Estimating Program Uptake and the Nature of Costs/Benefits in Agro-Manitoba

 

Investing in natural capital on privately owned farmlands is a way for society to encourage the continued provision of a wide array of Ecological Goods and Services (EG&S). EG&S are the positive environmental benefits derived from healthy ecosystems, including clean water and air, and enhanced biodiversity. The EG&S concept includes market goods produced from ecosystems (e.g. food, fibre, fuel, fresh water, genetic resources, etc.), the benefits from ecosystem processes (e.g. nutrient cycling, climate regulation, water purification, waste treatment, pollination, etc.) and non-material benefits (e.g. aesthetic values, recreation, etc.).

Agriculture is both a beneficiary of and a provider of EG&S. For example, farming's viability depends on ecosystem processes like soil renewal, climate regulation, and precipitation. At the same time, well-managed agricultural lands can provide benefits to broader society like fish and wildlife habitat, scenic views, and purification of air and water through natural processes.

Farmers and ranchers, as land managers, have the opportunity to adopt effective or promising responses that conserve or sustainably enhance the direct supply of ecosystems services provided by their lands (as recommended in the Millennium Ecosystem Assessment, 2005). They can do this by maintaining or enhancing the wetlands, riparian buffers, natural areas and ecologically sensitive lands (i.e., the natural capital) they own.

There is growing recognition among producers, governments, and other stakeholders that EG&S are vital to Canada’s economic and social well-being. Therefore, adaptive institutions need to be developed to ensure that the contributions to human well-being provided by ecosystem services can be sustained and enhanced. Systems of payment for ecosystem services can be one effective element in these institutions.

Manitoba Agriculture, Food and Rural Development (MAFRD) was interested in evaluating the costs and benefits of implementing an EG&S program across Agro-Manitoba. This project is in response to that interest.

We are pleased to share with you the final report "Ecological Goods and Services: Estimating Program Uptake and the Nature of Costs/Benefits in Agro-Manitoba" (PDF 1.7MB). Funding for this project was provided by MAFRD and the study was conducted by the George Morris Centre.

The main objectives of this project were: to determine the nature and extent of EG&S qualifying lands throughout Manitoba and, to describe the potential environmental and other benefits from an EG&S program and the main environmental practices involved.

A cost-benefit analysis model was developed to quantify several different scenarios based on payment type, contract length, adoption rate and benefit discounting scenario. The benefit/cost ratios were greater than one for all scenarios in the initial analyses; however a sensitivity analysis indicated that these results were highly dependent on the value placed on the benefits of wetlands and could actually produce ratios less than one if lower values were used for wetlands. The study suggests that a blanket EG&S program covering all of agro-Manitoba would cost in the order of several hundred million dollars per year, depending on uptake and payment levels.

Readers are advised to use caution in interpreting results of this cost-benefit analysis:

  • Prices used in the crop model reflect peak commodity prices experienced in 2008 and are highly atypical. Crop prices vary considerably from year to year, and should be evaluated using a time series of data points to reflect this annual variability
  • Rental rates are estimates only for the 2008 season and are based on the peak commodity prices experienced in winter 2008. Rental rates will change from year to year, and should be evaluated using a time series of data points to reflect this annual variability.
  • Results are extremely dependent on values placed on wetland benefits.