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Environmental compensation is not for the birds
The European Union (EU) recently implemented the Environmental Liability Directive (ELD), requiring that environmental damage be restored so that the affected environment returns to (or toward) its baseline condition and the public is compensated for the initial damage and the losses during the time it takes for the environment to recover (interim losses). Equivalency Analysis (EA) represents a method for scaling environmental compensation to offset interim losses. Ensuring appropriate compensation for resource loss requires a merging of ecological measurement with the theories of welfare economics. This thesis explores some of the issues in scaling resource-based compensation in three papers. Paper I is a quantitative application of the EA method to compensate for sea eagle mortality from wind turbine collisions. It is co-authored with a biologist and proposes a new and innovative compensatory measure based on electrocution prevention on power lines. Paper II is written for an ecological readership and communicates fundamental economic assumptions in a way that might be helpful for cross-discipline collaboration. The main contribution is to clarify that the underlying goal of environmental compensation should be "no net loss of welfare." Paper III scrutinizes the conventional EA method from a social efficiency perspective, suggesting that the focus on equity for the victim may preclude a socially optimal compensatory outcome. The overarching conclusion is that EA fails to inform policy makers of the inescapable environmental trade-offs that arise in compensating environmental losses.
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Violation of environmental regulations as a disinvestment in social capital
This paper developed a simple dynamic model in order to analyse the impact of social capital on violation of environmental regulations. Two main channels of influence were identified; through informal enforcement of regulations and through effects on costs from disinvestment in social capital caused by violation. The model was tested using survey data on enforcement and violation of command and control regulations at municipalities and counties in Sweden. Four different measures on the social capital variable were used; general trust, trust in local and national governments, and organizational activity. Count data models were used for estimating the explanatory power of these variables in relation to inspection frequency and control variables of community characteristics. Statistically best results were obtained for organizational activity for all firm categories. The results showed that both the level of this social capital measure and its growth over time curb violation.
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Implementation of environmental strategies in companies' management and control system
Sustainability reporting has grown in importance and transparency over the years. The reporting has in many countries gone from being voluntarily to become mandatory. This is the case within the EU, which adopted the non-financial reporting directive (2014/95/EU) in 2014. Sweden applied the directive in 2017 in the Annual Account Act. At the same time as the requirements have increased research has showed there is a gap between the content of the disclosed reports and companies' actual sustainability activities. To create a reliable and transparent external sustainability report there is a need to take internal activities into account and collect data for reporting from internal management and control systems. Previous research has also recognised that sustainability needs to be a part of the corporate strategy in order to ensure that sustainability becomes a part of the business operations. In order to contribute to a deeper understanding of any deficiencies between the information provided in sustainability reports and the internal activities the aim of this study is to investigate and explain the implementation of environmental strategies in company's management and controls system. Swedish companies operating in industries with a high environmental impact, the forest-, paper-, mining-, and steel industry, are selected as research objects in this study. A deductive method in combination with a hermeneutic method is applied. Management control systems, corporate sustainability strategy, legal requirements, the Global Reporting Initiative and accounting postulates form the theoretical framework. The empirical result shows there is a gap between the communicated environmental strategies and the implementation in the company management control system in each of the three industries. The result of the study raises questions regarding what the goal is for the communicated environmental strategies and to what extent the strategies are implemented. Another conclusion is that the companies in the three industries do not comply with the GRI framework, when reporting a limited number of environmental performance indicators. In addition, despite of a mandatory regulation for disclosing of non-financial information and the use of a common framework there is no common reporting standard for companies in the studied industries. External stakeholders need to have access to relevant non-financial information to assess companies' impact on the environment. Current legislation and standard frameworks provide a high level of flexibility regarding what to report. In order to achieve a common standard this study shows a need to add a conceptual sustainable framework for accounting and reporting, enforcement mechanisms and regulated common standards to achieve a more transparent and reliable reporting practice.
