5
Design Element 1: Performance-Based vs. Practice-Based PES Programs
crop selection can be determined from
by one unit increases to $8. The average
remote sensing data. Practices can be
cost under a practice-based program
used to estimate performance when the
without stewardship provisions more than
relationship between the practice (soil
doubles to $17 per point and increases to
tillage) and the environmental outcome
$73 per unit when producers are eligible
When evaluating alternative designs, it is
(carbon sequestration in the soil) is known
for stewardship payments based on past
important to distinguish between programs
with certainty.
conservation efforts.
However, when reliable quantitative
However, overall conclusions about the
data on linkages between practice and
relative efficiency of performance-
performance are not available, provisions
based vs. practice-based programs
of environmental services may need
must also factor in the difficulty of
to be paid based solely on practices.
measuring performance. Since measuring
As noted above, all else being equal,
performance (directly or indirectly) may
practice-based programs will generally
be more expensive than observing some
be less cost effective than performance-
types of practices, the total cost of
based programs. For example, Antle et
achieving an environmental objective with
al. (2003) illustrate that in the case of
a performance-based standard might
carbon sequestration in cropland soils,
be greater than the total cost under a
contracts based on adoption of specific soil
practice-based standard. In this case, the
tillage practices are as much as five times
practice-based program would actually
more costly than efficient performance
be more efficient, given the measurement
contracts based on payment per unit of
challenges of a performance-based
carbon sequestered. Claassen, Cattaneo
program (Weinberg and Claassen 2006).
and Johansson (2008) argue that this is
Periodically, it would be beneficial to
generally true for conservation programs
estimate the aggregate performance
in the U.S. Indeed, Cattaneo et al. found
implied by practices that were supported
that for a simulated $1 billion conservation
by a PES and compare them with actual
program, a performance-based program
performance. This would allow for an
Frequently, however, the direct
with bidding provisions achieves
assessment of the cost-effectiveness of
measurement of environmental
improvements at an average cost of $6 per
the practice-based program, which could,
performance (for example, nitrate runoff
unit of environmental performance. Without
in turn, guide efforts to improve payment
from a field) is difficult. In some cases, it
the bidding provision, the average cost
schemes.
might be possible to estimate performance
of enhancing environmental performance
that pay for performance measured by environmental outcomes (for example, reductions in greenhouse gas emissions or nutrients in water bodies) versus programs that pay for practices or activities that are believed to generate positive environmental benefits (for example, planting certain trees or engaging in soil management practices). Ideally, farmers should be paid based on environmental performance, i.e., the value of the environmental amenities they provide (e.g., Ferraro and Simpson 2002). When all else is equal, performance-based standards are superior to practice-based standards because they allow flexibility in meeting environmental goals and promote innovation and technology adoption (Fuglie and Kascak 2001, Sunding and Zilberman 2001). The flexibility of performance-based standards gives them an advantage over mandating “best management practices.�
based on practices are often more readily observable than performance. For example,
Top Ten Design Elements to Achieve More Efficient Conservation Programs