Grassland Easement Evaluation and Acquisition: an Integrated Framework

Ruiqing Miao, David Hennessy and Hongli Feng

No 252775, 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama from Southern Agricultural Economics Association

Abstract: Efficient grassland easement management requires correct evaluation and cost-effective acquisition of easements. We develop an integrated theoretical framework to study grassland easement evaluation and acquisition. Grassland tracts can be either kept under grass gaining grazing returns or converted to cropland generating cropping returns. Under a two-period framework, grassland owners choose an optimal action from ‘convert now,’ ‘ease now,’ and ‘wait and see’ in period one to maximize total expected returns over the two periods, while taking easement payment from an easement agency as given. The easement agency, however, aims to maximize the increase in expected environmental benefits arising from a budget-constrained easement acquisition program. We find that a mean preserving spread of the difference between cropping returns and grazing returns increases the value from action ‘wait and see’ and the minimum easement payment that landowners are willing to accept (i.e., the easement value). This change will decrease conversion probability in period one. If distribution of cropping returns and grazing returns undergo a shift such that they become larger in the supermodular order sense, then the easement value decreases and the period-one conversion probability increases. Therefore, the easement value and period-one conversion probability may go opposite directions, which indicates that an assumption commonly used in conservation literature (i.e., the larger the conversion probability the higher the easement value) may not hold. Solutions to the easement agency’s problem show that a grassland tract whose owner chooses ‘wait and see’ in period one should not be acquired in that period. An easement acquisition index is developed to rank acquisition priority for different grassland tracts.

Keywords: Land; Economics/Use (search for similar items in EconPapers)
Pages: 51
Date: 2017-01-18
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https://ageconsearch.umn.edu/record/252775/files/Easement_SAEA_2017_MainText.pdf (application/pdf)

Related works:
Working Paper: Grassland Easement Evaluation and Acquisition: an Integrated Framework (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:saea17:252775

DOI: 10.22004/ag.econ.252775

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