The cost-effectiveness of Agri-environmental Payments in Japan: An integrated Modeling Approach

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1 The cost-effectiveness of Agri-environmenta Payments in Japan: An integrated Modeing Approach Yu Nagamatsu, Katsuya Tanaka, Hiroaki Somura, Makoto Kimura, and Tomoya Kawaguchi 1. Introduction Agri-environmenta payments provide direct and indirect payments to farmers who adopt conservation practices on a vountary basis to improve environmenta and ecoogica conditions. Such payments are now viewed as a variety of payment for ecosystem services (PES) in the fied of agricuture. Agri-environmenta payments have gained an increasing attention recenty, as a viabe option for reducing damage to ecosystem services in both deveoped and deveoping countries. In Japan, nationwide agri-environmenta payment program has been impemented since It has been upgraded in 2011 and considered as the primary instrument in Agri-environmenta poicies in Japan. However, in both academic and practica perspectives, the cost-effectiveness of these agri-environmenta payments has not been we addressed. In genera, the payment can be cost-effective if (1) its costs are reasonabe to attract enough farmers, and (2) it enhances the ecosystem services to the desired eves. These conditions highy depend on the payment schemes and socio-economic and physica conditions of the watershed. There has been quite imited amount of studies that address these conditions empiricay in Japan. The objective of this study is to estimating empiricay the cost-effectiveness of the agri-environmenta payment in Japan. This is done by deveoping an integrated modeing framework that consists of the economic, river, and ake modes. The economic mode is an econometric and use mode for predicting the probabiities of farmers adoption of conservation agricuture under agri-environmenta payments. The mode uses the data from the farm survey on the stated preferences on actua and hypothetica agri-environmenta payments. The economic mode aso uses the spatia information of the and use in the watershed. Farmers adoption behaviors and resuting and use is simuated by the predicted probabiities of farmer s adoption decisions under different payment conditions. The resuting and use patterns are then used by the river mode to simuate the river water quaity. The river mode is based on the Soi and Water Assessment Too (SWAT). SWAT is a physicay-based continuous time hydroogic mode with an ArcView GIS interface. It was deveoped to predict the impact of and management practices on water, sediment, and agricutura chemica yieds in arge compex basins with varying soi types, and uses, and 1

2 management conditions over ong periods of time. SWAT has been widey appied for modeing watershed hydroogy and simuating the movement of non-point source poution. We use the SWAT to simuate the eve of nitrogen and phosphorous concentrations in the river under different agri-environmenta poicy scenarios. Predicted poutant concentration eves are exported to the ake mode to simuate the aquatic ecosystems. The Lake mode simuates the aquatic ecosystem in the Lake Nishinoko using the CASM (Comprehensive Aquatic Simuation Mode). The CASM describes numericay the properties of ake ecosystems. The CASM coupes with the water quaity mode and comprehensive food web mode. The water quaity mode describes physica, chemica and bioogica processes in ower trophic ecosystem of akes. The food web mode simuates popuation dynamics, incuding predator-prey interactions in the ake. We use the ake mode to simuate primariy the densities of agae and reated water quaity conditions. By combining the economic, river, and ake modes described above, we simuate the effects of agri-environmenta payments on and use and ecoogica conditions at the river and ake. The mode aso predicts the economic costs of poicy impementation. These resuts are then combined to estimate the cost-effectiveness of the poicy under different conditions. Our study region is Chomeiji watershed in Shiga Prefecture. This is the main drainage watershed of the Lake Nishinoko, one of the Ramsar sites near the Lake Biwa, the argest ake in Japan. The Lake Nishinoko provides a unique aquatic ecosystem and attracts wide variety of migratory birds. Agricuture has been quite intensive in the watershed and it has been criticized as a major source of poutants to the Lake Nishinoko. Such poutant oadings contribute to eutrophication and rapid expansion of agae boom, resuting in water quaity probems and damages to the unique aquatic ecosystems in the ake. 2. Empirica methodoogy 2.1 Economic mode The roe of an economic mode is to estimate farmers wiingness to accept (WTA) for adopting conservation practice in paddy farming. To this end, we conducted a farmers survey for adoption of hypothetica conservation agricutura practice. The survey first asks the characteristics of farmers in the region. The survey was sent to about 300 hundred farmers in the city of Azuchi. This is done by a oca agricutura cooperative office. A tota of 155 farmers responded with compete answers (response rate: 50%). The probabiity of choosing conservation practice i can be estimated by the conditiona ogit mode as the foowing: 2

