Impact of multiple interacting financial incentives on land use change and the supply of ecosystem services

Abstract

Multiple financial incentives are increasingly common for managing agro-ecosystems. We explored the impact of incentive interactions across multiple ecosystem services through their influence on land use change potential. Taking a spatial approach, we quantified the economic potential for land use change from agriculture to carbon monocultures and environmental plantings. We assessed 1875 scenarios—exhaustive combinations of five incentive price levels for four services (food and fiber, fresh water, carbon sequestration and habitat), and three cost settings. Incentive interactions had complex effects—characterized by synergies and tensions, non-linearity, dependencies, and thresholds. Tensions occurred between commodity price and carbon price in supplying food and fiber, carbon sequestration, fresh water, and indirectly, habitat services. Water price displayed synergies with commodity price, and tensions with carbon price in supplying fresh water services. For the supply of habitat services, a biodiversity price depended on either high carbon prices or low commodity prices. Interaction effects may reduce policy efficiency wherever multiple incentives encourage the supply of services from agro-ecosystems.