Contracts2.0 will work on contractual solutions which provide the right incentives to farmers and land managers to produce more environmental public goods (see Concept note_1), but also allow them to reconcile the profitability of their farms with environmental objectives. This is even more important, as many farmers are currently struggling to maintain the economic viability of their farms, facing serious trade-offs between short-term profitability and sustainable production. To reduce trade-offs, improved contract-based approaches are urgently needed which provide tangible support to farmers through additional public and private incentives to produce a mix of private and public goods that better reflects society’s preferences.
The main objective of Contracts2.0 is to develop novel contract-based approaches to incentivise farmers for the increased provision of environmental public goods along with private goods.
Newly developed contract-based approaches should be environmentally effective, economically viable for farmers and support the longevity of contractual arrangements.
Contracts2.0 will investigate the following four types of contract-based approaches:
Results-based payment schemes
Results-based payments are directly linked to the environmental outcome. Environmental indicators e.g. the presence of grassland species as well as modelling approaches can be used to describe these outputs. In these schemes, farmers determine the management required to achieve the desired result, rather than following prescribed management actions. This provides farmers with a higher flexibility regarding management decisions compared to a practice-based approach. The self-interest and intrinsic motivation of farmers to perform well are likely to increase effectiveness and possibly efficiency. Contracts2.0 will work to tackle the challenges of these approaches such as:
- A fair distribution of risk for failing to achieve the results.
- Development of appropriate indicators and quantification methods considering questions of acceptance and transaction costs (see concept note)
Our action partner Natural England is one of the pioneers of putting this approach into practice. Natural England carries out a pilot study on results-based agri-environmental Payment Schemes (RBAPS) for grassland and arable land to test environmental performance and farmers’ acceptance. Furthermore our action supporter from the Irish Burren Programme is experienced in results-based grassland schemes.
Collective implementations (or coordinated individual contracts) are an approach to reduce transaction costs, increase technical capabilities (economies of scale), improve knowledge sharing among participants and to target the appropriate spatial scale. Rather than on a single farm scale AECMs could be implemented on landscape-scale areas by joining up the plots of several farmers (to provide “linking/corridors” type features like hedges or woodland).
Contracts2.0 will facilitate the development of collaboration between different actors, not only farmers and land managers but also other stakeholders (e.g. environmental experts). Different collective contracts as well as cooperation models will be improved, developed and in some cases tested. For more detailed information see Concept note_4!
Our action partner BoerenNatuur are pioneers of putting this approach into practice. BoerenNatuur.nl facilitates the implementation of collaborative agri-environmental schemes of the 40 private farmer collectives in the Netherlands.
Land tenure-based approaches
Land tenure-based systems, such as land use obligations in combination with reduced rent, land use rights combined with specific land stewardship obligations, are an approach specifically for long-term nature conservation objectives. Furthermore, land tenure rights define an important framework condition for all other contract-based approaches. Different types of land tenure systems (private, public, common property and hybrid property regimes) can strengthen or constrain the necessary longevity of sustainable agricultural land use practices. On the one hand, Contracts2.0 will consider different land tenure systems as institutional framework conditions, and on the other hand, develop land tenure rights systems to govern land management on the ground. For more detailed information see Concept note_3!
Our German action partners SRK and SWK are putting such approaches into practice. They manage Biodiversity off-setting (arable and grassland) where compensation measures are integrated into extensive land management.
Value chain approaches
Value chain approaches are collaborative models to valorise environmental public goods within value chains and integrate the cost for environmental services in the product price. To ensure consumer trust, companies increasingly demand greater transparency about the management and delivery of public goods on supplier farms. Some companies integrate biodiversity or climate indicators into their life cycle assessments or try to gain a competitive advantage through labelling approaches.
Our research partner LUH together with the HIPP company are pioneers in developing such approaches. They developed biodiversity indicators for assessing the performance of farmers within the value chain.