Conference Agenda

Conservation science and economics research determine that wild species provide various valuable ecosystem services (ES) to agricultural production. Whether those services provide a strong incentive to farmers to allocate some land to habitat for those species depends on the characteristics of the land and ES, with Simpson (2019) finding a modest incentive for farmers to conserve habitat. This paper develops a farmer decision model using a set of agricultural production functions that have multiple ecosystem services entering in different observed ways, including synergistically. We use the model to examine how the farmer’s incentive for habitat conservation relates to market access costs for inputs that substitute for ES and varies across settings that provide more than one ES. We find that common market settings in low-income countries and common multiple ES settings can increase the farmer’s optimal habitat conservation. We also explore the response of private habitat conservation and rural incomes to policies that reduce market access costs, make payments for ecosystem services, and conserve public land for habitat. We apply the model to a coffee-growing region in Costa Rica that raises issues about the contribution of off-farm habitat to on-farm agricultural productivity and farmer’s private habitat conservation levels.

Biodiversity provides essential ecosystem services to human welfare, yet the topic is understudied in economic literature. This paper estimates the cost of herbivore biodiversity declines in Southern Africa via the mechanism of bush encroachment, a form of land degradation in which trees and shrubs expand into grasslands used to range cattle. Since wild herbivores control encroachment, biodiversity loss potentially decreases cattle production by reducing available rangeland. We exploit the placement of livestock fencing across Namibia and Botswana as a natural experiment in local biodiversity changes. Using these fences to instrument for encroachment induced by biodiversity loss, we estimate causal impacts on cattle density across the region and find that a one square kilometer increase in shrub cover decreases cattle density by around 7 individuals. These estimates suggest there were around 1.5 million fewer cattle in 2020 compared to 2002, equal to more than 30 million USD in lost trade revenue in 2020 alone. Finally, we use a machine learning algorithm to predict species distributions based on observational data and combine this with expert range maps to examine the role of biodiversity as a driving mechanism.

``No net loss'' policies are increasingly common tools through which governments reduce environmental damage. To function efficiently, these policies require trade, with firms who damage the environment paying for offsetting environmental improvements from other actors. Yet, current trade is hamstrung because the blocky nature of supply and demand for environmental services has yet to be recognised by existing market design solutions. In this paper we propose and test, both in the real world and laboratory, a package market using the Balanced Winners' Contribution rule of Lindsay (2018). Proprietary data from the real world shows that the package market design is highly flexible and can facilitate trade where current approaches fail. The experimental results point to this new market design offering substantial efficiency gains relative to the current approaches applied internationally, suggesting broad applicability of the market.