Cost-effectiveness of wetlands as a nature-based solution to buffer phosphorus in Canadian landscapes

The tradeoff between environmental services of wetlands and alternative land uses is well-documented, but this literature is not well-integrated. We review four decades of Canadian literature on the role of wetlands in reducing the runoff of nutrients. While there were 47 studies focusing on the role of wetlands to reduce phosphorous emissions from different types of land use, 19 studies focused on the costs of wetlands protection and restoration. Only five studies focus on both the costs and effectiveness of wetlands for P removal in Canadian landscapes. A database is created containing a set of common variables to examine the key drivers behind differences in study outcomes. The methods of calculating and reporting costs across studies vary. The three most common types of costs are: (1) one-off capital expenditure, (2) recurring opportunity costs of displaced land uses, (3) total costs without clear specification of the composition and (4) other costs (i.e., nuisance costs). We annualize one off costs using the relevant useful life of wetlands and add it to the recurring opportunity costs and other costs to produce a measure total costs per year per hectare. We also calculate costs per kg of phosphorous retained as a measure of cost-effectiveness. Our preliminary results indicate that total costs per hectare per year vary by latitude, province, wetland type, size, type of landscape and source of pollution, and by total phosphorous reduction. Total costs tend to decrease with latitude, increase with wetland area and with total phosphorous reduction. However, phosphorous reduction cost effectiveness seems not to be statistically significantly dependent on latitude, phosphorous emission reduction level, or wetland type. Wetland size had a positive, statistically significant impact on the cost per kg of phosphorous reduction indicating that smaller wetlands are more cost-effective means of phosphorous emission reduction. There were several comparability challenges for costs and phosphorous reductions across studies including unclear definitions of cost functions and baseline scenarios. We describe those challenges and propose a standardized method for reporting costs and phosphorous emission reductions that would make future meta-analyses more effective.This research was undertaken thanks, in part, with support from the Global Water Futures Program funded by the Canada First Research Excellence Fund (CFREF)

Are There Adequate Incentives for Research and Innovation in the Plant Breeding Supply Chain?

The breeding supply chain has expanded with genomic technology to include basic research scientists and applied genomicists along with traditional plant breeders and farmers. Genomicists have focused on identifying specific DNA sequences or quantitative trait loci (QTL) that can be used as molecular markers. However, the use of molecular marker-assisted selection (MAS) by breeders in their programs requires the identified QTL to be reliably correlated with agronomically desirable traits. Replication research is critical for reducing the risk associated with the adoption of new marker-based (or QTL-based) selection strategies, but the applied scientists doing genomics research often do not have the incentives to do replication and other research required to verify the reliability of markers. The misalignment of incentives in the breeding supply chain can curtail the development of the projected advances in food production by genomics research. Using a sample of 24 genomic journals, we found more highly ranked journals tend to favor new research on identifying new QTL over replication research on previously identified QTL. Given that breeders will tend to adopt only those markers perceived to be reliable, the implicit lack of incentives for basic and applied genomic scientists to undertake replication research can impede agricultural innovation

Cost Structure of the Ontario Dairy Industry Revisited: Distributional Aspects

The initially stated objective of the Canadian dairy supply management–farm revenue risk reduction–has been met well by the program. However, it is less clear whether the program has served all farms equally well. Namely, it is not known how successful the program was in enhancing the cost-effectiveness of smaller farms. This paper uses the 2006 Ontario dairy farm-level accounting data to compare the estimated cost structure with that identified by Moschini (1988). Next, farm size and profit distribution changes are assessed. Finally, the paper provides a simple framework for examining the relationship between current farm size and quota purchases by individual farms. The results suggest that the general cost pattern identified in the early 1980s has been retained. Average cost declines as output increases at lower output levels. However, the minimum-cost farm size has increased about threefold. Additionally, both output and profit distributions have become more skewed, with a lesser contribution by smaller farms. There is evidence that the possibility of quota exchange facilitated the greater expansion of larger farms and that the process of divergence in size and profit between small and large farms is continuing. These results have bearing on the sustainability of smaller farms

Comparative Advantage: From an Individual to the Economy

This paper identifies an internal inconsistency in the Heckscher-Ohlin (H-O) models of international exchange. The inconsistency stems from assuming homogeneity of inputs within a population. This assumption annihilates individual comparative advantage, benefits from exchange and, consequently, existence of autarky prices. In order to remove this inconsistency, I build a two-good multi-individual model by using the microeconomic concept of individual comparative advantage stemming from differences in endowments of qualitatively heterogeneous inputs. The model shows how differences in the distribution of individual production possibilities result in individual specialization, exchange and differences in autarky prices between hypothetically isolated economies. Next, the effect of preference heterogeneity, learning by doing and supply restrictions is examined. In addition to bringing internal logical consistency into the theory of cross-border exchange by demonstrating how price differences between hypothetically isolated economies can be derived from the general neoclassical and Austrian subjectivist principles, this paper addresses the criticisms raised by the labour value theorists. The model can be refined to include comparative advantage in the production of capital goods and differences in the distribution of ownership over natural resources and capital goods. This theoretical approach to inter-local exchange has important policy implications. While the H-O framework lends itself well to conflicting interventionist policies of production allocation based on different interpretations of ambiguous aggregate data, the alternative microeconomic approach acknowledges the importance of the institutional setting in which individual comparative advantage, unknown to an external observer, is discovered, enhanced, and expressed

