Managing increasing environmental risks through agrobiodiversity and agrienvironmental policies

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Managing increasing environmental risks through agrobiodiversity and agrienvironmental policies. / Quaas, Martin F.; Baumgärtner, Stefan.
In: Agricultural Economics, Vol. 41, No. 5, 01.09.2010, p. 483-496.

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@article{28ff9c25f1354d6891fc3a7e962c0a71,
title = "Managing increasing environmental risks through agrobiodiversity and agrienvironmental policies",
abstract = "Agrobiodiversity can provide natural insurance to risk-averse farmers by reducing the variance of crop yield, and to society at large by reducing the uncertainty in the provision of public-good ecosystem services, for example, CO 2 storage. We analyze the choice of agrobiodiversity by risk-averse farmers who have access to financial insurance, and study the implications for agrienvironmental policy design when on-farm agrobiodiversity generates a positive risk externality. While increasing environmental risk leads private farmers to increase their level of on-farm agrobiodiversity, the level of agrobiodiversity in the laissez-faire equilibrium remains inefficiently low. We show how either one of the two agrienvironmental policy instruments can cure this risk-related market failure: an ex ante Pigouvian subsidy on on-farm agrobiodiversity and an ex post payment-by-result 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 agroecosystem is characterized by a high natural insurance function, low costs, and large external benefits of agrobiodiversity.",
keywords = "Sustainability sciences, Management & Economics, Agrobiodiversity, Ecosystem services, # # Agrienvironmental policy, Insurance, Risk-aversion, Uncertainty, Agrienvironmental policy, Agrobiodiversity, Ecosystem services, Insurance, Risk-aversion, Uncertainty, Economics, Agrobiodiversity, Ecosystem services, # # Agrienvironmental policy, Insurance, Risk-aversion, Uncertainty",
author = "Quaas, {Martin F.} and Stefan Baumg{\"a}rtner",
year = "2010",
month = sep,
day = "1",
doi = "10.1111/j.1574-0862.2010.00460.x",
language = "English",
volume = "41",
pages = "483--496",
journal = "Agricultural Economics",
issn = "0169-5150",
publisher = "Wiley-Blackwell Publishing, Inc.",
number = "5",

}

RIS

TY - JOUR

T1 - Managing increasing environmental risks through agrobiodiversity and agrienvironmental policies

AU - Quaas, Martin F.

AU - Baumgärtner, Stefan

PY - 2010/9/1

Y1 - 2010/9/1

N2 - Agrobiodiversity can provide natural insurance to risk-averse farmers by reducing the variance of crop yield, and to society at large by reducing the uncertainty in the provision of public-good ecosystem services, for example, CO 2 storage. We analyze the choice of agrobiodiversity by risk-averse farmers who have access to financial insurance, and study the implications for agrienvironmental policy design when on-farm agrobiodiversity generates a positive risk externality. While increasing environmental risk leads private farmers to increase their level of on-farm agrobiodiversity, the level of agrobiodiversity in the laissez-faire equilibrium remains inefficiently low. We show how either one of the two agrienvironmental policy instruments can cure this risk-related market failure: an ex ante Pigouvian subsidy on on-farm agrobiodiversity and an ex post payment-by-result 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 agroecosystem is characterized by a high natural insurance function, low costs, and large external benefits of agrobiodiversity.

AB - Agrobiodiversity can provide natural insurance to risk-averse farmers by reducing the variance of crop yield, and to society at large by reducing the uncertainty in the provision of public-good ecosystem services, for example, CO 2 storage. We analyze the choice of agrobiodiversity by risk-averse farmers who have access to financial insurance, and study the implications for agrienvironmental policy design when on-farm agrobiodiversity generates a positive risk externality. While increasing environmental risk leads private farmers to increase their level of on-farm agrobiodiversity, the level of agrobiodiversity in the laissez-faire equilibrium remains inefficiently low. We show how either one of the two agrienvironmental policy instruments can cure this risk-related market failure: an ex ante Pigouvian subsidy on on-farm agrobiodiversity and an ex post payment-by-result 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 agroecosystem is characterized by a high natural insurance function, low costs, and large external benefits of agrobiodiversity.

KW - Sustainability sciences, Management & Economics

KW - Agrobiodiversity

KW - Ecosystem services

KW - # # Agrienvironmental policy

KW - Insurance

KW - Risk-aversion

KW - Uncertainty

KW - Agrienvironmental policy

KW - Agrobiodiversity

KW - Ecosystem services

KW - Insurance

KW - Risk-aversion

KW - Uncertainty

KW - Economics

KW - Agrobiodiversity

KW - Ecosystem services

KW - # # Agrienvironmental policy

KW - Insurance

KW - Risk-aversion

KW - Uncertainty

UR - http://www.scopus.com/inward/record.url?scp=77955630834&partnerID=8YFLogxK

U2 - 10.1111/j.1574-0862.2010.00460.x

DO - 10.1111/j.1574-0862.2010.00460.x

M3 - Journal articles

VL - 41

SP - 483

EP - 496

JO - Agricultural Economics

JF - Agricultural Economics

SN - 0169-5150

IS - 5

ER -