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Payingforpublicgoodsfromlandmanagement:HowmuchwillitcostandhowmightwepayFinalReportAreportfortheRSPB,theNationalTrustandTheWildlifeTrustsMattRaymentRaymentConsultingServicesLtd40GiffordTerraceRoadPlymouth,PL34JEUKTel:+447827946033Email:matt.
rayment@outlook.
comDate:28June2019ContentsExecutiveSummary41Introduction71.
1Backgroundandobjectives.
71.
2ThisReport.
72UpdatedcostestimatesofmeetingenvironmentallandmanagementprioritiesintheUK.
.
.
92.
1Introductionandmethod92.
2UpdatedUnitCostEstimates92.
3UpdatedOverallCostEstimates.
103CostsofadvicetosupportenvironmentallandmanagementintheUK113.
1ImportanceofEnvironmentalLandManagementAdvice113.
2AssessingtheUnitCostsofEnvironmentalLandManagementAdvice.
123.
3AssessingtheOverallCostsofEnvironmentalLandManagementAdvice.
153.
4ChangesinPaymentMethods–ImplicationsforAdvisoryCosts.
164Costsofsecuringpublicgoodsinvulnerablehighnaturevaluefarmingsystems184.
1TheIssue184.
2FarmIncomesandCAPSubsidies194.
3TheEffectofFarmBusinessPerformanceonProfitability224.
4Quantifyingthesupportneededtosecurepublicgoodsfrommarginalfarmingsystems.
244.
5EstimatingFinancialSupportNeedsforLandManagementPracticesthatdeliverPublicGoods.
284.
6Conclusions305Costsofsecuringlongtermenvironmentalbenefits.
325.
1TheIssue325.
2Existingarrangementsinagri-environmentandwoodlandgrantschemes335.
3Potentialmechanismstosecurelongtermbenefits345.
4Assessingthecostsofsecuringlongtermenvironmentalbenefits376Overallimplicationsforthecostsofmeetingenvironmentallandmanagementpriorities.
437PotentialalternativeELMpaymentmethodologies.
457.
1TheIssue457.
2CurrentthinkingonELMpaymentmethodologiesinEnglandandWales457.
3DefiningatypologyforalternativeELMpaymentmethodologies467.
4Optionsforthebasisforsettingpayments–theELMlogicchain.
487.
5Methodsforsettingpaymentrates.
527.
6Theprosandconsofalternativepaymentmethodologies527.
7Casestudiesofthepotentialforalternativepaymentmethodologies.
607.
8Conclusions70References72Annex1:ManagementandRestorationofBlanketBog–FurtherDetailsofCostsandBenefits76Annex2:Managementofarablelandforfarmlandbirdsandpollinators–Furtherdetailsofcostsandbenefits.
80PayingforPublicGoodsfromLandManagement4ExecutiveSummaryThisreportAnearlier(2017)studyestimatedthecostsofmeetingenvironmentallandmanagementprioritiesintheUKatbetween2.
2billionand2.
3billionperyear.
TheseestimatesweremadebybuildinganMSExcelspreadsheetmodel,whichdefinedthelandmanagementactionsrequiredtomeetarangeofdefinedenvironmentalpriorities(includingforbiodiversity/ecosystems,soil,water,landscapeandthehistoricenvironment),andestimatedthecostsofdeliveringtheseactionsusingappropriateunitcostestimates.
Thisreportpresentstheresultsofafollow-upstudyin2019whichbuiltonandfurtherdevelopedthemodeltoreflectrecentchangesincostdriversandstrengthenedtheanalysisinkeyareas(notablyadvisoryservices,thecostsofsecuringlongtermchangesinlandmanagement,andthecostsofmaintaininglandmanagementonmarginalhighnaturevaluefarms).
Thestudyalsoexaminedthefinancialimplicationsofmovingfromthecurrentcostsandincomeforgoneapproachtocalculatinglandmanagementpayments,toconsideralternativeapproachessuchaspaymentsbasedonnaturalcapitalvalues.
UpdatedcostestimatesofmeetingenvironmentallandmanagementprioritiesintheUKTheenvironmentallandmanagementcostingsmodelenablesunitcostestimatesofthecostsandincomeforgonefromenvironmentallandmanagementactionstobeupdatedtotakeaccountofchangesincostdrivers.
Themodelwasupdatedtoincludelatestavailabledataonoutputpricesandinputcosts,includingcropandlivestockpricesandyields,andthecostsoflabour,machinery,seeds,fertilisersandsprays.
Increasesinoutputpricesandinputcostssince2017increasethepreviousestimatesoftheoverallcostsofmeetingenvironmentallandmanagementprioritiesintheUKto2,538millionannually.
CostsofadvicetosupportenvironmentallandmanagementintheUKTheprovisionofadviceplaysacrucialroleinsupportingtheeffectivedeliveryofenvironmentallandmanagementschemes.
Thecostsofprovisionofadvicehavebeenestimatedthroughasimplemodellingapproach,estimatingthecostofeachadvisorandthenumberandareaoflandmanagementbusinessessupported.
Thecostofadviceisestimatedtoaverage4.
35perhectareperyearacrosstheUK,butvarieswidelyindifferentgeographiesandfarmingsystems,particularlyasaresultofdifferencesinaveragefarmsize.
Applyingtheaveragecostperhectaretotheareaoflandrequiringenvironmentallandmanagementactiongivesatotalestimateof62millionperyearofthecostofprovidingadvicetosupportenvironmentallandmanagementactionacrosstheUK.
CostsofsecuringpublicgoodsinvulnerablehighnaturevaluefarmingsystemsThe2017costestimatesfocusedonthecostsandincomeforgoneofmeetingdefinedlandmanagementactions.
Itwasrecognisedthatfarmingsystemsinsomeareas(particularlytheuplands)areatriskofcessationorchangeinlanduseifdirectpaymentsareremoved,andthatthecontinueddeliveryofenvironmentalpublicgoodsmayinvolveextracostsinsupportingthesystemsrequiredtodeliverthem.
ThesesystemiccostswereassessedbyexaminingdataonfarmbusinessincomefromtheFarmBusinessSurvey,andestimatingtheadditionalsupportrequiredtosupportvulnerablefarmingsystemsdeliveringenvironmentalpublicgoods.
Itwasestimatedthatadditionalsupportcouldberequiredover1.
7millionhectaresoflandatacostof247millionperyearacrosstheUK.
Thesecostswouldbereducediffarmsenhancedbusinessmanagementpractices,especiallythroughlowerstockingandreducinginputcosts.
Provisionoffarmbusinessadvicecouldhelptoachievethis,atanestimatedcostof5.
4millionannuallyacrosstheUK.
Financialperformanceisalsolinkedtofarmsize,withhigherperformingfarmstendingtobemuchlargerthanthelowestperforming.
Amalgamationofunprofitablefarmingenterprisescouldalsothereforeenhanceprofitabilityandreducethecostsofdeliveringenvironmentalpriorities.
CostsofsecuringlongtermenvironmentalbenefitsSomeenvironmentallandmanagementprioritiesrequirelongtermchangesinlanduseandmanagement,suchasthroughthecreationandrestorationofhabitatsandtheplantingofhedgerows.
Typicalfive-yearagri-environmentagreementspresentpotentialproblemsinthisrespect,providingPayingforPublicGoodsfromLandManagement5limitedcertaintytotaxpayersaboutthesecurityofpublicbenefitsinthelongerterm,particularlysinceinvestmentsincreatingorrestoringhabitatsmaytakemanyyearstodelivertheirpotentialbenefits.
Securinglongtermbenefitscouldbeachievedbyverylongterm(e.
g.
100year)contracts,incentivesforlongtermmanagement,results-basedpayments,and/orlegalmechanismssuchascovenants.
Thesemeasuresarelikelytorequireincreasedincentivestoobtainlongtermcommitmentsfromlandmanagers.
Thecostsofthesemeasuresdependonthemechanismandlevelofincentiveemployed.
Asimpleillustrativemodellingexercisesuggestedthatthenetpresentvalueofcostsover100yearsofexpandingandrestoringpriorityhabitatsandplantinghedgerowscouldincreasebyupto42%tosecuretheselong-termcommitments.
OverallimplicationsforthecostsofmeetingenvironmentallandmanagementprioritiesThecombinedeffectoftheadditionalcostelementsistoincreasetheoverallestimatedannualcostofmeetingenvironmentallandmanagementprioritiesintheUKto2.
9billionperannumoverthenext10years(TableES1).
TableES1:EstimatedoverallcostsofmeetingenvironmentallandmanagementprioritiesintheUK(mperannumover10years)LandmanagementcostsEnglandNorthernIrelandScotlandWalesUKPriorityhabitats518423811201,061Boundaryfeatures261507749437Historicenvironment504398102Arableland48618475556Grassland187547540356Organic1703526Totallandmanagement1,5201686222272,538AdditionalelementsEnvironmentallandmanagementadvice34321462Securingvulnerablehighnaturevaluefarming112158040247BusinessadvicetovulnerableHNVfarms30115Securinglongtermchangesinlanduse614112Sub-total:Additionalcostelements1541910746326Total1,6741887292732,864Proportionoftotal60%7%25%9%100%ThisfigurerepresentsanupdatedoverallestimateofthecostsofmeetingenvironmentallandmanagementprioritiesintheUK,asdefinedinthe2017report.
Thelargestincreasesarisefromtheinclusionofestimatesofthecostsofmaintainingvulnerablehighnaturefarmingsystems,whichwerenotincludedinthepreviousestimates.
Asbefore,somecareisneededininterpretingthefigurespresented.
Theexercisehashighlightedthatthereisnosinglecorrectanswertothequestion,andthatthecostestimatesaresensitivetotheassumptionsandinputsusedinthemodel.
Onemajorvariablerelatestotheoveralllevelofambitionappliedinestimatinglandmanagementneeds,andthemodelwasthereforedesignedtoallowthepolicychoicesandassumptionsregardingthescaleofneedtobevaried.
Whiletheworkinvolvedadetailedandwide-rangingassessment,andextensiveconsultationswithexpertsandstakeholders,thepreviousreportnotedthatthemodelwouldbenefitfromfurtherdevelopmentandrefinementinseveralareas.
Theseincludethespecificationofneedsforwaterquality,soilmanagementandthehistoricenvironment.
AswellasprovidingabroadassessmentofthefinancialneedsforachievingenvironmentallandmanagementprioritiesintheUK,themodelcanbeusedtomakealternativeestimatesoffinancialPayingforPublicGoodsfromLandManagement6needs,basedondifferentinputs,assumptions,andpolicyandeconomicscenarios.
Itishopedthattheassessmentandthemodelcanbefurtherrefinedanddeveloped,basedonpeerreview,expertinputandfurthertargetedresearch,andthatthemodelwillbehelpfulininformingfurtherdiscussionregardingfinancialneedsforenvironmentallandmanagementafterBrexit.