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Wind power compensation is not for the birds : an opinion from an environmental economist
This article advocates for better implementation of the Environmental Impact Assessment (EIA) framework as applied to wind power development, with a particular focus on improving compensatory restoration scaling. If properly enforced, the environmental impacts hierarchy "avoid - minimize - compensate" provides the regulated community with incentives to prevent wildlife and habitat impacts in sensitive areas and, if necessary, compensate for residual impacts through restoration or conservation projects. Given the increase in legislation requiring resource-based environmental compensation, methods for scaling an appropriate quantity and quality of resources is of increasing relevance. I argue that Equivalency Analysis (EA) represents a transparent and quantitative approach for scaling compensation in the case of wind power development. Herein, I identify the economic underpinnings of environmental compensation legislation and identify weaknesses in current scaling approaches within wind power development. I demonstrate how the recently-completed REMEDE Toolkit, which provides guidance on EA, can inform an improved scaling approach and summarize a case study involving raptor collisions with turbines that illustrates the EA approach. Finally, I stress the need for further contributions from the field of restoration ecology. The success of ex ante compensation in internalizing the environmental costs of wind development depends on the effective implementation of the environmental impacts hierarchy, which must effectively encourage avoidance and minimization over environmental restoration and repair.
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Effectiveness and equity of Payments for Ecosystem Services: Real-effort experiments with Vietnamese land users
Payments for Ecosystem Services (PES) are widespread in conservation policy. In PES, environmental effectiveness and social equity are often perceived as conflicting goals. Empirical studies on the relationship between popular design features, such as payment differentiation and payment conditionality, and effectiveness and equity are scarce. Further, they struggle with measuring and separating ecological and equity outcomes. In this study, we combine two incentivized lab-in-the-field experiments with 259 land users from eight villages in North-Western Vietnam to assess both individual conservation effort and community-level equity perceptions under four different PES designs. Effort is measured in a real-effort task with real-world environmental benefits; equity perceptions about payment designs in the real-effort task are measured in a coordination game. We demonstrate that payment design affects both effort and equity perceptions. Payments which are differentiated and are solely conditional on individuals' contributions of effort are perceived as most equitable. They are also more effective in motivating conservation effort than other designs, although the differences are small and not significant for all comparisons. By working out the positive correlation of effectiveness and equity across the four payment schemes, we show that these objectives are not necessarily conflicting goals in incentive-based conservation policy. Further, we can show that women exert greater conservation efforts. We discuss how greater equity and effectiveness could be achieved with reforms towards more input-based distribution criteria in Vietnam's PES legislation and the limitations and opportunities of the experimental paradigm for research on PES.
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Quality of institution and the FEG (forest, energy intensity, and globalization) -environment relationships in sub-Saharan Africa
The current share of sub-Saharan Africa in global carbon dioxide emissions is negligible compared to major contributors like Asia, Americas, and Europe. This trend is, however, likely to change given that both economic growth and rate of urbanization in the region are projected to be robust in the future. The current study contributes to the literature by examining both the direct and the indirect impacts of quality of institution on the environment. Specifically, we investigate whether the institutional setting in the region provides some sort of a complementary role in the environment-FEG relationships. We use the panel two-step system generalized method of moments (GMM) technique to deal with the simultaneity problem. Data consists of 43 sub-Saharan African countries. The result shows that energy inefficiency compromises environmental standards. However, the quality of the institutional setting helps moderate this negative consequences; countries with good institutions show greater prospects than countries with poor institutions. On the other hand, globalization of the region and increased forest size generate positive environmental outcomes in the region. Their impacts are, however, independent of the quality of institution. Afforestation programs, promotion of other clean energy types, and investment in energy efficiency, basic city infrastructure, and regulatory and institutional structures, are desirable policies to pursue to safeguard the environment.
