Integrating trade-offs and synergies into land use decision making- Ian Bateman. Biodiversity Workshop 25 October 2017

1. Ian Bateman, Amy Binner and Brett Day
Director: Land, Environment, Economics & Policy Institute (LEEP),
Business School, University of Exeter.
H.M. Treasury & Defra Natural Capital Committee
Presented to the OECD Workshop: Biodiversity, Climate Change and Agriculture:
Towards Coherent Approaches, OECD, Paris, France, 25th October 2017
Integrating trade-offs and synergies
into land use decision making

2. Timber
N2O CO2CH4
Greenhouse gases Recreation
& health
Biodiversity
Food
Incomes
Water
Drivers of change:
Policy, Market &
Environment
Value
Market values
Non-market
values
Social Value
Land use
Integrating trade-offs and
synergies into land use
decision making

3. Modelling agricultural land use: Data
Output prices
Input costs
Technology
Soils
Temperature
Rainfall
Common Agricultural Policy
Environmental Policy
Intervention
Spatially referenced data for all of GB
Data from 1972 to 2016: over 44 million observations

4. Modelling agricultural land use: Empirics
Farm profit and its constraints:
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The potential profit of each activity:
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Farmers determine land use
subject to a variety of constraints
Effects of the physical environment
of farms; prices; costs; policy; etc.
The farmer compares across
all alternative activities
We estimate the amount of land put to
each use and compare against actual
observations to test model validity
Modelling agricultural land use: Data

5. Validation
Out-of-sample, actual versus predicted tests
Actual Predicted
Actual Predicted
Cereals
Grasslands

6. Actual Predicted
Actual Predicted
igure!13.3:!Climate!change!impacts!over!the!2014>63!assessment!period:!Mean!
rowing!season!(April>Sept.)!air!temperature!and!total!monthly!precipitation.!
e!13.3:!Climate!change!impacts!over!the!2014>63!assessment!period:!Mean!
ng!season!(April>Sept.)!air!temperature!and!total!monthly!precipitation.!
2014 2063
20632014
Temperature
Rainfall
Drivers of land use: Climate change
Validation
Out-of-sample, actual versus predicted tests

7. Cereals Beef2014
Low High
Changing drivers – Changing land use
e.g. arising from climate change 2014-63
Cereals Beef20142039Cereals Beef201420392063

8. Nitrates Phosphates
Linking land use to water quality,
ecological quality and economic values
Beef
Low High
Beef
Cereals Beef2063
Land use change & water quality
e.g.
recreation
Market values
e.g. water
treatment costs
Non-market values
e.g.
biodiversity

9. 1 visit
1 visit
1 visit
8 visits
How much do people value their outdoor recreation?
• Survey data (MENE >200K households):
o Home location
o Location of visited sites
o Visit frequency
o Calculate visit travel time & costs
• Integrate data on site quality
£
4 visits
• Observed choices reveal how people trade-
off between site quality and visit costs:
o As costs increase so visits fall
o As quality increases so visits rise
o Reveals value of new or improved sites
£
• Analysis of visit patterns
(random utility model)

10. Carbon storage
in crops & trees
Carbon release from
harvest & felling
Soil carbon changes
Machinery &
fertiliser emissions
Land use change: GHG values (CO2, N2O, CH4)
Livestock emissions
Average annual GHG emissions 2014-63
Agriculture Forestry
Monetised using
official values
per tonne CO2e

11. Land use change & biodiversity
Breeding Birds Survey:
Bird diversity indices
• Grid referenced
• GB coverage
• Time series
Data:

12. Land use changeBreeding Birds Survey:
Bird diversity indices
• Grid referenced
• GB coverage
• Time series
Data:
Modelled linkages:
Biodiversity change
Climate change
Land use change & biodiversity

13. Modelled linkages:
Land use change
Biodiversity change
Climate change
Climate change impacts
2014-63
Land use change & biodiversity

14. Cost benefit value:
- £66million p.a.
Conventional approach –
announce a subsidy and let
targeting be determined by:
Market value only:
(food & timber)
Ignoring non-market goods
Policy application: Where to plant Britain’s new forests

15. Integrated approach –
target planting to maximise:
Market value
(food + timber)
+ greenhouse gases
+ recreation
+ water quality
+ biodiversity improvement
Cost benefit value:
+ £546million p.a.
Policy application: Where to plant Britain’s new forests
Cost benefit value:
- £66million p.a.
Conventional approach –
announce a subsidy and let
targeting be determined by:
Market value only:
(food & timber)
Ignoring non-market goods

16. Natural Environment Valuation Online Tool

19. Create Demonstration TODO

23. Supplier
(e.g. Farmers,
Mitigation Banks)
Purchaser
(e.g. Government,
Private Water Co.,
Developers)
Efficient implementation: Economic incentives for change
e.g. Payments for Ecosystem Services (PES); Offset Markets, etc.

24. Competitive PES markets
Problem: Diffuse pollution

25. Boosts
farm
profits
Raises water
treatment
costs<
Natural capital market
• Assess impacts of change in different areas (benefits)
• Competitive contracting (reverse auction) for undertaking change
• Company estimated a benefit:cost ratio of 60:1 from it’s investment
Problem: Diffuse pollution
Competitive PES markets

26. PES auctions for Government

27. Recent impact: UK Government policy
the
Natural
Capital
Committee
2011
2017
2011
2012
2014
2015
2015
2016
2017

28. • End per hectare payments.
• Provide a per farm universal income safety net in return for basic
production standards (regarding animal welfare, pollution, etc.).
• Additional payments allocated on a “public funding for public
goods” basis.
i.e. Scrap Pillar 1 and replace with an income safety net plus an
enhanced and targeted Pillar 2
Further details given in:
“Natural Capital Committee advice on the 25 Year Environment Plan”
(download from UK Government Defra website)
Agricultural policy proposals

29. • Employ (and where necessary develop) decision support tools
which combine natural and physical science with economic and
social science to:
o Examine the overall trade-offs and synergies of an investment
o Compare those in commensurate terms (values)
o Optimise across alternative investments
• Implement optimal investments using efficient instruments such
as incentivised payments for ecosystem services (PES).
• Adopt policies which:
o Incentivise farmers
o Provide good value for money for taxpayers
o Deliver sustainable agriculture and environment
Integrating trade-offs and synergies into land use decision making

30. Ian Bateman
Director, Land, Environment, Economics & Policy Institute (LEEP), Business
School, University of Exeter.
H.M. Treasury & Defra Natural Capital Committee
Presented to the OECD Workshop: Biodiversity, Climate Change and Agriculture:
Towards Coherent Approaches, OECD, Paris, France, 25th October 2017
Integrating trade-offs and synergies
into land use decision making