3 Pr!" = exp V!!!!!! exp V!! where V!" is farmer i's utiity from choosing conservation practice k. This utiity function is defined by the foowing conservation utiity function: V!" = β! + β! FERT + β! PEST + β! EXTRA + β! PAYMENT where FERT is the eve of chemica fertiizer reduction (%), PEST is the eve of pesticide reduction (%), EXTRA is an extra conservation practice besides chemica input reduction, and PAYMENT is a per-hectare payment for adopting conservation practice. A margina wiingness to accept (MWTA) for reducing chemica fertiizer can be cacuated from the foowing ratio: MWTA = β! β! The MWTA for pesticides and extra practices can be derived in simiar way. 2.2 SWAT mode Mode description SWAT has been widey appied for modeing watershed hydroogy and simuating the movement of non-point source poution. SWAT is a physicay-based continuous time hydroogic mode with an ArcView GIS interface deveoped by the Backand Research and Extension Center and the USDA-ARS (Arnod et a., 1998) to predict the impact of and management practices on water, sediment, and agricutura chemica yieds in arge compex basins with varying soi types, and uses, management conditions over ong periods of time. The main driving force behind SWAT is the hydroogica component. The hydroogica processes are divided into two phases: the and phase, which contros the amount of water, sediment, and nutrient oading in receiving waters, and the water routing phase which simuates movement through the channe network. SWAT considers both natura sources (e.g. mineraization of wet and dry atmospheric deposition organic matter and N-fixation) and anthropogenic contributions (fertiizers, manures and point sources) as nutrient inputs. SWAT deineates watersheds into sub basins interconnected by a stream network, and each sub basin is divided further into hydroogic response units (HRUs) based upon unique soi / and cass characteristics, without any specified ocation in the sub basin. Fow, sediment, and nutrient oading from each HRU in a sub basin are summed and the resuting oads are then routed through channes, ponds, and reservoirs to the watershed outet (Arnod et a., 2001). The mode incudes a number of storage databases (i.e. sois, and cover/ pant growth, tiage, and fertiizer) which can be customized for an individua basin. A singe growth mode in SWAT is used for simuating a crops based on the simpification of the EPIC crop mode (Wiiams et a., 1984). Phenoogica deveopment of the 3

4 crop is based on daiy heat unit accumuation. The mode can simuate up to 10 soi ayers if sufficienty detaied information is avaiabe. The SWAT is expected to provide usefu information across a range of timescaes, i.e. houry, daiy, monthy, and yeary time-steps (Neitsch et a., 2005). Input data description SWAT requires information such on cropping systems, incuding tiage, irrigation and amount and timing of fertiizer. Aso spatia data sets, incuding a digita eevation mode (DEM) and GIS maps of and cover and soi, need to be prepared. In addition, the mode requires meteoroogica data such as daiy precipitation, maximum and minimum air temperature, wind speed, reative humidity, and soar radiation data. Because there were some inconsistencies and missing cimate data for the system evauated in this study, the weather generator incuded in the SWAT was used for fiing in gaps in the measured cimatic records. DEM data were prepared using a digita map 10-m grid (eevation) created from a 1:25,000 topographic map pubished by the Geographica Survey Institute (GSI). Land-use data based on digita nationa information that identified categories such as paddy fieds, non-paddy fieds (upand fieds and orchards), denuded and, forests and water were used in this study. A and-use data were obtained from the Nationa Land Information Office in the MLIT ( Soi type data were obtained from the 1:200,000 Fundamenta Land Cassification Survey soi map prepared by the MLIT ( The and-use and soi GIS map were shown in Figure 1. 4

