Compensation schemes for plant quarantine pest costs: A case study for Germany

Abstract

Plant quarantine pests worldwide cause considerable economic damage due to direct plant losses, eradication costs, and contamination measures. Although these losses can threaten the survival of a farm, no country to date has a universal compensation solution that encompasses all agricultural sectors. This paper aims to assess various compensation options by, firstly, calculating potential monetary losses caused by selected quarantine pests, which have not been studied in this context before. Secondly, we calculate farmers’ willingness to pay (WTP) for different components of compensation options in plant production using a discrete choice experiment (DCE). We find that monetary losses caused by quarantine pests vary significantly across products and sectors and are highest for intensive vegetable production. The DCE reveals a strong preference for the state compensation and heterogeneity of preferences among farmers depending on their experience with risk management options and perception of pest occurrence. The WTP analysis indicates that requiring preventive plant protection measures as a prerequisite for receiving compensation significantly deters farmers from participating in such a system, as its WTP exhibits the most negative impact compared to all other factors. Due to sectoral differences and path-dependent nature of compensation programs, a universal solution is rather not feasible. Sector-specific solutions must be considered, which does not rule out similar compensation approaches among sectors. Our findings are useful for designing compensation programs for quarantine plant pest cases.