The Impacts of Eco-compensation on theFarmers’ Production Behavior
at the Hani Rice Terraces in China

Liu Moucheng
Associate Professor
Institute of Geographic Sciences and Natural
Resources Research, CAS

Farmers’ production behavior


Eco-compensation mechanism targeting non-point

pollution, can improve the environmental quality offarmland. However, the effect depends on how well thefarmers accept, respond to and implement the policies.
We built a multi-objective production decision-making

model to study the impact of eco-compensation
standards on the farmers’ production behavior andwelfare.

ContentThe study areas The methodology
 The analysis
 The conclusionHani Rice Terraces（2010.6）

Rice terracesEco-compensation——rice price

Lower comparative effectiveness of traditional
cultivation methods
 Land has been increasingly abandoned.
 Pesticide, fertilizer and other chemical usage hasincreased.



Eco-compensation
 Compensation price is 5.68 yuan/kg.

ContentThe study areas
 The methodology
 The analysis
 The conclusion1. Multi-Objective Production Decision-Making
Model

Predict the farmers’ decisions

Set utility functions and constraints

Simulate the optimal decision-making process

Analyze the policies’ impacts on farmers’ decisionDecision variables


Plant area

paddy, maize, intercropped soybeanInput


labor



capital input

expenditure on chemicals (fertilizers, herbicides,pesticides, etc.)other capital goods (seeds and farming tools, etc.)

Utility function
Maximizing profit

Minimizing risks

Maximizing the amount of grain retainedMulti-objective utility function

3. Grouping of farmers
Farmers are divided into two groups according to the altitudeof their farmland.
Group A: 107 households at higher altitudes;

Group B: 136 households at lower altitudes.

We simulated the production decisions and income of thefarmers in different groups under different eco-compensation
standards. The results are then aggregated to obtain the overall
result.
ContentThe study areas
 The methodology
 The analysis
 The conclusion1. Current situation of agriculture
Crop structure

Planting areas of all crops of Higher Altitude Group are

higher than that of Lower Altitude Group.
The total planting area was 6.7 mu per household forGroup A and 4 mu per household for Group B
Paddy
Maize
Intercropped
合计Group AGroup B

3.5
1.8
1.3
6.7

2.4
0.7
1.1
4.1

1. Current situation of agriculture
Input and yield
Yield

Paddy
Maize
Intersoybean
Intermaize

Labor input Chem-input Other input

AB

A

B

A

B

678.0
524.2

851.1
576.8

21.6
9.3

19.8 146.1 203.5 135.2 139.1
8.2 127.0 147.2 74.8 81.1

133.4

159.7

4.0

3.4

33.5

42.0

53.0

508.2

551.7

8.5

7.5

112.6 128.7 70.1

75.9

45.8

AB

1. Current situation of agricultureAmount of grain retained by the farmers

Paddy

Group AKg/mu
267.1

Group B
Kg/mu
72.5

Maize

109.9

148.3

Inter-soybean

73.6

28.4

Inter-maize

181.2

157.1

2. Impact of Eco-compensation on crop structureGroup A

Overall resultsGroup B

3. Impact of Eco-compensation on chemical use
Group A

Overall resultsGroup B

3. Impact of Eco-compensation on income
Planting Income

Eco-compensation has negative impact on both unit yieldand planting income, as it reduces fertilizers and pesticides.

Group AGroup B

3. Impact of Eco-compensation on income
Total Income
Eco-compensation affects farming decisions (crop structure, use ofchemicals), thus the planting income. This together with the ecocompensation change the farmers’ overall incomeGroup AGroup B

ContentThe study areas
 The methodology
 The analysis
 The conclusion
Conclusion
The addition income brought by the eco-compensation policies
encourages the farmers even though the policy aimed to reduce
chemicals. In pursuit of economic gains, the famers increase
labor input and prefer the crop structure with more complicatedmanagement but higher yield.
Whether the eco-compensation can reduce chemicals depends
on whether it exceeds the loss caused by the reduction. As it goesup, the use of chemicals becomes less sensitive to it at a fastpace.
Conclusion
The eco-compensation changes the farmers’ planting decisions
and thus their planting income. Besides this, the ecocompensation itself also impacts the farmers’ total income.


The total income of Group A decreases before it increases as theeco-compensation becomes higher. The inflection point is
RMB110/mu, which means after this point, the ecocompensation can not only reduce chemicals, but only increase
the farmers’ total income.

For lower altitudes, the reduction of fertilizers and pesticides has
significant impact on the farmers’ total income.

Thank you for yourattention!
liumoucheng@163.com
liumc@igsnrr.ac.cn