PotentialalternativeELMpaymentmethodologiesTheUK'sdeparturefromtheEUprovidesamajornewopportunitytochangethesystemoflandmanagementpaymentsineachofthefourcountries,focusingpaymentsonthedeliveryofpublicgoodsandpotentiallychangingthewaythatthesepaymentsarecalculated.
TheadministrationsinEnglandandWaleshavebothsignalledanintentiontochangethecurrentmethodologyforcalculatingenvironmentallandmanagementpayments,whichofferspaymentsforprescribedactivitiesbasedonestimatesofcostsincurredandincomeforgone.
Thecurrentsystemiscriticisedasbeinginflexibleandbureaucratic,anddoingtoolittletoincentivisedeliveryofenvironmentaloutcomes.
AnELMpaymentsmethodologyhasmanydimensions,buttwoimportantdistinguishingfeaturesbetweenthemainoptionsarethequestionofwhatispaidfor(activitiesoroutcomes)andhowthepaymentiscalculated(throughestimatesofcostsandincomeforgone,thevalueofbenefits,orindividuallydeterminedpaymentrates,whichmaybesetbynegotiationorbiddingprocessessuchasreverseauctions).
Basingpaymentsonlandmanagementactivitiesisawell-understoodapproachthatcanworkwellwheredefinedactionsareknowntobeeffectiveandthereisaclearpathwaybetweenactionsandresults.
Itmaybelesseffectivewherethereisaneedforlocallytargetedactionsbasedonlocalconditionsandknowledge.
Amajorlimitationisthatthisapproachrequireslandmanagersonlytofollowtheprescribedactivitiesanddoesnotincentivisethemtodeliverhigherlevelsofenvironmentaloutcomes.
Advicewhichengagesandraisesawarenesslandmanagerscanplayaroleinhelpingtoachievethis.
Outcome-basedpaymentsoffergreaterincentivesforlandmanagerstoincreaseenvironmentaloutcomesovertime,providedthatsuitableoutcomeindicatorsandrelatedcontrolandverificationsystemscanbedevisedandeffectivelyimplemented.
Theymayrequiregreaterinvestmentsinadvice,particularlyintheshortterm,tobeeffective.
Calculatingpaymentsbasedoncostsandincomeforgonehelpstolimitpaymentratesandcontrolthecostsofschemesbutmayofferlimitedprofittotheaveragelandmanagerand–asappliedatpresent-maybeinsufficienttoachievehighratesofuptake.
Nevertheless,thereispotentialtoapplytheapproachinaflexibleway,varyingassumptionsaboutcostsandbaselinepractices,andtoenhanceuptakebyvaryingthecalculationstoreflectthecoststructuresandpracticesoftargetfarms.
Variationsonthecostsandincomeforgoneapproachcanbeconsidered,offeringgeographicalorperformancerelatedsupplementsorrewardingcommitmentstodeliverlong-termchangesinpractice.
Costsandincomeforgonemaybeusedasthebasisforcalculatingoutcome-basedpayments,bymakingassumptionsabouttheactivitiesrequiredtodeliverthetargetoutcomes,settingpaymentratesaccordingly,andthengivinglandmanagerstheflexibilitytovarypracticesastheywish.
ThisapproachhasbeenappliedintheEnglishresults-basedpaymentpilots–earlyresultsappeartobepromising,thoughscalabilitymaypresentasignificantchallenge.
Calculatingpaymentsbasedonestimatesofthevalueofenvironmentalbenefitshasthepotentialtoincentiviseactionsthatdeliverthegreatestbenefits.
However,majorgapsinvaluationevidencemeanthatitisnotfeasibletoapplythisapproachtoallecosystemsandtheirservices,asillustratedintwocasestudies,whichexaminerestorationandmanagementofblanketbog,andmanagementofarablelandforbiodiversityandpollinators.
Forreasonsofvalueformoney,wherevaluationevidenceisavailable,itislikelytoinformmethodsofcalculatingpaymentratesratherthanbeusedtocalculatethemdirectly.
Ifavalues-basedapproachisapplied,itislikelytorelyonacombinationofmonetaryandnon-monetaryevidenceofELMbenefitstoguidesettingofpaymentrates.
Combinationsoftheseapproachescanalsobeconsidered.
Forexample,ELMpaymentsmightsupplementpaymentsforactivitieswithbonusestorewardthedeliveryofenvironmentaloutcomes.
Paymentscouldbebasedinitiallyonestimatesofcostsandincomeforgonebutvariedtoreflectdifferencesinthevalueofbenefitsachievedbylocationand/orperformance.
PayingforPublicGoodsfromLandManagement71Introduction1.
1BackgroundandobjectivesIn2017theRSPB,theNationalTrustandTheWildlifeTrustscommissionedMattRaymenttoprovideanassessmentofthecostsofmeetingenvironmentallandmanagementprioritiesintheUK.
TheworkinvolvedbuildinganMSExcelspreadsheetmodel,whichestimatedthelandmanagementactionsrequiredtomeetarangeofdefinedenvironmentalpriorities(includingforbiodiversity/ecosystems,soil,water,landscapeandthehistoricenvironment),andestimatingthecostsofdeliveringtheseactionsusingappropriateunitcostestimates.
Twocostestimatesweremade–thefirst(termed"currentcosts")appliedcurrentagri-environmentandwoodlandgrantpaymentratesinthefourcountries,whilethesecond(termed"adjustedcosts")re-estimatedthesecostsbasedondriversofcostsandincomeforgone(farmoutputpricesandinputcosts).
TheoverallcostofmeetingUKenvironmentallandmanagementprioritieswasestimatedat2.
2bn(basedon"currentcosts")to2.
3bn(basedon"adjustedcosts")(Rayment,2017).
Afollow-upstudyin2019involvedfurtherresearchandmodellingworkdesignedtohelptoimproveourunderstandingabouthowandhowmuchlandmanagersshouldbepaidbytheGovernmenttomeetenvironmentallandmanagementprioritiesacrosstheUK.
Theworkbuiltonandfurtherdevelopedthemodeldevelopedin2017toassessthefinancialcostsoflandmanagementintheUKafterBrexit,aswellasstrengtheningtheanalysisinkeyareas(notablyadvisoryservices,thecostsofsecuringlongtermchangesinlandmanagement,andthecostsofmaintaininglandmanagementonmarginalhighnaturevaluefarms).
Theanalysisaimedtoprovideafullerassessmentofthecostsofmeetingenvironmentallandmanagementpriorities,addressinglimitationsinthecurrentsystem(suchasunder-provisionofadviceandinsufficientincentivesforlongtermchangesinlandmanagement),aswellastheneedtoaddressfuturechallengesfortheprovisionofenvironmentalpublicgoodsaftertheremovalofPillar1subsidies.
Thestudyalsoexaminedthefinancialimplicationsofmovingfromthecurrentcostsandincomeforgoneapproachtocalculatinglandmanagementpayments,totestalternativeapproachessuchaspaymentsbasedonnaturalcapitalvalues.
Thedifferentelementsoftheworkweredevelopedthroughaseriesofworkingpapers,thefindingsofwhicharecompiledinthisfinalreport.
1.
2ThisReportThisFinalReportpresentsthefindingsofthestudy.
Itisstructuredasfollows:Section2presentsupdatedcostestimatesofmeetingenvironmentallandmanagementprioritiesintheUK,developedbyupdatingthecostingsmodeltotakeaccountofchangesincostdriverssince2017;Section3presentsestimatesofthecostsofprovidingadvicetosupportthedeliveryofenvironmentallandmanagementprioritiesacrosstheUK;Section4presentsestimatesoftheadditionalcostsofsecuringpublicgoodsinhighnaturevaluefarmingsystems,whichmaybeatriskofcessationoffarmingactivityorchangesinlanduseafterBrexit;Section5presentsestimatesoftheadditionalcostsofsecuringlongtermchangesinlanduseandlandmanagement,recognisingthatinvestmentincreationandrestorationofhabitatsandlandscapefeatureswouldbenefitfromlongtermincentivestructures;Section6summarisestheoverallimplicationsoftheanalysesinSections2-5forthecostsofmeetingenvironmentallandmanagementintheUK,basedontheupdatedestimatesofcostsandincomeforgonepresentedinthemodel;andSection7considersthepotentialroleofalternativepaymentmechanismsforenvironmentallandmanagementintheUK,lookingbeyondthecurrentapproach(whichpaysforlandmanagementactivities,calculatingpaymentsbasedoncostsandincomeforgone).
ItexaminesthepotentialcaseforpayingforenvironmentaloutcomesratherPayingforPublicGoodsfromLandManagement8thanlandmanagementactivities,andforvaryingthemethodusedforcalculatingpayments(forexample,toreflectthevalueofbenefitsratherthancostsandincomeforgone).
Eachsectionprovidesabriefintroductiontotheissue,setsoutthemethodologyusedintheanalysis,andpresentsthefindingsandconclusions.
Annex1andAnnex2presentfurtherdetailsofthecostsandbenefitsofenvironmentallandmanagementwithrespecttomaintenanceandrestorationofblanketbog,andmanagementofarablelandforpollinatorsandfarmlandbirds,thetwocasestudiespresentedinSection7.
PayingforPublicGoodsfromLandManagement92UpdatedcostestimatesofmeetingenvironmentallandmanagementprioritiesintheUK2.
1IntroductionandmethodThe2017estimatesofenvironmentallandmanagementcostswerebasedonestimatesoftheunitcostsoflandmanagementactionsfromthatyear.
Themodelwasdesignedtoenabletheunitcostsappliedtobeupdatedtoreflectfuturechangesinfarmoutputpricesandinputcosts.
Furtherdetailsareprovidedinthe2017reportandinthemodelitself.
Inthecurrentstudy,themodelhasbeenupdatedtoreflectlatestavailabledataonoutputpricesandinputcosts,includingcropandlivestockpricesandyields,andthecostsoflabour,machinery,seeds,fertilisersandsprays.
Thedataweretakenfromthelatest(2019)editionoftheJohnNixFarmManagementPocketbook(Redman,2018).
Basedontheseinputandoutputdata,themodelcalculatesupdatedestimatesofthe"adjusted"unitcostsoflandmanagementactionsandcombinesthesewiththe(unchanged)estimatesoftheextentofdifferentlandmanagementpracticesrequired,toestimatetheoverallcostsoflandmanagementrequirements.
2.
2UpdatedUnitCostEstimatesThepricesofmostagriculturalcropsandlivestockhaveincreasedsince2017.
Mostinputcostshavealsoincreased(Table2.
1).
Table2.
1:Changesinselectedoutputpricesandoutputcosts,2017-2019OutputsNix(2019)Nix(2017)%changeFeedwinterwheat(/te)150130+15%Winteroilseedrape(/te)335300+12%Springsucklercalf(/kg,liveweight)1.
951.
80+8%Dairyfinishing(/kg,liveweight)1.
801.
77+2%Uplandspringlamb(/kg,liveweight)2.
001.
75+14%Labourcosts(/hr)12.
8010.
13+26%Tractorcosts(185hp,/hr)32.
3430.
49+6%Fertilisercosts(N,/kg)0.
6520.
