Agri-environmental schemes: Adverse selection, information structure and delegation

Canton, Joan; Cara, Stéphane de; Jayet, Pierre-Alain

doi:10.1016/j.ecolecon.2009.02.007

Cited by 23 publications

(16 citation statements)

References 23 publications

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“…Further refinement of the models and a field experiment would be necessary precursors to deciding which allocation method is eventually implemented to ensure these issues, as well as the impacts of monitoring costs and the possibility of perverse outcomes, were considered (Sisk, Castellanos, Alejandro, & Koch, 2007;Zabel & Roe, 2009). The level of targeting has important implications for which participants do best out of a given scheme and so directly affects the inequality of a scheme (Canton et al, 2009). However, as long as the payment scheme process is perceived as fair, unfairness in the outcome of that payment scheme may be more acceptable (Prager & Freese, 2009).…”

Section: Discussionmentioning

confidence: 99%

Improving private land conservation with outcome‐based biodiversity payments

McDonald

Helmstedt

Bode

et al. 2018

Journal of Applied Ecology

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Payments to private landholders for providing biodiversity land can improve conservation outside protected areas. Input‐based payments are widely used despite evidence they are often ineffective at improving biodiversity outcomes. Meanwhile, little has been done to assess how to use outcome‐based payments to maximize biodiversity, despite growing academic interest. We compare different outcome‐based allocation methods to assess which returns the greatest benefits for biodiversity. We predicted the likely landholder actions in response to outcome‐based payments. We incorporated strategic interactions between landholders under four different funding allocation methods: the commonly applied “set‐price” allocation method; capacity‐based payments; proportional payment; and payment for change. We compared biodiversity outcomes (percentage change in abundance of a species of conservation interest), return on investment and cost‐effectiveness of each method. The set‐price allocation method, despite its common usage, is the least cost‐effective method that we test. Regardless of cost, it only results in better biodiversity outcomes than other methods under a very narrow range of conditions (high initial target species abundance and low profitability). The profitability of the property, and to a lesser degree initial population size, will influence which allocation method will perform best. Most perform well when the initial population of the species of conservation interest is very small and profitability negligible. Only one method—based on change in population—performs well across all scenarios. This method outperforms the others particularly when the property has a higher profitability and low initial numbers of animals. Policy implications. Pursuing conservation on private land using outcome‐based payments for biodiversity can result in varied levels of success depending on the allocation methods used to support payment decisions. Allocation method choice should be based on a transparent analysis that incorporates both the dynamics of the ecological system and interactions between individual landholders. This analysis can guide adoption of funding allocation methods that greatly increase biodiversity outcomes.

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Section: Discussionmentioning

confidence: 99%

Improving private land conservation with outcome‐based biodiversity payments

McDonald

Helmstedt

Bode

et al. 2018

Journal of Applied Ecology

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“…In case of individually negotiated payments, farmers may obtain such rents directly by claiming higher costs than the actual ones (Ferraro 2008). In case of flat rate payments, such rents can be generated by putting unproductive land into contracts (Canton, De Cara, and Jayet 2009;Quill erou and Fraser 2010). 5 The SSGES includes flat rate as well as top-up premiums.…”

Section: Negotiation Stagementioning

confidence: 99%

Does transaction costs expense create transaction gains for farmers participating in an agri-environmental scheme?

Weber

2014

Journal of Environmental Economics and Policy

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Participating in agri-environmental schemes (AES) induces transaction costs for farmers, originating from time and money spent on tasks related to participation. High transaction costs may inhibit scheme participation, which would endanger the environmental goals aspired. To date, farmers' transaction costs have been investigated from a cost-minimising perspective, implying fixed gains from participation. Nonetheless, participation contracts may contain negotiable parts. In such a case, especially, cost-constituting tasks undertaken by farmers' own attempts could serve gain-maximising: Farmers can utilise additional information to increase their transactional gain, namely the payment. This paper addresses this question by investigating transaction costs of farmers participating in a site-specific grassland extensification scheme in Hesse, Germany, which contains negotiable features. Upon insights from information economics and transaction cost economics, the study discusses possible gains and tests the impact of farm and scheme-related features on both absolute and relative transaction costs, the latter conceptualised as payment/total transaction costs ratio. Results reveal that a higher transaction costs expense goes in line with a lower payment/transaction costs ratio; however, higher transaction costs expense predominates for particular farms features indicating dependency on AES income. Thus, voluntary transaction cost expenses seem to serve as a safeguard for securing participation-related income.

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Section: Introductionmentioning

confidence: 99%

“…The international literature provides substantial evidence on how subsidy payments for voluntary conservation activities have been subject to baseline measurement issues that lead to adverse selection (Fraser, 1995;Ferraro, 2008Ferraro, , 2011Canton et al, 2009;Pattanayak et al, 2010;Arnold et al, 2013;Duke et al, 2013). Arnold et al (2013, p. 388) conclude that reverse auctions for payments for ecosystem services can produce "an extreme adverse selection" that delivers rents to landowners paid to do what they intended to do anyway.…”

Section: Introductionmentioning

confidence: 99%

Undermined by Adverse Selection: Australia's Direct Action Abatement Subsidies

Burke

2016

J of App Econs and Policy

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This paper examines the economic challenges faced by Australia's Direct Action abatement subsidy scheme. Introduced in 2014, the scheme operates by reverse auction, funding projects voluntarily proposed by the private sector. Because the Government cannot know true project counterfactuals, the lowest auction bids are likely to often be non‐additional “anyway” projects. The scheme is hence likely to exhibit a systematic skew towards low‐quality abatement. The paper presents a model of the adverse selection problem and describes the early experience with Direct Action. A discussion of a way forward is also provided.

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Agri-environmental schemes: Adverse selection, information structure and delegation

Cited by 23 publications

References 23 publications

Improving private land conservation with outcome‐based biodiversity payments

Improving private land conservation with outcome‐based biodiversity payments

Does transaction costs expense create transaction gains for farmers participating in an agri-environmental scheme?

Undermined by Adverse Selection: Australia's Direct Action Abatement Subsidies

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