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No. 12: Assessments of the financial and welfare economic costs of nature preservation of current permanent grasslands in Denmark

Hasler, B., Chistensen, L.P., Martinsen, L., Källstrøm, M, Levin, G., Dubgaard, A. & Jespersen H.M.L. 2012. Omkostninger ved hensigtsmæssig drift og pleje af arealer med naturplejebehov indenfor Natura 2000 og Naturbeskyttelseslovens §3. Teknisk rapport vedr. delprojekt 3 i projektet: Sikring af plejekrævende lysåbne naturtyper i Danmark. Aarhus Universitet, DCE – Nationalt Center for Miljø og Energi, 52 s. Teknisk rapport fra DCE - Nationalt Center for Miljø og Energi nr. 12. www2.dmu.dk/Pub/TR12.pdf

Summary

The report contains assessments of the financial and welfare economic costs of nature preservation of current permanent grasslands in Denmark. The report is based on an assessment of the need for nature preservation on grasslands located within Natura 2000 areas and areas covered by §3 of the Nature Protection law. The considered means of preservation are manual or machine based hay harvest and grazing by sheep or cattle. In the analyses the grasslands are divided into five different nature types: meadows, commons, salt meadows, bogs/marshes and heath, and where relevant the slope of the area is also considered. Moreover, costs are assessed separately for three different area classes, namely 3 ha, 6,5 ha and 15 ha.

Based on the assessment of the extent of grasslands covered by Natura 2000 and §3 of the Nature Protection law and calculated unit cost estimates of the different nature preservation measures for the different nature types and area classes the total financial and welfare economic costs of nature preservation on Natura 2000 and §3 grasslands are calculated The calculated financial costs illustrate how the changes in agricultural management affect the economy of the private landowners whereas the welfare economic costs illustarate the effect that the changes have on the overall level of welfare in society.

Due to insufficient availability of data it has not been possible to account for the actual current state of specific areas. Likewise it has not been possible to include information on which measures are necessary to ensure ”good preservation status” on specific areas. Hence, the calculations are based on the assumptions that nature preservation measures are necessary on all permanent grasslands covered by Natura 2000 and the §3 of the Nature Protection Law, and that the cheapest nature preservation measures are sufficient to ensure ”good preservation status” on all areas. Consequently the calculations may overestimate the need for additional financing for nature preservation, since nature preservation measures are already being practiced on some of the concerned areas. In a welfare economic analysis, however, it seems most relevant to assess the total costs associated with ensuring that proper nature preservation measured are implemented in the considered areas.

For sheep as well as cattle grazing costs are calculated based on the assumption that it requires the establishment of new herds. Hence the calculated costs include investment costs related to the establishment of new production units. If the demand for grazing can be covered by existing livestock herds, as must be expected at least to some extent, costs will probably be lower than the costs resulting from the present analyses. Due to limited resources within the project it was not possible to calculate the share of the demand for grazing which can be covered by existing herds. Data, however, are now available for making such calculations.

The results of the analyses show that nature preservation leads to financial economic deficits in all the cases considered. In order to obtain estimates of the actual real costs of different measures which can then be used to determine the necessary size of potential future subsidies, the calculations does not account for current subsidies. However, even if results are adjusted to reflect current subsidies the financial economic results will be negative in most cases. Comparison of results across the different area classes show that costs per ha generally decrease as the size of the area increase. For grazing costs per ha are seen to be lower for oligothophic nature types than for more eutrophic nature types. This is caused by the fact that earnings per animal are negative. Hence, as fewer animal are needed per ha to ensure sufficient removal of biomass on oligotrophic areas than on eutrophic areas, nature preservation costs decrease as one moves from eutrophic to oligotrophic nature types.

The total cost calculations are based on the cheapest nature preservation measure. Hay harvest by machines constitutes the cheapest measure for all areas that are accessible for machines. On areas that cannot be accessed by machines, i.e. areas with slopes greater than 20 degrees and bogs/marshes, grazing constitute the cheapest measure. The total calculated financial and welfare economic costs amount to DKK 663 and 491 M per year. Those numbers are based on the assumption that hay harvest by machines is feasible on commons with a slope less than 20 degrees. The reasonability of this assumption can be questioned, and therefore total costs are also calculated for the case where hay harvest by machines is assumed inappropriate on commons with a slope less than 20 degrees, and where these areas therefore in stead are assumed to be managed by grazing with sheep. This change in the measure used for nature preservation on commons result in a significant increase in total costs as annual financial and welfare economic costs increase to DKK 748 and M, which is equivalent to cost increases of 13 %.