49+33%Asaresult,thecostsincurredandincomeforgonefromundertakingmostenvironmentallandmanagementpracticeshasincreasedsince2017.
Thisisreflectedingeneralincreasesinthe"adjusted"unitcostsofarangeoflandmanagementpracticesinthecostingsmodel.
Thisinturnisreflectedinincreasesinthe"adjusted"costsofaddressingenvironmentallandmanagementprioritiesintheUK.
Thereareestimatedincreasesinthe"adjusted"costsofallmanagementoptionsforarablefarmland,boundaryandhistoricenvironmentfeatures,andrestorationandcreationofpriorityhabitats.
Forthemanagementofpriorityhabitatsandgrassland,thecostshaveincreasedforsomehabitatsandgrasslandmanagementoptionsanddecreasedforothers.
Thisreflectstheincreasesrecordedinbothlivestockpricesandinputcosts.
Asaresult,grossmarginshavedeclinedforsomelivestockandincreasedforothers(withmixedeffectsonincomeforgone),whilecostsoflabourandotherinputshaveincreased.
PayingforPublicGoodsfromLandManagement102.
3UpdatedOverallCostEstimatesTheoverallresultistoincreasetheUK"adjusted"costestimatefrom2,307millionto2,538million.
Thiscomparestothe(slightlyupdated)estimateof"current"costs,basedoncurrentagri-environmentandwoodlandgrantpaymentrates(mostofwhichweresetseveralyearsago)of2,155million.
Table2.
2:Summaryofoverallannualcostsofmeetingenvironmentallandmanagementpriorities,basedon"adjusted"costs(m)EnglandNorthernIrelandScotlandWalesUKPriorityhabitats518423811201,061Boundaryfeatures261507749437Historicenvironment504398102Arableland48618475556Grassland187547540356Organic1703526Total1,5201686222272,538Asmightbeexpected,the"adjusted"estimatesofenvironmentallandmanagementcostsdivergefromthe"current"costestimatesovertime,asthepricesoffarmoutputsandinputsdivergefromthebaselevelswhichwereusedtoestimatecostsandincomeforgonewhenthepaymentrateswereset.
Table2.
3:Summaryofoverallannualcostsofmeetingenvironmentallandmanagementpriorities,basedon"current"costs(m)EnglandNorthernIrelandScotlandWalesUKPriorityhabitats47132252120876Boundaryfeatures255466535402Historicenvironment41340792Arableland40314405461Grassland164475632298Organic170.
53526Total1,3521434562052,155PayingforPublicGoodsfromLandManagement113CostsofadvicetosupportenvironmentallandmanagementintheUK3.
1ImportanceofEnvironmentalLandManagementAdviceThe2017estimatesofthecostsofmeetingenvironmentallandmanagementprioritiesfocusedonthecostsoflandmanagementactions.
Thereportrecognisedthattheeffectivenessoflandmanagementactionsisenhancedwheretheyarebackedbyprovisionofgoodqualityadvicetolandmanagers,andthatanincreaseintheprovisionofadviceisneededforenvironmentallandmanagementprioritiestobemet.
However,thecostsofprovidingadvicewerenotincludedintheanalysis.
Theimportanceofadviceinenhancingtheeffectivenessofenvironmentallandmanagementschemes,andthedeliveryofenvironmentaloutcomes,isrecognisedbyseveralstudiesandevaluations(Box3.
1).
Box1:RoleofadviceinenhancingoutcomesofenvironmentalschemesVariousstudiesandevaluationshavefoundthatprovisionofgoodqualityandtargetedadvicehelpstoenhancetheoutcomesofenvironmentallandmanagementschemes.
Forexample:Boatmanetal(2014)foundthattheprovisionofadvicewasvaluedbyparticipantsintheHigherLevelStewardship(HLS)schemeandmadeastrongcontributiontodeliveryofenvironmentaloutcomes.
Jonesetal(2015)foundthattwo-thirdsoftheEnvironmentalStewardshipagreementholderssurveyedsaidthattheadviceandsupportreceivedhadmadethemmoreawareofmanagementrequirements.
Theauthorsconcludedthattheoverallimpactoftheadviceandsupportisstrong,thatagreementholdersreceiveconsiderablebenefitfromit,andasaresultaremoreawareofwhattheintendedoutcomesoftheagreementshouldbe.
NaturalEngland(2014),inevaluatingthedeliveryofcatchmentsensitivefarming,foundthatsuccessfuldeliveryofenvironmentaloutcomeswasunderpinnedbyeffectivefarmerengagementanddeliveryofadvice,achievedthroughacombinationof:directdeliverybyprojectstaff;workcommissionedthroughcontractors;andpartnershipswithindustrybodiesandotherorganisations.
Boatmanetal(2013)foundthatthebestoutcomesfromenvironmentallandmanagementschemesresultfromwell-targetedaction,andthattheprovisionofhighqualityon-farmadviceisessentialtoachievethis.
Theygavenumerousexamplesofinstancesinwhichenhancedprovisionofadvicewouldincreasetheuptakeandeffectivenessofagri-environmentoptions.
Boatmanetal(2008)foundthattheprovisionoftargetedadvicewouldenhancetheeffectivenessoftheEntryLevelStewardshipschemeforbiodiversity(includingarableplantsandthebrownhairstreakbutterfly)andwaterquality.
Lobleyetal(2013)foundthateducationalandadvisoryprogrammescanplayapositiveroleinincreasingfarmerengagementinAESandchangingattitudestoenvironmentalmanagement.
Bespokegrouptrainingeventswerefoundtohelptofillknowledgegaps,equipfarmerswitharangeofmanagementskills,improveconfidenceandengenderamoreprofessionalisedapproachtoagri-environmentalmanagement.
Themajorityofparticipantsindicatedthatthishadpositivelyinfluencedenvironmentalmanagementontheirfarm.
ThemostrecentavailabledataforEnglandindicatethatexpenditureonguidanceandadvicetosupportthedeliveryoftheagri-environmentprogrammeamountedto2.
6millionin2008/09,lessthan1%ofthevalueofagreements,whichamountedtomorethan400millionannually.
Sincethen,resourceshavebeenfurtherconstrainedbyreductionsinpublicPayingforPublicGoodsfromLandManagement12expenditure,withreportsthatfarmersareoftenunabletoaccesstheadvicetheyneedtosupportagri-environmentdelivery1.
ThisledthereportoftheEnvironmentalAuditCommitteeInquiryintotheFutureoftheNaturalEnvironmentaftertheEUReferendum2tostatethat"itiswidelyrecognisedthatthepotentialbenefitsofagri-environmentschemeshavebeenreducedbyminimaltrainingoffarmersandadviceonschemeimplementation".
Scotland'sFarmAdvisoryServiceispartoftheScottishRuralDevelopmentProgramme(SRDP)whichisco-fundedbytheEUandScottishGovernment3.
Ithasabudgetof20millionoverthefiveyearstoDecember2020,suggestingannualaverageexpenditureof4million.
Thiscoversawiderangeoftopicsincludingcrosscompliance,veterinarymedicines,businessadviceaswellasenvironmentaladvice.
Thereisaspecialfocusonoutreachtofarmersandcroftersinremoteareas,suchasislands.
Muchoftheadviceisprovidedonaonetomanybasis.
Onetooneadviceisprovidedthroughtheproductionoffarmplans,includingbusinessandenvironmentalplans.
Agri-EnvironmentandClimatePlansareestimatedtocostanaverageof2-3,000perfarm,withamaximumof800perplanpaidbythegovernment.
ThereisnofacilitationfundinScotland,thoughsomeadvisoryfundingisprovidedfromavarietyofsourcesincludingtheKnowledgeTransferandInnovationFund,PeatlandActionFund,WorkingforWadersproject,andScottishForestry.
NopreviousestimatescouldbefoundofthescaleofprovisionofadviceneededtomeetenvironmentallandmanagementprioritiesintheUK.
3.
2AssessingtheUnitCostsofEnvironmentalLandManagementAdviceThecostsofprovidingadvicetosupportdeliveryofenvironmentallandmanagementprioritiesacrosstheUKhasbeenestimatedbydevelopingasimpleadvisorymodulewithintheenvironmentallandmanagementcostingsmodel.
Themodelassumesthatadviceisprovidedtogroupsoffarmersatalocallevel,workingatalandscapescaletoaddresscommonenvironmentallandmanagementpriorities.
Itisassumedthatadviceisdeliveredthroughacombinationofgroupworkshopsandonetooneadvice.
Groupworkshopsallowbasicadviceandinformationtobeprovidedcosteffectivelytogroupsoflandmanagers,encouragingthemtoworktogetherandshareknowledgeandexperience.
Thisissupplementedbyonetooneadvicetargetedtotheneedsandprioritiesofindividuallandmanagers.
ThisissimilartotheFarmerClustersapproach4championedbytheGameandWildlifeConservationTrust(GWCT),andothergroupapproachesworkingwithlandmanagersatlandscapescale,assupportedbyNaturalEnglandthroughtheCountrysideStewardshipFacilitationFund.
ByOctober2017,thishadfundedsixty-onegroupswithmorethan1400farmer/landmanagermembersworkingtoimprovethenaturalenvironmentatalandscapescale5.
Oneofthefeaturesofthisgroupapproachtoenvironmentallandmanagementadviceisthatitenablesfundingtobepooledfromavarietyofsources.
InEngland,aswellaspublicsupportthroughtheCountrysideStewardshipFacilitationFund,providedonacompetitivebasis,groupsoflandmanagershavebenefitedfromgrantsfromcharitabletrustsandotherorganisations,andcontributionsfromparticipatingfarmers.
Forexample,participantsintheMartinDownFarmerClusterhavecontributed1perhectareperyear,raising7,000perannumtowardstheemploymentofafull-timeadviser.
Thebasicapproachtomodellingadvisorycostsinvolves:1https://www.
theguardian.
com/environment/2019/jan/29/agency-protecting-english-environment-reaches-crisis-point2https://publications.
parliament.
uk/pa/cm201617/cmselect/cmenvaud/599/59907.
htm3https://www.
ruralpayments.
org/publicsite/futures/topics/all-schemes/advisory-service/4https://www.
farmerclusters.
com/5https://assets.
publishing.
service.
gov.
uk/government/uploads/system/uploads/attachment_data/file/656911/csff-case-studies.
pdfPayingforPublicGoodsfromLandManagement13Estimatingthecostofemployingafull-timeadvisor,takingaccountofsalary,otherstaffingcostsandoverheads;Estimatingthenumberandareaoffarmssupportedbyeachadvisor,takingaccountofthecapacityandworkloadoftheadvisorandthesupportneedsofeachgroup(assumedtobemetthroughacombinationofgroupworkshopsandone-to-oneadvice);andEstimatingthecostofadviceperhectareperyear,bydividingtheannualcostsofeachadvisorbythenumberofhectarescovered.
Themodellingapproachmakesclearthatthecostofadviceissensitivetoanumberofvariables.
