The design of agri-environmental schemes: Farmers preferences in southern Spain

Agri-environmental schemes (AES) play a key role in promoting the production of environmental public goods by European Union agriculture. Although extensive literature has analyzed AES, some important issues remain understudied. This paper performs an ex-ante assessment of AES in permanent cropping, analyzing several issues that have received little attention from researchers, such as ecological focus areas (EFA) and collective participation. For this purpose, a choice experiment was used to assess farmers&rsquo; preferences towards AES in a case study of olive groves in southern Spain. Results show high heterogeneity among farmers, with different classes being identified, from potential participants to non-participants. As regards EFA, almost half of the farmers would be willing to accept it for low monetary incentives (&euro;8-9/ha per additional 1% of the farmland devoted to EFA) while the rest would do it for moderate-to-high monetary incentives (&euro;41-151/ha per additional 1% of EFA). However, for a high share of EFA (e.g., 5-7%) higher incentives would presumably be required due to the intrinsic spatial restrictions of olive groves. With regard to collective participation, we find that it is unlikely that farmers would participate collectively with the incentive of the up-to-30% EU-wide bonus. These results are relevant for policy-making now when new AES are being designed for the next programming period 2014-2020.Los programas medioambientales son un instrumento clave para la provisi&oacute;n de bienes p&uacute;blicos de car&aacute;cter ambiental. En este trabajo utilizando los experimentos de elecci&oacute;n se determina el grado de adopci&oacute;n seg&uacute;n el tipo de sistema de olivar. Los resultados indican que casi la mitad de los olivareros estar&iacute;an dispuestos a dedicar el 2% a Superficie de Inter&eacute;s Ecol&oacute;gico (SIE) por reducidos incentivos monetarios. Para una adopci&oacute;n entre 5-7% se requerir&iacute;an elevados incentivos.</p

Factors explaining the adoption of risk management instruments in mediterranean irrigated agriculture

Agriculture is highly impacted by different sources of risk. There is a wide variety of management instruments that farmers can use to cover these risks. The objective of this paper is to analyze the explanatory variables for the simultaneous adoption of a large set of risk management instruments. The main innovation is the methodological approach: first, we apply a hierarchical cluster analysis to identify the groups of instruments whose adoption is correlated; second, we use multivariate probit models to analyze the influence of different factors on the simultaneous adoption of the instruments included in each cluster. Explanatory variables capture farmers’ socio-demographic features, perception of risks, risk aversion and subjective perception of past risk experience; farms’ technical-economic characteristics; and perception of local-level climate change. The results show that there are significant differences in the variables influencing the adoption of the risk management instruments. The findings provide useful information to support the decision-making process for three main stakeholders: farmers (optimal choice over the joint use of instruments), providers of agricultural risk management instruments (e.g., the design of new combinations of risk management instruments better targeted to distinct profiles of farmers), and policymakers (policy strategies aiming to promote better risk management within the agricultural sector)

Retos y oportunidades de la implantación de los bancos de agua en España

Con el fin de conseguir una buena gobernanza del agua, que trate de alcanzar un equilibrio entre los objetivos de eficiencia económica y sostenibilidad ambiental, durante las últimas décadas se ha potenciado el uso de instrumentos económicos para una mejor gestión de la demanda de los recursos hídricos, dada la dificultad de seguir aumentando la oferta de los mismos. En este contexto, este trabajo se centra en los bancos de agua como mecanismo de mercado que aporta la necesaria flexibilidad institucional en la asignación de los recursos hídricos entre los diferentes usuarios. La investigación realizada en este sentido ha permitido desarrollar una tipología de los bancos de agua que actualmente operan a nivel mundial en base a sus características operativas. Esta caracterización ha permitido igualmente realizar un análisis crítico de las experiencias de bancos de agua implementadas hasta la fecha, con el fin poder valorar el desempeño de este instrumento económico para la mejora de la gestión pública del agua. La investigación llevada a cabo revela que los bancos de agua son un instrumento útil para la gestión de los recursos hídricos, aportando sugerencias para la mejora de su implementación operativa en España mediante la correspondiente reforma de la Ley de Aguas.Ministerio de Economía y Competitividad (MINECO) AGL2013-48080-C2-1-RFondo Europeo de Desarrollo Regional (FEDER) AGL2013-48080-C2-1-

The predictive power of farmers’ risk attitude measures elicited by experimental methods

Aim of study: Farmers’ behavior is shaped by their individual attitudes towards risk. Consequently, an understanding of the heterogeneous risk attitudes among farmers is key to predicting their decision-making. Therefore, there is a need for reliable methods to assess individuals’ risk attitudes. The main objective of this paper was to contribute to the existing literature about the external validity of risk attitude measures obtained with diverse experimental methods.Area of study: Irrigated agriculture in a Mediterranean climate region.Material and methods: Two different experimental methods widely applied in the agricultural sector were used to elicit farmers’ risk attitudes in a sample of irrigators in southern Spain: the Eckel and Grossman lottery-choice task and a self-assessment general risk question. We evaluated the explanatory power of both measures for the farming risk borne by farmers, using an approach based on dispersion measures of farming returns.Main results: Results revealed stability across these elicitation methods, but the study yielded no evidence of statistical correlation with the farming risk actually borne by farmers, suggesting that it may not be advisable to use these methods for directly predicting farmers’ decision-making in modeling exercises.Research highlights: The most relevant innovation of this paper was the validation approach followed, based on measures assessing the overall level of farming risk borne by individual producers, and the complementary analyses controlling for key variables that could affect farmer risk-taking

