1. Supply and Demand for Ecosystem Services
from Agriculture
Scott M. Swinton
Michigan State University
Agricultural, Food, and Resource Economics
True Cost of Food workshop, London, December 4-5, 2013

2. Ecosystem services from agriculture come
bundled together
Services TO
- Climate regulation
- Water provision
- Soil provision
- Pollination
- Pest regulation
- Genetic diversity
Disservices TO
- Pests & diseases
Swinton et al, Ecol Econ 2007
Farm Mgt:
Supplemental inputs
Enterprise choices
AGRICULTURE
(with Forestry &
Aquaculture)
Services FROM
- Food & fiber
- Aesthetics
- Recreation
- Carbon sequestration
- Biodiversity conserv.
Disservices FROM
- Water pollution
- Health risks from
agrochemicals
- Greenhouse gasses
- Wildlife habitat loss

3. Environmental Values arise from supply and
demand, analogous to markets

Demand


Supply


Willingness to pay for
extra unit
Cost to supply extra unit
(“willingness to accept”
payment)
Economic value:


Demand=Supply
Market “price” where all
goods produced are sold
source: wikipedia.org

4. Drivers of Supply (by Producers) & Demand
(by Consumers) of Ecosystem Services

For farmer suppliers to provide more ES:




Direct cost (incl. equipment & resource base)
Opportunity cost (foregone earnings)
Environmental attitudes & information
For consumers to demander more ES:


Income
Environmental attitudes & information

5. Agriculture produces ES in bundles, but
people experience them separately
Ma, 2011

6. Supply & demand for crop system with most
climate & lake benefits: Michigan, USA 2008-09
Payment (US$/acre)
100
Wheat added to corn-soya rotation.
Agrochemicals cut by 1/3.
Winter cover crop.
75
Farmer supply:
Better
stewardship
Less GHG &
eutrophic lakes
50
Resident
demand:
Less GHG &
eutrophic
lakes
25
0
0
Ma, 2011
2
1
Michigan Cropland (million acres)
3

7. Take-away messages

Farmers mostly willing to adopt practices
that produce more ES.

Changed practices  Multiple ES

Citizens mostly willing to pay for less
eutrophic lakes & less GHG emissions.

Equilibrium payment ~$45/acre ≈10%
higher price at typical yields and prices.

Would change practices on 35-50% of
Michigan corn-grain & soy land

8. Cautionary note

Environmental “costs” not constant; they
depend on



Prices of agric products & inputs
Citizen incomes
Knowledge and attitudes