Aswellassalaryandoverheadcosts,theseinclude:Theintensityofadvisoryprovision,andvolumeofadviceprovidedtoeachgroupoflandmanagers;Theutilisationrateoftheadvisor–i.
e.
thenumberofdaysperyearspentactivelyprovidingadvice(ratherthanundertakingadministration,recruitment,informationgathering,trainingandotheractivities).
Thisisalsoaffectedbytheapplicationwindowforagri-environmentschemes,whichconcentratesactivityatcertaintimesoftheyear;andThelocalcontextandstructureofthefarmingsystem.
Theperhectareunitcostsofadvisorysupportarereducedinareaswheretheaveragefarmsizeislarge,ascostsaredividedoveralargernumberofhectares.
ThemodellingworkwasinformedbyinterviewswithfarmadvicespecialistsinRSPB,NaturalEngland,theNationalTrust,TheWildlifeTrusts,theYorkshireDalesNationalParkAuthorityandFWAG,togatherdatafordifferentadvisorymodelsindifferentcontexts.
EstimatedaverageperhectareadvisorycostsaregiveninTable3.
1.
Thecurrentestimateofadvisorycostsis4.
35perhectareperyear,basedontheaverageUKfarmsizeof81hectaresin2017(Defra,2018).
PayingforPublicGoodsfromLandManagement14Table3.
1:Estimatedunitcostsofenvironmentallandmanagementadvice–averageacrossUKAdvisorcostsAdvisorsalary30,000perannumxcostmultiplier1.
5toaccountforotherstaffcostsandoverheads=costofadvisor(fullcostrecovery)45,000perannumNumberofworkingdaysperyear225%oftimespentprovidingpracticaladvice50%excludingtimespentonadmin,recruitmentetcandtakingaccountofapplicationwindowNumberofdaysadvisoryworkperyear112.
5Costofadviceperday400FarmergroupNumberoffarmsingroup20Averagesizeperfarm81UKaveragefarmsizeAveragenumberofhectarespergroup1,620Adviceprovidedpergroupper5-yearagreementperiodNumberofgroupworkshops4Numberofdays1:1adviceperfarm4Timeperworkshop(prep+delivery)2DaysAdvisorytimepergroupover5-yearagreementWorkshops8Days1:1advice80DaysTotal88DaysNumberofgroupsperfulltimeadvisor6.
4OverallcostsofadviceTotalcostofadviceprovidedpergroup35,200daysxdayrateAnnualcostofadviceprovidedpergroup7,020averageperannumfor5yearsAnnualcostofadviceprovided4.
35perhectareperyearPayingforPublicGoodsfromLandManagement15Thisaveragevarieswidelybetweendifferentfarmingsystemsindifferentpartsofthecountry.
Forexample,usingthesamemodel,theRSPBestimatesaverageperhectarecostsfordeliveryofadvicetoarablefarmersintheFens,whereaveragefarmsizeismorethan200hectares,atlessthan2/ha/year.
Table3.
2illustrateshowperhectarecostsofthismodelarelikelytovaryfordifferentfarmingsystemswithdifferentfarmstructuresacrosstheUK.
Thefiguresassumethesameadvisoryinputsperfarmandpergroupandillustratetheeconomiesofscaleofprovidingadvicetolargerfarms.
Theassumptionthatthesameadvisoryinputsperfarmarerequiredirrespectiveoffarmsizeisperhapsnotunrealistic,giventhefixedcostelementinprovidingadvice,andthefactthatmanylargefarmsareoftenmorespecialisedwhilesmallfarmsareoftenmorediverse(andbiodiverse).
Widevariationsinfarmsizecanhaveadramaticinfluenceonunitcosts,whichareestimatedtorangefromlessthan1perhectareperyearforLFAcattleandsheepfarmsinScotlandto35perhectareperyearforcroftingontheUists.
Table3.
2:Illustrativeestimatesofperhectareadvisorycostsfordifferentfarmtypesandregions,duetoscaleeffectsFarmtypeandregionAveragefarmsize(ha)Costperhectareperyear()Crofting,Uists1035.
20Averagefarm,NorthernIreland418.
59Averagefarm,Wales487.
33Uplandlivestockfarm,Pennines655.
42Mixedfarm,SouthDevon705.
03AverageUKFarm814.
35Arablefarm,FensandHampshire2001.
76LFACattleandSheep,Scotland5280.
67ThefiguresinTable3.
2arelikelytooversimplifythecostsofprovidingadvicetodifferenttypesoffarms,sincetheyfocusonvariationsinfarmsizeonlyanddonottakeaccountofotherfactorssuchasthecostsofworkingwithfarmsinremoteruralareas.
ThismayincreasecostsinsomeareassuchastheScottishuplands.
3.
3AssessingtheOverallCostsofEnvironmentalLandManagementAdviceTheoverallcostsofprovidingadvicetosupportthedeliveryofenvironmentallandmanagementactionatUKlevelcanbeestimatedbymultiplyingtheperhectareunitcostsbytheestimatednumberofhectaresoverwhichadviceisprovided.
Ifitisassumedthatalltheenvironmentallandmanagementactivityidentifiedinthenationalcostingsmodelissupportedbyadvice,theareaoflandintheUKrequiringadvisorysupportamountsto14.
2millionhectares(Table3.
3).
PayingforPublicGoodsfromLandManagement16Table3.
3:EstimatedAreaofLandRequiringAdvisorySupport(hectares)andCosts(m)EnglandNorthernIrelandScotlandWalesUKPriorityhabitats1,832,693227,0203,154,527463,2335,677,473Historicenvironment289,74739,235349,96882,102761,053Arableland4,144,767102,585468,30663,3094,778,967Grassland1,195,682384,314675,257208,4962,463,749Organic296,5178,298121,62081,482507,916Totalarea(ha)7,759,405761,4524,769,679898,62114,189,158Totalcost(m/year)34321462Basedontheestimateofadvisorycostsof4.
35perhectareperyear,thisgivesanestimatedtotalcostof62millionannuallyacrosstheUK.
Thisisanestimateoftheoverallcostsoftheadviceneededtosupportenvironmentallandmanagementactivity.
Itshouldbenotedthatthiscostcouldbemetthroughavarietyofsources,includingpublicfundsandcontributionsfromlandmanagers,oracombinationofthese.
3.
4ChangesinPaymentMethods–ImplicationsforAdvisoryCostsTheabovecostestimatesarebasedonassessmentoftheadviceneededtosupportthecurrentsystemofenvironmentallandmanagementschemesintheUK,inwhichlandmanagersarepaidtoimplementprescribedactivitiesandarerequiredtofollowspecifiedrules.
Whileadvicehasbeenshowntobeimportantinthecurrentagri-environmentpaymentsystem,itsimportancecouldincreasefurtherifalternativepaymentmethodologiesforenvironmentallandmanagement–suchasresults-basedpayments-weretobeadoptedintheUK.
Underaresults-basedsystem,thebasisforpaymentswouldswitchfromprescribedactivitiestoenvironmentaloutcomes,givinglandmanagersmuchmoreflexibilityinthepracticestheyapplyinpursuitofthetargetedresults(seeSection7).
Itislikelythatadvisoryneedsandcostswillincreaseundersuchasystem,atleastintheearlyyears.
EUexperienceandguidanceonresults-basedpaymentsforbiodiversityprovidesomeinsightsintotheroleofadvice(Box3.
2).
Provisionofon-farmadviceandtrainingareseentohaveplayedanessentialroleintheresults-basedagri-environmentpaymentpilotinEngland(LePage,2018).
PayingforPublicGoodsfromLandManagement17Box3.
2:RoleofAdviceinSupportingResults-basedPaymentsforBiodiversityAEuropeanGuidanceHandbookonresults-basedpaymentschemesforbiodiversity(Keenleysideetal,2014)identifiedprovisionofhighlevelsoffacilitation,adviceandsupporttofarmersasoneofthekeysuccessfactors,especiallywheretheyneedtoalternormalfarmingpracticestoachievebiodiversityresults.
Thisrequiresawiderrangeofskillsandmuchbetterunderstandingofbiodiversitythanisnecessaryformanagement-basedschemes,butiscriticalforbuildingthenecessarytrust,knowledgeandunderstandingbetweenthefarmerandtheschemeorganisers.
TheHandbookstatesthatadviceandtrainingforresults-basedschemesshouldfocuson:Explainingtherationaleofthescheme;Explainingthebiodiversityobjectivesandthereasonforusingresultindicators;Identifyingtheresultindicatorspeciesonthefarm;Adviceontypesofmanagementthatwillhelptoachievetheintendedresults;Theimportanceoftimingofparticularactionsforoptimumimpactsforbiodiversity;Bestpracticesfordifferenttypesofactivities;andMethodologyandprotocolsformeasuringindicatorsonthefarm.
Somespeciesmaybeverysensitivetoevensmallchangesinenvironmentalconditionsandmanagementpractices(suchasstocktype,timingofgrazingandcuttingetc),whichneedtobeunderstoodandcommunicatedtolandmanagers.
Regularfeedbackontheyearlyresultsoftheschemeishelpfulinbuildingknowledge,skillsandengagement.
Thefollowingexamplesweregiven:IntheNiedersachsenpilotmeadowscheme,farmersweretrainedbyexperiencedbotanists,enablingthemtorecogniseindicatorspeciesreliably;IntheBurrenFarmConservationProgramme(BFCP),theadviserworkscloselywiththefarmerandadvisesonprioritytasks,where,howandwhentheyshouldbedone.
Theadviseralsoinspectsgrasslandsandawardsconditionscores,whichformthebasisfortheresults-basedpayment.
Aswellasface-to-faceadvice,results-basedschemesoftenproduceguidancedocumentsforparticipants,examplesofwhicharegiveninaSupplementtotheGuidanceHandbook.
Onitswebsite,theCLAargues6thatthepilotsinEnglandhaverevealedthatashortageofexpertiseandadvicerepresentconstraintstoresultsbasedpaymentschemes:Thestudyisalreadyhighlightingsomeinterestingissues;inparticular,thequalityofavailableseedandthelackofagronomicalexpertiserelatedtoenvironmentaldelivery.
Whenyouarebeingpaidtodeliver,aswithagriculturalproduction,youneedaccesstohighqualityinputsandadvisers;it'squestionablewhetherthesecurrentlyexist.
NaturalEnglandarealsoconsideringtechnicalissueslikehowmanydifferentpaymentratesdoyouneedandwhatadviceandsupportdofarmersneedtomeetthehigherendofenvironmentaldelivery.
Themodellingworkcouldpotentiallyincludeestimatesoftheadvisorycostsofmovingtoalternative,results-basedpaymentsystems.
However,moreinformationwouldbeneededontheimplicationsforadvisoryworkandcosts,drawingonexamplessuchasthepilotschemesinEngland.
6https://www.
cla.
org.
uk/advice/payment-results-piloting-revolution-agri-environment-schemes#PayingforPublicGoodsfromLandManagement184Costsofsecuringpublicgoodsinvulnerablehighnaturevaluefarmingsystems4.
1TheIssueThe2017assessmentestimatedthecostsofapackageofspecifiedactionsdesignedtoaddressenvironmentallandmanagementprioritiesacrosstheUK.
