Managing increasing environmental risks through agro-biodiversity and agri-environmental policies
Publikation: Arbeits- oder Diskussionspapiere und Berichte › Arbeits- oder Diskussionspapiere
Authors
Agro-biodiversity can provide natural insurance to risk-averse farmers by reducing the variance of crop yield, and to society at large by reducing the uncer- tainty in the provision of public-good ecosystem services such as e.g. CO2 storage. We analyze the choice of agro-biodiversity by risk-averse farmers who have access to financial insurance, and study the implications for agri-environmental policy de- sign when on-farm agro-biodiversity generates a positive risk externality. While increasing environmental risk leads private farmers to increase their level of on-farm agro-biodiversity, the level of agro-biodiversity in the laissez-faire equilibrium re- mains inefficiently low. We show how either one of two agri-environmental policy instruments can cure this risk-related market failure: an ex-ante Pigouvian subsidy on on-farm agro-biodiversity and an ex-post compensation payment for the actual provision of public environmental benefits. In the absence of regulation, welfare may increase rather than decrease with increasing environmental risk, if the agro- ecosystems is characterized by a high natural insurance function, low costs and large external benefits of agro-biodiversity.
Originalsprache | Englisch |
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Erscheinungsort | Lüneburg |
Verlag | Institut für Volkswirtschaftslehre der Universität Lüneburg |
Anzahl der Seiten | 28 |
Publikationsstatus | Erschienen - 2008 |
Bibliographische Notiz
Literaturverz. S. 20 - 23
- Volkswirtschaftslehre - agro-biodiversity, ecosystem services, agri-environmental policy, insurance, risk-aversion, uncertainty
- Wirtschaftswissenschaften für Nachhaltigkeit - agro-biodiversity, ecosystem services, agri-environmental policy, insurance, risk-aversion, uncertainty