PROMOTING COLLECTIVE ACTIONS IN IMPLEMENTING AGRI-ENVIRONMENTAL POLICIES: A CONCEPTUAL DISCUSSION

OECD Workshop on Agri-environmental Policy

Braunschweig, Germany

June 20-22, 2011

Mikitaro Shobayashi, Gakushuin Women’s College

Yukio Kinoshita, Iwate University

Mari Takeda, University of Tokyo

OUTLINE

1. Introduction

2. Why do we need collective actions?

3. Measures to promote collective actions in the context of agri-environmental policies

4. Actors coordinating collective actions

5. Implications for further research

INTRODUCTION

Collective actions have been recognized in many countries as a key to achieving sustainable management of common pool resources related to agriculture such as irrigation water and communal grazing areas.

The monumental work by Ostrom (1990)(Governing the Commons: The evolution of institutions for collective action) gave us the framework for analysis of self-governed and self-organized CPRs, by which we could also obtain profound thoughts on how collective actions could play roles in implementing agri-environmental policies.

INTRODUCTION

As the OECD’s work on multifunctionality suggests, many types of non-commodity outputs produced jointly with commodity outputs have public goods characteristics, in which some of them could be categorized into common pool resources. This implies that agri-environmental policies in some cases would also require collective actions.

PUBLIC GOODS CHARACTERISTICS

OECD (2000), Multifunctionality of agriculture: Towards an analytical framework, OECD, Paris

INTRODUCTION Collective actions have been advocated in some OECD countries

(e.g., Latacz-Lohmann (1998), Hodge and McNally (2000), Hodge (2001),Davis et.al (2004)), and have been translated into actual policies in several countries.

This presentation tries to discuss conceptually how collective actions could be developed in the context of agri-environmental policies.

Our main focus will be on the supply side; as Hodge (2001) argued, collective actions would also be required in coordinating demand, which is not covered in this presentation.

Latacz-Lohmann, U. (1998), Moral Hazard in agri-environmental schemes, Paper presented at the Agricultural Economics Society Conference.

Hodge, I. and McNally, S. (2000), Wetland restoration, collective action and the role of water management institutions, Ecological Economics 35, 107-118.

Hodge, I. (2001), Beyond agri-environmental policy: towards an alternative model of rural environmental governance, Land Use Policy 18 (2001) pp.99-111.

Davis, B, Blackstock, K., Brown, K., and Shannon, P. (2004), Challenges in creating local agri-environmental cooperation action amongst farmers and other stakeholders, The Macaulay Institute.

WHY DO WE NEED COLLECTIVE ACTIONS?

①Common pool resources (CPR) ②Economy of scale in the provision of public goods ③Economy of scope in the provision of public goods ④Reducing transaction costs

WHY DO WE NEED COLLECTIVE ACTIONS?

② Economy of scale in the provision of public goods

Minimum threshold may have to be established

Benefits may not be proportional to the increase in the areas

“Services with a proportional or more-than-proportional observable relationship with effort require less collective action than services that require landscape-scale efforts or involve non-negligible threshold before they emerge.”(Swallow and Meinzen-Dick (2009))

Swallow, B., and Meinzen-Dick, R. (2009), Payment for Environmental Services: Interactions with Property Rights and Collective Action, in Beckmann, M. and Padmanabhan, M. “Institutions and Sustainability”, Springler Science

WHY DO WE NEED COLLECTIVE ACTIONS?

③ Economy of scope in the provision of public goods

Different types of non-commodity outputs are provided by neighboring farms, and

Benefits associated with those non-commodity outputs are complements to each other

WHY DO WE NEED COLLECTIVE ACTIONS?

④ Reducing transaction costs

Transaction costs, especially fixed costs, could substantially be reduced as the number of participating farms increase.

The key question would be whether transaction costs associated with organizing farms are smaller than the reduced amount of the transaction costs.

“Economies of scale in contracting, monitoring, and making payments favor larger suppliers.” .”(Swallow and Meinzen-Dick (2009))

MEASURES TO PROMOTE COLLECTIVE ACTIONS IN THE CONTEXT OF AGRI-ENVIRONMENTAL POLICIES

This section tries to categorize measures to promote collective actions into four groups, each of which corresponds to a type of agri-environmental policies in general. ①Regulation ②Payment ③Market-based approaches ④Voluntary approaches

MEASURES TO PROMOTE COLLECTIVE ACTIONS IN THE CONTEXT OF AGRI-ENVIRONMENTAL POLICIES

①Regulation

i.Voluntary basis

e.g., in southern part of Japan livestock farmers cooperate with crop farmers to meet the regulations required by the manure management law.

ii.Requirement

e.g., drought coordination committees in Japan require irrigation districts to reduce the use of water, in which member farmers have no choice but to act collectively.

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MEASURES TO PROMOTE COLLECTIVE ACTIONS IN THE CONTEXT OF AGRI-ENVIRONMENTAL POLICIES ② Payment i. Bonus

e.g., farmers could receive larger amounts of payments as the number of farmers participating in the programs increases.

ii. Payments for transaction costs

e.g., “in England the Higher Level Stewardship Scheme has a supplement for group applications which offers a contribution towards the costs of facilitating communal agreements (Mills et al. (2010)).”

