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



1. Introduction

1.1. Fundamental disadvantages of the current agri-environmental policy

Agriculture plays an important role in protecting the botanical diversity of the rural
environment. Since the reform of the Common Agricultural Policy (CAP) in 1992, agri-
environmental schemes have been supported by the EU within the framework of the
second pillar of the CAP. In these programs farmers were rewarded for environmental
services. In the context of the current agri-environmental policy, ecological services
provided by agriculture are predominantly rewarded action-orientated and imply particular
disadvantages both from an ecologics and from an economics point of view (Kleijn and
Sutherland, 2003; Wilhelm, 1999). On one hand it implicates substantial regimentations for
farmers, so there are no purposeful incentives connected for an innovative and regional
differentiated reach of socially desired ecological goals. On the other hand an action-
oriented agri-environmental policy with the use of an uniform premium - especially
against the background of the necessary examination of agricultural subsidies - faces an
economic justification problem. This rightfully, since from the current agri-environmental
policy no incentives proceed to an efficient use of limited public funds. Furthermore it is
necessary to compare this payment scheme with existing agri-environmental programs.
Therefore the farmer’s transaction costs to take part in auctions bound in this payment
scheme will be ascertained and compared with the farmer’s transaction costs of taking part
in existing agri-environmental programs in a model-region.

1.2. Goals of the payment scheme

For the solution of the initially described problems and thus for the advancement and
improvement of agri-environmental programs, an outcome-based payment scheme to
reward ecological services in agriculture was developed.
1 This payment scheme differs
fundamentally from the status quo of agri-environmental programs. It is outcome-based,
integrates market-similar elements by the use of auctions and is regional embodied with
consideration of the EU-principle of subsidiarity. Furthermore it delivers the possibility to

1 The project is a part of the BIOPLEX-programme. BIOPLEX is an interdisciplinary project investigating
the links between biodiversity and spatial complexity in agricultural landscapes at different spatial scales
[see:
http://www.uni-giessen.de/bioplex/]. BIOPLEX is part of the BIOLOG-programme funded by the
German BMBF (Federal Ministry of Education and Science). Aim of the programme is to promote research
in the context of global change and decreasing biodiversity. BIOPLEX is a collaborative project bringing
together working groups from Justus Liebig University Giessen and from Georg-August-University
Gottingen.



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