Farmer preferences for conservation incentives that promote voluntary phosphorus abatement in agricultural watersheds

Abstract

Financial incentives are commonly used to promote voluntary adoption of agricultural best management practices (BMPs), but little is known about farmer preferences among alternative incentives. Using experimental procurement auctions, we evaluate how different conservation incentives affect farmer willingness to adopt BMPs that reduce phosphorus (P) runoff, a major driver of harmful algal blooms in Lake Erie. We rank incentives (e.g., payment, BMP insurance, tax credit, and certification price premium) by the cost per pound of P runoff reduction. Payments and tax credits that target high impact areas of the watershed are more cost-effective than untargeted price premiums for product certification. Farmers demand higher payments for contracts offering BMP insurance (i.e., protection against yield loss from BMP use) due to uncertainty about how the program will be implemented and the reliability of indemnities, as well as anticipated transaction costs associated with the program. Understanding farmer preferences for different types of conservation incentives is critical to design agri-environmental programs that engage more farmers and cost-effectively enhance ecosystem services.

Behavioral and Experimental Agri-Environmental Research: Methodological Challenges, Literature Gaps, and Recommendations

“…18 Duflo, Kremer, and Robsinson (2011) analyze farmer investments in fertilizer and is, therefore, not categorized as an Ag-E paper. 19 A large portion of this literature tests the outcomes of various tax and subsidy mechanisms to reduce nonpoint source (NPS) pollution (Alpízar et al 2004;Poe et al 2004;Spraggon 2004Spraggon , 2013Cochard et al 2005;Vossler et al 2006;Suter et al 2008;Spraggon and Oxoby 2010;Cason 2010;Cason and Gangadharan 2013;Suter and Vossler 2014;Miao et al 2016;Palm-Forster et al 2017, improve extraction of ground water for irrigation (Gardner, Moore, and Walker 1997;Suter et al 2012Suter et al , 2018Li et al 2014;Liu et al 2014), and incentivize land conservation and ecosystem service provision (Parkhurst et al 2002;Cason and Gangadharan 2004;Shogren 2007, 2008;Arnold, Duke, and Messer 2013;Banerjee et al 2014Banerjee et al , 2015Banerjee et al , 2017Fooks et al 2015Fooks et al , 2016Messer et al 2017;Duke et al 2017;Banerjee 2018).…”

Ecosystem Services Auctions: The Last Decade of Research

“…In the laboratory, transaction costs are often neglected for experimental reasons [89], but there are exceptions: Messer et al [90], for instance, include a submission fee for each parcel submitted to mimic transaction costs. In practice, however, transaction costs are a significant factor in instrument selection [91], incentive type [92], mechanism design decisions like number of rounds [93], and bid selection rules like targeting [94]. In ECOSEL, data and model development demands represent significant transaction costs that could conceivably determine the mechanism's viability [40,95].…”

Willingness to Accept for Perennial Crop Adoption: The Influence of Trust in Environmental and Government Organizations

“…As such, these 157 were excluded. While the response rate is low, the sample size is reasonable for discrete choice experiments (Orme 2010;de Bekker-Grob et al 2015).…”