Rural Development Policy and the Provision of Public Goods: Challenges for Evaluation

Bill SleeKen Thomson

122nd EAAE Seminar

"Evidence-based Agricultural and

Rural Policy Making“,Ancona,

17-18 Feb. 2011

The structure of our presentation The overarching challenges

The policy context

Public goods - what they are

Ecosystem services as an organising concept

Payments for ecosystem services

Some specific challenges posed for evaluation and policy

Some interim conclusions

The core challenges: To support the provision of public goods at a socially desirable

level

To facilitate entrepreneurial activity in rural Europe, thereby addressing the Lisbon Agenda

To avoid ‘crowding out’, whereby public expenditure inhibits private sector economic activity

To better evaluate the contribution of public-good-related policy to sustainable rural development and wellbeing

Rural Development Programmes: three types of measures for ‘public goods’ Area-based payments incentivising land management practices benefiting soils,

water quality, habitats/species, carbon management and/or landscape maintenance ( e.g. measures for agri-environment, natural handicaps, Natura 2000)

Support for capital investments to assist: introduction of environmentally sustainable technologies and infrastructure (e.g.

measures for farm modernisation, infrastructure development, and adding value to agricultural products)

creation of new business opportunities, services and other activities in rural areas (e.g. measures for farm diversification, basic rural services, conservation and upgrading of rural heritage and investment in tourism);

Investments in advice and training for as well as capacity building for land managers and rural communities (e.g. measures for advice and training, Leader)

European Network for Rural Development (2010)

“Public Benefits” vs. “Public Goods” “public benefits”: the values (economic or other?) of goods or services

(marketed or non-marketed) potentially available to all citizens

“goods”: products or services which are valued , i.e. not “non-bads” avoided, e.g. pollution

“private goods”: excludable and rivalrous, i.e. marketable

“public goods”: non-excludable and non-rival (hence non-marketable)

“mixed goods”: “common goods”: non-excludable but rivalrous, e.g. berry-picking, sea fishing

“club goods”: excludable but non-rivalrous, e.g. entry-fee parks

the “public”(s): local residents, visitors, national/EU citizens, world population?

Public Goods from European Land Use biodiversity (wildlife) e.g. in fringe habitats in areas of non-provisioning

land and field boundaries or within low-intensity land use systems

visual landscapes of fields, woodlands, rural buildings

cultural values associated with farming etc. in particular places

food security?

rural employment??

Only “goods” if additional value beyond legal minimum (or GAEC)?

Higher values (per hectare) in more populated regions and/or more accessible areas?

The Ecosystem Approach and Services Ecosystem Approach (EA)

‘a strategy for the integrated management of land, water and living resources that promotes conservation and sustainable use in an equitable way’ (Convention on Biological Diversity )

Millennium and National Ecosystem Assessments (MA, NEAs)

Ecosystem Service Categories Provisioning: e.g. food, water, wood, biofuel

Regulating: floods, climate, disease, erosion, C sequestration

Cultural: aesthetic, spiritual, educational, recreational

Supporting: soil/habitat formation, nutrient/water cycling

Payments for Ecosystem Services (ESSs) Beneficiaries (e.g. consumers, citizens, residents, visitors)

purchase ESSs from suppliers (e.g. farmers, landowners), often via buyers/intermediaries (e.g. governments, water companies, clubs, agencies)

ESSs a mixture of private goods (e.g. food, fibre), mixed goods and public goods

Some supplied as unrewarded by-/co-products, i.e. positive externalities

Suppliers balance (trade-off) production incentives between and within ESS categories (e.g. food vs. C seq. vs. biodiversity)

The CAP, RDPs and PESs Non-private ESSs may be purchased by govts. (as discriminating

monopsonists?) on behalf of local, regional/national and/or global consumers

ESSs sometimes multiple, e.g. non-intensive farming, landscape and wildlife: e.g. RDP agri-environmental measures

CAP payment rates based on “additional costs and income foregone” (plus up to 20% transaction costs), i.e. not on social values of environmental benefits

Rates (should/must) vary according to farm product returns

Recent proposals to widen this basis, e.g. to include fixed costs, and/or diversification options foregone

Green Box (non-trade-distorting) constraints?

Comments on Commission proposals No (or minimal) changes to:

Structure: two Pillars, three/four-Axes

GAEC: baselines and application

but

Pillar 1 made optionally “multi-purpose” (and “tiered”?), for (i.a.): “Basic” income support

Widespread agri-environmental payments (why not Pillar 2?)

Area payments for “constrained” regions (why not Pillar 2?)

Pillar 2 to include risk management toolkit (why not Pillar 1?) Little or no specific mention of Health Check “new challenges” of water

management and climate change

EU Rural Development Policy post-2013 size of overall EU budget?

CAP’s share of overall EU budget?

Pillar 2’s share of CAP budget (in EU, and in MSs)?

