Yearly Archives: 2018

316 – Resources for agri-environmental schemes

I’ve been asked to present a talk in Ireland in two weeks, on the topic “The Design of Effective Agri-Environment Schemes”. In putting the talk together, it struck me that I (with help from colleagues) have developed quite a few resources in this space, so I’ve collected them on a new web site to make them easily accessible.

Agri-environmental schemes (or programs or policies) aim to reduce the adverse impacts of agriculture on the environment. There are many such schemes around the world, but often they are not very efficient or effective. We could often do a lot better if we did a smarter job of designing and implementing these schemes.

Not that it’s easy. There are so many aspects to consider: the effectiveness of different practices at reducing environmental damage, their attractiveness (or otherwise) to farmers, the mechanisms to be used to promote the best practices, the costs and risks of different approaches, which environmental issues are the priorities, and so on. In my view, most designers of agri-environmental schemes don’t appreciate what a difficult task they are trying to do, and make do with relatively quick and dirty approaches to the design.

The resources I’ve included on the web site address a wide range of relevant issues, including:

  • Lessons from past agri-environmental schemes
  • The selection of appropriate policy mechanisms
  • Measuring environmental values
  • Ranking projects, including the choice of an appropriate metric
  • Additionality
  • Understanding and predicting farmers’ adoption of new practices
  • Dealing with uncertainty and including systems for learning from experience
  • The need to pull off that together in a coherent framework

It includes journal articles, books, reports, frameworks, computer tools, web sites, and blog posts, plus links to my free online course on “Agriculture, Economics and Nature”.

Overall, if an organisation wanted to design and deliver an agri-environmental scheme that would really deliver outcomes, they could benefit greatly from the material on this site. The URL is www.resources4aes.net.

Further reading

Pannell, D.J. (2008). Public benefits, private benefits, and policy intervention for land-use change for environmental benefits, Land Economics 84(2): 225-240. Full paper (140K) * IDEAS page

315 – Shark conservation and demand for tourism in the Maldives

As I’ve noted previously, diving with wild sharks is a growing tourism industry. It has the potential to increase the demand for shark conservation, in order to maintain the economic benefits to tourism operators, and the benefits to tourists. Here we quantify these benefits in the Maldives, as well as the cost of worsening conservation.

The Republic of the Maldives is a small island nation in the central Indian Ocean. The country is composed of about 1200 islands of which 200 are inhabited, around 122 are assigned as resort islands, and the remainder are uninhabited.

Tourism dominates the nation’s economy, accounting for 27% of the gross domestic product in 2014. Diving and snorkelling are the most popular activities of tourists.

In 2010, a shark sanctuary was implemented in the Maldives when the declining status of shark fisheries and concerns over decreased shark sightings from divers encouraged the government to announce a total ban on shark fisheries in its waters. Today, shark populations are recovering in most, but not all, atolls.

However, the new regime is not without challenges. One is the ability of the government to actively enforce the ban on shark fishing. Another is the fact that it is still legal to sell shark jaws and teeth in tourist shops, creating an incentive for illegal fishing. Reef fishermen don’t like sharks eating their potential catch, and have been observed killing them.

On the other hand, conserving sharks is in the interests of dive operators and resorts.  Some resorts report illegal fishing activities to authorities and refuse to buy fish from fishermen that have landed sharks.

Led by PhD student, Johanna Zimmerhackel, we  investigated the link between shark conservation actions and economic returns from diving tourism. A survey-based approach (travel cost combined with contingent behaviour) was used to estimate the dive trip demand under different management scenarios.

Our results show that increasing shark populations could increase dive-trip demand by 15%, raising dive tourists’ welfare by US$58 million annually. This could result in annual economic benefits for the dive-tourism industry of more than US$6 million.

Conversely, in scenarios where shark populations decline from their current levels, where dive tourists observe illegal fishing, or if dive operators lack engagement in shark conservation, dive trip demand could decrease by up to 56%. This decline causes economic losses of more than US$24 million annually to the dive tourism industry.

