Improving environmental financing via result-based agri-environment measures

Whereas classical action-based agri-environment measures (AEMs) pay farmers for prescribed management activities, result-based agri-environment measures (RB-AEMs) instead link payments to the provision of a desired environmental outcome. Result-based schemes are increasingly seen as a promising way to improve the conditionality of Common Agricultural Policy (CAP) funding (i.e. the degree to which a payment is given only if the required result is achieved), resulting in improved environmental effectiveness. This is because they allow more direct control of the environmental output of agricultural policies.

A new paper led by IEEP’s Daniela Russi, published in Land Use Policy, analyses the MEKA-B4 scheme - the first CAP RB-AEM introduced in the German region of Baden-Württemberg in 2000 to preserve species-rich grassland. The paper shows that MEKA-B4 has a high degree of conditionality and environmental effectiveness, because the payment is granted only to farmers with a number of wildflower indicator species at or above the established threshold. The scheme also plays an important educational role, increasing the farmers’ motivation towards biodiversity conservation.

In addition, the paper considers whether it is legitimate to label AEM schemes as Payments for Ecosystem Services (PES), and it concludes that MEKA-B4 can be considered a PES if a broad definition of PES is adopted, since it remunerates farmers for the ecosystem services they provide in terms of biodiversity conservation. However, in the 2007–2013 programming period the measure acted more as a reward or incentive than a true market-based instrument, as the payment was too low to influence the management strategies of farmers who were not already concerned about environmental protection. The higher payment during the current programming period may increase the incentive aspect of the measure at least for a part of the farming community, favouring the buy-in of farmers with higher opportunity costs.

This paper on RB-AEMs forms part of IEEP’s broader work assessing the role of Innovative Financing Mechanisms (IFMs) for environment and biodiversity. The insights from Baden-Württemberg will be next used in a global context, to inform a project funded by the EU Delegation in Mexico that explores the use of, and lessons learned from, IFMs to finance biodiversity conservation in Mexico and Europe.

The paper can be accessed here: Results-based agri-environment measures: Market-based instruments, incentives or rewards?

For more information on our work in this area, please contact Dr. Daniela Russi (drussi@ieep.eu) and Clunie Keenleyside (ckeenleyside@ieep.eu).