Shortcuts costly

April 16th, 2012

Shortcuts in the design of payment schemes to persuade farmers to undertake conservation works could be putting the potential environmental benefits at risk, a study involving researchers at The University of Nottingham has found.

Farmers in the EU and US receive billions of dollars/pounds in government subsidies. Increasingly, these payments are justified on the basis that they provide financial incentives to farmers to improve the environment through their activities.

An international team of researchers led by experts from Nottingham examined how the design of subsidy schemes influenced the conservation benefits provided by these programmes. Researchers combined economic surveys of farms with studies of how different species responded to farm management actions.

Dr Paul Wilson, Director of the University’s Rural Business Research Unit, said: “Environmental schemes designed to correct for market failures and provide public goods from land-use have been a feature of EU payments to farmers over recent decades. Many such schemes are designed with administrative ease in mind as much as achieving broad environmental outcomes. However, designing more targeted schemes is the most efficient use of public funds.”

The EU and member states spend on average the equivalent of USD $7.2bn a year on payments to farmers that are designed to safeguard environmental benefits. The largest subsidy scheme of this type in the US, the Conservation Reserve Program, spends $1.7bn a year to purchase such benefits on agricultural land.

The researchers found that all manner of shortcuts common in scheme design undermined environmental performance. Between 49% and 100% of the promised conservation gain was lost. Comparing alternatives allowed researchers to identify which simplified policies were most problematic.

“The need for different payments, in different areas, to achieve different environmental outcomes lies at the heart of better designed agri-environmental policy,” added Dr Wilson.

The study involved researchers at the universities of Tennessee, Stirling, Copenhagen, Nottingham and Exeter and the Joint Research Institute of the European Commission’s Institute for Prospective Technological Studies. It was funded by the UK Research Councils’ Rural Economy and Land Use Programme, a collaboration between the Economic and Social Research Council (ESRC), the Natural Environment Research Council (NERC) and the Biotechnology and Biological Sciences Research Council (BBSRC), with additional funding from Defra and the Scottish Government.

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