Theassessmentfocusedonthecostsandincomeforgoneassociatedwithundertakingtheseactions,ontheassumptionthatthefarmingsystemsrequiredtoimplementthespecifiedpracticeswouldcontinuetobeinplace.
Thereportrecognisedthatthisapproachpotentiallyunderestimatedthefullcostsinareaswherefarmingsystemsarevulnerabletoabandonmentorchangesinlanduse,notingthatsomecurrentlanduses,particularlyinuplandareas,wouldpotentiallyceasetobeviableifcurrentCAPPillar1subsidiesandLessFavouredAreaspaymentswereremoved.
Iftheoveralllandmanagementsystemceasestobeeconomicallyviable,paymentsforspecificagri-environmentpracticesmaynotbesufficienttomeetenvironmentalpriorities.
Themodelmadesimpleprovisionfortheinclusionofanarea-basedcostofsecuringbasiclandmanagement,asrequired,butdidnotexaminesuchcostsindetail.
Theriskofcessationoflandmanagementorchangesinlanduseisperhapsgreatestforhighnaturevalue(HNV)farmingsystems,whichareoftencharacterisedbysmaller-scaleholdingsonmoremarginalland,ofteninremoteareas,usingtheleastintensivepractices,andrichinenvironmentalandculturalvalue(RSPBetal,2011).
Thisissuehasbeenrecognisedinpreviousstudies.
Forexample,areportfortheLandUsePolicyGroup(Barnesetal,2011)investigatedalternativepaymentapproachesfornon-economicfarmingsystemsdeliveringenvironmentalpublicgoodsinEnglandandScotland(Box4.
1).
Thereportusedbroadindicatorssuchaspresenceofroughgrazingandstockingdensitiestoestimatesupportneeds,ratherthanattemptingtoestimateareasofHNVfarmingorlandthatwasdeliveringparticularpublicgoods.
Box4.
1:StudyofalternativepaymentapproachesfornoneconomicfarmingsystemsdeliveringenvironmentalpublicgoodsBarnesetal(2011)examinedarangeofoptionsforalternativepaymentapproachesfornon-economicfarmingsystems,oneofwhichwasbasedonfullcostofmanagement.
Thisapproachestimatedthefull(variable+fixedcosts+normalprofit)ofmanagementofspecificuneconomicparcelsoflandwithinfarms(ratherthanwholefarms),allocatingfixedcostsasaproportionofthetotalareaoftheholding.
Theestimatesfocusedontheproportionofroughgrazinglandsupported(from25%to100%).
Thiswasfoundtosubstantiallyincreasethesupportprovidedtonon-economicfarms,helpingtomaintainthemanagementoflandthatwouldotherwisebeabandonedorconvertedtonon-agriculturaluse.
Thereportalsoexaminedalternativeapproachesincludingaholdingwidepaymentforareaswithnaturalconstraints(basedonstockingdensities)andapaymentforopportunitycosts(basedondifferentialsbetweenreturnstofarmlabourandcomparativenon-agriculturalwagerates).
Usingthesethreemethods,thereportestimatedsupportneedsat35-101/haforLFAcattleandsheepfarmsand27-88/haforspecialistSDAsheepfarmsinScotland,and163-895forLFAcattleandsheepfarmsand1-297forlowlandcattleandsheepfarmsinEngland.
ThissectionexaminesthelikelihoodofcessationorchangesinlandmanagementinHNVfarmingsystemsintheUK,andhowthiscanbeincorporatedintothecostingsmodel.
PayingforPublicGoodsfromLandManagement194.
2FarmIncomesandCAPSubsidiesThevulnerabilityoffarmingsystemstotheremovalofCAPPillar1subsidiesintheUKcanbeexaminedbyanalysingFarmBusinessSurveydata.
Table4.
1presentsFBSdatafordifferentfarmtypesinEnglandin2016/17and2017/18.
Table4.
1:FarmBusinessIncomecomparedtoincomefromBasicPaymentScheme,EnglandFarmTypeYearAverageperfarm()FarmBusinessIncomeBPSReceiptsFBInetofBPSCereals2016/1743,10039,1004,0002017/1864,20044,00020,200GeneralCropping2016/1770,10045,50024,6002017/1893,30052,50040,800Dairy2016/1715,00027,300-12,3002017/1879,50031,00048,500LowlandLivestock2016/1716,10017,200-1,1002017/1821,90018,3003,600LFALivestock2016/1727,00026,5005002017/1821,90029,900-8,000SpecialistPigs2016/1757,80011,40046,4002017/1831,3009,40021,900SpecialistPoultry2016/1754,2008,30045,9002017/1896,0009,20086,800MixedFarms2016/1728,80030,700-1,9002017/1841,80037,0004,800Horticulture2016/1743,8004,60039,2002017/1847,7004,90042,800Allfarms2016/1738,00028,00010,0002017/1856,50031,70024,800ThefiguresfocusonFarmBusinessIncome,themostwidelyusedmeasureoffarmincomes,whichrepresentsthefinancialreturntoallunpaidlabouronthecapitalinvestedinthefarmbusiness,includinglandandbuildings.
ItisequivalenttonetprofitandisdesignedPayingforPublicGoodsfromLandManagement20tocompareperformanceacrossdifferenttypesoffarming7.
ThetablecomparesFBIwithreceiptsfromtheBasicPaymentScheme(BPS)inEngland.
Itshouldbenotedthatthefiguresareaveragesforeachfarmtype,whereasthereisawidevariationinprofitabilityacrossdifferentfarmsizesandbetweenlow-andhigh-performingfarms.
ItshouldalsobenotedthatasimplestaticcomparisonoffarmincomeswithBPSpaymentsdoesnotnecessarilyindicatetheactualeffectonfarmincomesifBPSpaymentswereremoved,becauseitdoesnottakeaccountofpossiblechangesinfarmbusinesspracticestoadapttosuchachange,orpotentialchangesinthepricesofinputsandoutputs.
Forexample,Defra(2018a,2018b),initsanalysistosupporttheAgricultureBill,estimatedthatremovalofdirectpayments(whicharecapitalisedintherentspaidbytenantedfarms)willresultinareductioninfarmrentsaveraging23,700perfarm.
Furthermore,thereisevidencethatdirectpayments,thoughintheorydecoupled,haveaneffectinstimulatingproductionandraisinginputcosts,suchthatremovingthemwouldenhanceefficiency.
Defrasuggeststhatfarmswillbeabletomakeavarietyofchangestoenhancefarmincomesandadjusttotheremovalofdirectpayments,includingimprovingefficiencytoreduceinputcosts,optimisinginvestmentdecisions,diversifyingandjoiningenvironmentalschemes,improvingfarmbusinessmanagementandenhancingthevalueofoutputsthroughimprovedanimalandplanthealthandbettermarketing.
ThefiguresindicatethatmostfarmtypesinEnglandwouldhavebeenprofitablein2016/17and2017/18,evenifdirectpaymentswereremoved.
However,theprofitabilityofLFAlivestock,lowlandlivestockandmixedfarmsappearstobesensitivetoremovalofdirectpayments,withfarmbusinessincomesturningnegativeorclosetozeroineachcase.
Table4.
2givessimilarfiguresforScotland,WalesandNorthernIrelandfor2016/17.
AswellastheBasicPaymentScheme,thefiguresincludeotherfarmsubsidiesincludingcoupledlivestocksubsidiesinScotlandandLessFavouredAreas/AreaofNaturalConstraintpaymentsinNorthernIrelandandScotland.
ThefiguresshowthatwithoutthesesupportpaymentsfarmincomeswouldbenegativeorclosetozeroforLFAlivestock,lowlandlivestockandmixedfarmsinallthreecountries.
ThesamewouldalsoapplytocerealsanddairyfarmsinScotlandandNorthernIrelandthatyear.
Table4.
2:FarmBusinessIncomecomparedtoincomefromfarmsubsidies,UKcountries,2016/17CountryandFarmTypeAverageperfarm()FarmBusinessIncomeTotalsubsidypayments(includingLFA/ANC)FBInetoffarmsubsidiesandLFApaymentsScotlandSpecialistsheep(LFA)14,04827,292-13,245Specialistbeef(LFA)25,56537,035-11,470Cattleandsheep(LFA)35,28440,368-5,084Cereals20,58931,073-10,4847ItshouldbenotedthatFBIisameasureofprofitability,whichdoesnotnecessarilyreflectthecashpositionofthebusinessanditsabilitytosurviveintheshortterm.
BusinesseswithpositiveFBImayhavenegativecashflowsifinvestinginfixedassets,whileotherswithzeroornegativeFBImaybeabletosurvivebydepreciatingorliquidatingtheirassets.
PayingforPublicGoodsfromLandManagement21Generalcropping47,08035,16511,915Dairy34,69634,174522Lowlandcattleandsheep18,25331,669-13,416MixedFarms24,16837,664-13,496Alltypes26,40234,338-7,936NorthernIrelandCereals16,49225,527-9,035GeneralCropping27,61616,88910,727Pigs58,67314,12344,550Dairy23,61822,5721,046CattleandSheep(LFA)21,35229,679-8,327CattleandSheep(Lowland)16,57823,324-6,746Mixed27,63722,9104,727Alltypes21,92825,814-3,886WalesDairy31,30019,70011,600CattleandsheepLFA23,10024,900-1,800CattleandsheepLowland22,70017,1005,600Alltypes24,50023,1001,400Thefiguresdemonstratethattheremovalofdirectpaymentsmayimpactnegativelyonthefutureviabilityofuplandlivestock,lowlandlivestockandmixedfarmsacrosstheUK,andpotentiallytocerealsanddairyfarmsinScotlandandNorthernIreland.
Thispotentiallybecomesanenvironmentalissueininstanceswherethedeliveryofenvironmentalpublicgoodsisdependentontheongoingviabilityofthesesystemsincertainplacesorhabitattypes.
Agri-environmentschemeswithpaymentsbasedoncostsincurredandincomeforgonemaybeinsufficienttomaintaintheviabilityoffarmswherethisisnecessarytosecurepublicgoods,becausetheyaredesignedtopayforthecostsofundertakingprescribedactivities,ratherthantosupportfarmincomes.
Inthesecases,thefullcostsofdeliveringenvironmentalgoodsincludeashareofthecostsofmaintainingthefarmingsystemswhichdeliverthesegoods.
PayingforPublicGoodsfromLandManagement224.
3TheEffectofFarmBusinessPerformanceonProfitabilityFarmBusinessSurveydataItishelpfultoconsiderhowfarmbusinessincomesvaryaccordingtotherelativeperformanceofdifferentfarms,toexaminethepotentialforimprovementsinperformancetoenhanceprofitability,withouttheneedforpublicsupport.
Table4.
3comparesdataonFarmBusinessIncomeandBasicPaymentSchemereceiptsforlowlandandLFAgrazinglivestockandmixedfarmsinEngland.
ThedataaretakenfromtheFarmBusinessSurvey.
Thefiguresindicatethatthereisalargedifferenceinincomesbetweenthetopperformingquartileandlowestperformingquartileoffarmsforallthreefarmtypes.