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Impacts of direct payments – lessons for CAP post-2020 from a quantitative analysis
In this report we aim to analyse the economic and environmental impacts of Pillar I direct payments, and to demonstrate alternative instruments that are better suited to achieve CAP objectives. The instruments—a targeted payment to land at risk of abandonment and a tax on mineral fertilisers—were selected on the basis of the Polluter Pays and Provider Gets Principles. We do this using two state‐of‐the‐art agricultural economic simulation models. The first model, CAPRI, is used to quantify the large‐scale or aggregate impacts for individual countries, the EU and the world. The other model, AgriPoliS, is used to quantify the fine‐scale or farm and field level impacts in a selection of contrasting agricultural regions, to consider the potential influence of the large spatial variability in agricultural and environmental conditions across the EU. The results show that direct payments are keeping more farms in the sector and more land in agricultural use than would otherwise be the case, and thus avoiding land abandonment, principally in marginal regions. Particularly the area of grassland is substantially higher, because it is generally less productive than arable land and hence more dependent on direct payments for keeping it in agricultural use. The magnitudes of the impacts of direct payments on land use therefore vary strongly across regions due to spatial variability in productivity: marginal regions with large areas of less productive land are heavily influenced by direct payments, while regions with large areas of relatively productive land are hardly affected, because this land would be farmed in any case. By keeping more farmers in the sector longer, direct payments are slowing structural change, which can hamper agricultural development. However the potential benefits of faster structural change vary considerably among our study regions. In relatively productive regions direct payments are hindering development, because too many farmers are staying in the sector and preventing the consolidation of land in larger farms, which would improve their competitiveness and increase farm profits. On the contrary, the mass departure of farms that is currently avoided, will not lead to the same general benefits in marginal regions. Instead of freed land being absorbed by remaining farms, large areas of relatively unproductive land are abandoned without payments. This land is unprofitable to maintain in agricultural land use, even if integrated into larger farms, because current market prices are too low to motivate farming it. Consequently direct payments pose a serious goal conflict: the avoidance of land abandonment on the one hand, which can have negative impacts on public goods, and restricting agricultural development on the other hand. Once again this goal conflict is rooted in the spatial variability of agricultural conditions in the EU. Maintaining extensively managed farmland, particularly semi‐natural pastures, is central for conservation of biodiversity and preservation of the cultural landscape. Therefore direct payments are contributing to the provisioning of these public goods, but principally in marginal areas. Further, abandonment of land can reduce its agricultural productivity due to erosion or afforestation. Thus, direct payments are contributing to food security by preserving the productive potential of land for the future, but only marginal land since relatively productive land is farmed in any case. Production of agricultural commodities is affected to a lesser degree by direct payments than land use per se. Nevertheless, food exports from the EU are higher and imports lower as a consequence of direct payments. However, the additional supply generated by direct payments also lowers output prices, which reduces the profitability of commodity production; thereby partially offsetting the additional revenues from direct payments. The higher agricultural output brought about by direct payments causes higher levels of environmentally damaging greenhouse‐gas emissions, nutrient surpluses and pesticide use. The higher greenhouse‐gas emissions for the EU are, to some extent, moderated by lower emissions in the rest of the world. Nevertheless, the net effect of direct payments is higher global emissions of greenhouse gases. The environmental impacts of higher nutrient surpluses and pesticide inputs are less conclusive, since these depend also on spatial factors, i.e., where the emissions occur. Although EU‐scale and regional emissions are higher due to direct payments, agricultural production is less intensive generally, on account of the lower output prices. Analysing the net effects of these two opposing forces requires additional biophysical modelling at relevant spatial scales, such as watersheds or landscapes, which is beyond the scope of this study. Pillar I direct payments generate a significant transfer of income to farmers and land owners who are not necessarily farmers; 40 billion euro annually. Of this transfer a substantial proportion goes to farmers in relatively productive regions and, further, to a minority of farmers that need them least. In relatively productive regions payments are not needed for continued agricultural production and preservation of farmland, but instead rather fuel higher land and rental prices, which hampers structural change. On the contrary, the need for support is greatest in marginal regions, because some form of payment to marginal land is needed to avoid its abandonment and the loss of associated public goods. Finally, the direct payments even come at the cost of lower market returns for farmers due to slower structural change (smaller and less competitive farms) and lower output prices (due to greater EU output). On the other hand the lower output prices lead to somewhat lower food prices, but at the greater cost of financing the direct payments. Our main conclusion is that Pillar I direct payments are generating serious goal conflicts due to spatial variability in conditions across the EU. On the one hand these payments are contributing to the provisioning of public goods by preserving marginal agricultural land. On the other hand they are hampering agricultural development, primarily in relatively productive regions. Payments to relatively productive land that would be farmed any way not only inflate land values (capitalisation) but also slow structural change, which are both likely to hinder