Pillar 2 “Axes” or equivalents: reduced (e.g. “losing” LFAs and/or Axis 3) or expanded (e.g. to include risk mngt. tools)

relationship of current Axes 1 and 2 to a reformed Pillar 1, i.e. how the “green” and “specific natural constraints” components of direct payments fit with “additional” Pillar 2 schemes

The Evaluation Challenge for Environmental Public Goods (EPGs)

Unit values of EPGs vary by: “unit” – hectare, litre, animal/plant, “view”?

base (regulated) level(s)

location, e.g. peri-urban vs. remote

consumers

general or self-selected, e.g. incoming residents

users and “non-users”

Amounts of EPGs vary by: Region, e.g. peri-urban (limited) vs. remote (widespread)

Challenge 1: Accurate estimation of values (i)

Disaggregating the land use component from landscape structure

Estimating the incremental value of publicly funded schemes

Challenge 1 : Accurate estimation of values (ii)

Use and non-use componentsValuing the

visitor/user experience

Valuing the non-use component of value

Methods have improved but no real belief in the scientific community that aggregate values can be estimated accurately

Challenge 1: Accurate estimation of values (iii)

The issue is not just what it is but where it is

Peri-urban forestry very heavily used, even where not especially attractive

… and values depend on availability/quality of substitute sites

Challenge 1 : Accurate estimation of values (iv)

‘Culture’ is not easy to value in terms of public good values

…..But certainly has value which is embodied in land management practices and products

Challenge 2: Delivering landscape-scale effects

Isolated habitats cannot deliver full biodiversity

Habitat connectivity is needed to maximise biodiversity benefits

Voluntary schemes with individual landowners may not deliver optimal levels of biodiversity

Prioritise joint applications

Challenge 3: Secondary marketisation (i)

Agritourism can internalise externalities

Car parking can generate fees for access to high-quality environments

But: can govt. payments for public goods crowd out private entrepreneurship?

Challenge 3: Secondary marketisation (ii)

Considerable scope for creation of new ancillary markets:

In leisure enterprises: Recreation

Tourism

Social care?

In local and regional food: ‘eat the view’

Challenge 3: Secondary marketisation (iii)

Property rights differ: the case of Girolles (the golden chanterelle)

in Nordic countries: a free good

in Italian community forests: a club good

in France: a private good

Challenge 4: Getting Governance Right

How farmers are engaged to undertake environmental practices may be critical to their effective delivery

This may also apply to the demand side, in eliciting local community values

CMEF 2007-2013 and beyond (i) “continuity and adaptation” of 2000-2006 guidance; “few additional data collection

requirements”; “clear and robust”; common and quantified indicators

“Ongoing” as well as ex ante, mid-term and ex post evaluation

A hierarchy of objectives and (“SMART”) indicators, viz.: Inputs, i.e. reported expenditures (not transaction costs, e.g. admin time) per

Measure, i.e. Axis 1 = 16, Axis 2 = 13, Axis 3 = 8, Axis 4 = 5; total <= 42 Outputs (1 to 5 per RDP measure), e.g. no. of training sessions or farms Results (Axis 1 = 5, Axis 2 = 1 (managed area), Axis 3 = 6), e.g. investment Impact (7, i.e. growth, jobs, productivity, biodiversity, high nature value areas,

water, climate change) Baseline (measurements)

Objective: horizontal = 3, Axis 1 = 13, Axis 2 = 12, Axis 3 = 9, Leader = 1 Context-related: horizontal = 5, Axis 1 = 10, Axis 2 = 13, Axis 3 = 7

Additional: specific to national priorities or areas/sites

CMEF 2007-2013 and beyond: (ii) Simplify a complex and high-cost CMEF system

Add M&E for: RDP delivery, e.g. Axis 2 landscape , Axis 3 community

Evaluation feedback, e.g. consequent RDP and RDP admin revisions

Better understand the economic impact of the green infrastructure role of attractive rural areas

Review the ‘rules of the game’ (opportunity foregone as a reward principle) which currently militate against positive rural development

Recognise that post 2013 both Pillar 1 and Pillar 2 contain public good elements that will require evaluation - separately?

Conclusions: General Environmental public goods (EPGs) vary widely by type

(ecological or economic), location, value, etc.

Some EPGs are by/co-products of commercial land use, e.g. food or wood production, or excludable sport e.g. hunting – but unlikely that quantity and quality will be optimal

Reformed CAP (and future agricultural markets, and technology) may alter base levels of EPG “production”, and relative private/public values

Conclusions: Environmental Public Goods (EPGs), Rural Development Policy and Evaluation

Future RD policy should attempt/continue to:

Identify and target EPGs (possibly “packaged”, e.g. by land use) A role for the “strategy” phase?

At what spatial/regional level(s)?

Consider trade-offs of EPGs, e.g. climate-related and other EPGs, e.g. landscape quality vs. C sequestration

Recognise and measure wider-economy values of EPGs (to incoming residents, businesses, visitors, tourists)

Where possible, encourage “commoditisation” of EPGs via (non-central govt.) Payments for Ecosystem Services schemes

Thank you for your attention!

Useful readings and further links: ENRD (2010): “Conceptual Framework On Public Goods”.

http://enrd.ec.europa.eu

European Evaluation Network for Rural Development (2010): “Working paper on Approaches for assessing the impacts of the Rural Development Programmes in the context of multiple intervening factors”. http://enrd.ec.europa.eu/evaluation

European Evaluation Network for Rural Development (2010): Working Paper on “Capturing impacts of Leader and of measures to improve Quality of Life in rural areas“. http://enrd.ec.europa.eu/evaluation