Harris, L. M. and S. M. Swinton.
Presented at the All Scientist Meeting (2013-04-04 to 2013-04-05 )
Financial incentives are commonly used to promote voluntary adoption of agricultural conservation practices, but determining how to allocate these incentives in a cost-effective way constitutes an important challenge for environmental program design. Procurement auctions are an increasingly popular tool used to select conservation projects because of their ability to reveal privately held information about landowner costs. In these auctions, farmers compete for conservation contracts by bidding the minimum payment they would accept in exchange for adopting a specified management practice. Payments are awarded not simply to the farmer with the lowest bid, but to the one offering the lowest cost per unit of environmental benefits. Benefits can be calculated using simple indexes, ecological models, or direct measurements. The potential oversimplification of indexes and the prohibitive cost of direct measurements make the use of ecological models an attractive middle path. In this research, models are parameterized for the farm’s geographical setting then run to simulate ecological outcomes from the conservation practices bid by participating farmers. By knowing the cost bid by each farmer and predicted benefits of each bid, contracts can be awarded to the farmers whose bids offer the most conservation benefit per dollar spent. This project focuses on how to design conservation auctions to increase the adoption of agricultural management practices that reduce phosphorus runoff from farm land in the Maumee watershed (NW Ohio, SE Michigan, and NE Indiana) in an effort to abate damaging algal blooms in western Lake Erie. We also explore how to design auctions that allow multiple farmers to bid as a group. Group bidding has the potential to improve auction outcomes by encouraging the adoption of complementary practices and taking advantage of relative management efficiencies among farmers.
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