These results highlight the dependence of the shark-diving industry on the creation and enforcement of appropriate management regimes for shark conservation. These results are important given the shameful over-exploitation of sharks in many parts of the world, particularly to satisfy the pointless demand for shark fins (flavourless cartilage) for shark-fin soup in Asia.

Further reading

Zimmerhackel, J.S., Rogers, A.A., Meekan, M.G., Ali, K., Pannell, D.J. and Kragt, M.E. (2018). How shark conservation in the Maldives affects demand for dive tourism, Tourism Management 69, 263-271. Journal web page  NOTE: The journal article can be downloaded for free, without subscription, until August 15.

Zimmerhackel, Johanna S & Pannell, David J & Meekan, Mark & Kragt, Marit E & Rogers, Abbie, (2016). Diving Tourism and Fisheries in Marine Protected Areas: Market Values and New Approaches to Improve Compliance in the Maldives Shark Sanctuary, Working Papers 243921, University of Western Australia, School of Agricultural and Resource Economics. IDEAS page

314 – ADOPT goes online

ADOPT is the Adoption and Diffusion Outcome Prediction Tool. It is now available as an online version, replacing the spreadsheet that has over 1000 users.

I’ve previous talked about how agricultural scientists, extension agents, policy makers and suppliers need to be able to predict how farmers will respond to a new practice or technology (PD203). How many farmers will adopt the new practice, and how quickly will they do so? This knowledge can influence research priorities, reserach funding decisions, the design and emphasis of extension campaigns, and the effectiveness of agricultural policies.

Although there is any amount of research exploring factors that influenced past adoption of novel practices by farmers, there has been very little effort to convert all that knowledge into a prediction tool.

A team of us developed ADOPT to fill that gap. There have been over 1000 downloads of the spreadsheet tool we developed, which comes in two versions: for developed and developing countries.

Now we have released an online version that superscedes the spreadsheet version for developed countries (we’re still working on the developing-country online version). It has a number of new features that make it even more useful and informative.

If you’d like a to investigate it, head over to adopt.csiro.au. You’ll need to create an account, and then you can explore the tool for free.

There is also an option to register for a full license, costing A$49, which gives you access to more results, a project report, and an unlimited number of assessments for one year.

Meanwhile, our journal paper about ADOPT in Agricultural Systems continues to be in their top 10 most downloaded papers (as of 9 June 2018). There have been around 10,000 downloads of the paper since it went online in late 2017. Feel free to get one yourself – it’s free and doesn’t require a subscription.

Further reading

Kuehne, G., Llewellyn, R., Pannell, D.J., Wilkinson, R., Dolling, P., Ouzman, J. and Ewing, M. (2017). Predicting farmer uptake of new agricultural practices: a tool for research, extension and policy, Agricultural Systems 156, 115-125. Journal web page * Ideas page

313 – Joining the dots versus growing the blobs

For the recent AARES conference in Adelaide, Maksym Polyakov did a wonderfully creative poster presenting our research on optimal targeting of ecological restoration.

There is a small image of the poster below, but if you want to see the details, go here. (Scroll down when you get there to see the poster.)

Not surprisingly, it won the prize for the best poster at the conference.

Abstract

The primary causes of biodiversity decline worldwide are habitat destruction, alteration and fragmentation resulting from human economic activities such as agriculture or property development. Public- and private-sector organizations allocate considerable resources to slow down biodiversity decline by developing conservation networks that preserve the remaining habitat. In this study we use simulation to compare several strategies to spatially target ecological restoration effort to create conservation networks, on private lands in a fragmented agricultural landscape. The evaluated targeting strategies are aggregation, connectivity and representativeness. The effectiveness of these targeting strategies is compared to the effectiveness of ecological restoration without targeting. We allow for heterogeneity of landowners’ willingness to participate in restoration projects and explicitly assume that that not all parcels within target areas will be restored. We model the probability of participation in restoration projects as a function of the private benefits of ecological restoration captured by the landowner. The results of the simulation are analyzed using regression analysis. Our results suggest that effectiveness of the targeting strategies depends on landscape characteristics (level of fragmentation) and species characteristics (habitat requirements and area of home range). On average, when uncertainty about whether landowners will participate is considered, for most analyzed species, the aggregation strategy outperforms the connectivity strategy with the representativeness strategy performing worst. This is contrary to the findings of previous studies and Government policy, that connectivity is the most effective strategy in fragmented landscapes. Accounting for the landowners’ behavior through a private benefits function improves the biodiversity outcome for most species.

