Economic analyses of benefits and costs of USDA conservation programs: What can we do?

Transcription

1 Economic analyses of benefits and costs of USDA conservation programs: What can we do? LeRoy Hansen Economic Research Service Presented to the Society of Benefit Cost Analysis March 17 th and 18 th, 2016

2 There are interests in the benefit and cost of USDA conservation programs For example, on July 21 st, 2015 the USDA/Office of Environmental Markets (OEM) and the Center for Food, Agriculture, and Resource Economics (C-FARE) hosted the workshop: Economic Valuation of Conservation Based Ecosystem Services to: 1. Determine what information is needed to support the valuation of ecosystem services associated with USDA programs and 2. Assess whether USDA reporting systems can be used to generate estimates of ecosystem services values for benefit-cost analyses

3 Information can increase the net benefits of federal programs Decisionmakers have little benefit-cost information Small gains in efficiency can have big payoffs More than $5 billion was spent on USDA conservation programs in 2015 Benefit estimates can be used to compare programs

4 As you know, environmental benefit analyses have many challenges 1. Values are not observed in markets and must be derive 2. A lack of data (or funding for data) limit economic analyses

5 Benefit-cost analyses of federal programs have additional challenges 1. One USDA program could encourage a variety of land-use changes across a wide geography and the subsequent impact on amenities could be widespread 2. Analyses must capture social values of multiple impacts to a large, dispersed population

6 Linking costs of conservation actions to environmental benefits 1. Program incentives effects on agricultural land uses (e.g., the cost of changing land uses) 2. The effects that changes in land uses have on ecosystem services (i.e., bird populations), 3. Ecosystem services effects on environmental amenities (i.e., the quality of bird watching), and 4. The public s willingness to pay for changes in amenities (i.e., better bird watching)

7 Spatial variation and interdependence of relationships are difficult to capture 1. Costs of practice adoption vary across the country 2. A practice s effects on ecosystem services and ecosystem services effects on amenities differ across the country 3. Changes in an ecosystem service can affect amenities at multiple sites and often the sites are substitutes 4. Values of amenities differ spatially because sizes and incomes of populations differ and 5. Benefits can occur far from a conservation practice

8 There are resources that can be used in regional/national analyses Meta analyses can be applied when relevant studies are available Economic and ecological models can be used (i.e., REAP, EPIC, and RUSLE) can be applied BUT, it takes matching combinations to value benefits and costs of USDA conservation programs

9 Looking forward: How can one judge the reliability of benefit and cost estimates, given the multiple links/data/assumptions/etc.? Or, more specifically: 1) Without a measure of variance, how does one judge acceptable ranges of benefit and cost estimates? 2) How old are acceptable models, data, and results of previous analyses? 3) What level of spatial proximity and resolution is acceptable? 4) Etc.

10 ANSWERS: Economists (implicit) answers to such questions are revealed in prior research published in professional journals.

11 Four (?) regional/national benefit-costs analyses have been published since All included land retirement as a conservation practice Two valued programs costs and (some) benefits; others value possible changes in land uses No study evaluated all benefits Three focused on eco-regions, one is a national analysis

12 The objective here is to provide qualitative answers to the previous questions by reviewing these studies. For brevity, the focus is on the economics; there is no discussion of the methods used to quantify the biophysical links

13 1. Gascoigne et al. (2011) evaluated the costs of three land-use changes and three benefits in the central plains 2. Jenkins et al. (2010) evaluate three benefits and costs of restoring wetlands in the Mississippi Alluvial Valley (MAV) 3. van Kooten et al. (2011) developed a dynamic model to estimate the optimal stock of wetlands in the northern plains, given their duck hunting existence values and wetland costs 4. Hansen (2008) evaluated soil conservation benefits of retiring lands in the CRP (not discussed)

14 Gascoigne et al. set the cost of: 1. Retiring cropland equal to 2007 county cash-rents 2. Converting prairieland to cropland equal to zero 3. Bringing retired land into production equal to the 2007 county per-acre CRP/WRP payments

15 Gascoigne et al. set the benefit of: 1. Carbon sequestration at $24 per ton of CO2e, taken from a 2009 report 2. Soil conservation at regional and county-level $/ton values taken from a 2008 report (more than half of those values come from analyses done in the early 1980 s. others from studies done between 1999 and 2007) 3. Improved duck hunting equal to $24 per duck, taken from a 1974 study done in the pacific northwest

16 Jenkins et al. set the cost of restoring and preserving wetlands equal to the WRP payments for wetland restoration and preservation in the same area between 1995 and 2007

17 Jenkins et al. based benefit values on: 1. The social cost of carbon was set to range from $13 to $17 per ton of CO2e, taken from a 2007 report 2. The value of reduced nitrogen loadings was set equal to a mitigation price of $10.50/lb., based on a 2005 study (done within the same region) of the least expensive means of reducing N in waterways 3. A per-hectare duck-hunting benefit estimate that was calculated by multiplying an outdoor recreation dayvalue from a 2001 meta analysis (base on studies that are up to 40 years old) by the total days spent duck hunting in the MAV and divided by the wetland area

18 van Kooten et al. defined the cost of a new wetland as the difference in land values with and without the wetland land value data are from 1955 to 2009

19 van Kooten et al. based duck hunting benefits on an estimate from a 2000 publication of the average value of a day of wilderness recreation in the US. They set ecosystem services benefits equal to $28/ac and $78/ac based on a 2001 study.

20 Summary and some qualitative answers 1) Without variance estimates, how does one judge the relevant ranges of estimates? Answer: analysts have evaluated the sensitivity of results to alternative values reported in the literature and assumptions employed. 2) How old are acceptable models, data, and results of previous estimates? Answer: accepted values were up to 40 years old. 3) What level of spatial proximity and resolution is acceptable? Answer: analysts have applied national values to regional estimates and results of studies done in the pacific northwest to studies done in the central plains.

21 Questions, comments?