Farm in Lancaster County, PennsylvaniaWhen it comes to allocating money for conservation, reverse auctions can help governments get the biggest bang for their buck.
Reverse auctions are auctions with many sellers but only one buyer. They are often used in the private-sector to procure services inexpensively, but reverse auctions can also be used to cost-effectively allocate public conservation dollars.
In 2005, WRI, together with the Pennsylvania Environmental Council and other partners, conducted a pilot reverse auction in the agriculture-heavy Conestoga watershed of Lancaster County, Pennsylvania. The goal was to pay farmers to implement best-management practices that reduce phosphorus, a leading cause of water pollution in the watershed.
The Conestoga WatershedWe held two reverse auctions that resulted in allocations of $486,000 to farmers who showed that they reduced the most phosphorus for the least amount of money. Farmers first selected the best management practices that they wished to propose. Next, phosphorus reductions from each proposal were estimated using WRI’s NutrientNet software. Farmers then placed competitive bids indicating the payment they would accept to implement each proposal. Bids with the lowest prices per pound of phosphorus reduced were funded; those with the highest prices were not.
As a result, an estimated 92,000 pounds of phosphorus are expected to be reduced over the lifespan of the best-management practices implemented through the reverse auction. Results showed that the allocation method resulted in seven times more phosphorus reductions per program dollar spent than traditional government-subsidy allocation methods within the watershed.
The federal government even has an in-house example of this method of award allocation. In July 2006, a wetlands reserve program pilot used reverse auctions to reduce the acquisition costs of program easements in several areas across the country. It was a huge success, enrolling 3,500 acres and reducing acquisition costs by 14 percent, or $820,000.
Reverse auctions can maximize the effectiveness of federal and state dollars because they combine performance measures with cost. Many conservation programs do not currently consider cost as a factor when allocating funding. Furthermore, reverse auctions allow for competitive bidding—which encourages applicants to reveal the “true cost” of adoption—and do not rely on fixed payment schedules.
In the face of rising concerns about climate change and water quality, it is critical that governments become more effective at allocating money to achieve environmental objectives. One way for them to do it is to formally adopt reverse auctions for agricultural conservation programs, but also for programs that aim to protect and restore wetlands, species, and habitats.
Mindy Selman, Senior Associatemselman@wri.org+1 (202) 729-7644Mindy Selman a senior associate in the People and Ecosystems Program at the World Resources Institute (WRI). Her current research covers a variety of issues including U.S.
1 Comment
Phosphorus is indeed a
Phosphorus is indeed a nutrient, but it is often also used as a red herring to divert the attention from the increase of reactive nitrogen in our biosphere and while farmers are getting blamed for their pollution (CAFO’s and agricultural runoff), causing the dead zone in the Gulf of Mexico, cities still are allowed to dump the same pollution (nitrogenous waste = urine and proteins) in our open waters, in spite of the fact that the goal of the Clean water Act was to eliminate (100% treatment) all water pollution by 1985.
A better way to improve the water quality in our open waters would be to implement the CWA as it was intended and promised to the American public.
The reason the CWA is not implemented?
Simple, but also very embarrassing! EPA, like the rest of the world, used an essential pollution test incorrect and the pollution (now called nutrients) caused by nitrogenous (urine and protein) waste is ignored, while nitrogenous (urine and proteins) waste like fecal waste exerts an oxygen demand, but in all its forms is a nutrient (fertilizer) for algae and aquatic plants.
In 1984 EPA acknowledge the problems with this test, but in stead of correcting this test (so we finally would be able to evaluate the true performance of such facilities and determine what their effluent waste loading on open waters would be), EPA allowed an alternative test and officially lowered the goal of the CWA from 100% treatment to a measly 35% treatment, without even informing Congress, as apparently the media also did not understand what was going on.
But who cares, this is a technical issue and for that you have to trust the experts, who clearly in this case prefer the status quo. If you like to know more you can visit my website www.petermaier.net and in the Technical PDF section read a description of the BOD test and the consequences if you apply the test as still is applied.