropics. This project will collaborate with NQ Dry Tropics and engage with tender participants to review design, operational, administrative and other matters of the trial. It will evaluate the effectiveness of the tender to achieve long-term change and identify strengths as well as opportunities for improvement. The research will inform economic theory and future tenders

Ex-post evaluation of an environmental auction: legacy of the 2008 Lower Burdekin Water Quality Tender

This project conducts an ex-post evaluation of a water quality tender (auction) project. In 2007-08, a water quality pilot tender was trialled in the Lower Burdekin River area, funded by the Australian Government through the National Market Based Instruments and co-funded and administered by the NQ Dry Tropics. This project will collaborate with NQ Dry Tropics and engage with tender participants to review design, operational, administrative and other matters of the trial. It will evaluate the effectiveness of the tender to achieve long-term change and identify strengths as well as opportunities for improvement. The research will inform economic theory and future tenders

Spatial dynamic modeling and urban land use transformation : an ecological simulation approach to assessing the costs of urban sprawl

Assessing the economic impacts of urban land use transformation has become complex and acrimonious. Although community planners are beginning to comprehend the economic trade-offs inherent in transforming the urban fringe, they find it increasingly difficult to analyze and assess the trade-offs expediently and in ways that can influence local decisionmaking. New and sophisticated spatial modeling techniques are now being applied to urban systems that can quickly assess the probable spatial outcomes of given communal policies. Applying an economic impact assessment to the probable spatial patterns can provide to planners the tools needed to quickly assess scenarios for policy formation that will ultimately help inform decision makers. This paper focuses on the theoretical underpinnings and practical application of an economic impact analysis submodel developed within the Land use Evolution and Impact Assessment Modeling (LEAM) environment. The conceptual framework of LEAM is described, followed by an application of the model to the assessment of the cost of urban sprawl in Kane County, Illinois. The results show the effectiveness of spatially explicit modeling from a theoretical and a practical point of view. The agent-based approach of spatial dynamic modeling with a high spatial resolution allows for discerning the macro-level implications of micro-level behaviors. These phenomena are highlighted in the economic submodel in the discussion of the implications of land use change decisions on individual and communal costs; low-density development patterns favoring individual behaviors at the expense of the broader community