This special issue on “Environmental Regulation and Innovation in Local Communities” came out of the 2019 Northeastern Agricultural and Resource Economics Association's Post-Conference Workshop. The workshop sought to invite a conversation among researchers, think tanks, government agencies, and policy makers to enhance our understanding of (1) how local communities innovate when shaping and responding to environmental regulations, and (2) how these environmental regulations affect rural communities’ economic well-being and environmental quality. This resulting special issue includes two invited pieces from the workshop's keynote speakers, both leading scholars in the area of regulation or innovation and five manuscripts that deal with local environmental issues—issues that highlight geographically distinct environmental problems related to land use, water quality, and energy—each of which require different solutions. In various ways, these papers look at the linkages between economic and environmental objectives that define the location-specificity of the environmental issue at hand and the requisite policy solutions.

Valuing the ecosystem services delivered by conservation and stewardship programs is of interest within USDA and across the federal government. Answering these types of questions requires accurate and scientifically sound measures of Ecosystem Service Values (ESVs). While there is a rich literature on valuation of nonmarket goods, it is often difficult to use for the ESVs provided by USDA and other federal agencies. To advance understanding of the use of ESVs in conservation programs, this special issue of ARER presents selected papers from a 2019 workshop entitled “Applications and Potential of Ecosystem Services Valuation within USDA – Advancing the Science.”

Food waste has been recognized as an economic issue for at least a century and is gaining tremendous traction in academia as well as in discourse about public policy. The goal of our study is to examine the evolution of food waste over the last several decades at the United States and global levels. We first review the methodologies that have been used to estimate the magnitude of food waste so that the quality of the data can be evaluated. Though with limitations, existing data generally show that for many regions of the world, including the United States, pre-consumer food loss and waste as a share of total supply has been stable in recent decades. However, the aggregate share wasted masks important changes over time. We provide some evidence that food waste has shifted downstream in recent decades, i.e., from producers and processors to retailers and consumers. Through a reflection on the trends in major socioeconomic factors, we hypothesize that this downstream shift has been driven by increases in household incomes, improvements in technology, and changes in culture and institutions.

Risk management tools are at the core of farm policy in many developed countries, and their effectiveness relies on the appropriate mechanism design. This study developed a gain-loss framework based on prospect theory to examine the reasons for the declining use of the main risk management tool offered to farmers despite growing volatility in returns. Using the administrative Ontario Farm Income Database (OFID) 2003 to 2013 and taking the beef sector as the example, this study found that the gain-loss framework predicts and explains the dynamic program participation pattern better than the conventional expected utility framework. Farms were found to be more likely to stay enrolled in the program when they experienced either larger gains or losses in revenue compared to previous years, suggesting that they were using the insurance programs both as an investment strategy (to seek government subsidies) and as a risk management tool (to protect against business risks), though the effects of revenue losses and hence risk management needs were stronger than gains. In addition, the program payment history and farm characteristics also shape the dynamic participation patterns. The findings increased the understanding of the drivers of withdrawal behavior associated with government-sponsored business risk management programs.

Much of the research on ecosystem service values (ESVs) has limited applicability to USDA program benefit analyses, largely because the models/data/results (1) lack spatial breadth and hence cannot be applied in national analyses of USDA programs, and (2) do not link land use changes to the changes in ESs. This article provides an overview of a set of 15 ESVs related to agriculture's impacts on erosion in order to identify (1) weaknesses in methods, data, and assumptions that limit the quality of the ESVs and means of avoiding such weaknesses in future ESV development, and (2) approaches that might improve the reliability and spatial resolution of future ESV estimates.

A number of issues arise when considering the positive and normative implications of local environmental policy making. This paper provides an overview of some of the issues and implications. These vary depending on whether local jurisdictions are charged with determining the stringency of policies or instead stringency is determined at a higher level of government and the local role focuses on implementation and the design of cost-effective measures for achieving the required goals. Key issues include both physical and economic spillovers across jurisdictions, and the extent to which stringency can be differentiated based on local conditions or preferences.