Comparative Advantage: From an Individual to the Economy

This paper identifies an internal inconsistency in the Heckscher-Ohlin (H-O) models of international exchange. The inconsistency stems from assuming homogeneity of inputs within a population. This assumption annihilates individual comparative advantage, benefits from exchange and, consequently, existence of autarky prices. In order to remove this inconsistency, I build a two-good multi-individual model by using the microeconomic concept of individual comparative advantage stemming from differences in endowments of qualitatively heterogeneous inputs. The model shows how differences in the distribution of individual production possibilities result in individual specialization, exchange and differences in autarky prices between hypothetically isolated economies. Next, the effect of preference heterogeneity, learning by doing and supply restrictions is examined. In addition to bringing internal logical consistency into the theory of cross-border exchange by demonstrating how price differences between hypothetically isolated economies can be derived from the general neoclassical and Austrian subjectivist principles, this paper addresses the criticisms raised by the labour value theorists. The model can be refined to include comparative advantage in the production of capital goods and differences in the distribution of ownership over natural resources and capital goods. This theoretical approach to inter-local exchange has important policy implications. While the H-O framework lends itself well to conflicting interventionist policies of production allocation based on different interpretations of ambiguous aggregate data, the alternative microeconomic approach acknowledges the importance of the institutional setting in which individual comparative advantage, unknown to an external observer, is discovered, enhanced, and expressed.Comparative advantage, Heckscher-Ohlin model, input heterogeneity, microeconomic foundations, International Relations/Trade, F11, D51,

Quota Prices as Indicators of Comparative Advantage in Supply Managed Industries

The Canadian Farm Products Agencies Act (2012) requires that comparative advantage be used to guide the allocation of new quota under supply management. This requirement, however, has not been met in practice. Agricultural economists have proposed several ways of making this legal requirement operational. We review and evaluate these proposed approaches and find that quota prices are the only direct measure of comparative advantage in supply managed industries. We develop an agent-based general equilibrium model of quota exchange to illustrate the use of quota prices as indicators of comparative advantage. Our approach complements the proposal by Meilke (2009) to use quota prices as indicators of comparative advantage in supply managed industries and also addresses the concerns of Larue and Gervais (2008) that quota prices may not be theoretically consistent with comparative advantage. We also discuss potential practical challenges of using quota prices as indicators of comparative advantage in the Canadian supply managed industries. Finally, we provide an example of calculating provincial shares of new quota using recent quota price data according to two prototype decision rules

Do farmers waste fertilizer? A comparison of ex post optimal nitrogen rates and ex ante recommendations by model, site and year

While there appear to be costs to farmers of over-applying nitrogen, there is evidence in many regions that farmers are applying nitrogen at levels that exceed those suggested by government extension services. A major reason why farmers would apparently waste money by applying more fertilizer than a crop can use is a perception that the general recommendations are not appropriate for their individual situations. In this paper we estimate the economically optimal rates for 7 Ontario sites over multiple years using four yield response functional forms to examine whether the profit-maximizing rates as determined at the end of the growing season (ex post optimal rates) are generally higher than recommended rates due to site, year, or yield response functional form differences. There was no statistical or economic basis for selecting one response model over another suggesting functional form choice or perception is not a reason for over-application. However, there was a great deal of variability found between the actual optimal rate for the season and the ex ante recommended rate, which is constant across seasons for a given site. While the recommended rate is higher than the maximum economic rate of nitrogen (MERN) on the majority of sites examined, the distribution is skewed due to a few large differences. When the recommended rate is lower than the ex post MERN in a given year, it tends to occur on less productive sites and is much lower. The pay-off function to alternative nitrogen rates is generally flat as the difference between the MERN and recommended was less than $10/ha on approximately one-third of the trials but there are large differences in the good years on less productive sites. Thus, the decision to apply more than average to take advantage of the good years is appropriate since the cost of over-application is low compared to the cost of under-application. While the pay off to soil testing for nitrogen and consequently variable rate application technology is brought into question, there appears to be significant value to information on the growing conditions for the upcoming season particularly on less productive sites. Another implication of the study is the need to have a sufficient range of application rates in nitrogen field trials for accurate estimation of the underlying response function.

Analyzing higher moments of nitrogen response for risk efficient fertilizer application in wheat and corn production

• The question of optimal fertilizer intensity has a long history and is still relevant from several perspectives. • While it is obvious that the optimal input use contributes to economic benefits for the farmer, understanding the economically optimal use of nitrogen fertilizer may help to address environmental policies more efficiently. • Literature shows that nitrogen (N) fertilizer applications to agricultural crops often exceed the rate recommended by officials or advisors. One possible explanation is farmers’ response to uncertainty. • This study contributes to this question based on long term crop response data in Canada and Germany