AveragefarmbusinessincomesforthehighestquartileoffarmsbyperformanceexceededBPSreceiptsby29,500forlowlandlivestockfarms,18,400forLFAgrazinglivestockfarmsand62,400formixedfarmsinEnglandin2017/18.
Thissuggeststhat,ifallfarmswereabletoraisetheirprofitabilitytoequalthatofthetopperformingquartile,farmsofeachtypecouldachievepositivefarmbusinessincomesevenifBasicPaymentswereremoved.
However,thefiguresalsodemonstratethatfarmsizeappearstobeamajorcontributortorelativeperformance.
Thetopquartileofperformershasanaveragefarmarea4.
5timeslargerthanthelowestquartileforLFAlivestockfarms,2.
3timeslargerforlowlandlivestockfarmsand2.
1timeslargerthanmixedfarms.
Thissuggeststhatlowerperformingfarmsmayneedtoamalgamatetoreapeconomiesofscaleandraisetheirperformancetothatofthetopperformingquartile.
Table4.
3:FarmBusinessIncomeandBasicPaymentsfordifferentfarmperformancebands,England,2017/18Lowest25%Middle25%Top25%AllGrazinglivestock(lowland)farmsAveragefarmarea(ha)579413395FarmBusinessIncome(FBI)-2,60017,20055,40021,900BPSreceipts10,70018,20025,90018,300FBI–BPS-13,300-1,00029,5003,600Grazinglivestock(LFA)farmsAveragefarmarea(ha)79134356177FarmBusinessIncome(FBI)-6,40021,40075,30028,300BPSreceipts12,90024,50056,90029,900FBI–BPS-19,300-3,10018,400-1,600MixedfarmsAveragefarmarea(ha)119175250180FarmBusinessIncome(FBI)-17,30032,900115,40041,800BPSreceipts23,90035,20053,00037,000FBI–BPS-41,200-2,30062,4004,800TheFarmBusinessSurveydatathereforesuggestthatimprovementsinperformancedohavepotentialtoenhanceprofitability,ifthereissubstantialstructuralchangeintheindustry.
PayingforPublicGoodsfromLandManagement23However,withoutsuchchanges,thelevelsofprofitabilityachievedbyhighperformingfarmsareunlikelytobeachievablebyall.
Theextenttowhichscaleisafactorinenvironmentalperformanceisunclear,althoughthereissomeevidencethatHNVfarmingisassociatedwithsmallerfarms.
Therearealsopoliticalimplicationsassociatedwithapolicychangethatimpliessignificantindustrialchange.
CPRE(2017)arguesthatcontinuinglossesofsmallfarmsposerisksforwildlifeandtheenvironment,aswellastheruraleconomyandsociety.
ProfitabilityandMaximumSustainableStockingRatesCurrentworkbyChrisClarkfortheRSPB,NationalTrust,TheWildlifeTrustsandothersisexaminingtheperformanceandsustainabilityofuplandlivestockfarmsinEnglandandthepotentialforthemtoenhanceprofitabilityaswellasenvironmentalsustainabilitybyreducingstockingrates.
WorkingwithneighbouringfarmsintheYorkshireDales,Clarkhasfoundthatmosthavesoughttogrowtheirincomebyincreasingoutput,withresultantreductionsinprofitability.
HehasfoundthatthereisaMaximumSustainableStockingRate(MSSR),relatedtotheavailabilityofnatural(free-issue)grass.
StockingratesabovetheMSSRlevelcanonlybeachievedbyaddingadditional"corrective"variablecosts(CVCs),includingexpendituresonfertilisers,sprays,purchasedconcentrates,vetsbills,winterforageandover-wintering.
Thisresultsinanon-linearvariablecostcurve,whichkinksupwardsabovetheMSSR.
Farmswhichseektoincreaseoutputabovethislevelsufferareversalinprofitability(Figure4.
1).
Thediagramindicatesthatthereisabreak-evenpointatwhichvolumeofoutputissufficientforrevenuestocoverfixedandvariablecosts–markedbytheleft-handintersectionbetweentheredcostcurveandgreenrevenuecurve.
However,thereisalsoamaximumlevelofsustainableoutput(MSSR)beyondwhichvolumescanonlybeincreasedbypurchasingadditionalinputsandtherebyincreasingvariablecostsatthemargin.
Thispointismarkedbythekinkintheredcostcurve.
Beyondthispoint,thecostcurvetiltsmoresharplyupwards,intersectingtherevenuecurveagainata"break-back"point,beyondwhichthefarmceasestobeprofitable.
Profitsareindicatedbythehatchedareabetweentherevenueandcostcurvesandrequirevolumestobebetweenthebreak-evenandbreak-backpoints.
ClarkarguesthatprofitislikelytobemaximisedbymaintainingoutputattheMSSR,butfindsthatmanyfarmsmistakenlyexceedthislevel,increasingoutputattheexpenseofprofitability.
Figure4.
1:IllustrationofeffectsofoutputonprofitabilityofhillfarmsSource:Clark(2019)PayingforPublicGoodsfromLandManagement24Theimplicationsofthisarethatreducingstockingratestomoresustainablelevelscouldenhancetheprofitabilityofuplandlivestockfarms,aswellasenhancingtheirenvironmentalperformance(throughreducedgrazingpressureonuplandvegetation,andloweruseoffertiliser).
Clarkarguesthatincreasingthefocusonmarginsratherthanvolumeswillenhancetheprofitabilityandsustainabilityofhillfarms.
However,givennaturalconstraints,thismaynotbesufficienttomakeallfarmsprofitable,andthereisalsoaneedtoexplorenewopportunitiestoaddvalueandincreasethepricethatconsumersarewillingtopay.
Clark'sanalysisisrelevanttothisreport,asitsuggeststhattherearewaystoimproveprofitabilitywithouttherestructuringassociatedwithimprovingprofitabilitythroughscaleasdescribedabove.
Thisisrelevanttoanydiscussionabouthowmuchpublicsupportisneededtosecurepublicgoodsfromthesefarmingsystems,althoughthereiscurrentlyinsufficientdatatofactorthisintotheanalysisbelow.
4.
4QuantifyingthesupportneededtosecurepublicgoodsfrommarginalfarmingsystemsTheAgricultureBillinEnglandandthe'BrexitandourLand'consultationpaperinWales,embracetheprincipleofpublicmoneyforpublicgoods.
InthesepartsoftheUK,supportforagriculturewillshiftawayfromdirectpaymentsbasedonlandareaandrewardpracticesthatenhancetheenvironment,culturalandnaturalheritage,improvepublicaccess,contributetoclimatechangemitigationandadaptation,protectagainstnaturalhazards,andenhancethehealthandwelfareofanimalsandplants.
Althoughlessclear,itislikelythatsimilarsupportwillformaprominentpartoffuturepaymentsinScotlandandNorthernIreland.
Insomeinstances,provisionofpublicgoodsdependsonthecontinuingviabilityofthefarmingsystemsthatdeliverthem.
Restorationandmanagementofgrasslandandfarmedhabitats(e.
g.
maintenanceofpasturesbygrazingandmanagementofmeadows),maintenanceoflandscapeandhistoricenvironmentfeatures,andmanagementofpublicaccess,canalldependonthecontinuationoffarmingpractices.
Therewillbebenefitsintakingsomelandoutofagriculture,tore-createwoodlandsandotherwildlifehabitats,contributingnotonlytobiodiversityconservationbutalsotoclimatechangemitigation,enhancedwaterqualityandprotectionagainstflooding.
However,insomeinstancesmeetingprioritiesfortheenvironmentandculturalheritagewilldependonthecontinuationoffarming.
Thedataabovesuggestthatthefuturedeliveryofenvironmentalpublicgoodsmayrequiretailoredsupportmechanismsinareaswheretheremovalofdirectpaymentscallsintoquestiontheviabilityofmarginalfarmingsystems.
Forexample,themanagementofhaymeadowswouldceaseiffarmsnolongerrequiredforageforover-winteringcattle.
Inthesecases,theremaybeaneedtoprovideongoingsupportformaintainingthefarmingsystemsinsomecases,linkedtothedeliveryofenvironmentalpublicgoods.
Thiscouldfeasiblybeachievedeitherby:Targetingenhancedlevelsofsupporttofarmsorareasofhighnaturevalue;orLinkingenhancedlevelsofsupporttolandmanagementpracticesidentifiedinthecostingsmodelwhichdeliverpublicgoodsbutarevulnerabletothelossofthefarmingsystemsrequiredtosupportthem.
Thesetwooptionsareexploredinmoredepthbelow.
LinkingSupporttoHighNatureValuefarmingThisapproachwouldtargetsupportformaintaininglandmanagementtofarmingsystemsrecognisedtohavehighnaturevalue.
Thesesystemsmakethegreatestcontributiontothedeliveryofpublicgoods,and,becausetheytendtobelessintensive,areoftenmarginalandPayingforPublicGoodsfromLandManagement25atgreatestriskofabandonmentoffarmingactivityorchangeoflanduse(RSPBetal,2011).
TheconceptofHighNatureValue(HNV)farmingdevelopedintheearly1990sinrecognitionoftheimportanceoftraditionallowintensityfarmingsystemsforbiodiversityandtheenvironmentacrosstheEU8.
HNVfarmingischaracterisedbylong-established,low-intensityandoftencomplexfarmingsystemsusinglabourintensivepractices,livestockbreeds,andcroptypeshighlyadaptedtolocalsoils,vegetation,andclimate(Keenleysideetal,2014).
TheEuropeanEnvironmentAgency(EEA)hasidentifiedthreebroadtypesofHNVfarmland(Paracchinietal,2006):Type1–Farmlandwithahighproportionofsemi-naturalvegetation.
Type2–Farmlandwithamosaicoflowintensityagricultureandnaturalandstructuralelements,suchasfieldmargins,hedgerows,stonewalls,patchesofwoodlandorscrub,smallriversetc.
Type3-FarmlandsupportingrarespeciesorahighproportionofEuropeanorWorldpopulations.
InaUKcontext,HNVfarmingismainlyassociatedwithextensivebeefandsheepfarmingintheuplandsandmarginalfarmingareas,whichreliesonunimprovedsemi-naturalvegetationforgrazing.
Therearealsoexamplesfromthelowlandswhichincludesomelowinputarable/mixedfarmingsystemsandcoastalhabitatswhichcontainamosaicofseminaturalfeatureswhichsupportarichassemblageofwildlife.
HNVfarmingreliesuponthesympatheticlandmanagementpractices–suchaslowintensitygrazing,traditionalmowingofhaymeadows,leavingfallowareas,usingseaweedasfertiliser,andtraditionalapproachestomanagingsemi-naturalvegetation–tomaintainhabitatsandspecies9.
Variouseffortshavebeenmadetodefine,mapandquantifyHNVfarmingsystemsintheUKcontext.
Keenleysideetal(2014)estimatedarangeofbetween6,590,000and7,190,000hectares,basedonestimatesoftheextentofsemi-naturalgrassland.
