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Evaluating Agri-Environmental Schemes – The Marginal Costs of Ecosystem Services

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  • Sauer, Johannes
  • Wossink, Ada

Abstract

We provide a new approach for assessing the cost of marginal ecosystem changes and the effectiveness of agri-environmental schemes. The approach is based on a theoretical and empirical analysis of the bio-economic production interactions between marketed outputs and non-marketed ecosystem services at the micro level. To frame the economic nature of the problem, we employ a generalized joint production model in combination with cost minimization. The generalized joint production framework allows for the consideration of complementary, substitutive and competitive relationships between agricultural production and non-marketed ecosystem services generation and avoids double counting. From this theoretical model we distinguish three theoretical cases depending on the imposed minimum acceptable level of the non-marketed ecosystem services. We employ farm level panel data for the UK to empirically investigate these cases. More specifically, to represent and evaluate the production structure, we estimate first- and second-order elasticities derived from a flexible transformation function. Results show that the majority of farms produce agricultural output and ecosystem services in a complementary relationship. Generation of multiple ecosystem services on the same farm showed either a substitutive or competitive relationship. A change in the composition of the ecosystem services output would have very different implications for individual farms.

Suggested Citation

  • Sauer, Johannes & Wossink, Ada, 2011. "Evaluating Agri-Environmental Schemes – The Marginal Costs of Ecosystem Services," 122nd Seminar, February 17-18, 2011, Ancona, Italy 99425, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaa122:99425
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    File URL: http://purl.umn.edu/99425
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    References listed on IDEAS

    as
    1. Dobbs, Thomas L. & Pretty, Jules, 2008. "Case study of agri-environmental payments: The United Kingdom," Ecological Economics, Elsevier, vol. 65(4), pages 765-775, May.
    2. de Koeijer, T. J. & Wossink, G. A. A. & van Ittersum, M. K. & Struik, P. C. & Renkema, J. A., 1999. "A conceptual model for analysing input-output coefficients in arable farming systems: from diagnosis towards design," Agricultural Systems, Elsevier, vol. 61(1), pages 33-44, July.
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    More about this item

    Keywords

    agri-environmental services; bio-economic modelling; economies of scale and scope; Agricultural and Food Policy; Environmental Economics and Policy; Q18; Q57; Q58.;

    JEL classification:

    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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