Deciding with long-term environmental impacts: what role for discounting?

The problem of how to discount values in the far future is reviewed, and shown to lead down a blind alley. An alternative is proposed that allows long term consequences to be addressed by decisions using a relatively short term time horizon. A simple model investigating the optimal containment of radioactive waste in a deterministic world is used to show that current generations can indeed cater for the interests of the far future while optimising over the short term; however, this is not always possible. The proposed method seems to address most of the critiques of long term discounting found in the literature.Environmental Economics and Policy, Research Methods/ Statistical Methods,

Alternative Policies with Complementary Benefits: Targeting Greenhouse Emissions or Water Recharge on Farming Systems?

Policies introduced to address one environmental objective can often have the side-benefit of also addressing other environmental objectives. This analysis uses a whole farm bioeconomic model to explore the farm level implications, economic and environmental, of a policy initially designed to reduce greenhouse emissions. We model a regulatory policy which imposes an upper limit on farm greenhouse emissions but allows trees to be used as carbon sinks to offset emissions. The implementation of this policy causes a reduction in whole farm profit, but in addition to decreasing emissions it also decreases groundwater recharge from the farming system and therefore contributes to the prevention of dryland salinity. The analysis compares this approach with using a recharge restriction policy to achieve recharge and emissions reductions. The analysis finds that the position of trees in the landscape affects the extent to which groundwater recharge can be reduced for a given reduction in emissions and that there is a three-way trade-off between profit, emissions reduction and recharge.Environmental Economics and Policy,

Captive insurance companies and the management of non-conventional corporate risks

We examine under what conditions setting up a captive insurance company with reinsurance is an optimal solution for risk-averse firms when the insured firm, the insurer and the reinsurer do not know the probability distribution of some risks, and have conflicting estimates of this distribution.corporate insurance, reinsurance, uncertainty, ambiguity, non-conventional risks, captive insurance companies, Risk and Uncertainty, D81, G22, Q2,

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,

A Methodological Approach to the Spatial Aggregation of Values

A Choice Modelling (CM) experiment is developed with the purpose of gaining some insight on how to identify the relevant population for the valuation of an environmental asset. The experiment is based on a survey of Perth residents over the values they attach to Kings Park, the largest urban park in Western Australia, 4/5 of which is native bushland. We design the experiment in order to isolate NUVs form UVs so that trade-offs between attributes of the asset imply tradeoffs between Use Values, Non-Use Values and money. One can then estimate the coefficients for each attribute and analyse the effect of distance on patterns of use. Preliminary results are obtained using data from a pre-survey trial of the questionnaire.Environmental Economics and Policy,

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,

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,

The impact of price and yield risk on the bioeconomics of reservoir aquaculture in north Vietnam

A bioeconomic model of reservoir aquaculture in northern Vietnam is used to investigate the impacts of price and yield risk on the level, variability and skewness of expected net revenue and utility. Prices and yields are assumed to follow lognormal and beta distributions, respectively. Net revenue follows a generalized gamma distribution and is found to be very risky compared with similar enterprises elsewhere, mainly due to the relatively high yield risk. This represents the nascent nature of the industry in Vietnam and the opportunity for efficiency improvements. Increasing production capacity (through increasing reservoir size, stocking density, production cycle length and harvest rate) are found to increase profits and decrease the variability of profits. Species diversification was found to reduce the riskiness of the enterprise.bioeconomic modelling, price risk, yield risk, aquaculture, Vietnam, Resource /Energy Economics and Policy,

The dynamics of phase farming in dryland salinity abatement

Farm Management, Land Economics/Use,

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,