agricultural development and hence the competitiveness of the EU on the global market. The direct payments also increase environmental pressure; by subsidising land use generally and the associated production, they are incapable of controlling environmentally damaging emissions, which is also in conflict with broad CAP objectives. The goal conflict arises because direct payments are universal, a payment principal that does not consider spatial variability in the EU and the associated trade‐offs in regard to development and environmental effectiveness. Our analysis considered two alternative policy instruments that have the potential to curb the identified goal conflicts associated with direct payments, by applying the Polluter Pays and Provider (of public goods) Gets Principles at appropriate spatial scales. Replacing direct payments with a payment targeted on marginal land (and associated public goods) prevents land abandonment at a lower cost, by avoiding payments to relatively productive land that is farmed in any case. This also allows surviving farms in regions with relatively productive land to compensate for lost direct payments through expansion and associated scale economies, as well as higher output prices. This instrument therefore finances the provisioning of public goods without adverse effects on development and the efficiency of agricultural production. The EU‐wide tax on mineral fertiliser demonstrates that this instrument has the potential to reduce nutrient surpluses. Since direct payments cause higher levels of polluting emissions, policy instruments targeting emissions at relevant spatial scales are needed to achieve cost‐effective abatement. Overall we find that Pillar I direct payments are not addressing the diversity of challenges facing European agriculture. In fact our quantitative analysis indicates that the potential for the current system to meet these challenges is seriously impaired by goal conflicts and spatial variability across the EU. A better policy requires that instruments are targeted on desired outcomes and designed according to sound principles, specifically the Polluter Pays and Provider Gets Principles. These principles would ensure that farmers are provided with appropriate incentives to i) generate public goods that otherwise would be underprovided; ii) mitigate environmentally damaging emissions at the lowest possible cost to society; and iii) continually strive to improve environmental performance. Such instruments are also fairer and promote a more competitive or viable agricultural sector by not obstructing structural change and hence agricultural development.
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Costs and fairness of forest carbon sequestration in EU climate policy
Large emissions of greenhouse gases are expected to cause major environmental problems in the future. European policy makers have therefore declared that they aim to implement cost-efficient and fair policies to reduce carbon emissions. The purpose of this paper is to assess whether the cost of the EU policies for 2020 can be reduced through the inclusion of carbon sequestration as and abatement option while also equity is improved. The assessment is done by numerical calculations using a chance-constrained partial equilibrium model of the EU Emissions Trading Scheme and national effort-sharing targets, where forest sequestration is introduced as an uncertain abatement option. Fairness is evaluated by calculation of Gini-coefficients for six equity criteria to policy outcomes. The estimated Gini-coefficients range between 0.11 and 0.32 for the current policy, between 0.16 and 0.66 if sequestration is included and treated as certain, and between 0.19 and 0.38 when uncertainty about sequestration is taken into account and policy-makers wish to meet targets with at least 90 percent probability. The results show that fairness is reduced when sequestration is included and that the impact is larger when sequestration is treated as certain.
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Should forests be used as uncertain carbon sinks or uncertain fossil fuel substitutes in the EU Roadmap to 2050?
This study investigates the contribution of forest carbon sequestration to a cost-efficient EU climate policy from 2010 to 2050 under conditions of uncertainty. We note that there is a trade-off between sequestration and alternative uses of forests such as bioenergy and timber production. A dynamic and probabilistic cost-minimization model is developed, which includes fossil fuel use within the EU Emissions Trading System and forest management in the EU-27 countries. The results suggest that if policy makers wish to meet emissions targets with 80% certainty, this goal will be eight times more expensive than when they were unconcerned with uncertainty. Policy makers' risk attitudes affect forest management strategy primarily through the inclusion of wood products, where potential carbon emissions reductions are high but also highly uncertain. Excluding wood products from a climate strategy can be expensive if policy maker are insensitive to uncertainty.
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D 2.6 Report on state and outlook for risk management in EU agriculture
The SURE-Farm project aims to analyse, assess and improve the resilience and sustainability of farming systems in Europe. Farming systems face a whole range of social, ecological, economic and political disturbances and changes, such as sharp market fluctuations, severe weather events, climate change, new technologies, changes in consumer preferences and in governance structures and so forth, operating at a range of scales (local, regional, national and global). Some stresses on the farm system can be predicted (e.g. retirement of farmers), while other shocks are more uncertain and unpredictable (e.g. flooding, sudden price drop, illness). Project's WP2 aims to comprehensively understand farmers' risk behaviour and risk management (RM) decisions, and to develop and test RM strategies and decision support tools that farmers can use to cope with increasing economic, environmental and social uncertainties and risks. WP2 contributes to the development of RM in EU farming systems by understanding and eliciting farmers' risk perceptions and preferences; learning about farmers' adaptive behaviour; learning capacity and preferred improvements of current RM tools; designing and analysing improved strategies to deal with extreme weather; and co-creating improved RM tools and map-related institutional challenges.