Mills, J., Gibbon, D., Ingram, J, Reed, M., Short, C., and Dwyer, J. (2010), Collective action for effective environmental management and social learning in Wales, 9th European IFSA Symposium, 4-7 July 2010, Vienna.

MEASURES TO PROMOTE COLLECTIVE ACTIONS IN THE CONTEXT OF AGRI-ENVIRONMENTAL POLICIES ② Payment iii. collective contracts(payments only for groups)

e.g., in Japan the Resource Conservation Payments are made only to collective actions

iv. Minimum size for the application

e.g., in the Netherlands applications with smaller than 100ha could not be received.

v. Physical conditions

e.g., in Shiga Prefecture in Japan, farmers are being paid to make a special type of fish stay in paddy fields by increasing water level of drainage canals, which needs collective actions.

Until the mid-1960s mid-1960s to the present Paddy field fish nursery

魚のゆりかご水田プロジェクト (The Fish Nursery Paddy Field Project)

Modernized paddy fields prevent

lake’s fish from coming up & spawning. Source：Shiga

Prefecture

MEASURES TO PROMOTE COLLECTIVE ACTIONS IN THE CONTEXT OF AGRI-ENVIRONMENTAL POLICIES

③ Voluntary approach carried out by suppliers

i. Rule making for common pool resources

e.g., village farmers use community owned wells in Pakistan.

ii. Eco-labeling

e.g., in many countries including Japan farmers producing a commodity output with the same farming practices cooperate so that the product could be marketed under the same eco-labeling, which could lead to establishing bland names.

Labeling: Examples

Source：MAFF, Shiga Prefecture

ECO-LABELING & ECOTOURISM TOYOOKA, JAPAN Agri-environmental issues in rice farming

- Extinction of The Oriental White Stork caused by intensive farming practices - Introduction of PES scheme to restore the habitat quality of the fields in 2003 - Payment of US$ 330 per 10are (US$ 80 today)

MAFF Japan Website

ECOLOGICAL AND COMMUNITY ECONOMIC EFFECT

Payment for Environmental Services(PES) scheme - 2003 to 2007, 200 participating farmers were paid for income forgone and additional costs - Eco rice farming: 16 →183 hectare - Stork population: 0 → 36

Community based eco-labeling - Rice grown with reduced pesticide use can be sold at 23% higher and organically grown rice at 54% higher

Ecotourism - Stork tourism is estimated to generate US$ 11 mil.

1.4% regional income increase by stork reintroduction

MEASURES TO PROMOTE COLLECTIVE ACTIONS IN THE CONTEXT OF AGRI-ENVIRONMENTAL POLICIES

④ Market based approaches i. Minimum threshold eligibility

e.g., only entities that would produce a minimum threshold of a environmental service could join the emission trading scheme as in the case of Chicago Climate Exchange.

ii. Economy of scale

e.g., Irrigation districts are the main players in the water market in California, not individual farmers although individual farmers could participate.

ACTORS COORDINATING COLLECTIVE ACTIONS

Collective actions could also be categorized by how they are coordinated

① Existing agricultural organizations

i.Farmers’ cooperatives

ii.Water users’ associations (irrigation and drainage districts)

② Organizations newly established for providing non-commodity outputs

i.Aggregators

ii.Other organizations

③ Communities

④ External assistance driven organizations

i.NGO

ii.Government initiatives

ACTORS COORDINATING COLLECTIVE ACTIONS

Collective actions could also be categorized by how they are coordinated

① Existing agricultural organizations

i.Farmers’ cooperatives

e.g., some of eco-labeling schemes in Japan are being organized by agricultural cooperatives since commodity outputs produced according to the standards need to be marketed together.

ii.Water users’ associations (irrigation and drainage districts)

e.g., irrigation districts in many countries are playing substantial roles in addressing issues associated water-linked environment

ACTORS COORDINATING COLLECTIVE ACTIONS

Collective actions could also be categorized by how they are coordinated

② Organizations newly established for providing non-commodity outputs

i.Aggregators

e.g., Chicago Climate Exchange (not operate anymore)required that farmers whose reduction or sequestration of GHG is smaller than 10,000 co2-eqt need to be aggregated by aggregators.

ii.Other organization

ACTORS COORDINATING COLLECTIVE ACTIONS

Collective actions could also be categorized by how they are coordinated

③ Communities

e.g., in Japan, payments for less-favored areas can be made only to communities, not individual farmers; the payments are for the provision of non-commodity outputs in those areas.

