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Agricultural Producers’ Costs of Adoption of Wetland Restoration Beneficial Management Practice: Estimation and Spatial Transferability Open Access


Other title
Cost transfer
Financial cost simulation
Wetland restoration
Beneficial management practice
Willingness to accept
Type of item
Degree grantor
University of Alberta
Author or creator
Kanjilal, Manikarnika
Supervisor and department
Dr. Wiktor Adamowicz (Resource Economics and Environmental Sociology)
Dr. Scott Jeffrey (Resource Economics and Environmental Sociology)
Examining committee member and department
Dr. Peter Boxall (Resource Economics and Environmental Sociology)
Dr. James Rude (Resource Economics and Environmental Sociology)
Dr. Ken Belcher (Bioresource Policy, Business and Economics - University of Saskatchewan)
Dr. Wiktor Adamowicz (Resource Economics and Environmental Sociology)
Dr. Scott Jeffrey (Resource Economics and Environmental Sociology)
Dr. Bruno Wichmann (Resource Economics and Environmental Sociology)
Department of Resource Economics and Environmental Sociology
Agricultural and Resource Economics
Date accepted
Graduation date
Doctor of Philosophy
Degree level
This thesis estimated agricultural producers’ costs of adopting a wetland restoration beneficial management practice (BMP) in the Western Canadian Prairie region using two alternative cost discovery methods. It then explored the spatial transferability of the cost estimates obtained for the two case study sites in Alberta and Saskatchewan. The primary objectives of this thesis were to estimate the costs of adoption of wetland restoration BMP, evaluate if true costs of BMP adoption could be approximated by FC, and assess the accuracy of a spatial cost transfer exercise. Producer willingness to accept (WTA) for environmental conservation on agricultural land represents the “true” cost of BMPs but, is also unobservable. In this study, producers’ WTA for restoring wetlands on their currently active farmland was estimated using stated preference (SP) methods based on the results of an in-person survey of 29 producers with farms located in three rural municipalities in Alberta and one rural municipality in Saskatchewan. The financial opportunity cost (FC) of wetland restoration was estimated as an alternative measure of the direct cost of BMP adoption for agricultural producers. Farm-level dynamic stochastic cash-flow simulation models were developed for the sampled farms using a combination of farm-specific primary data collected in the survey and secondary data from various sources. Using stochastic crop yields and prices, farm-level FCs of wetland restoration BMP were estimated using Monte Carlo simulation and net present value analysis. Spatial cost transfer was conducted to address the policy need of obtaining estimates of welfare impact of BMP adoption without conducting a complete direct valuation study. The WTA estimates from the SP auction, FC estimates from the farm-level cash-flow simulation models and salient bids from existing reverse auction studies were used to transfer the estimates of cost of wetland restoration from the designated study site at Alberta to the policy site of Saskatchewan by adapting select benefit transfer methods. The producers’ WTA and the estimated FCs indicated that adoption of wetland restoration BMP imposes net private costs on the producers with significant within- and between-sample heterogeneity in costs. Given the underlying assumptions of the farm-level cash flow models, farm-specific FC estimates were generally lower than the corresponding WTA estimates. Transferring the WTA and FC estimates across sites, using unit cost transfer, simple function transfer and structural function transfer methods, generated errors in the range of 2.74% - 38.01%. Compared to salient reverse auction bids obtained from existing studies in the case study areas, the errors associated with the transferred costs were in the range of 1.43% - 58.39%. Transfer errors were found to be dependent on the transfer method employed, but were lower than the median errors found in the benefit transfer literature. The findings indicated that policy intervention in terms of compensation payments is required to encourage uptake of wetland restoration BMP in Alberta and Saskatchewan. SP auctions and cost transfer could be employed as valid and less expensive cost discovery tools compared to reverse auctions for facilitating wetland policy and design of compensation packages.
This thesis is made available by the University of Alberta Libraries with permission of the copyright owner solely for the purpose of private, scholarly or scientific research. This thesis, or any portion thereof, may not otherwise be copied or reproduced without the written consent of the copyright owner, except to the extent permitted by Canadian copyright law.
Citation for previous publication
Kanjilal, M. and S. Jeffrey. 2014. Benefit and Cost Transfer: Relationship to Implementation and Performance of Market-based Instruments – Literature Review and Summary. Working Paper prepared for Sustainable Prosperity. University of Ottawa.

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