Grassland easement evaluation and acquisition with uncertain conversion and conservation returns

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2022-Feng-GrasslandEasementManuscript.pdf (643.42 KB)

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2022-02-18
Authors
Hennessy, David
Feng, Hongli
Feng, Hongli
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© 2022 Canadian Agricultural Economics Society
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Economics
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EconomicsCenter for Agricultural and Rural Development
Abstract
We develop an analytical framework to examine an agency’s optimal grassland easement acquisition while accounting for landowners’ optimal decisions under uncertainty in both conversion and conservation returns. We derive the value of “wait and see” (i.e., neither convert nor ease grassland) for landowners and find that grassland-to-cropland conversion probability and easement value vary in opposing directions when “wait and see” is preferred, indicating that a larger conversion probability does not necessarily imply a higher easement value. Our analysis shows that when conservation funds can be flexibly allocated across periods then the agency’s optimal acquisition can be readily achieved by sorting land tracts according to their owners’ optimal choices. When funds cannot be flexibly allocated across periods, we examine both a rational agency’s and a myopic agency’s decision problems. An acquisition index is developed to facilitate optimal easement acquisition.
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This is the peer reviewed version of the following article: Miao, Ruiqing, David A. Hennessy, and Hongli Feng. "Grassland easement evaluation and acquisition with uncertain conversion and conservation returns." Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie (2022), which has been published in final form at doi:10.1111/cjag.12302. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited. JEL Classification: Q24, Q21, Q28, G12
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Acquisition, Conversion Risk, Cost Effectiveness, Easement, Environmental Benefits, Evaluation, Property Rights
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