We analyze optimal budget allocations to acquire protected areas for carbon storage while balancing risk and return from protection under economic growth uncertainty in a local community. Our study is the first to explore how risk of uncertain economic growth affects cost of protected area acquisition using real estate values at the parcel level, enabling us to estimate the site-specific opportunity cost of carbon storage. The Pareto optimal trade-off frontier between the expected carbon storage benefit and its variance provides a continuum of risk-return combinations. The pattern of the trade-off relationship implies that risk mitigation is less costly in terms of foregone expected benefit when risk is higher than when it is lower. Our results also find that the difference in cluster-specific budget allocations between the strong economic growth scenario and the weak economic growth scenario subsequently decreases between the point of expected benefit maximization and the point of variance minimization. Our findings of optimal hectares of land for protected area acquisition for carbon storage and corresponding benefits and costs serve as an empirically informed knowledge base to help a local community prioritize acquisition of potential protected areas for carbon storage under economic growth uncertainty.

This article explores the environmental and market determinants of irrigation management in a five-state Great Lakes region. We found evidence that corn, soybean, and potato irrigators respond to the cost of water at the intensive margin. Evidence of a water-cost effect at the extensive margin was mixed. This article is unique in its geographic focus and its consideration of various temperature effects. We found evidence of a long-run average temperature effect on crop acreage allocation decisions and a short-run extreme heat effect on water application rates.

This article discusses prospects and challenges related to the use of meta-regression models (MRMs) for ecosystem service benefit transfer, with an emphasis on validity criteria and post-estimation procedures given sparse attention in the ecosystem services literature. We illustrate these topics using a meta-analysis of willingness to pay for water quality changes that support aquatic ecosystem services and the application of this model to estimate water quality benefits under alternative riparian buffer restoration scenarios in New Hampshire's Great Bay Watershed. These illustrations highlight the advantages of MRM benefit transfers, together with the challenges and data needs encountered when quantifying ecosystem service values.

The National Visitor Use Monitoring (NVUM) program data underlies estimates of the volume of recreation use of the National Forest System. The data also enable estimation of both the local economic contributions and nonmarket benefits of that visitation. Applications include evaluating the effects of natural disasters, site characteristics, and climate change, as well as expenditure and benefit transfers. This article describes the history and science background of the NVUM program, outlines the methods used in estimating market and nonmarket economic outcomes, and lists some examples of results found in the literature.

Prior tests of Hicks’ Induced Innovation Hypothesis (IIH) have been greatly hampered because the lack of supply-side data implicitly requires the untenable assumption that the marginal research cost is the same for different inputs. We document that, with appropriate model specification and panel data, a two-way fixed-effects estimator can account for much of the non-neutrality of the innovation function. Using a test procedure that is robust to a time-variant and non-neutral innovation function, we test the IIH in U.S. agriculture for the period 1960–2004. We use only readily available data for innovation demand and total public research expenditures.

This paper investigates cost-share program attributes that would affect producers' willingness to enroll in a cost-share program to fund the adoption of best management practices to improve water quality and decrease water use. Through a survey administered to Florida agricultural producers, we conducted choice experiments to assess farmers’ preferences for cost-share programs using five attributes: contracting agency, length of contract, annual verification process, costs included, and percent of costs covered. Results suggest that producers prefer cost-share programs with shorter contract lengths, self-monitoring, and administration by agricultural (as opposed to environmental) agencies. Our findings suggest the importance of an existing trust between the local communities and the contracting agencies for higher enrollment rates in cost –share programs. Our results can inform policymakers on ways to increase enrollment rates that move towards long-term environmental goals.

We discuss the process of estimating the ecosystem service value (ESV) for provisioning of non-timber forest products (NTFPs) to market, with a focus on the United States. NTFPs are harvested throughout the U.S. for numerous purposes, and those sold in market contribute significantly to household and local economies. While estimates of ESV can aid decision-making related to conservation and management, NTFPs have been generally neglected. We discuss challenges and approaches for prioritizing valuation, quantifying production, measuring costs and benefits, and finding data sources. Many NTFP markets are informal, and market players may have an interest in withholding information. Data about geographic and temporal distribution, production cost, quantity harvested, and price may therefore be limited. In two case studies, we explore the nuances of estimating ESV of forests for medicinal products.

