Calculating the Costs of Farmland Conservation: Case Study of Alberta, Canada

Abstract

For the last two decades the Canadian province of Alberta has experienced rapid conversion of former farmland into residential and industrial uses. The resulting loss of prime agricultural land and the low density of housing and industry have prompted new interest in farmland conservation. Although authorities at the provincial and local level have recognized the importance of farmland conservation, at this point they have not implemented any efficient policy tools to fulfill the conservation goal partly due to the insufficient knowledge of farmland conservation. This thesis aims to explore the private costs of farmland conservation in Alberta and provide useful input into policy discussions. First, we analyse the factors that influence farmland values using a spatial hedonic price model. We find that residential value, recreational value, development potential, and suitability for agriculture all have significant impacts on farmland price. Second, using agricultural rental rates as a measure of agricultural value, we estimate the value of development rights for 615 sample plots by subtracting capitalized agricultural value, recreational value and residential value from farmland list prices. Third, using the Co-Kriging interpolation technique, we predict the value of development rights for farmlands throughout the province of Alberta. Our results suggest that land around the Calgary and Edmonton metropolitan areas would be the most expensive to conserve in agricultural uses, while land in the central-east Alberta would be the least expensive. We use those results to derive a hypothetical supply curve for farmland conservation.