5 Figure 1 Land-use and Soi GIS data Meteoroogica data were obtained from the Japan Meteoroogica Agency (JMA: Data for precipitation, temperature, wind speed, and actua sunshine duration were monitored by the Automated Meteoroogica Data Acquisition System (AMeDAS), which is comprised of about 1,300 stations for precipitation and 850 stations for other weather parameters in Japan. These data are made avaiabe to the pubic near rea time (e.g., Japan Meteoroogica Agency, 2006). For the anaysis, data from 2 gauges for precipitation and 1 gauges for air temperature, wind speed, and reative humidity that were ocated in and around the basin were seected. However there were no observations in the basin to coect soar radiation. Therefore, the soar radiation data were deveoped using the Angstrom formua (FAO, 1998) and the actua sunshine duration in the watershed, which was obtained from the AMeDAS data base. River discharge, SS, TN, and TP concentration data were monitored five times by Shiga Prefecture. Amounts and ratios of chemica fertiizer and manure for genera rice and Kankyo Kodawari rice were determined according to Hasukawa et a., Scenario anaysis After caibrating the mode, a scenario anaysis, which was in the case of 100% genera rice production and 100% Kankyo Kodawari rice production in the rice fieds, was conducted to check differences of nutrient oadings from sub-watersheds to downstream Lake Nishinoko. Mode performance evauation The SWAT was caibrated using observed data. Initia assessment of the resuts was performed using graphica techniques, which provide a visua comparison of simuated and observed constituent data and preiminary overview of the mode performance (ASCE, 1993). 5

6 The Nash-Sutciffe Index (NSI) was then used to statisticay evauate the mode performance. The NSI vaue (Nash and Sutciffe, 1970) indicates how we the pot of the observed vaues versus the simuated vaues fit the unit sope ine. The NSI vaues range from to one, with vaues ess than or very cose to zero indicating unacceptabe or poor mode performance and a vaue of one representing the perfect match. The NSI vaue is cacuated using the foowing equation: n n 2 2 NSI = 1.0 ( Yobs, i Yca, i ) ( Yobs, i Yobs _ mean ) (1) i= 1 i= 1 where n is the number of registered data, Y obs,i is the observed data at time i, Y ca,i is the simuated data, and Y obs_mean is the mean vaue of the observed data. 2.3 Lake ecosystem mode This paper presents a method to predict a regime shift for ake ecosystems, improving a mode caed the Comprehensive Aquatic Simuation Mode (CASM; DeAngeis et a., 1989), which iustrates an aquatic ecosystem to simuate popuation dynamics. The reason is that infuence of change for socia activities and meteoro-hydroogica condition is considered on the CASM. In this study, the CASM coupes water quaity mode with comprehensive food web mode. Water quaity mode describes physica and chemica. Food web mode simuates bioogica processes in ower trophic ecosystem and popuation dynamics, incuding predator-prey interactions. Mode structure of the CASM is shown in Figure 1. In this study, we assess impacts of NPS on ake ecosystems for whoe Lake Nishinoko watershed. The impacts are prominenty visibe in producers such as phytopankton and macrophytes. Consequenty, the CASM covers compartments shown in gray of Figure1. 6

