Grant Hauer

A Regional Analysis of Climate Change Impacts on Canadian Agriculture

Climate change is expected to alter production opportunities facing agricultural producers. Global studies of climate change impacts on agriculture suggest positive benefits for Canada. Results from Canadian studies tend to be more pessimistic; however, most of these studies are regionally specific and focus on the impacts on specific crops, particularly grains and oilseeds. This paper examines the impact of climate change on Canadian agricultural land values. Changes in land values are used to impute expected changes to agricultural GDP. We find that all provinces benefit from climate change and that previous estimates may be overly pessimistic.

Is the tragedy of the commons likely? Factors preventing the dissipation of fuelwood rents in Zimbabwe.

Although village “rules” classify fuelwood resources in rural Zimbabwe as being open-access, theory suggests that social norms and/or heterogeneity among users prevents rents from being dissipated. Results from a Random Utility Model suggest that social norms and heterogeneous travel costs significantly influence site choice. Welfare measures suggest that there are positive site rents, and that these rents vary because social norms and/or heterogeneity are preventing rent dissipation at some sites more than others. Given the prevalence of social norms and heterogeneity in costs, the “tragedy-of-the commons” is unlikely. (JEL Q23)

Achieving Conservation when Opportunity Costs Are High: Optimizing Reserve Design in Alberta’s Oil Sands Region

Recent studies have shown that conservation gains can be achieved when the spatial distributions of biological benefits and economic costs are incorporated in the conservation planning process. Using Alberta, Canada, as a case study we apply these techniques in the context of coarse-filter reserve design. Because targets for ecosystem representation and other coarse-filter design elements are difficult to define objectively we use a trade-off analysis to systematically explore the relationship between conservation targets and economic opportunity costs. We use the Marxan conservation planning software to generate reserve designs at each level of conservation target to ensure that our quantification of conservation and economic outcomes represents the optimal allocation of resources in each case. Opportunity cost is most affected by the ecological representation target and this relationship is nonlinear. Although petroleum resources are present throughout most of Alberta, and include highly valuable oil sands deposits, our analysis indicates that over 30% of public lands could be protected while maintaining access to more than 97% of the value of the regions resources. Our case study demonstrates that optimal resource allocation can be usefully employed to support strategic decision making in the context of land-use planning, even when conservation targets are not well defined.

Selection of reserves for woodland caribou using an optimization approach.

Habitat protection has been identified as an important strategy for the conservation of woodland caribou (Rangifer tarandus). However, because of the economic opportunity costs associated with protection it is unlikely that all caribou ranges can be protected in their entirety. We used an optimization approach to identify reserve designs for caribou in Alberta, Canada, across a range of potential protection targets. Our designs minimized costs as well as three demographic risk factors: current industrial footprint, presence of white-tailed deer (Odocoileus virginianus), and climate change. We found that, using optimization, 60% of current caribou range can be protected (including 17% in existing parks) while maintaining access to over 98% of the value of resources on public lands. The trade-off between minimizing cost and minimizing demographic risk factors was minimal because the spatial distributions of cost and risk were similar. The prospects for protection are much reduced if protection is directed towards the herds that are most at risk of near-term extirpation.

Modeling Congestion as a Form of Interdependence in Random Utility Models

This paper develops a theory of interdependent utility functions in examining congestion in recreation demand equilibria. The notion is examined empirically through the development of congestion forecasting functions which individuals use to sort themselves among a set of recreation sites. These forecasts are used in site choice models estimated on revealed preference information. An interesting outcome of this exercise is that recreation site attribute changes, which are projected to provide positive utility, may in fact generate negative utility if the effect of the change on congestion is jointly considered.

A Net Present Value Model of Natural Gas Exploitation in Northern Alberta: An Analysis of Land Values in Woodland Caribou Ranges

This report was prepared for the purpose of providing background documentation of inputs to be used in mathematical programming models and papers, which are being prepared for our research project: Ecological and economic tradeoff analysis of conservation strategies for woodland caribou. The report presents a simple net present value model of resource and land value for natural gas in northern Alberta. The variables in the model include costs (drilling, seismic, operating and capital); geological variables (stratigraphic intervals, booked reserves, future reserves); drilling variables (well densities, drilling success rates, and drilling depths); production data and prices. Each variable is described in detail and methods of derivation are provided. A map of net present values for natural gas at a spatial resolution of 250ha sections is provided and overlaid on top of caribou ranges to provide a spatial representation of where the most valuable reserves are in relation to caribou ranges.

Economic analysis of threatened species conservation: The case of woodland caribou and oilsands development in Alberta, Canada

Tradeoffs between cost and recovery targets for boreal caribou herds, threatened species in Alberta, Canada, are examined using a dynamic cost minimization model. Unlike most approaches used for minimizing costs of achieving threatened species targets, we incorporate opportunity costs of surface (forests) and subsurface resources (energy) as well as direct costs of conservation (habitat restoration and direct predator control), into a forward looking model of species protection. Opportunity costs of conservation over time are minimized with an explicit target date for meeting species recovery targets; defined as the number of self-sustaining caribou herds, which requires that both habitat and population targets are met by a set date. The model was run under various scenarios including three species recovery criteria, two oil and gas price regimes, and targets for the number of herds to recover from 1 to 12. The derived cost curve follows a typical pattern as costs of recovery per herd increase as the number of herds targeted for recovery increases. The results also show that the opportunity costs for direct predator control are small compared to habitat restoration and protection costs. However, direct predator control is essential for meeting caribou population targets and reducing the risk of extirpation while habitat is recovered over time.

A decomposition approach to modeling overlapping tenures in Alberta: a case study

The purpose of this study was to demonstrate how a decomposition approach to solving large spatially detailed forest management scheduling models could be applied to the problem of overlapping tenures in Alberta. A Model II forest scheduling model that maximized net present value subject to mill capacity, multiple mill and product demands, regeneration, area, overlapping tenure, and even-flow constraints was specified. The resulting formulation is extremely large with over 5 million decision variables and at least 100,000 constraints. The decomposition approach was able to solve this formulation in about 30 minutes on a computer with a Pentium III processor. This shows that the method used has a potential of being applied in practice to investigate long-term timber supply and demand situations where spatial detail is required. This overlapping tenure application of the model showed that constraints imposed by overlapping tenures could lead to inefficiencies in wood allocation. The results showed that marginal costs of the overlapping tenure constraints were positive and that the marginal cost of producing wood products increased when overlapping tenure constraints were present. The model also provides important shadow price information (marginal cost or marginal value) that is useful for determining how various constraints affect each demand location in the model. For example, the results in this report show that relaxation of overlapping tenure constraints may lead to gains for some mills and losses for others although the overall effect of removing constraints is positive.