Should We Pay for Ecosystem Service Outputs, Inputs or Both?

White, Ben; Hanley, Nick

doi:10.1007/s10640-016-0002-x

Cited by 66 publications

(35 citation statements)

References 39 publications

(31 reference statements)

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“…Beyond conditionality and additionality, other issues have been considered in setting up a PES scheme, e.g., output-vs. input-based approach (e.g., White and Hanley 2016;Drechsler 2017) and cost-effectiveness of conservation payments (e.g., Ferraro and Simpson 2002;Drechsler et al 2016). These are all consequences of three main issues: (i) the assessment of financial compensations (directly related to valuation of services), (ii) the individual heterogeneity and the problem of asymmetric information (e.g., Ferraro 2008;Hanley and White 2014), and (iii) the spatial (e.g., Wünscher et al 2008) and temporal issues .…”

Section: Payments and Incentive Mechanisms For Ecosystem Servicesmentioning

confidence: 99%

How does economic research contribute to the management of forest ecosystem services?

Garcia

Abildtrup

Stenger

2018

Annals of Forest Science

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& Key message More and more environmental and resource economists are taking a particular interest in research on forest ecosystem services (FES), especially in a context of climate change. Spatial and temporal issues are crucial to economic analyses and for the design of conservation policies. Interdisciplinary research involving ecological and economic disciplines is a prerequisite for the more effective management of forest ecosystems. & Context Economists define non-market ecosystem services (ES) as public or common goods due to their characteristics of non-rivalry in terms of consumption and/or non-excludability. Just because they do not have a price does not mean that ES have no economic value because their social benefits are undoubtedly considerable. These features, associated with the market demand for timber and a poor climate risk assessment, may lead to the under-provision of non-market forest ES and the over-harvesting of timber. & Aims In this article, we review research questions that are central to the enhancement of FES provision. Beyond the economic modelling of the joint provision of FES, we focus on issues related to the design of public policies to guide forest management. The objective is to provide crucial insights concerning the importance of a spatial and sustainable provision of FES. & Results First, we provide an economic interpretation of the FES concept and a review of economic models of forest management. Second, we explain how spatial and temporal dimensions of FES can have major implications on their supply and demand. Both dimensions explain why FESs have to be taken into account in production decisions and public policies (including the design of payment for environmental services (PESs)). & Conclusion A better understanding of FES provision and public policies to be enhanced is not possible without accounting for spatial and temporal dimensions. This helps to analyse the impact of intervention on FES and the cost-effectiveness of economic instruments, implying a coordinated effort to bring together ecological and economic data and models.

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Section: Payments and Incentive Mechanisms For Ecosystem Servicesmentioning

confidence: 99%

How does economic research contribute to the management of forest ecosystem services?

Garcia

Abildtrup

Stenger

2018

Annals of Forest Science

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“…The principal's decision problem now centres on maximising the social welfare function (

Z

) subject to a series of constraints marked by the strategic behaviour of the farmers. Assuming this regulator is risk neutral (Moxey et al ., ; Ozanne et al ., ; White and Hanley, ), this optimisation problem can be expressed algebraically as follows:

\underset{γ_{i}, B_{i}, p_{it}, m_{it}}{falsemax} Z = \underset{t}{false\sum} \underset{i}{false\sum} δ_{t} γ_{i} w_{i} z_{it} = \underset{t}{false\sum} \underset{i}{false\sum} δ_{t} γ_{i} w_{i} [\begin{matrix} v_{it} (c_{it} B_{i}) - ψ_{it} (c_{it} B_{i}) - p_{it} (λ - 1) \\ + p_{it} m_{it} θ (c_{italicit}) ρ_{t} (c_{italicit}) false(λ - 1 false) - M (m_{italicit}) λ \end{matrix}]

s . t . \underset{t}{false\sum} δ_{t} p_{it} - \underset{t}{false\sum} δ_{t} ψ_{it} (B_{i}) \geq 0 \forall i

γ_{i} []

…”

