Description of valuation study conducted – DEMAND

The demand side valuation of the Austrian case study region considered the three public goods (i) biodiversity and habitat, (ii) water and (iii) soil and climate. The aim of the valuation was to elicit the marginal willingness to pay of the local population of the case study region for an improved provision of these three public goods by agriculture and whether certain socio-economic factors cause differences in marginal willingness to pay.

A discrete choice experiment was conducted and marginal willingness to pay was estimated based on a random parameters logit model. The public good biodiversity and habitat was implemented as an attribute for the discrete choice experiment as percentage of hedges and flower strips on agricultural land. Water was expressed as groundwater quality, which could take on the two levels potable without treatment or potable only after treatment. The third public good, soil and climate was expressed as percentage of arable land which is subject to specific soil conservation practices. Finally, a payment-vehicle was included, which was expressed as additional tax payment per household and year.

The discrete choice experiment was based on an online-survey, which was administered in cooperation with a market research institute. From a total of 559 people contacted, 204 respondents completed the survey. The sample was representative with respect to age, gender and place of residence of the target population (all respondents were residents of Marchfeld).

PG valuation results – DEMAND

The results indicate a positive marginal willingness to pay for an improved provision of all three public goods by agriculture. Respondents have a marginal willingness to pay (expressed in Euro per household and year) of 60.22 for groundwater which is potable without previous treatment, 6.39 for a one percentage point increase of hedges and flower strips on agricultural land and 0.63 for a one percentage point increase in arable land which is subject to soil conservation practices.

With respect to preference heterogeneity, the involvement of respondents regarding public goods seems to be more relevant for determining differences in marginal willingness to pay, than classical socio-economic factors like gender or education (except age). For example, farmers show strong preferences for the status quo, as they are the ones, who would have to implement measures aimed at improving the provision of public goods by agriculture. On the other hand, people who are related to farmers show negative preferences for the status quo.

Regarding preferences for specific public goods, older people show disutility for the public goods water as well as soil and climate, while they derive utility from biodiversity and habitat. Locals have negative preferences for water as well as for biodiversity and habitat, opposed to incomers, who mostly moved to Marchfeld from adjacent urban areas. Also, people, who indicated that certain public goods (soil and climate or water) are important for them, also derive utility from an improved provision of these public goods. Finally, people who thought of the whole case study region instead of their own municipality during the discrete choice experiment derive benefits from an increase in soil conservation practices on arable land, which would also contribute to climate change mitigation.

Description of valuation study conducted – SUPPLY

To analyse the agricultural cost of providing the public goods „climate stability/soil functionality“ and „diversity of agricultural landscapes“ in the Marchfeld, we carried out cost calculations on municipality level. Hereby, each municipality of the Marchfeld represents a „regional farm“. This means that all agricultural area within a municipality, as well as the crop rotation on that area (crops cultivated and their share of the UAA), are considered to be one farm. The entire UAA and the share of the individual crops on the UAA represent the area equipment and crop rotation of the “regional farm”. In our calculation model, the CSR Marchfeld is represented by 23 regional farms with 23 individual crop rotations.

Costs of the provision of  “climate stability/soil functionality” occur due to the implementation of climate friendly agricultural management practices on the area of the “regional-farm”. These practices consist of four management measures, namely “Lucerne programme”, “Crop residues remain on the field”, “Reduced tillage” and “Intercropping”. As costs of the latter three measures, the decrease of gross margin per hectare resulting from management changes was calculated. As costs of the measure “Lucerne programme”, the costs of planting and managing lucerne (direct costs) on different shares of UAA (2.5%; 5%; 7.5% & 10% of UAA) of the “regional farm”, as well as the opportunity cost of the original agricultural crops displaced by the lucerne were assessed.

Costs of the provision of “diversity of agricultural landscapes” occur due to an “increase of hedgerows and flower strips” on the UAA of the “regional farm”. Costs consist of the costs of planting and managing flower strips and hedgerows (direct costs) on different shares of UAA (2.5%; 5%; 7.5% & 10% of UAA) of the “regional farm”, as well as the opportunity cost of the original agricultural crops displaced by the flower strips and hedgerows.

PG valuation results – SUPPLY

The range of costs for implementing the necessary management changes are shown in the box below:

The range of costs shown in the results is caused by the different proportions of different crops in the respective communities. For example, in municipalities with a high percentage of cereals in the regional crop rotation, the costs of lost profits of straw sales per hectare of regional farm are higher than in municipalities where only few crops appear in the crop rotation. In municipalities where the proportion of vegetables in crop rotation is high, on the other hand, the costs per hectare of regional farm are lower than in municipalities where the proportion of vegetables is low. This is because vegetable areas are not suitable for mulch and direct sowing and are thus excluded from this measure.

The costs of planting flower strips increase with increasing area for flowering strips, as larger area losses are increasingly limiting the cultivation of „expensive“ crops. The middle variant causes (at the same area rate for flower strips) the lowest cost, mainly due to the low cost of cultivating the flower strip. If assuming that mainly those crops in the crop rotation with the lowest gross margin are displaced by the flower strips, the major determinant driving the costs are the prices of the crops displaced.