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Quantifying the Benefits of Conservation Auctions

  • Uwe Latacz-Lohmann
  • Steven Schilizzi
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    summary Most EU conservation schemes offer a single, fixed payment for compliance with a predetermined set of management prescriptions. Alternatively, the conservation tasks could be put up for tender: landholders are invited to bid competitively for a limited number of conservation contracts. Theory suggests that bidding reduces over-compensation and increases the cost-effectiveness of conservation contracting. There is, to date, little evidence about the cost-effectiveness gains of such conservation auctions vis-à-vis the more traditional fixed-payment schemes, and what evidence does exist appears inconclusive. Building on available theory, this work uses controlled laboratory experiments to investigate the budgetary and the economic performance of conservation auctions. The experiments were carried out in two countries to check for robustness of results. We find that conservation auctions outperform the more traditional fixed-price schemes in the one-shot setting: one unit of environmental benefit paid at a fixed rate would have cost 10 to 60 per cent more than the auction, depending on the fixed-rate benchmark chosen. With identical repetition, however, the auction quickly loses its edge, making it possible for the auction to be outperformed by an equivalent fixed-rate programme. Our results suggest that previous estimates of conservation auction performance have been far too optimistic. Copyright The Agricultural Ecomomics Society and the European Association of Agricultural Economists 2007.

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    Article provided by The Agricultural Economics Society in its journal EuroChoices.

    Volume (Year): 6 (2007)
    Issue (Month): 3 (December)
    Pages: 32-39

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    Handle: RePEc:bla:eurcho:v:6:y:2007:i:3:p:32-39
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