What do food crops, clean drinking water and the beauty of vegetated landscapes have in common? All of them are benefits that people derive from nature, what scientists call "ecosystem services." Despite wide recognition, however, many of these services are not valued through existing markets.
Michigan State University (MSU) AgBioResearch economist Scott Swinton is working to measure the economic value of ecosystem services linked to agriculture and identify ways that policy can communicate those values to farmers.
Creating A Viable Market For Ecosystem Services
Ecosystem services are divided into four broad categories:
- Provisioning, such as the production of food, fiber, fuel and drinking water.
- Regulating, such as the role of plants and vegetation in maintaining a sustainable climate for human life and the species we depend upon.
- Cultural, such as recreational hunting and fishing.
- Supporting, such as supplying nutrients to plants and crop pollination, which enable the other three types of services.
"The general idea of ecosystem services is that it's focused on people," says Swinton, a professor in the MSU Department of Agricultural, Food and Resource Economics. "Where an economist fits into this picture is finding ways to improve the supply of ecosystem services to society.
"Markets work when you have private goods and services that can be bought and sold," he explains. "You can buy apples or wheat or milk, but you can't buy cleaner stream water. Many of the regulating and cultural ecosystem services tend to lack markets because they involve things that can't be privately owned. No one owns the climate or the Kalamazoo River or Lake Huron, and no one owns the whitetail deer population. Yet people care about these things and clearly derive benefits from them. There's an important role for policy in this arena."
Much of Swinton's research involves working closely with biological scientists in the Long-Term Ecological Research Program (LTER) and at the Great Lakes Bioenergy Research Center (GLBRC) -- both housed at MSU's Kellogg Biological Station in Hickory Corners -- on understanding the ecosystem services that come from agricultural systems.
"Historically, we've tried to develop technologies that enhance productivity," Swinton explains. "We continue to do that, but we're also increasingly trying to develop technologies that improve environmental performance, including some of these ecosystem services that benefit society and have off-farm benefits.
"The big question is, under what conditions would farmers adopt environmentally beneficial, low-input technologies?" he says. "One part of answering this question is determining what farmers need, and the other part is designing policies that could support those needs."
To address this challenge, Swinton conducted a study in 2007 to investigate why farmers weren't adopting some of the environmentally beneficial row crop practices such as cover crop planting, small grain rotation and reduced fertilizer rates.
The research was followed by focus groups and a survey of 3,000 Michigan corn and soybean farmers in 2008. What Swinton found is that farmers are well aware of low-input technologies, but they see implementing these practices as adding to their costs.
"Cover crops require extra labor for planting and seed costs, and they are sometimes hard to kill when it's time to plant the main crop," Swinton explains. "Reduced fertilizer levels create the risk that yields might be lower if growing conditions are very good. We did find, however, that large numbers of Michigan growers would adopt these practices if provided an incentive."
The study findings helped Swinton, fellow AgBioResearch economist Frank Lupi and their team develop supply curves, which show how much land Michigan farmers would be willing to put into these practices for various levels of payment.
Another part of Swinton and Lupi's research involved asking Michigan residents if they would be willing to pay for the kinds of ecosystem services that these changed farm practices would require. Results revealed that Michigan residents would be willing to pay to reduce the number of eutrophic lakes and the level of greenhouse gas emissions. Those payments could support potentially 20 to 50% of Michigan's corn-soybean land going into low-input practices.
"The hard part is making the link between what farmers do and what non-farmer residents experience," Swinton says. "The preconditions are there. Farmers are willing to implement some of these practices for certain payments. Residents are actually willing to pay amounts of money that would support significant change. The missing piece is a way to make that connection. Residents see no reason to care whether farmers plant cover crops. But if you can build the connections, you can get to some of the endpoints that they directly experience, such as enjoyment of the lakes where they go swimming or fishing, or their climate change concerns."
Swinton also points out that farmers are a very diverse group of people.
"They are at different life stages. Some are avid fishers or enthusiastic about environmental stewardship. For these farmers, being environmental stewards is a very important part of their identity. They are more willing to make some of these changes than other farmers who view farming more as primarily an income-generating activity. So there's a lot of potential there based on individual preferences."
Although there is still much ground to cover in creating a viable market-based mechanism for agricultural systems, Swinton believes that there is a growing awareness of the need to look at cropland from a broader public benefit perspective rather than simply considering the immediate goods it provides.
"Successfully creating these types of markets for ecosystem services has to make tangible economic sense to all the groups that are affected," Swinton says. "Being able to demonstrate the full range of ecosystem values and their economic benefits is one part of the equation. Another is to find ways of equitably capturing values and benefits over the long term so that incentives can be put in place to promote sustainable agricultural systems."