Auctions in an outcome-based payment scheme to reward ecological services in agriculture – Conception, implementation and results

provided by Research Papers in Economics

Auctions in an outcome-based payment scheme to reward ecological
services in agriculture - Conception, implementation and results

45^th Congress of the Regional Science Association in Amsterdam, 23-27^th August 2005

Markus Groth

Georg-August-University Goettingen
Department of Agricultural Economics
Platz der Gottinger Sieben 5, D-37073 Gottingen
E-Mail: [email protected]

Abstract:

This paper presents an outcome-based payment scheme to reward ecological services in
agriculture with the focus on the use of auctions. Starting in January 2004 the payment
scheme is tested upon its implementation as an agri-environmental program. The intention
of the program is to overcome the disadvantages of existing and mostly action-orientated
agri-environmental programs. The design of the payment scheme is based on fundamental
criteria of market economy such as supply and demand and integrates auctions as an award
procedure. Furthermore it is outcome-based and considers the interests of the local people
and the relevant stakeholders and their demand for botanical diversity. During the first
auction and two surveys of local farmers it is already obvious that this payment scheme is
not just a theoretical construct but that it is already practicable in the model-region. The
main research is the determination and the evaluation of the farmer’s transaction costs to
take part in auctions bound in this regional payment scheme.

Keywords:

agri-environmental policy, auctions, ecological services, principle of subsidiarity,
transaction costs

JEL-Code: Q 10

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