Are people willing to pay for carbon farming?

Public ‘willingness-to-pay’ for co-benefits


Key messages:
  • Adopting carbon farming practices often leads to a loss in profit for farmers
  • We estimated the public’s ‘willingness-to-pay’ for the co-benefits of carbon farming
  • Respondents were willing to pay $19.20 per year for every extra hectare of native vegetation, and $1.13 per year for every metric tonne of CO2-e reduced

Agricultural production is a major emitter of greenhouse-gases in most developed nations. It is therefore no surprise that there has been a lot of scientific and political focus on reducing greenhouse-gas emissions from the agricultural sector. Our research looked at general community preferences for the potential benefits of carbon farming (see the box ‘What is carbon farming’).

There have been two Australian policy programs that aimed to reduce carbon emissions by rural landholders: the Carbon Farming Initiative (2011-2014) and the Emissions Reduction Fund (since 2014). Both of these programs provide(d) financial rewards to farmers who adopted practices to reduce greenhouse-gas emissions or increase carbon storage in soils or vegetation. Only practices meeting prescribed eligibility criteria are eligible for funding.

Our previous research has shown that adopting carbon-farming practices often leads to a loss in profit for farmers (Kragt et al, 2012). Financial incentives offered by the government are typically too low to offset such losses. We therefore investigated other ways to increase funds for farmers’ adoption of carbon farming.

Some carbon farming practices can deliver environmental benefits in addition to climate-change mitigation. For example, planting native species on cleared lands or protecting native forests could have co-benefits for biodiversity or landscape aesthetics. It is very likely that some of the ‘co-benefits’ will provide socio-economic benefits to the wider community. The values provided by these co-benefits could partly offset the private profit losses to farmers.

We set out to measure those values, by estimating the public’s ‘willingness-to-pay’ for the co-benefits of carbon farming. To do this, we conducted a choice-experiment survey of Australian residents in NSW, Queensland, Victoria and WA (Kragt et al, 2016). An example of one of the choice questions we used is shown in Figure 1.

Figure 1: An example of one of the choice questions used in the survey.

Figure 1: An example of one of the choice questions used in the survey.

In the choice experiment, respondents chose their preferred alternative out of the three options provided (these options change in each choice question and respondents saw six choice questions each). We showed four impacts of carbon farming: (1) climate change mitigation (emission reduction/carbon storage); (2,3) two possible co-benefits of carbon farming (increase in native vegetation, reduced soil erosion); and (4) costs to the respondent. Through an econometric analysis of respondents’ choices, we can ascertain the relative weight that people put on the various impacts presented.

The model results demonstrate that people cared about costs, emission reduction, and protecting native vegetation – but that preferences varied significantly across the population. For example, we found that people who believe that climate change is happening and at least partly caused by humans had more positive preferences for the benefits of carbon farming than other respondents.

Using our econometric model, we can estimate people’s individual willingness-to-pay to receive carbon-farming benefits. On average, respondents were willing to pay $19.20 per year for every extra hectare of native vegetation, and $1.13 per year for every metric tonne of CO2-e reduced. These willingness-to-pay estimates varied for respondents with different climate-change opinions.

The results of our work have important implications for carbon-farming policies. Given that the Australian community derives a positive value from carbon-farming benefits (carbon mitigation and biodiversity protection), there is a strong case to broaden policies to include co-benefits in the value calculations – rather than considering greenhouse gas reductions alone.

To increase the social welfare from carbon-farming policies, higher incentive payments should be offered to encourage changes in agricultural practices that generate environmental co-benefits.


What is ‘carbon farming’?

A set of activities that increases carbon storage or avoids greenhouse-gas emissions. Storage activities can include:

  • re-introducing woody vegetation into landscapes,
  • protecting native forests,
  • new farm-forestry plantations, or
  • increasing soil carbon by reducing soil disturbance (eg, through no-till farming or increased stubble retention).

Practices that can avoid greenhouse-gas emissions can include early savanna burning, changing manure handling practices, or changing livestock feed.


More info: Marit Kragt marit.kragt@uwa.edu.au

References

Kragt ME, FL Gibson, F Maseyk & KA Wilson (2016). Public willingness to pay for carbon farming and its co-benefits. Ecological Economics 126: 125-131.

Kragt ME, DJ Pannell, MJ Robertson & T Thamo (2012). Assessing costs of soil carbon sequestration by crop-livestock farmers in Western Australia. Agricultural Systems 112: 27-37.

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