Thisisapproximately37%-41%oftheagriculturallandareaoftheUK.
ScottishGovernment(2011)estimatedtheareaofHNVinScotlandat2.
3millionhectares,or40%oftheutilisedagriculturalarea,usingtheareaofroughgrazingasthemainindicator.
Chaplinetal(2017)estimatedthatapproximately25%offarmlandinEnglandisofHighNatureValue,bycombiningestimatesbasedonthethreeHNVtypesdefinedbytheEEA.
AcriticismofpreviouseffortstodefineandmapHNVsystemsintheUKisthebroadandinclusivenatureoftheindicatorsused(e.
g.
includingsemi-naturalvegetationorroughgrazingirrespectiveofthewayinwhichitismanaged).
ThishasledtolargeestimatesoftheextentofHNVfarming,whichoftenmapcloselytodesignationsofLessFavouredAreas,anddonotnecessarilycapturethespecificfarmingpracticestypicallyassociatedwithHNVsystems.
Asaresult,broadareasoftheuplandshavebeenmappedasHNV,whetherornottheyaredeliveringbenefitstotheenvironment.
ThishasledtoeffortstodeveloptighterdefinitionsofHNVfarming,usingmorespecificindicators.
Forexample,theRSPBiscurrentlyexploringthepotentialtomapHNVfarmingbasedonasetofbirdindicatorspecies(corncrake,chough,curlew,lapwing,redshank,twiteandwhinchat)typicaloffarmingsystemsofhighbiodiversityvalueinuplandsandLessFavouredAreas.
SuchanindicatorwouldsignificantlyreducetheareaoflandclassifiedasHNV,excludinglargeareasoftheuplandsthatarecoveredbybroaderindicators.
OnelimitationisthatthefocusonbirdindicatorspeciesdoesnotnecessarilycapturewiderbiodiversityvalueassociatedwithHNVsystems.
ThechallengesofdefiningandquantifyingHNVfarmingsystemsusingsimpleindicatorsmeanthatitisnotpossibletousethemasabasisforestimatingfinancialneeds.
Itisalso8http://www.
high-nature-value-farming.
eu/what-is-hnv/9http://www.
highnaturevaluefarming.
org.
uk/what-is-high-nature-value-farming/PayingforPublicGoodsfromLandManagement26difficulttoreconcilebroadestimatesoftheextentofHNVfarmingwiththecostsintheexistingcostingsmodel,whicharediscussedinthenextsection.
LinkingSupporttoLandManagementPracticesthatdeliverPublicGoodsAnalternativeapproachistoidentifylandmanagementactionsspecifiedinthecostingsmodelwhichdeliverpublicgoodsandaredependentonthemaintenanceofvulnerablefarmingsystems.
Thisincludes:Themaintenance,restorationandcreationofuplandpriorityhabitats;Themaintenance,restorationandcreationoflowlandpriorityhabitatsthatdependongrazing;Themaintenanceandrestorationofhistoricenvironmentfeatures;Managementoflowintensityarablelandforthebenefitofbiodiversity,landscapeandthewiderenvironment(includinginmixedfarmingsystems);andManagementofuplandroughgrazingwithlowinputsandmixedgrazing,forthebenefitofbiodiversity,landscapeandthewiderenvironment.
Maintenance,restorationandcreationofhabitatsandlowintensityfarmingsystemsdeliverarangeofpublicgoods,benefitingbiodiversityandlandscapeanddeliveringavarietyofecosystemservicessuchasclimateregulation,waterpurification,floodmanagementandrecreation.
PriorityhabitatsinuplandandlowlandareaswhicharemostatriskfromcessationofgrazingmanagementaresummarisedinTable4.
4.
Table4.
4:PriorityHabitatsdependentonmaintaininglivestockfarmingUpland/LFAPriorityHabitatsGrazedLowlandPriorityHabitatsUplandHayMeadowsUplandCalcareousGrasslandUplandHeathland(somesites)UplandFlushes,FensandSwampsLimestonePavement(somesites)CalaminarianGrasslandMachairCoastalandFloodplainGrazingMarshLowlandMeadowsLowlandCalcareousGrasslandLowlandDryAcidGrasslandLowlandHeathlandPurpleMoorGrass&RushPasturesLowlandFens(somesites)MaritimeCliffandSlope(somesites)CoastalSaltmarsh(somesites)Otherpriorityhabitatssuchasreedbeds,sanddunesandwoodlandsarelessdependentonagriculturalgrazingsystemsanditisassumedthattheycanbemaintainedwhetherornotfarmingremainsviable,throughhabitatmanagementactionsundertakenbylandowners,contractorsandconservationorganisations.
Themaintenanceandrestorationofblanketbogisnotreliantongrazingandblanketbogwouldgenerallybenefitfromreductionsingrazingpressure(IUCN,2014).
Somehabitats,suchaslimestonepavement,lowlandfens,maritimecliffandslopeandcoastalsaltmarsh,aswellasuplandheathland(muchofwhichismanagedasgrousemoor),requirecontinuedagriculturalgrazingatsomesitesbutnotothers.
Inthesecases,wehaveassumedthat50%ofthehabitatareadependsoncontinuationoffarming.
Theapproachexcludeslandtargetedbyresourceprotectionmeasuresinagriculture.
Themodelincludesarangeofmeasuresdesignedtoenhancethemanagementofsoilsandtoprotectwaterresourceswithinarableandgrasslandsystems.
However,thesemeasuresarePayingforPublicGoodsfromLandManagement27addressingresourcemanagementchallengesrelatedtoagriculturalsystemswhichwouldnolongerberequirediffarmingactivityceased.
Anewsheethasbeenaddedtothecostingsmodel(Sheet14.
Needs-MaintainingLandManagement).
Thisestimatestheareaoflandrequiringsupporttoensurecontinuingviabilityofmanagement.
Therearethreeelements:1.
Theproportionofland(LFAgrassland,lowlandgrassland,arableland)coveredbyidentifiedenvironmentallandoptionsinthemodelthatisvulnerabletocessationorchangeoflanduseandthereforerequiresfurthersupporttomaintaintheviabilityoflandmanagement.
Workingestimatesare100%forLFAgrassland,70%forlowlandgrasslandand12%forarableland,basedontheestimatedareasoflandineachcategoryonMixed,LowlandLivestockandLFALivestockfarms.
Inpractice,higherperformingfarmsinthesecategoriesmaynotrequirethisextrasupport,butlowerperformingonesarelikelytorequirehigherthanaveragelevelsofsupport.
Supportforthesefarmtypeswouldhelptosustainthedeliveryofenvironmentalpublicgoodslistedabove;2.
Whethersupportisprovidedtomaintainlandmanagementforlandunderdifferenttypesoffeatures/managementpractices(priorityhabitats;historicenvironmentfeatures;arableland/roughgrazingwithbiodiversityandlandscapemeasures).
Theassumptionisthatsupportisonlyprovidedformaintainingthemanagementoflandthatdeliverspublicgoodsandgoesbeyondthedeliveryofresourceprotectionmeasuresforagriculturalproductionpurposesalone;3.
Estimationoftheareasineachcategoryforwhichsupportforcontinuedlandmanagementisprovided,byapplyingtheaboveratiosandassumptionstotheareaneedsforeachcategoryinthecostingsmodel.
Basedonthisapproach,itisestimatedthat1.
7millionhectaresoflandacrosstheUKmayrequireongoingsupporttomaintaintheviabilityoflandmanagementinordertosustaindeliveryofpublicgoods(Table4.
5).
60%ofthislandiscoveredbypriorityhabitats,ofwhichnearlyhalfisuplandheathland.
Theseareasrepresentanestimated19%ofallpriorityhabitats,29%ofroughgrazinglandand2%ofarablelandintheUK,basedontheareasinthemodelthatwouldbemanagedforthedeliveryofenvironmentalpublicgoods.
Table4.
5:EstimatedareaoflandrequiringfinancialsupporttomaintainlandmanagementEnglandNorthernIrelandScotlandWalesUKPriorityhabitats467,15031,630383,832156,8691,039,480Arableland119,4511,08311,8342,002134,369Roughgrazing79,937-374,27486,253540,464Total666,53832,712769,940245,1241,714,314PayingforPublicGoodsfromLandManagement284.
5EstimatingFinancialSupportNeedsforLandManagementPracticesthatdeliverPublicGoodsEstimatingsupportneedsperhectareHavingdeterminedtheareaoflandrequiringsupporttomaintainlandmanagement,thenextstepistoestimatetheamountofsupportrequiredperhectaretosustainthelandmanagementrequiredtodeliverenvironmentalpublicgoods.
Toachievethis,itisassumedthatsupportwouldbesetataleveldesignedtoensureaminimumlevelofincomeperfarm.
Tomaintainviability,thisminimumincomelevelwouldneedtobeabovezero,toensurethatthefarmreceivedsomecompensationforunpaidworkundertakenbythefarmingfamily/farmbusinesspartners.
FarmBusinessSurveydataindicatethatthevalueofunpaidmanuallabour(suppliedbythefarmer,spouseandfarmbusinesspartners)averaged25,700fortheaveragelowlandlivestockfarm,26,300fortheaverageLFAlivestockfarm,and32,000fortheaveragemixedfarminEnglandin2017/18.
Thissuggestsaminimumleveloffarmbusinessincomeofatleast25,000perannumwouldberequiredtoprovidecompensationforunpaidlabour.
Table4.
6estimatestheaveragelevelofperhectaresupportthatwouldneedtobemadetodifferenttypesoffarmineachcountry,ifdirectpaymentsandotherfarmsupportpaymentswereremoved,inordertoachievethisleveloffarmbusinessincome,andtherebysustainthelandmanagementsystemsdeliveringtheidentifiedenvironmentalpublicgoods.
Table4.
6:Averagelevelofsupportperhectarefarmed,byfarmtype,toachieveaveragefarmincomeof25,000YearLFALivestockLowlandLivestockMixedFarmsEngland2017/18131.
40215.
3899.
41NorthernIreland2016/17389.
33483.
93273.
59Scotland2016/1778.
34330.
89235.
02Wales2017/18159.
28168.
4799.
41Source:FarmBusinessSurveydataThisanalysissuggeststhatthereare,forcertainpublicgoods,systemiccoststhatarenotincludedinconventionalestimatesusedtodateforagri-environmentschemes.
Onepotentialoptiontolinkthisupliftinfundingclearlytotheprovisionofpublicgoodswouldbetoprovideitasaperhectaresupplementforagri-environmentcontractsthatmetcertaincriteria,suchasbeneficialmanagementofpriorityhabitatsassociatedwithnon-economicgrazingsystems.
ThiswouldbejustifiablewithintheconstraintsofWTOrulesonthebasisofbroaderdefinitionofcosts,andisanapproachalreadyallowedforunderEuropeanCommissionguidanceformemberstatesonestimatingagri-environmentpaymentrates.
Theseperhectarefigurescanbeaddedtotheperhectarecostsofenvironmentallandmanagementspecifiedinthemodel,togiveahigherperhectarecostwhichreflectsthesystemiccostsofmaintaininglandmanagementaswellasthecostsofthespecifiedenvironmentallandmanagementpractices.