COMMUNITY-BASED CONSERVATION ACTIVITY IN JAPAN

Statistical panel data shows some evidences. Long history in managing common pool resources, which has been the

origin of collective actions

Community meetings and dialogs for managing common pool resources are the basis for community-based conservation activity

Importance of grass-roots traditional institutions for organizing and

coordinating community-based conservation activity

y = -0.0647x2 + 3.2847x + 42.391

R2 = 0.3438

0

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paddy filed per community(ha)

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SPATIAL SCALE AND COMMUNITY-BASED CONSERVATION ACTIVITY

THE CLOSE LINKAGE BETWEEN DIALOGUES AMONG COMMUNITY MEMBERS AND COMMUNITY-BASED CONSERVATION ACTIVITY

y = 3.1995x + 38.083

R2 = 0.2957

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0 2 4 6 8 10 12 14 16 18 20

annual frequency of community meeting per community(times)

ratio o

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ACTORS COORDINATING COLLECTIVE ACTIONS

④ External assistance driven organizations

i. NGO

e.g., Agricultural Carbon Project in Kenya is organized by Swedish NGO, Vi Agroforestry, in which 60,000 farms are acting collectively (Lager, B. (2011).

ii. Government initiatives

e.g., LWMPs in the NSW, Australia, in which 1,610 irrigation farms in large scale collaborate with Government to lower the GW level. Also LANDCARE.

Lager, B. (2011), Kenya Agricultural Carbon Project, Presentation at the Workshop held in Tokyo, on March 7, 2011

IMPLICATIONS FOR FURTHER RESEARCH

① Reviewing horizontally country experiences with special attention to how commodity production by individual farmers could interact with collective actions in the provision of agricultural public goods.

② Comparing policy choices with special attention to their efficiency and impacts on social aspects; analytical framework based on multidisciplinary experiences and knowledge would be required.

③ Applying experimental economics and social experiment

APPLYING CONSERVATION AUCTIONS TO AGRICULTURAL WATER MANAGEMENT IN JAPAN

:Evidence from a social experiment

Mikitaro SHOBAYASHI (Gakushuin Women’s College)

Mari TAKEDA (The University of Tokyo)

Daisuke TAKAHASHI (Tsukuba University)

BACKGROUND

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No independent agri-environmental policy in Japan on a

national level

Tight budget and endorsement of decentralization -Cost efficiency and decentralization of decision-making processes of market-

oriented policies are attractive

Collective action for agricultural resource management -strong externality among rice farmers because their cultivated lands are small

and scattered, and they share agricultural water and its facilities.

Coping with the merits of market–oriented policies with

collective actions by farmers?

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SCOPE AND METHODOLOGY

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Methodology: social experiment

Object to be conserved: agricultural water -main source of the externality is agricultural water

Market-oriented policy to be conducted: auction

(not trade) - little expectation for increased demand of water and no chronic water

shortage

EXPERIMENTAL DESIGN (1)

Mar 07/2011 Workshop

(1) The way of designing an auction: Interactive approach Details are proposed by the applicants and prefecture staffs - to reduce information cost & to avoid incentive incompatible situation

(2) Conservation Program: water conservation by irrigation water saving

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(A) Raising the drainage water levels (B) Plot-to-plot irrigation

Collective action is necessary Collective action is not always

necessary.

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EXPERIMENTAL DESIGN (2)

(3) The unit of application: LID (Land Improvement District)

LID is organized by beneficiary farmers when land improvement

projects will be implemented

LIDs can choose how to organize the farmers to apply;

1) “leave it to the farmers” way, 2)“set the target” way/

3)“participation by all” way, 4) “combination of 1)&2)

(4) The way of bidding and pricing

Choose their bid from several unit price we set.

1)500yen($6) /10a,

2)1,000yen($12) /10a,

3)2,000yen($25)/10a,

4)3,000yen($37)/10a,

5)4,000yen($50)/10a

Uniform Pricing (considering social aspect)

Fixed budget auction (total amount of budget is blinded)

AUCTION RESULT

LID (A)Raising the drainage water levels (B) Plot-to-plot irrigation

Area (ha)

bid price* (\/ha)

Unit of bid Ways of Organizing**

Area (ha)

Bid price* (yen/10a)

Unit of bid*** Ways of Organizing**

A - - - - 20.5 2,000 Individual farmers “Hamlet farming”

4)

B - - - - 22.4 1,000 “Hamlet Farming” 4)

I - - - - 10.5 500 1,000 2,000 3,000

Individual Farmers 1)

K 30.8 30,000 Hamlet 2) 17.0 1,000 Individual Farmers 4)

S 1.75 20,000 Representative of farmers who shared the targeted drainage

2) 20.1 2,000 Individual Farmers 4)

*Bid Prices are 1)500yen($6) /10a, 2)1,000yen($12) /10a,3)2,000yen($25)/10a, 4)3,000yen($37)/10a, 5)4,000yen($50)/10a

**Ways of Organizing by LIDs are 1) “leave it to the farmers” way, 2)“set the target” way 3)“participation by all” way, 4) “combination of 1)&2)

***”Hamlet Faming” is one of the cooperatives of the farmers who are living in same hamlet.

Tentative Findings ・(A)Raising the drainage water levels is more costly than the (B)plot-to-plot irrigation, not only in that (A)

requires more labor cost of operation and maintenance than (B) but also in that (A) requires to

coordinate many farmers shared the targeted drainage (coordination cost) .

・LIDs saves the coordination cost by means of utilizing the coordination functions of hamlet.