PubData Leuphana Repository: Managing increasing environmental risks through agro-biodiversity and agri-environmental policies

Please use this identifier to cite or link to this item: https://doi.org/10.48548/pubdata-1232

Resource type	Working Paper
Title(s)	Managing increasing environmental risks through agro-biodiversity and agri-environmental policies
DOI	10.48548/pubdata-1232
Handle	20.500.14123/1295
Creator	Baumgärtner, Stefan 0000-0001-8314-8462 121846857 Quaas, Martin F. 0000-0003-0812-8829
Abstract	Agro-biodiversity can provide natural insurance to risk-averse farmers by reducing the variance of crop yield, and to society at large by reducing the uncertainty in the provision of public-good ecosystem services such as e.g. CO2 storage. We analyze the choice of agro-biodiversity by risk-averse farmers who have access to financial insurance, and study the implications for agri-environmental policy design when on-farm agro-biodiversity generates a positive risk externality. While increasing environmental risk leads private farmers to increase their level of on-farm agro-biodiversity, the level of agro-biodiversity in the laissez-faire equilibrium remains inefficiently low. We show how either one of two agri-environmental policy instruments can cure this risk-related market failure: an ex-ante Pigouvian subsidy on on-farm agro-biodiversity and an ex-post compensation payment for the actual provision of public environmental benefits. In the absence of regulation, welfare may increase rather than decrease with increasing environmental risk, if the agroecosystems is characterized by a high natural insurance function, low costs and large external benefits of agro-biodiversity.
Language	English
Keywords	Biodiversity; Ecosystem; Environmental Policy; Insurance; Risk Aversion; Biodiversität; Umweltpolitik; Risikoausschluss; Biologische Landwirtschaft; Biologischer Landbau
Year of publication in PubData	2008
Publishing type	First publication
Publication version	Published version
Date issued	2008-03-12
Creation context	Research
Published by	Medien- und Informationszentrum, Leuphana Universität Lüneburg
Related resources	Relations of this publication Relations of this publication