Economics of riparian beneficial management practices for improved water quality: A representative farm analysis in the Canadian Prairie region

Abstract

This paper examines the economics of adopting agricultural beneficial management practices (BMPs) to protect riparian areas in the Canadian Prairies. Monte Carlo simulation methods and cost/benefit analysis (net present value) are used to evaluate BMP adoption for a set of representative cropping and mixed farm operations in Alberta and Saskatchewan. BMPs considered in the analysis involve restoration, maintenance and/or protection of riparian areas and associated wetlands. Implementation of these BMPs by the representative farms is generally costly, resulting in negative net benefits. This is primarily due to opportunity costs from forgone returns and BMP establishment costs. The farm level results are combined with estimates of public values for riparian ecosystem services using the Pannell land use policy framework. Results indicate that in many cases, positive incentives, such as subsidies or conservation auctions, are appropriate policy responses to encourage increased production of riparian/wetland ecosystem services. Given the uncertainty in public and private benefit estimates, it may also be the case that no intervention is the optimal policy response in some instances. There is significant scope for further research in order to obtain better estimates of benefits and costs associated with riparian area management.Ce travail étudie les gains économiques obtenus en adoptant de meilleures pratiques agricoles de management (MPAMs) pour protéger les zones riparienne des Rocheuses Canadiennes. Nous combinons les méthodes statistiques de Monte Carlo et une analyse coût/bénéfice (valeur présente nette) pour évaluer l'adoption de meilleure pratiques pour un échant-illon représentatif de fermes céréalières dans l'Alberta et la Saskatchewan. Les MPAMs considérées dans notre analyse impliquent la restauration, le maintien et/ou la protection des zones riparienne et des marais qui leur sont associés. La mise en place d'une MPAM est en général couteuse et réduit les bénéfices nets. Cette réduction est en grande partie due aux coûts de mise en oeuvre de la MPAM et à la perte nette d'exploitation qui résulte de la MPAM. En nous aidant du cadre règlementaire de l'utilisation des terres développé par Pannell, les résultats obtenus à l'échelle de la ferme sont combinés avec les estimations des valeurs publiques pour des services des écosystèmes riparien. Nos résultats montrent que dans de nombreux cas des incitations positives telles que des subventions ou des enchères de conservation sont nécessaires pour encourager la production de services obtenus grâce aux écosystèmes riparien. Dans certains cas, étant donnée l'incertitude, il est possible qu'il soit optimal de ne pas intervenir du tout. Notre étude montre aussi l'importance de continuer les travaux de recherche dans le management des zones ripariennes.

What factors influence the effectiveness of financial incentives on long-term natural resource management practice change?

“…It is a reality that most landholders are under financial pressure to make an income from their land, and that some of the recommended practice changes do come at a financial cost. Some environmental practices are costly to farmers because they take land out of production (such as re-vegetation), or they are costly to implement with minimal or no return on investment (such as the materials and labour for fencing off riparian zones) (Aarons et al 2013;Jeffrey et al 2014). Sustainable practices that do bring about some production benefit or save landholders time and money are often adopted by landholders voluntarily.…”

Applications of water economics and policy in Canada

“…The last two papers employ different approaches to evaluate the adoption of beneficial management practices in three Prairie provinces: Alberta and Saskatchewan (Jeffrey et al 2014) and Manitoba (Mann et al 2014). Jeffrey et al (2014) employ Monte Carlo simulation methods to construct net present value estimates that would be associated with the adoption of wetland and riparian restoration and protection measures.…”

“…Jeffrey et al (2014) employ Monte Carlo simulation methods to construct net present value estimates that would be associated with the adoption of wetland and riparian restoration and protection measures. They combine farm-level results for representative cropping and mixed farm operations with estimates of public values for improvements to ecosystem services.…”

Environmental Stewardship and Technical Efficiency in Canadian Prairie Canola Production

“…However, the resulting effects of BMP adoption on farm economic performance are uncertain. Limited evidence suggests that many BMPs contribute to lower returns for producers due to direct costs (e.g., fencing riparian areas) and/or opportunity costs (e.g., lost production due to restored wetland) associated with adoption (e.g., Jeffrey et al ).…”