September 28, 2022
Guest post by Valentina Ofori, Patrick Lloyd-Smith, Ken Belcher, and Peter Boxall
Wetlands play a vital role in ecosystems in Canada, yet they remain at risk due to drainage, degradation, and development. On the Canadian prairies, 80% of the lost wetlands are converted for agricultural activities. When wetlands are lost, society loses some of the important services they provide such as water quality improvement, flood management, and provision of habitat for wildlife and waterfowls. Wetland conservation policies implemented to date have had limited success in managing wetland loss in Canada. One of the reasons for continued loss is that wetland drainage often makes financial sense for private landowners as they are not rewarded for the wetland benefits that accrue to society. However, voluntary market-based approaches to improving environmental outcomes hold the promise of achieving conservation goals.
We recently undertook research to understand if a potential wetland certification scheme can align consumer benefits and producer costs to incentivize the provision of wetlands on agricultural landscapes. This initial feasibility assessment is essential to assess whether the price premiums consumers are willing to pay are sufficient to cover the adoption costs of certification for producers. Certification schemes are voluntary programs that compliant producers can enrol in if they met certain requirements, with any products the producers sell receiving a label to differentiate their products to consumers in the marketplace. To ensure the accuracy of the claims, enrolled producer’s practices are independently audited to verify the sustainability of a business or of production activities relative to a particular standard. Ecolabels and other ‘green’ certification schemes have the potential of matching ‘green’ producers with consumers willing to pay a premium for more sustainable products.
In our paper, we study the economic feasibility of a wetland certification scheme for agricultural producers in the Canadian Prairie Provinces. We conduct a stated preference survey of consumers in Canada’s three Prairie Provinces (Alberta, Saskatchewan, and Manitoba). We then use these estimated price premiums and compare them to the costs the producer incurs to restore wetlands on their land. Our study finds that prairie wheat consumers were willing to pay 28% to 40% more for wheat flour that is produced on an agricultural field with restored wetlands. We also identified that people are more likely to buy wetland certified wheat flour if the certification process is verified by the provincial government or Ducks Unlimited relative to a producer-led organization. The consumer price premium translates to about 16% to 21% more for the producer per bushel of wheat, with these benefits outweighing the costs of wetland restoration. A typical Saskatchewan producer using a wheat-canola rotation can increase their profitability by 16% to 21% if they join the wetland certification program.
The study’s findings suggest that certification schemes have the potential to contribute to wetland conservation on the Canadian prairies. However, the domestic demand and acceptance of such a label may not guarantee its acceptance in export markets where commodity differentiation is more challenging. Aligning the wetland certification scheme with broader sustainability supply chain initiatives such as the Sustainable Agriculture Initiative Platform will be important. Furthermore, there are ongoing concerns about the scalability of price premiums for sustainability differentiation as the more producers that adopt the certification program, the less differentiated the product is in the marketplace.
Consumers already encounter many sustainability labels while shopping. Going forward, an introduction of a wetland certification label must be accompanied by initiatives to raise consumer awareness and understanding of what these labels actually mean. Consumers must be given information outlining how a wetland certification program differs from other certification schemes and justify the need to add another certification scheme to an already saturated food information market.
To learn more, read the full Working Paper on “Economic Feasibility of a Wetland Certification Program in the Canadian Prairies”.