An economic evaluation of the Organic Farming Scheme

This report was presented at the UK Organic Research 2002 Conference. This paper describes a review commissioned by DEFRA into the operation of the Organic Farming Scheme. In particular the review examines the rationale of the Scheme, and its effectiveness and efficiency in meeting its objectives, and makes recommendations for improvements to the Scheme

QUANTIFYING THE BENEFITS OF CONSERVATION AUCTIONS: EVIDENCE FROM AN ECONOMIC EXPERIMENT

Building on available theory, this work uses controlled laboratory experiments to investigate the budgetary and the economic performance of competitive tenders for allocating conservation contracts to landholders. Experiments have been replicated in two different countries to check for robustness of results. We find that auctions outperform the more traditional fixed-price schemes only in the one-shot setting. With repetition, the auctions quickly lose their edge. Our results suggest that previous estimates of conservation auction performance are too optimistic.Conservation auctions, agri-environmental policy, experimental economics., Environmental Economics and Policy,

Agricultural multifunctionality and trade liberalisation

This paper employs a partial equilibrium trade model to analyse the interaction of trade and environmental policy in the context of agriculture’s multifunctionality. We formally demonstrate that free trade is suboptimal if no efficient environmental policy addressing the provision of multifunctional benefits is in place. However, tariff reductions in a large net-importing country reinforce the incentive for that country to introduce environmental policy, though this policy will be strategically distorted to partly substitute for the tariff. Despite its strategic character, this environmental policy programme will unambiguously enhance global welfare if it is introduced in conjunction with tariff reductions. We conclude that, although the multifunctionality argument may lend some support to the criticism of trade liberalisation, the argument is not solid when trade liberalisation induces the introduction of environmental policy.agricultural trade, agricultural multifunctionality, strategic environmental policy, welfare economics

Assessing the performance of conservation auctions: an experimental study

Building on available theory, this work uses controlled laboratory experiments to investigate the budgetary and the economic performance of competitive tenders for allocating conservation contracts to landholders. Experiments have been replicated in two different countries to check for robustness of results. We find that auctions outperform the more traditional fixed-price programs only in the one-shot setting. With repetition, the auctions quickly lose their edge. The budget-constrained auction performs similarly to the target-constrained in the one-shot setting but appears more robust to repetition. Our results suggest that previous estimates of conservation auction performance are too optimistic, and we propose a method for improving such estimates.Resource /Energy Economics and Policy,

AGRICULTURAL TRADE LIBERALIZATION AND STRATEGIC ENVIRONMENTAL POLICY: A FORMAL ANALYSIS

This paper develops an extended general equilibrium model of international trade in order to analyze the welfare effects of agricultural trade liberalization if a large country influences its terms of trade by means of environmental policy. We derive globally optimal first-best and second-best environmental and trade policy combinations as a benchmark for assessing the trade-distorting character of strategically motivated environmental policies and demonstrate that if second-best rather than first-best policies are chosen as a benchmark the conclusions may differ not only in magnitude but also in direction. We further demonstrate that if a Pigouvian instrument is transformed into a strategic environmental policy, following trade liberalization, the global welfare effect is unambiguously positive. We thereby prove that the distorting effect of an optimal tariff is generally greater than that of a strategically motivated environmental policy.International Relations/Trade,

Agricultural Trade Liberalisation and Strategic Environmental Policy

We use an extended partial equilibrium trade model to derive optimal environmental policy responses to tariff reduction requirements and assess the impact of such policies on the welfare of trading partners. We find that countries which attribute preferential political weights to farmers' welfare have an incentive to implement environmental policies that deviate from the Pigouvian solution - even if production is not de facto linked to environmental externalities. We clarify the conditions under which trading partners do not gain from unilateral trade liberalisation if trade concessions are accompanied by strategic environmental policy changes. We postulate a role for the WTO in overseeing the process of domestic policy formulation.trade liberalisation, strategic environmental policy, multifunctionality, agri-environmental policy, WTO, Environmental Economics and Policy, D60, F11, F18, Q17,

AUCTIONING OUTCOME-BASED CONSERVATION CONTRACTS

This paper explores two ideas to enhance the performance of agri-environmental contracting schemes: linking contract payments to environmental outcomes and putting the contracts up for tender. This paper investigates whether there are any gains to be had by combining the benefits of both approaches. Controlled lab experiments were run in two countries, systematically varying the rate at which payments are linked to environmental outcomes. This paper clarifies the conditions under which the benefits from combining tenders with incentive payments outweigh the costs.Conservation tenders, auctions, incentive contracts, agricultural policy, environmental policy, market-based instruments, experimental economics, Auktionen, Ausschreibungsverfahren, Agrar-Umweltverträge, Agrar-Umweltpolitik, Anreizverträge, experimentelle Ökonomie, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Demand and Price Analysis, Political Economy,

ORGANIC OR CONVENTIONAL? OPTIMAL DAIRY FARMING TECHNOLOGY UNDER THE EU MILK QUOTA SYSTEM AND ORGANIC SUBSIDIES

Organic farming, EU milk quota, Data Envelopment Analysis, subsidy payments, Agricultural and Food Policy,

Should we combine incentive payments and tendering for efficiently purchasing conservation services from landholders?

Policy makers aiming to get private landholders to provide non-marketed environmental services need to provide efficient economic incentives. Two ideas have been explored to achieve this: linking contract payments to environmental outcomes and putting the contracts up for tender. This paper investigates whether there are any gains to be had by combining the benefits of both approaches. Landholder risk aversion may offset incentive effects if the fall in participation outweighs any increases in individual effort. Using controlled lab experiments in two countries and across four subject groups, and systematically varying the rate at which payments are linked to uncertain outcomes, this paper clarifies the conditions under which incentives overcome risk-aversion – a parameter which was also measured. Results show that for risk averse landholders the most efficient approach is in general to tender contracts only moderately linked to environmental outcomes – that is, using a balanced combination of fixed input payments and of payments linked to uncertain outcomes. This paper also highlights how experiments can complement the inherent limitations of a purely theoretical analysis.Conservation tenders, auctions, incentive contracts, agricultural policy, environmental policy, market-based instruments, experimental economics, Agricultural and Food Policy, Environmental Economics and Policy,

ESTIMATING NON-CONCAVE METAFRONTIERS USING DATA ENVELOPE ANALYSIS

In this article we propose non-concave metafrontiers for estimating the inefficiency among production functions which do not necessarily belong to the same technology. In this case, estimating a joint production by literature approaches might be inappropriate. We call this inefficiency technological inefficiency and suggest Data Envelopment Analysis to construct a metafrontier production function which consists only of parts of different (group) frontier production functions. Thus, in contrast to the common literature our metafrontier does not need any assumptions additional to the group production functions. We illustrate our approach by means of a large sample of differently diversified crop farms. Results show that the literature approach overestimates the technological inefficiency in our sample for 75% of the observations and on average up to 7%-points in a diversification class of farms.Efficiency analysis, Metafrontier production function, Data Envelopment Analysis, Production Economics,