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Agriculture plays a crucial role in shaping our environment, but intensive farming practices often threaten biodiversity. To address this, governments worldwide have introduced agri-environmental schemes, which provide financial incentives to farmers who adopt practices that benefit the environment.
One such approach is result-based payments, where farmers are rewarded based on the actual environmental outcomes they achieve, such as increased biodiversity on their land.
A recent study published in Nature Energy by Sergei Schaub, Tobias Roth, and Petyo Bonev explores the effectiveness of these result-based payments in Switzerland.
Using a unique dataset spanning 20 years, the researchers examined how these payments influenced plant biodiversity on farmland. Their findings offer valuable insights into the design of agri-environmental policies and their potential to promote biodiversity.
What Are Result-Based Agri-Environmental Payments?
Result-based agri-environmental payments are a type of financial incentive where farmers receive payments based on the environmental outcomes they achieve, rather than just for adopting specific practices.
For example, in Switzerland, farmers are eligible for payments if their grassland contains at least six plant species that indicate high biodiversity. This approach contrasts with action-based payments, where farmers are paid for implementing specific practices, such as reducing fertilizer use, regardless of the actual environmental results.
The idea behind result-based payments is to encourage farmers to actively manage their land in ways that enhance biodiversity. However, there has been limited empirical evidence on whether these payments actually achieve their intended goals. This study aims to fill that gap by analyzing the impact of result-based payments on plant diversity in Swiss farmland.
The Study: Data and Methodology
The researchers used a unique dataset from the Swiss Biodiversity Monitoring Program, which contains detailed information on plant species found on randomly selected plots of farmland across Switzerland. The data spans 20 years (2001–2021) and includes information on over 400 grassland plots, each surveyed multiple times.
To assess the impact of result-based payments, the researchers focused on a policy reform introduced in 2014, which significantly increased the payments for farmers who met biodiversity targets.
They used a difference-in-discontinuities approach, a statistical method that compares plots just below and just above the eligibility threshold for payments (six plant species). This allowed them to isolate the effect of the increased payments on biodiversity.
Increased Biodiversity on Marginal Plots: The study found that plots that were just below the eligibility threshold before the reform (i.e., had five plant species) saw a significant increase in biodiversity after the reform.
On average, these plots gained 0.8 additional plant species, representing a 15% increase compared to the pre-reform period. This suggests that the higher payments provided a strong incentive for farmers to improve biodiversity on these marginal plots.
No Significant Change on Already Eligible Plots: In contrast, plots that were already eligible for payments before the reform (i.e., had six or more plant species) did not see a significant change in biodiversity.
This indicates that the increased payments primarily benefited plots that were close to meeting the eligibility criteria but needed additional effort to cross the threshold.
Differential Incentives Based on Distance to Threshold: The study also found that plots further below the threshold (e.g., those with only four plant species) did not experience the same level of improvement.
This suggests that the cost of increasing biodiversity was too high for these plots, making the payments less effective. The findings align with a microeconomic model presented in the study, which predicts that result-based payments are most effective for plots close to the eligibility threshold.
Implications for Policy Design: The study highlights the importance of thresholds in designing result-based payment schemes. By setting a single threshold (e.g., six plant species), policymakers may inadvertently create disproportionate incentives for plots close to the threshold, while leaving others with little motivation to improve.
To address this, the researchers suggest exploring multiple or continuous thresholds that reward incremental improvements in biodiversity. For example, farmers could receive higher payments for achieving higher levels of biodiversity, rather than just meeting a single target. This approach could encourage more widespread adoption of biodiversity-friendly practices and lead to greater overall environmental benefits.
While the study provides valuable insights, it also highlights some challenges in implementing result-based payments:
- Measurement Costs: Accurately measuring biodiversity is costly and time-consuming, which can limit the scalability of result-based schemes.
- Farmer Participation: Farmers may be reluctant to participate if the administrative burden is too high or if they perceive the payments as insufficient to cover the costs of improving biodiversity.
- Uncertain Outcomes: Biodiversity outcomes can be influenced by factors beyond farmers’ control, such as weather conditions, which may affect the effectiveness of result-based payments.
Conclusion
The study by Schaub, Roth, and Bonev demonstrates that result-based agri-environmental payments can effectively promote biodiversity, particularly on plots that are close to meeting eligibility criteria. However, the design of these schemes plays a critical role in their success.
By incorporating multiple thresholds and ensuring that payments are sufficient to cover farmers’ costs, policymakers can create more effective and inclusive agri-environmental programs.
As the world faces growing environmental challenges, innovative approaches like result-based payments offer a promising way to align agricultural practices with biodiversity conservation goals. This research provides a strong foundation for future studies and policy reforms aimed at enhancing the sustainability of farming systems.
Reference: Schaub, S., Roth, T., & Bonev, P. (2025). The effect of result‐based agri‐environmental payments on biodiversity: Evidence from Switzerland. American Journal of Agricultural Economics.
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