Benefit Asymmetry

Benefit Asymmetry refers to the spatial mismatch that occurs between cause and effect of pollution distribution. Often, the users primarily responsible for a pollutant do not readily feel the negative effects of those polluting actions, and likewise may not directly benefit from the management actions needed to reduce these detrimental effects. The concept of benefit asymmetry as it applies to nutrient pollution management has multiple dimensions relating to social and economic factors that influence land management decisions as well as geospatial responses to nutrient reduction practices. . While some amount of correction for benefit asymmetry is inherent in any conservation scheme as they attempt to get people to move away from making purely individually rational decisions to addressing longer-term concerns, it is especially important for targeting, as conservation staff may be calling on a limited number of potentially non-self selecting individuals. Below will outline some concepts to both clarify the idea of benefit asymmetry and apply it more directly to targeting goals.

Tragedy of the Commons

Many readers will be familiar with the classic Tragedy of the Commons conundrum outline by Garret Hardin. When a resource is held in common between multiple users, each user, acting in his or her own self-interest, will maximize their use of the shared resource, leading to its long-term depletion. This is because the benefit of utilizing a resource to its fullest is felt directly by the consumer of that good, while the long term negative effect of resource depletion is felt indirectly and is shared amongst the entire population of users.

This is the case for nonpoint source pollution. Farmers applying fertilizers to their crops do not perceive that their actions are negatively impacting waterways. Instead, its is the impact of all users within a watershed carrying out their individually rational practices, exacerbated by the fact outlined in the disproportionality section that certain areas within a landscape are more vulnerable to transport mechanisms.

The tragedy of the commons in this case is further exacerbated by the fact that nonpoint source pollutants are continually being redistributed across the landscape and through waterways. As such, the collective impact of nutrient pollution is not felt intensely until further downstream, creating a cognitive dissonance amongst those contributing the most to pollution. In this case, the correct term may instead be impact asymmetry, as the problem is that the environmental impact is not felt directly by those producing the effect.

Economic Factors

When designing and implementing a conservation framework, the impact of this benefit asymmetry is that it is very difficult to distribute and target incentivizing mechanisms. Because the environmental impact of nutrient application decisions bears no direct financial burden on landowners, getting them to retire or change the management strategies on all or parts of their land that could result in reduced revenue requires some financial incentive. Many conservation incentivizing programs rely on voluntary enrollment by landowners, but this is problematic because:

  1. Certain parcels and landowners can have a much greater environmental impact than others and
  2. If those landowners who can make a greater impact perceive that the incentive structure is not cost effective for them, they will simply not apply.

Essentially, the concept of cost-effectiveness, as it applies to conservation strategies, is reflective of a one size fits all approach, that fails to recognize the variability involved in achieving that cost effective standard.

Cost-effective program design requires the weighting and tradeoffs between the factors identified above. While some users may require additional expenditures than those who enroll voluntarily, a great enough environmental impact may warrant that use of resources

Cost-effective program design requires  weighting and tradeoffs between the factors identified above. While some users may require additional expenditures than those who enroll voluntarily, a great enough environmental impact may warrant that use of resources

Resources

Ecosystem services in agricultural landscapes

Groffman, P. et al. 2007. Ecosystem Services in Agricultural Landscapes. In Managing Agricultural Landscapes for Environmental Quality.

This article defines ecosystem services in a landscape context. This means that changes in ecosystem performance should be linked to multi-scalar changes spatial arrangements. The authors are concerned primarily with how this approach impacts monitoring, and define four considerations in monitoring within a landscape ecology framework: spatial arrangements as regulating energy and ecosystem service flows; scale and hierarchy, and specifically the ability to apply observations and data at multiple spatial scales; context versus contents i.e. understanding each unit of observation in its broader context vs. understanding its ecological processes as only products of the until of analysis; and last understanding landscapes as products of their historical legacy. The authors also discuss the challenge of this and other water quality and conservation management strategies when placed in a land-management context, due to both temporal mismatch and benefit asymmetry. In a targeting context, this approach is important both conceptually and as it relates concretely to the relationship between monitoring and effective targeting.

