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Antle j. trade off analysis minimum data july 2011
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Transcript of Antle j. trade off analysis minimum data july 2011
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Modeling GHG Incentives Using TOA-MD
John AntleAgricultural and Resource Economics
Oregon State University
Smallholder Mitigation Options and Incentive Mechanisms Expert WorkshopJuly 7-8, 2011, Rome
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Key issues for assessing GHG mitigation potential
- Heterogeneity in farm populations and ecosystems
- Uncertainties in key economic dimensions of systems
- productivity transitions
- variable costs
- size & timing of fixed costs (capital, transactions)
- Behavior: “willingness to adopt”
- Uncertainties in mitigation outcomes
- Payment mechanism design & verification costs
- Institutions and property rights
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What is the TOA-MD Model?
• a unique simulation tool for multi-dimensional impact assessment and analysis of ES supply
• … that uses a statistical description of a heterogeneous farm population to simulate the adoption and impacts of a new technology or a change in environmental conditions such as climate change.
• a generic, “parsimonious” model of agricultural systems
• … designed for forward-looking assessments of agricultural technology adoption, ecosystem services supply and environmental change
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What does the TOA-MD Model do?
TOA-MD simulates an experiment to measure the effects of technology adoption* or environmental
change under specified environmental and economic conditions.
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TOA-MD parameters are means, variances and correlations of economic, environmental and social outcomes associated with production systems.
• the ideal data would come from a paired, stratified random sample of farms using each system
• …but such ideal data don’t exist!
• …so we combine available survey data with secondary, experimental, modeled data and expert knowledge
What kinds of data are needed?
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It does not solve for market equilibrium prices determined by demand and supply.
It is not a decision support tool for management of an individual farm.
It does not predict the future, unless the future is a lot like the assumptions made in the simulated experiment!
What does TOA-MD not do?
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TOA-MD simulates an experiment to compare two systems, referred to as System 1 and System 2. System 1 is the baseline case, or the control in an experimental design; System 2 is a new system, typically a modification of System 1, or the treatment in an experimental design.
• First, the model simulates the System 2 “adoption rate” –this can include a specified level of adoption incentive, e.g., a PES or GHG incentive payment
• Second, based on the adoption rate of System 2, it simulates economic, environmental and social impact indicators for adopters, non-adopters and the entire population (including the amount of GHG mitigation associated with adoption of system 2)
How does the TOA-MD Model work?
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TOA-MD can be used to simulate many possible “experiments” for GHG mitigation and climate impact assessment:
• GHG mitigation without climate change
– System 1 = base climate, base technology
– System 2 = base climate, mitigation technology + incentive
• Climate change without mitigation payment
– System 1 = base climate, base technology
– System 2 = changed climate, base or adapted technology
• GHG mitigation with climate change:
– System 1 = base climate, base technology
– System 2 = changed climate, mitigation technology + incentive
• … and so on …
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Op
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/Mg
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)
Adoption Rate (%)
ROT Base +50% Productivity -50% Productivity + 50% Variable Costs
- 50% Variable Costs +50% Prod & Cost -50% Prod & Cost
Example: assessing productivity and cost uncertainties in rangeland soil C sequestration with adoption of rotational grazing (U.S. northern plains)
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Example: Soil C supply curves for rotational grazingand improved pasture, U.S. northern plains
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Carbon Sequestration (Million Mg CO2E/yr)
Improved Pasture Rotational Grazing
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tradeoffs.oregonstate.edu
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Key Issues in GHG Mitigation: system characterization and heterogeneity
Systems are being used in
heterogeneous populations
A system is defined in terms of household, crop, livestock and
pond sub-systems
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(ω)
0
Map of a heterogeneous region
Opportunity cost, system choice and adoption
Opportunity cost follows distribution () for specified econ, environ conditions and techs
represents productivity and cost differencesbetween systems opportunity cost
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()
100
0 < ω < a
a
Analysis of ES supply: Farms adopt system 2 if < a
a = mitigation incentive adjusted for “willingness to
adopt”
ω < 0
ω > a
r
adoption rate for
a = 0
adoption rate for a > 0
ES supply curve for specified prices, tech,
climate