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A thorny business
Roses and other cut flowers from Kenya can be found in innumerable European and Asian supermarkets, floristry shops and online mail-order firms. The importance of the floricultural sector is fundamental for the Kenyan economy. However, during the last two decades, international media and scientific reports have pointed out the problematic working conditions and negative environmental impacts of the industry. In response, at the beginning of the 21st century, the international Fairtrade initiative came into the picture to improve the problematic production impacts of the sector. The Fairtrade initiative has a broadly positive reputation and quantitative data show an improvement in production manners. Nevertheless, it remains unclear if and how Fairtrade is perceived and experienced by ordinary workers on a subjective level. This study examines whether Fairtrade initiatives are an attainment for general workers or if they are considered as more of a top-down development approach. Through a qualitative, phenomenological inspired research design, a comparison of working conditions on a Fairtrade and non-Fairtrade cut flower farm is done on a local micro level. Results show that the Fairtrade initiative on the examined farm is perceived and experienced as rather negative and inhuman while, on the contrary, workers on the non-Fairtrade farm reported their conditions as positive in comparison. Also, the empirical data shows that this specific Fairtrade farm might not be an individual case in Kenya. Due to weak compliance with international Fairtrade standards and national legislation, workers and worker's unions point out lacks in the Fairtrade system in the cut flower business in general. Therefore, starting from this study's results on worker's subjective negative experience of their working conditions, a broader, mixed method study on a meta level is required. Meanwhile, the Fairtrade initiative should re-evaluate its standards and inspection systems to prevent the dilution of its own standards and reputation.
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Setting the scene
Biodiversity loss can degrade ecosystems and impactthe ability of ecosystems to contribute to people. The last 20 years of ecosystem service research has increased society's interest in fighting the consequences of ecosystem degradation. During the last decades, attitudes towards conservation have been shaped in many ways. According to Mace (2014), "nature for itself" was a key principle during 1960s–1970s supporting concepts such as protected and wilderness areas. Human pressures on nature during the 1980s and early 1990s resulted in extinctions, habitat loss, and pollution, which made it urgent to act for"nature despite of people". That period was followed by a "nature for people" period, in which biodiversity challenges were mainstreamed via concepts such as ecosystem approach, ecosystem services and economic values. The latest paradigm, which was developed by Mace (2014) is called "people and nature". Key concepts in conservation circles include environmental change, resilience, adaptability and socio-ecological systems. Several assessments of the state and trends of biodiversity, ecosystems and ecosystem services have been carried out via various initiatives, such as Millennium Ecosystem Assessment (MA, 2005), followed by the Economics of Ecosystems and Biodiversity (TEEB) assessments and the Aichi biodiversity targets of the Convention on Biological Diversity (CBD). In Europe, Mapping and Assessment of Ecosystems and their Services (MAES) has generated a lot of new knowledge on the quantification of ecosystem services and use of this information in decision-making. Today, more and more open data is available through research infrastructures, for example, remote sensing data through the Copernicus programme of the European Union and European Space Agency. Naturebased solutions and green and blue infrastructure are becoming popular in landscape planning and highlight different aspects of the socio-ecological (synon. coupled human-environment) systems and their sustainable management. The most significant attempt to highlight the importance of biodiversity and ecosystem services globally, has been the establishment of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES). IPBES has launched a series of thematic and geographical assessments. The European and Central Asian regional assessment has been ongoing parallel to this Nordic IPBES-like assessment that has focused on coastal ecosystems and their services. This assessment covers the Nordic countries, i.e. Denmark, Finland, Iceland, Norway and Sweden, and autonomous areas such as Åland, Faroe Islands and Greenland, which are a unique "biocultural" piece of Earth with unique nature values and well-established societies.
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