312 – The economics of nitrogen in agriculture

The global challenge of feeding seven billion people would be more difficult without nitrogen fertilizer, but it causes pollution of rivers, lakes and coastal waters around the world, and it contributes to emissions of greenhouse gases. It increases the profitability of individual farmers, but it is over-applied in many cases, wasting money and needlessly worsening environmental problems.

These are, in large part, economic issues. In a recent paper I attempted to summarise the large and diverse research literatures on the economics of nitrogen in agriculture. Here are some of the key points.

At the farm level

The production function for nitrogen (N) fertilizer (the relationship between yield and the rate of nitrogen fertilizer) always exhibits diminishing marginal returns – it flattens out at higher fertilizer rates. In dry conditions, yield may even fall at high N rates.

The rate of nitrogen fertilizer that maximises expected profit is less than the rate that maximises expected yield, sometimes much less.

Here’s a really neat tool that shows the relationships between N, yield and profit for corn in the US. http://cnrc.agron.iastate.edu/

Visual effect of nitrogen fertilizer on corn

Risk

N fertilizer affects the riskiness of cropping. For two reasons, higher N rates are more risky (i.e. profits are more variable at higher N rates). One reason is that the grain price is itself risky. Since profit depends on grain price times yield, and yield usually increases with increasing N rate, the more N you apply, the more variable your profit will be. In addition, yield also tends to be slightly more variable at higher N rates.

Flat payoff functions

There always exists a range of fertilizer rates that are only slightly less profitable than the profit-maximising rate (i.e. a range where the payoff function is relatively flat), and in most cases, that flat range is wide. This means that the farmer has flexibility in choosing the fertilizer rate. If a lower rate would better satisfy another objective (e.g. risk reduction), the farmer can choose that rate with little sacrifice of profit. If regulators require a moderate reduction in fertilizer rate below the farmer’s economic optimum, the cost to the farmer will be small. Flat payoff functions also mean that the benefits of precision-agriculture technologies that spatially adjust fertilizer rates within a field will usually be small.

Nitrogen pollution

Typically, the marginal cost to farmers of nitrogen emissions abatement is low for low levels of abatement but increases at an increasing rate as the required level of abatement increases. As a result, modest targets for abatement can often be achieved at low cost, but ambitious targets can be extremely costly.

Spatial targeting of abatement effort (both at the regional and international scales) can generate much larger benefits than untargeted policies, although these additional benefits are likely to be offset to some degree by increased costs required to run a targeted program (costs of information and administration).

Policies intended to increase farmers’ incomes can have the unintended consequence of increasing nitrogen pollution by increasing the incentive to apply fertilizer.

Further reading

Pannell, D.J. (2017). Economic perspectives on nitrogen in farming systems: managing trade-offs between production, risk and the environment, Soil Research 55, 473-478. Journal web page

Gandorfer, M., Pannell, D.J. and Meyer-Aurich, A. (2011). Analyzing the Effects of Risk and Uncertainty on Optimal Tillage and Nitrogen Fertilizer Intensity for field crops in Germany, Agricultural Systems 104(8), 615-622. Journal web page ♦ IDEAS page

Schilizzi, S. and Pannell, D.J. (2001). The economics of nitrogen fixation, Agronomie 21(6/7), 527-538.

Pannell, D.J. and Falconer, D.A. (1988). The relative contributions to profit of fixed and applied nitrogen in a crop‑livestock farm system, Agricultural Systems 26(1), 1‑17. Journal web page ♦ IDEAS page

Pannell, D.J. (2006). Flat-earth economics: The far-reaching consequences of flat payoff functions in economic decision making, Review of Agricultural Economics 28(4), 553-566. Journal web page ♦ IDEAS page