Precautionary savings as an instrument to hedge the risk of hydrological drought in irrigated agriculture

This paper explores the use of precautionary savings as a new risk management instrument that can be implemented to hedge hydrological drought risk in irrigated agriculture, a risk currently not covered by any policy instrument. For this purpose, the Drought Savings Account (DSA) is proposed as a personal savings account to which farmers make regular contributions, with withdrawals allowed in the event of irrigation water supply gaps in order to guarantee a minimum income. The implementation of the DSA is empirically assessed in a Mediterranean-climate irrigation district using an innovative simulation approach. Based on the results obtained, the DSA has proved to be a theoretically suitable policy instrument that can overcome the problems hindering the implementation of agricultural insurance, managing the risk in a more cost-effective way. This cost-effectiveness is a key advantage of precautionary savings over agricultural insurance, since the former instrument minimizes moral hazard and adverse selection problems, and the transaction costs of risk-sharing. Moreover, in this context, precautionary savings may play a significant role as an efficient climate change adaptation measure since the self-insurance strategy adopted does not distort the signals underlying farmers’ own risk exposure, leading to better individual assessment and an adequate management of water supply gaps

Agricultural Water Allocation Under Cyclical Scarcity: The Role of Priority Water Rights

Water is becoming an increasingly scarce resource worldwide, suggesting that water rationing methods should be revised to improve water allocation efficiency, especially during cyclical scarcity events (droughts). The proportional rule is the most widely used rationing method to allocate water in cases of water scarcity. However, this method fails to achieve Pareto-efficient allocation arrangements. Economic theory and international experience demonstrate that implementing security-differentiated water rights could improve allocative efficiency during cyclical scarcity periods. Moreover, it has been proven that this kind of priority rights regime is an efficient instrument to share risks related to water supply reliability, and can thus be considered as an adaptation measure to climate change. This evidence has enabled the development of an operational proposal for the implementation of security-differentiated water rights in the irrigation sector in Spain, as an alternative to the current rights based on the proportional rule. This proposal draws on the Australian case study, which is the most successful experience worldwide. Nevertheless, the insights obtained from the analysis performed and the proposal for reforming the water rights regime are applicable to any country with a mature water economy

Priority Water Rights for Irrigation at the River Basin Level. Do They Improve Economic Efficiency During Drought Periods?

This paper assesses the potential efficiency gains of reforming the water rights regime in the Spanish agricultural sector by replacing current allocation procedures based on the proportional rule with a priority allocation procedure based on two tiers of security-differentiated water rights. This assessment is useful for evaluating whether said change in water rights can be considered a suitable policy instrument to improve water management during droughts events. For this purpose, a mathematical programming model is built to simulate the performance of the proposed reform. The empirical analysis is implemented at the basin scale, where water rights holders are highly heterogeneous, considering different climate scenarios accounting for changes in water supply reliability. The Guadalquivir River Basin (GRB) in southern Spain is used as a case study. The results obtained show that this change in the water allocation regime would yield only modest economic efficiency gains under the current climate scenario. However, it is also evidenced that this policy instrument could play a more relevant role as an efficiency enhancer in a climate change scenario, given that more frequent and intense drought episodes are expected. Moreover, priority rights represent an interesting risk management instrument for farmers, allowing the most vulnerable farmers to reduce income volatility. These findings suggest that the combined implementation of the proposed shift in the allocation regime with spot or allocation water markets would lead to successful outcomes, significantly improving drought management in the irrigation sector

Priority water rights. Are they useful for improving water-use efficiency at the irrigation district level?

This paper examines the effectiveness of reforming water rights regimes in the agricultural sector by replacing allocation procedures based on the proportional rule with the implementation of a priority rule that establishes security-differentiated water rights. The main objective is to assess whether this change improves the economic efficiency of water allocation at the irrigation district level, particularly during cyclical scarcity events. To this end, a Positive Mathematical Programming model is built to simulate the performance of the proposed reform in an irrigation district in southern Spain. The results show that the efficiency gains brought about by this change are very small, which casts doubt on its ability to improve water-use efficiency in the agricultural sector at the local level (i.e., irrigation district) under current local climate and water availability conditions. In any case, further research is needed to assess the suitability of this change in allocations rules at basin scale with greater farm heterogeneity, especially given the likelihood of more frequent, more intense droughts due to climate change

Self-financed water bank for resource reallocation to the environment and within the agricultural sector

In closed river basins, economic activities commonly threaten instream flows, especially during drought episodes. In such situations, a suitable policy option is to recover water for the environment by purchasing water allocations from farmers through a water bank. However, the purchase of temporary water rights strongly depends on the public budget available for this purpose. We propose a self-financed water bank with the twofold objective of reallocating water within the agricultural sector and recovering a share of the purchased water for the environment. The main feature of this water bank is that it will operate in a monopsony-monopoly setting, using its market power to recover water for environmental purposes, and working with a balanced budget (expenditure on purchases will equal revenues from sales). A mathematical programming model is developed to simulate the potential performance of the proposed water bank in the Guadalquivir River Basin (southern Spain), considering society’s demand for environmental water and different water scarcity scenarios. Results show that a maximum of between 5.8% and 10.4% of total water availability can be recovered for the environment, depending on the severity of the drought, while total economic efficiency is increased, yielding a beneficial result for farmers and society