Section: Principal‐agent Modellingmentioning

confidence: 99%

“…() and Fraser (). It is also worth highlighting the studies that jointly consider the two problems, such as Melkonyan and Taylor () and White and Hanley (). Interested readers can also consult Fraser (), where a comprehensive collection of papers in this field is compiled.…”

Section: Introduction and Objectivesmentioning

confidence: 99%

“…In addition, the problem of moral hazard in the implementation of these measures has been analysed in Choe and Fraser (1999), Hart and Latacz-Lohmann (2005), Ozanne and White (2008), Bartolini et al (2012) and Fraser (2013). It is also worth highlighting the studies that jointly consider the two problems, such as Melkonyan and Taylor (2013) and White and Hanley (2016). Interested readers can also consult Fraser (2015), where a comprehensive collection of papers in this field is compiled.…”

Section: Introduction and Objectivesmentioning

confidence: 99%

See 1 more Smart Citation

Optimal Design of Agri‐environmental Schemes under Asymmetric Information for Improving Farmland Biodiversity

Gómez‐Limón¹,

Gutiérrez‐Martín²,

Villanueva³

2018

J Agricultural Economics

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Information asymmetry is one of the main obstacles to the effective design and implementation of agri‐environmental schemes (AES). The literature has generally addressed this issue through the use of principal‐agent models (PAM). We develop a PAM to support optimal design of a new AES for improving farmland biodiversity. We use the results of choice experiments to assess both the costs incurred by the agent for the provision of biodiversity and the resulting social benefits. We also make a number of novel contributions such as the inclusion of a non‐linear non‐compliance detection curve, a sensitivity analysis to identify which parameter estimates have a critical impact on PAM results, and analysis of the efficiency of different sanction scenarios. The results suggest that: (i) the second‐best solutions differ significantly from the optimal solutions attainable with perfect information, with farmers being strongly over‐compensated for the extra costs associated with improved biodiversity; (ii) monitoring levels should be higher; (iii) the sanction system should be tougher. Sensitivity analysis shows the need for accurate estimates of the marginal cost of public funds and the costs and benefits associated with the public goods, which represent the key parameters determining PAM results.

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“…There is a broad body of literature that address the issue of asymmetric information through the application of principal-agent theory in agriculture [13,[23][24][25][26] and a series of papers exist that address the issue of moral hazard [27][28][29][30][31][32]. Nevertheless, only a few studies directly address the moral hazard problem inherent in irrigated agriculture.…”

Section: Introductionmentioning

confidence: 99%

Water Authorities’ Pricing Strategies to Recover Supply Costs in the Absence of Water Metering for Irrigated Agriculture

2017

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Most of the irrigated agricultural regions in Europe are supplied by surface irrigation networks managed by local water authorities (WAs). Under such conditions, WAs are not able to fully monitor water usage and farmers have an information advantage vis-a-vis the WA. This results in the water authority suffering 'pricing failure' if it decides to apply an incentive pricing strategy (tariffs proportional to the alleged water uses). Indeed, farmers could exploit their information advantage by behaving in an opportunistic manner, withdrawing more water than declared, and ultimately paying less than they should. This situation could also undermine the efficacy and the efficiency of the WA incentive pricing strategies. This paper analyses incentive water pricing schemes under asymmetric information by the means of a Principal-Agent model. The Agency problem between the WA and farmers is addressed by introducing a monitoring strategy that would enable the WA to detect farms action. In doing so, we compare incentive strategies with flat rate water pricing and investigate under what conditions the WA might provide/not provide incentive water pricing in the absence of water metering.

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Should We Pay for Ecosystem Service Outputs, Inputs or Both?

Cited by 66 publications

References 39 publications

How does economic research contribute to the management of forest ecosystem services?

How does economic research contribute to the management of forest ecosystem services?

Optimal Design of Agri‐environmental Schemes under Asymmetric Information for Improving Farmland Biodiversity

Water Authorities’ Pricing Strategies to Recover Supply Costs in the Absence of Water Metering for Irrigated Agriculture

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