Mark Ribaudo has published many useful resources on cost-efficiency in conservation practices. Some of these include:

Nitrogen in Agricultural Systems

Ribaudo, Marc, Jorge Delgado, LeRoy Hansen, Michael Livingston, Roberto Mosheim, and James Williamson. 2011. Nitrogen In Agricultural Systems: Implications For Conservation Policy. ERR-127. U.S. Department of Agriculture, Economic Research Service, September.

This report answers three questions: Why nitrogen management is important, What is the current extent of cropland utilizing nitrogen BMPs, and what are the strengths and weaknesses of policy approaches for improving nitrogen management. Farmers tend to over fertilize because they assume optimal weather conditions and yields. This reduces the Nitrogen Use Efficiency (NUE), causing excess nitrogen to be released into the environment. In order to improve NUE, farmers should practices appropriate method of fertilizer application, appropriate timing and appropriate form. Off-site practices of wetland restoration and vegetation buffers can enhance these on-site improvements.

A number of policy instruments are available to influence adoption of these practices. Those examined in the article include: Providing education and assistance not only on the technical aspects of nitrogen BMPs, but also the financial benefit to farmers therein; Providing financial incentives, though they must be targeted to certain landholders; Creating an input tax on nitrogen fertilizers; introducing a compliance program to require certain improvements on farms receiving government subsidies; Increasing the use of emissions markets and/or water quality trading programs; and increasing regulatory BMP use, such as requiring nutrient management plans. It concludes that the emphasis has historically been on providing financial incentives and information, but with the persistence of mismanagement or lack of BMP implementation indicates the need for broadening the application of policy instruments.

Related: Ribaudo, M. 2011. “Reducing Agriculture’s Nitrogen Footprint: Are New Policy Approaches Needed?” Amber Waves (feature), Vol. 9, Issue 3, Economic Research Service, U.S. Department of Agriculture, pp. 34-39.

Improving the efficiency and effectiveness of agro-environmental policies for the chesapeake bay

Ribaudo, M., J.S. Shortle, D. Blandford, and R.D. Horan. 2011. “Improving the Efficiency and effectiveness of agro-environmental policies for the Chesapeake Bay”. Choices 26 (3).

This article takes some concepts laid out in other Ribaudo pieces from 2011-2012 and applies them to the challenges of the Chesapeake Bay. The Chesapeake Bay is a concrete example of a region that has received ample funding from the State and Federal level but has failed to channel it into policy instrument that effectively address NPS pollution from agriculture. The region has also been tasked with finding nutrient BMPs that will minimize economic loss in agriculture. Policy instruments that are discussed include pay for performance, expanded conservation compliance, regulation, compliance rewards, water quality trading, manure markets, and input taxation. Targeting of famers that will achieve tangible downstream effects is essential in improving the cost-effectiveness of any of these policy instruments.

Reforming Agricultural NPS Pollution Policy

Shortle, J., M. Ribaudo, R. Horan, and D. Blandford. 2012. “Reforming Agricultural Nonpoint Pollution Policy in an Increasingly Budget-Constrained Environment”. Environmental Science and Technology 46 (3): 1316-1324.

The emphasis of this paper is on who bears the responsibility for paying for nutrient pollution reduction. Traditional policy instruments utilize a Pay-the-Polluter principle, providing financial assistance to farmers who enroll in pollution reduction programs. However, this results in farmers enrolling based on private economic benefit calculations and not their ability to contribute towards improved environmental quality. Additionally, the authors discuss the presence of contrary federal incentives that contradict federal environment quality goals, further reducing the private incentive for voluntary enrollment.

The authors propose two shifts in current federal funding programs. First would be a shift to an emphasis on the Polluter Pays Principle. A successful PPP approach would (1) be performance-based (2) target producers based on their ability to address environmental problems and (3) provide flexibility in how to achieve performance goals. A second shift would modify PTP programs to improve their impact on environmental performance. This could be achieved by (1) linking policy instruments to measurable outcomes instead of simply requiring specific BMPs (2) improving payment mechanisms and targeting and (3) incorporating elements of PPP into PTP programs.