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

  • Author / Creator
    Kanjilal, Manikarnika
  • 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.

  • Subjects / Keywords
  • Graduation date
    Spring 2016
  • Type of Item
  • Degree
    Doctor of Philosophy
  • DOI
  • License
    This thesis is made available by the University of Alberta Libraries with permission of the copyright owner solely for non-commercial purposes. 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.