Agricultural activities have imposed significant impacts on water resources, leading to hypoxic zones and harmful algal blooms all over the world. Government agencies, nongovernmental organizations, and individuals have been making various efforts to reduce this non-point source pollution. Among those efforts, even the more cost-effective examples of performance-based environmental payment programs generally have low participation rates. We investigate the effects of externalities in farmers’ decisions on neighboring farms, incorporating both a knowledge spillover effect and a positive environmental outcome externality of farmers’ best-management practice (BMP) adoption decisions. Our focus is on how these effects may influence the outcome of performance-based payment programs and how policy makers might recognize these effects in the design of cost-effective policies to promote program participation and BMP adoption. Rather than imposing an assumption of profit-maximization or forward-looking behavior, we allow outcomes to emerge from interactions among neighboring farmers. We recommend cost-effective policies across communities depending on their composition. It is more cost-effective to target communities with fewer innovators and/or target the programs towards the least-innovative individuals.

This paper examines grass-fed beef producer preferences for cattle traits using data from a mail survey of 384 U.S. grass-fed beef producers. Conjoint analysis and Likert scale questions were used to determine preferences. Generally, results indicated that producers preferred easy-to-handle, heavy, black, and relatively lower-priced feeders raised from their own cows. The Kernel density figures for source, color, and temperament confirm the mixed logit standard deviation estimates that suggest heterogeneity in producer preferences.

Animal disease events can lead to international trade restrictions which can vary in duration, products included, and geographical extent. Accounting for multilateral resistance between trading partners, a general gravity model of trade is estimated with a Hausman-Taylor and a Hausman-Taylor seemingly unrelated estimator to evaluate the trade quantity impact by commodity resulting from highly pathogenic poultry disease events in 24 exporting markets. Commodity specific results show that quantity traded and products demanded during a disease event differ by commodities. Understanding these impacts can better prepare exporters for potential changes in trade quantity given a disease event.

The relative performance of public and private enterprises has been long debated. We construct a comprehensive violation dataset based on the EPA's Safe Drinking Water Information System to empirically investigate the compliance behavior of publicly and privately owned Public Water Systems (PWSs). Our results show that publicly owned PWSs commit significantly more Maximum Contamination Level, Treatment Technique, and Health-Related violations but fewer Monitor and Reporting violations than privately owned PWSs. We also find that municipal-level heterogeneities explain a substantial amount of variation in violation behaviors among PWSs, suggesting water supply quality depends crucially on location-specific regulations and local economic conditions.

We estimate the ecosystem service value of water supplied by the San Bernardino National Forest in Southern California under climate change projections through the 21st century. We couple water flow projections from a dynamic vegetation model with an economic demand model for residential water originating from the San Bernardino National Forest. Application of the method demonstrates how estimates of consumer welfare changes due to variation in water supply from public lands in Southern California can inform policy and land management decisions. Results suggest variations in welfare changes over time due to alterations in the projected water supply surpluses, shifting demand limited by water supply shortages or surpluses, and price increases. Results are sensitive to future climate projections—in some cases large decreases in welfare due to supply shortages—and to assumptions about the demand model.

This study quantifies how spending changes induced by the Supplemental Nutrition Assistance Program (SNAP) affects production and employment in rural and urban areas. A general equilibrium simulation model with an estimated demand system is first used to project how SNAP affects spending on different goods and services. These impacts are then linked to the expansion and contraction of different economic sectors that differ in importance across rural and urban Oregon. In urban areas, a number of service sectors linked to higher-income households shrink slightly in response to SNAP, while food-related sectors expand; the net effect on jobs is slightly negative. Production changes in rural areas are generally smaller, while having a slightly positive net effect on jobs. Overall, SNAP makes a positive difference for low- or no-income households without strong effects elsewhere in the economy.

We demonstrate an application evaluating carbon sequestration benefits from federal policy alternatives. Using detailed forest inventory data, we projected carbon sequestration outcomes in the coterminous 48 states for a baseline scenario and three policy scenarios through 2050. Alternatives included (1) reducing deforestation from development, (2) afforestation in the eastern United States and reforestation in the western United States, and (3) reducing stand-replacing wildfires. We used social cost of carbon estimates to evaluate the present value of carbon sequestration benefits gained with each policy. Results suggest that afforestation and reforestation would provide the greatest marginal increase in carbon benefit, far exceeding policy cost.