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Land Use Change, Environment and Society: a integrated framework for economic assessment

Final Report Summary - LUCES (Land Use Change, Environment and Society: a integrated framework for economic assessment)

This highly interdisciplinary research project examines one of the most fundamental of all problems in natural resource and environmental economics: the optimal use of land. Many complex resources deliver a number of goods and services, but none provides the variety offered by land. This project developed an integrated framework for the economic analysis of decisions concerning agriculture, land use change and associated environmental impacts. In the original proposal, this framework was designed to include three integrated components: a) agricultural land use, production and profits, b) greenhouse gas (GHG) emissions from agriculture and their values c) open-space recreational opportunities and their values. We decided to extend this already rich structure by including a fourth, fully integrated, component concerning river water quality and diffuse pollution from agriculture.

LUCES produced a spatially-explicit, structural econometric framework to support decision making and land use policy. In the original proposal, our goal was developing such model on a case-study area covering the Humber basin, located in the North-East of England, which covers an area of about 25,000 km2 or roughly 20% of the country. However, during the first two years of the project we were able to secure additional data and we significantly exceed our initial scope to include in our analysis the whole of Great Britain. This is a study area which is ten times larger than the one promised in the original grant agreement.

In line with our original proposal, we demonstrated how this integrated framework can be used by stakeholders and policy-makers by developing a series of analyses tackling issues which are both extremely policy relevant but also academically challenging. We select three of such analyses to showcase the impact of our work:

a) The environmental impact of climate change adaptation, published on Nature Climate Change [1]. The analysis presented in this paper uncovered a new dimension of the climate change adaptation debate. The existing literature tends to focus on estimating the benefits and the scope of adaptation, on designing efficient policies for facilitating the adoption of adaption measures, or on identifying priorities for action. However, given that human activities are the main cause of environmental change worldwide, it follows that adaptation has also the potential to generate further pressures, creating new threats for both local and global ecosystems. From this perspective, policies which encourage adaptation may conflict with legislation aimed at preserving or enhancing environmental quality. Through the use of the LUCES integrated framework, which links models of agricultural land use change to models of its environmental consequences, we shown that the impact of climate change adaptation in the agricultural sector on river water quality will be significant, and will vary from positive to negative across locations. These findings have raised significant interests with policy makers, with, for example, Dr. Fezzi invited to present his work twice at the UK Department for the Environment, Food and Rural Affairs during last year.

b) The spatially-explicit analysis and valuation of the environmental benefits generated by land use in the United Kingdom. This highly cited work, published on Science [2] showcases the linkages of LUCES with large, high-profile and policy relevant research efforts and the ability of the Fellow, Dr. Fezzi, to contribute to cutting-edge, interdisciplinary research and work as part of a large, multidisciplinary team. This work shows that land-use decisions, while based largely on agricultural market prices, generate a series of values (e.g. the provision of wildlife habitat or recreational space), the magnitude of which overwhelms market profits. Policies that recognize the diversity and complexity of the natural environment can target changes to different areas so as to radically improve land use in terms of agriculture and greenhouse gas emissions, recreation, and wild species habitat and diversity. This work generated considerable impact among policy makers, significantly influencing the drafting of the UK Natural Environment White Paper (available on-line at natural/whitepaper/). It also generated substantial press coverage in the general media.

c) The study of recreation demand and the value of travel time, published on the Journal of Environmental Economics and Management [3]. This analysis shows that, as promised in the original research proposal, not only the final LUCES framework, but also each single model, considered by itself, is innovative and provided a significant, stand-alone contribution. One of the focus of the recreational demand modelling developed within LUCES is the estimation of the value of travel time (VTT). The VTT is a fundamental component for travel costs models used to value environmental resources and, yet, it is very difficult to estimate. Our work used revealed preferences to estimate this subtle parameter showing that the value of saving travel time is at least twice as previously believed (at least 2/3 of the wage rate rather than the commonly implemented 1/3). This means that traditional approach has provided estimates of the value of environmental resources which are systematically downward biased. According to the Journal of Environmental Management editor Daniel Phaneuf, this paper will “become the new standard citation for whichever fraction of the wage rate garden variety recreation analysis should use" and it is expected to generate very high citations. It has also generated significant policy impact, with the our VTT been used by the UK Office of National Statistics to derive the most up to date estimates of the UK Natural Capital (see /environmental/uk-natural-capital/initial-estimates/art-article.html).

In addition, the LUCES model has also served as the “core” of other high-profile and policy relevant research such as the UK National Ecosystem Assessment Follow-On (UK NEA-FO) study, which, commissioned by the UK Parliament, organised by UNEP-WCMC and funded by Defra, the Devolved Administrations, NERC and ESRC, provided a comprehensive analysis of the cultural and economic value of nature in GB and developed a range of methods to assist decision-makers wishing to apply an ecosystem services approach.

The project fully achieved the objectives in the proposal. LUCES developed a spatially-explicit integrated framework to assess the impact of the main drivers of agricultural land use change, and the consequential effects on the environment, including GHG emissions, water quality and the resulting changes in recreational values. Dissemination within the academic community and to policy maker has been significant, with Dr Fezzi giving presentation at several university across Europe and the United States and at the UK Department for the Environment, Food and Rural Affairs (Defra). The presentations at Defra have been important to define LUCES scope and scenarios, and increase the connections between policy-makers and academia. The Defra agricultural economics team will make more use of the LUCES framework in order to test the implication that different agricultural policy may have on land use and estimate the resulting consequences for the environment. The dissemination activities have also encouraged further research collaborations. For instance, Dr. Fezzi is now writing-up a research proposal for an EU funded call (JPI, water challenges for a changing world) with colleagues at the Toulouse School of Economics, which he visited to present the research developed in LUCES. LUCES also generated a series of publications on top environmental economics outlets (e.g. Journal of Environmental Economics and Management, Journal of the Association of Environmental and Resource Economists), general interest journals such as Science and Nature Climate Change, and several working papers which are currently submitted to high profile journals.

Finally, the LUCES project provided a springboard for Dr. Fezzi’s career. At the end of the project, Dr Fezzi received multiple job offers to transition to a full time Faculty post. He is now Associate Professor at the Department of Economics at the University of Trento and Senior Lecturer at the new Land, Environment, Economics and Policy Institute at the University of Exeter.