The Economics of Agri-environment Scheme Design

Designing agri-environment schemes (AESs), the European Union’s main policy tool to improve the environmental performance of farms, that result in participation in the areas of most need is a challenge faced by policymakers. A number of high level options are available to policy makers including the use of voluntary and mandatory measures, top-down versus participatory approaches, collaborative versus coordinated participation, and whether to target the schemes or apply them horizontally. Using Ireland as a case study, this paper assesses the evolving structure of AES design in the context of changing environmental targets, by creating an institutional framework to analyse past and current AESs and other measures. This information is then used in a spatial analysis comparing the location of important environmental public goods to participation in agri-environment schemes. The analysis shows that although higher uptake in extensive farming areas may not result in additionality, due to their extensive nature, these areas may contain high concentrations of areas of environmental concern. However, the optimal design of an AES depends on whether the specific public good targeted is global or localised as the distribution of areas of environmental concern does not always follow strong spatial patterns.