Economically Optimal Spatial Scale for Integrated Assessment of Agricultural Production Systems

Montana State University, Bozeman MT

Investigators

Abstract

Compliance with international agreements like the Kyoto protocol requires that policy outcomes meet accepted scientific standards and are verifiable. Assessing policies to increase carbon sequestration in agriculture will require economic models that estimate the effects of alternative policies on land-use and management decisions of farmers and ecological models that estimate how their behavior affects soil carbon. Because agricultural production systems are characterized by spatially variable economic and biophysical processes, their measurement is scale dependent. The results of the same analysis therefore may vary depending on the areal unit or spatial scale chosen for the study. An integrated assessment conducted at an inappropriate scale could furnish misleading estimates of economic and biophysical outcomes and lead to the development of inefficient policies. This research project will provide a theoretical foundation for identifying an appropriate scale for integrated assessment modeling of agricultural production systems that can form the basis for formulating such policies. The project also will investigate methods for comparing alternative specifications of integrated economic and bio-physical system models. More specifically, the project will develop a conceptual and empirical framework for determining the economically optimal spatial scale for integrated assessment of agricultural production systems that are characterized by spatially variable economic and bio-physical processes. The economically optimal spatial scale will be defined as the scale that maximizes the net benefits of information produced. This framework then will be applied to examine soil carbon sequestration in the Great Plains region of the United States, with this example used to investigate methods to compare alternative spatial scale specifications of integrated economic and bio-physical models. Field-scale econometric production models are used as the basis for the spatially explicit stochastic simulation models of land use and management decisions. The simulation models are then linked to the Century ecosystem model (designed to estimate changes in soil carbon) on a site-specific basis to assess economic-environmental tradeoffs. Net benefits for the alternative scale specifications will be compared to assess the optimal spatial scale for integrated analysis of carbon sequestration within agricultural production systems. This research contributes to the scientific foundations needed to facilitate the participation of U.S. agriculture in policies designed to sequester carbon in soils. The generality of the scale problem in integrated assessment modeling means that this research will have broader applicability and significance in bringing economic analysis to bear on a fundamental methodological issue in the environmental sciences. A formulation of the scale problem within an economic framework will provide a theoretically consistent analysis of the tradeoffs associated with conducting integrated assessments at alternative scales.