Supplying Ecological Good and Services from the Agricultural Landscape through Auction Mechanisms

Researchers: Paul Thomassin, McGill University

Research Summary

The objective of this research is to investigate the potential for auctions to be used as a policy instrument to supply ecological goods and services by decreasing non-point source pollution from agricultural landscapes. The Federal government has placed an increased emphasis on the role of agriculture to supply ecological goods and services to society. One means of supplying these ecological goods and services is to pay producers to adopt beneficial management practices (BMPs) that provide such goods. Given the federal government’s limited resources, it is appropriate to investigate different types of mechanisms that can provide the greatest amount of environmental benefit in the most cost effective way. Two auction mechanisms will be tested: the uniform price auction and the discriminative price auction. The experiment will use expected project costs, land uses and environmental benefits from an agricultural landscape in Quebec. This research will contribute to the Federal government farm level policy area related to the environment. In particular it will address the issue of government policy related to the generation of ecological goods and services that will increase environmental quality and have a positive impact on farm income.

Significance of Research

This research will build in the work of Carson and Gangadharan (Land Economics 2005) and their work on auctions in Australia and the US. It will extend their work by providing a new parameterization for Quebec as well as addressing questions of ordering and complementarity.

Summary of Research Results: Yet to come.