7 Piscivorous Fish: FF (1 Popuation) Panktivorous Fish: FP Omnivorous Fish: FO Zoopankton: ZP Radiation+ Macrophytes: MP Radiation+ Phytopankton: PP Degradation Sinking Soution, Sediment Oxygen Demand at Water Bed Dissoved Oxygen: DO Uptake Photosynthesis Particuate COD of Detritus Condition: PC Infow+ Dissoved COD: DC Infow+ Infow+ Inorganic Nitrogen: IN Phosphorus: IP Infow+ Re-aeration Extraceuar Reease Excretion, Respiration, Mortaity Excretion, Respiration Water Quaity Mode The CASM for Lake Nishinoko in This Study Predation Phytopankton: PP Figure 2 Structure of the CASM to predict a regime shift for Lake Nishinoko ecosystems The CASM is deveoped under a two-dimensiona muti-ayered mode to predict horizonta and vertica water quaity distributions through a year in ake; t K x y ( H C ) + ( M C ) + ( N C ) + ( wc) ( wc) H C H x x + C H + K Z y y 1 C z 1 = K Z C z + R (1) where, H is ayer height(m); C is water quaity concentration(gm -3 ), (M, N), discharge fux in the (x, y) directions(m 2 s -1 ); w is veocity in the z direction(ms -1 ); K H and K Z are eddy diffusivity in the horizonta and vertica directions(m 2 s -1 ), R is physica, chemica and bioogica reaction rate(gm -3 s -1 ), is suffix expressed ayer. 3. Resuts 3.1 Economic mode We estimated the MWTA for adopting conservation agricuture in paddy rice production. 7

8 The estimated MWTA for reducing 10% of chemica fertiizer and pesticides is 632 Yen and 416 Yen, respectivey. In tota, MWTA for 10% reduction of both chemica fertiizer and pesticides accounts for 1,048 Yen. This indicates that 50% of reduction, a common conservation practice in Japan, accounts for 5,240 Yen. We use this vaue for poicy evauation for possibe diffusion of the conservation practice through payment program in the region. 3.2 SWAT mode The watershed was divided into 5 sub-watersheds. Then simuated fow and oad discharges were graphicay compared with observed vaues. It was evident that SWAT coud represent fuctuations of observed vaues reasonaby in sub-watershed No.5, where is the argest one among sub-watersheds, but coudn t in other sub-watersheds. It is because SWAT coud not represent compex water aocation of the target area in the mode though, in reaity, sma irrigation ditches are extended in the area intricatey. In sub-watershed No.5, most of the time cacuated vaues were underestimated during simuation period in fow (Figure 3). However, the resuts of SS, TN, and TP oads show that SWAT coud represent these oads reativey we, especiay in SS and TN. Figure 3 Simuated resuts of Fow and oads of SS, TN, and TP in sub-watershed No.5 As a resut of scenario anaysis, it was reveaed that nitrate nitrogen oad infow to the ake decreased by amost 10% during 5 years if Kankyo Kodawari rice method was introduced 100% in the area. Aso, about 7% decined for tota nitrogen. 3.3 Lake ecosystem mode 3.4 Poicy simuations 8

9 Figure 4 depicts the poicy simuation of the conservation practice in Japan. More specificay, this we simuate how increase in the area adopting conservation practice (50% reduction of chemica fertiizers and pesticides) reduces the eve of chorophy (mg/l) in Lake Nishinoko. As the figure shows, an increase in conservation agricuture reduces the eve of chorophy sharpy. In annua average (bue ine), the eve of chorophy woud be neary 6 mg/l if no there exists no conservation agricuture. This eve decines as more farmers adopt conservation practice and it reaches to about 2.5 mg/l if a farmand adopts conservation practice of 50% reduction. This is an extreme case, but we observe even sma increase in conservation practice can indeed increase the chorophy eve in the ake. Figure 4. Simuated chorophy eve (mg/l) under different areas under conservation practice in Lake Nishinoko. 4. Summary and discussions Our resuts show that farmers are highy responsive to poicy change, particuary the eve of payments. Even sma increase in payment eve is predicted to attract more farmers to the payment program. Such increase aso induces currenty participating farmers to adopt more strict conservation practices. Our resuts aso show that such diffusion of conservation practices highy affects water quaity in the Chomeiji River. It aso affects ecoogica conditions in the Lake Nishinoko. Greater cost-effectiveness can be achieved by focusing on highy environmentay sensitive subwatersheds and induce farmers in these regions to switch to conservation practices under the agri-environmenta payment program. 9

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