Targetingbased quantitative analysis

A primary challenge of conservation funding is how to target purchases to maximize the impact of a given budget. Some of the principles for analysis and data collection required to answer this question have been addressed in the emerging economic literature on the management of bioresource purchasing funds (Wu, Zilberman, Babcock, 2001), which has been used to analyze the Conservation Reserve Program (CRP) and water quality programs in the United States (Ise and Sunding, 1998). The basic premise of this approach is that an agency has a certain amount of money that it must to use to purchase, rent, or modify the use of environmental resources. These resources can be land or water rights. The question is how to target the resources. To solve this question, one needs to take into account the quantification of environmental benefits and the costs associated with changes in behavior.

6.2.1 Quantification of the environmental benefits associated with modification of behavior at various locations

This information can be represented by indices of environmental quality. In the case of the CRP in the United States, indices of environmental quality improvement included such items as the reduction in soil erosion, increases in quality and diversity of native plants, increases in populations of migrating birds, etc. OECD3 has also developed indicators of environmental quality based upon the pressure-state-response (PSR) model. Work has already begun at FAO on developing indicators of agricultural biodiversity, as part of the Global Plan of Action for Conserving Plant Genetic Resources for Food and Agriculture. The types of indicators being developed include measures of crop genetic erosion and vulnerability, number and kind of threatened species relevant to food and agricultural production, number and kind of wild relatives of species relevant to food and agriculture under conservation programs, areas under in situ conservation, and degree of genetic integrity of ex situ accessions. In light of the discussion in this paper, it may be useful to distinguish between areas which yield high biodiversity conservation benefits in the form of option values versus those which yield high values in terms of improvements of current production systems, as the payment mechanisms and costs associated with conservation in the two areas will be quite different. A key question is the extent to which the value of genetic diversity in improving cropping systems coincides spatially with the value of genetic diversity as an option value for future development.

3 Organization for Economic Cooperation and Development.

6.2.2 Quantification of costs associated with inducing the desirable changes in various locations

Moving towards changes in behavior requires payment of some kind. As discussed in Chapters 6 and 7 of this volume, the most significant cost to farmers in providing in situ conservation services is foregoing agricultural productivity gains that may be obtainable with modern variety adoption. Areas with the highest conservation costs, therefore, may be expected to be those where adoption is possible, but has not yet occurred. Areas with the lowest costs of conservation are those where no option of modern variety adoption exists. These tend to be marginal production areas and cropping systems for which no modern varieties have been developed, or where modern varieties do not perform as well as local varieties. As noted in our analysis above, these also tend to be the areas with the highest potential benefits from genetic diversity as an input to the development of sustainable production systems. In many cases, we may end up with a situation where the private incentives to preserve diversity coincide with the public values. If the most effective way of increasing the productivity and profitability of farmers operating under such conditions is to enhance the availability and performance of genetic diversity, then farmers and the breeding systems serving them will have strong incentives to conserve diversity.

With the development of information technologies, the costs of establishing databases on the costs and benefits of conservation funds is declining over time. Studies on the costs and distribution of environmental benefits of resource conservation efforts suggest that there is significant heterogeneity in the distribution of benefits. For example, 10% to 15% of the land base considered for preservation of native plants in the United States provided up to 90% of the potential benefits (Wu, Zilberman, and Babcock, 2001). Similarly, the costs of purchasing resources vary greatly and, again, a relatively small percentage of the resources may possess most of the economic value and may absorb most of the costs.

Efficient conservation fund management will target funds to locations that provide the highest rate of conservation per dollar spent. Thus, locations that have the highest ratio of per acre benefits to per acre costs would be selected. Sometimes, for convenience or political/economic reasons, fund managers may target the cheapest resources. This support will maximize acreage that may be enrolled in a land-based conservation program with a given budget, but the effectiveness of this strategy depends on the correlation between environmental benefits and the cost of land. If land provides a high level of biodiversity conservation and there is a high positive correlation between cost of purchasing/leasing/payment per land area and environmental quality, this strategy may be inefficient because some of the included land provides very little additional conservation value. On the other hand, if there is a strong negative correlation between the cost of bringing the land into a conservation program and its associated biodiversity level, then acreage maximization and targeting of the lowest cost lands may also maximize environmental benefits purchased with a given budget.

Another targeted approach aims to conserve locations that provide higher conservation benefits per acre, regardless of cost. This approach may be suboptimal if environmental benefits are negatively correlated with economic costs, but it may result in the most efficient outcome when there is a strong correlation between environmental benefit and cost. For example, if land potentially highly productive under modern varieties provides high in situ conservation benefits, such that the relative advantage in conservation provision is higher than in production (e.g., the value of the conservation benefits are greater than the opportunity costs of foregone production), then funding farmers to preserve cropping and variety patterns which generate in situ conservation will be optimal.

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