Themodellingapproach:Increasestheannualperhectarecostsofmaintaininguplandhabitats(suchasuplandheathland,uplandhaymeadowsanduplandcalcareousgrassland)aswellasthecostsoflowintensitymanagementofuplandroughgrasslandforenvironmentalPayingforPublicGoodsfromLandManagement29publicgoodsby131inEngland,389inNorthernIreland,78inScotlandand159inWales;Increasestheannualperhectarecostsofmaintaininglowlandgrasslandhabitats(suchascoastalandfloodplaingrazingmarsh,lowlandmeadowsandlowlandheath)by215inEngland,484inNorthernIreland,331inScotlandand168inWales;andIncreasestheannualperhectarecostsoflowintensitymanagementofarablelandforbiodiversityandlandscapeinmixedfarmingsystemsby99inEngland,274inNorthernIreland,235inScotlandand99inWales.
EstimatingthecostsofsupportinglandmanagementThecostsofsustainingthelandmanagementpracticesrequiredtodeliverenvironmentalpublicgoodsinvulnerablesystemshavebeenestimatedatnationallevelbycombiningtheareaestimates(Table4.
5)withtheenhancedperhectaresupportneeds(Table4.
6).
Theadditionalcostsofaddingthesearea-basedsupplementstoestimatedperhectaremanagementcostsaregiveninTable4.
7.
Table4.
7:Estimatedcostsofmaintaininglandmanagement(000sperannum)EnglandNorthernIrelandScotlandWalesUKPriorityhabitats88,46214,66047,01425,926176,061Arableland11,8742962,78119915,151Roughgrazing11,774-30,65313,77256,199Total112,11014,95680,44839,897247,411TheadditionalcostsatUKleveltomaintainthefarmingsystemsrequiredtodelivertheseenvironmentalgoodsareestimatedat247millionannually.
70%ofthecostsrelatetothemaintenanceofpriorityhabitats.
ProvisionoffarmbusinessadviceformarginalfarmsSection4.
4abovesuggestedthatthereispotentialtoenhanceboththeprofitabilityandsustainabilityofmarginalfarmingsystemsintheUK,especiallyintheuplands,byfocusingonprofitmarginsandreducingproductiontomaximumsustainablelevels.
Farmbusinessadvicecouldplayanimportantroleinenhancingprofitability,byfocusingonboostingmarginsratherthanvolumes,aswellasidentifyingopportunitiestoaddvaluetoproduceandenhanceincomethroughdiversification.
Thiscouldpotentiallyreduceovertimethecostsofsupportingthefarmingsystemsneededtodeliverenvironmentalpublicgoods.
ProvisionoffarmbusinessadviceoverthelandareadetailedinTable4.
5abovewouldinvolvecostsofapproximately5.
4millionperyearforaperiodof10years,basedonestimatesoftheaveragesizeofeachfarmtypeineachcountryandassumingthateachfarmwasprovidedwithanaverageof10daysadviceatanaveragecostof500perday(Table4.
8).
Provisionoffarmbusinessadvicewouldhelptoenhanceprofitabilityandtherebyreducethecostofmaintainingvulnerablefarmingsystemsprovidingenvironmentalpublicgoods.
PayingforPublicGoodsfromLandManagement30Table4.
8:Estimatedcostsofprovidingfarmbusinessadvicetosupportvulnerablefarmingsystems(000sperannumfor10years)EnglandNorthernIrelandScotlandWalesUKPriorityhabitats2,1922297012091,082Arableland3537366403Roughgrazing272-5033361,111Total2,8172361,2411,1155,409Evidencedemonstratesthatonlyaminorityoffarmscurrentlyundertakestandardbusinessmanagementpracticessuchasproducingbudgets,analysinggrossmargins,preparingcashflowforecastsorproducingin-depthprofitandlossaccounts.
Thisproportionwasaslowas17%forLFAlivestockfarmsand18%forlowlandlivestockfarmsin2016/17(Defra,2018a).
Thelowtake-upofadvicesuggestsaroleforpublicintervention–suchastheprovisionoffreeorsubsidisedadvice–toenhancefarmbusinessplanningandmanagement.
TheRoleofAlternativePaymentMethodologiesinenhancingtheviabilityoflandmanagementIntroducinganewpaymentmethodologyforenvironmentallandmanagementintheUKcouldalsoplayaroleinhelpingtosustaintheviabilityoflandmanagementsystemsdeliveringenvironmentalpublicgoods.
Oneofthelimitationsofthecurrentapproachoflimitingagri-environmentpaymentstocostsandincomeforgoneisthatthisprovideslimitedprofitforlandmanagers.
Asaresult,removalofPillar1subsidiesisexpectedtoreducetheprofitabilityoffarmingandadverselyaffecttheviabilityofmarginalfarms,evenifthosesubsidiesareredirectedtoenvironmentallandmanagementpayments.
Alternativepaymentsystems–iftheyofferedpaymentsexceedingcostsandincomeforgone–wouldhavethepotentialtoenhancetheincomesoflandmanagementbusinessesdeliveringenvironmentalpublicgoods.
Focusingpaymentsonenvironmentalpublicgoodswouldpotentiallyredistributepaymentstowardshighnaturevalueareas,whereopportunitiestoprovideenvironmentalbenefitsaregreatest,potentiallyprovidingnewincomestreamsinareaswhichfacedisadvantagesforfoodandtimberproduction.
TheissueofalternativepaymentmethodologiesisdealtwithinmoredetailinSection7ofthisreport.
4.
6ConclusionsThe2017costingsmodelestimatedtheannualcostofthemanagementpracticesrequiredtoachieveenvironmentalprioritiesintheUKat2.
3billionperannum.
Thisestimatewasbasedonthecostsincurredandincomeforgonetodelivertherequiredmanagementpractices.
ItwasrecognisedthatthiswaslikelytobeanunderestimateofthefullcostsofmeetingtheseprioritiesincaseswherefarmingsystemsceasetobeviableifCAPdirectpaymentsareremoved.
Ininstanceswheredeliveryofenvironmentalpublicgoodsisdependentonthemaintenanceofotherwiseunviablefarmingsystems,thecostsofmaintainingthesystemsrequiredtodeliverenvironmentalpublicgoodsalsoneedtobeincludedintheanalysis.
Thissectionsetsoutasimplemodellingapproachthatenablestheseadditionalsystemiccoststobefactoredintothecostassessment.
Itisestimatedthatmaintainingthedeliveryofenvironmentalpublicgoodsmayincuradditionalcostsoveranareaof1.
7millionhectares,especiallyinpriorityhabitatsinuplandareasoftheUK.
TheadditionalcostsofsustainingthesystemsrequiredtodelivertheseenvironmentalpublicgoodsisestimatedatslightlyPayingforPublicGoodsfromLandManagement31lessthan247millionannuallyintheUK.
Thesecostsarebasedoncurrentfarmstructuresandpractices.
However,thereisscopeforfarmstoenhancetheirprofitabilitythroughcostreductions(particularlybyloweringstockingratesandinputcosts)andthroughamalgamationtoachieveeconomiesofscale,potentiallyreducingfuturesupportneeds.
Thereisalsogreatscopetoimprovefarmbusinesspractices,andinterventionstofacilitatetheprovisionofbusinessadvicetovulnerablefarmsthatdeliverenvironmentalpublicgoodscouldbeacost-effectivemeansofachievingthis.
PayingforPublicGoodsfromLandManagement325Costsofsecuringlongtermenvironmentalbenefits5.
1TheIssueAswellasongoingmanagementactivities,agri-environmentandwoodlandmanagementschemesfundcapitalinvestmentsdesignedtodeliverenvironmentalbenefitsoverthelongerterm.
Theseincludechangesinlanduse,throughcreationofhabitats,woodlandsandlandscapefeatures,aswellasrestorationactionsintendedtodeliverlongtermenvironmentalbenefits.
Thelong-termnatureoftheseinvestmentsraisesthefollowingquestions:1.
Howcanschemesbedesignedtoattractparticipationbylandmanagers,especiallygivenuncertaintiesregardingthefuturereturnsandopportunitycostsoflong-termchangesinlanduseormanagement2.
Howcanschemesbedesignedtoensurethatthepublicbenefitsfromlandmanagementinvestmentsaresecuredoverthelongerterm,andarenotlostwheninitialagreementscometoanend3.
WhatarethecostimplicationsofaddressingtheseconsiderationsTypicalfive-yearagri-environmentagreementspresentpotentialproblemsinthisrespect,providinglimitedcertaintytotaxpayersaboutthesecurityofpublicbenefitsinthelongerterm,particularlysinceinvestmentsincreatingorrestoringhabitatsmaytakemanyyearstodelivertheirpotentialbenefits.
Thereisthereforeariskthatthebenefitsofpubliclyfundedinvestmentswillbelost(orwillfailtomaterialiseatall)aftercontractsexpire.
Similarly,whileagreementsrequirelandmanagerstomakelongtermdecisionsaboutlanduseandmanagement,theyprovidelimitedcertaintyaboutfutureincomestreams,overtimescalesinwhichotherfactorsthataffectbusinessdecisions(suchascommoditypricesandexchangerates)arelikelytochange.
Thismaydiscourageentryintosuchagreements.
Arangeoffinancial,legalandcontractualmeasurescanbeconsideredtoaddresstheseissues,andtoenhancethesecurityoflong-termbenefitsfromenvironmentalinvestments.
Theseinclude:Longtermcontractsforagri-environmentandwoodlandmanagement;Incentivesformaintaininglongtermmanagementregimes;Resultsbasedpayments;Conservationcovenantstosecurelongtermlandusechange,whichmaybeaccompaniedbyincentivepayments;andTaxincentives.
Thesemeasurescanbeexpectedtoinfluencethecostsofenvironmentallandmanagementpayments,aslandmanagersarelikelytorequirecompensationfortheopportunitycostsandpotentialforgoneoptionvalueofcommittingtolongtermchangesinlanduseand/orlandmanagement.
Thecostimplicationsofthesealternativemeasurescanbeassessedthroughtheenvironmentallandmanagementcostingsmodel.
Thissectionprovidesabriefreviewofexistingarrangementsrelatingtolongterminvestmentsinagri-environmentandwoodlandmanagementintheUK,beforeexaminingthepotentialroleofeachoftheoptionslistedabove.
Thepotentialcostsofimplementingtheseoptionsarethenassessed.
PayingforPublicGoodsfromLandManagement335.
2Existingarrangementsinagri-environmentandwoodlandgrantschemesCountrysideStewardship,EnglandCountrysideStewardshipprovidesgrantsfor:Managementoptions–mostagreementslastfor5years,butsomeoptionscanbe10or20yearslong;Capitalitems–arangeofgrantsforspecificcapitalworksoritems–workmustbecompletedwithin2years.
SomeHigherTieragreementslastformorethan5years,whereoptionsinvolvecomplexchangeswithlong-termimpactsonenvironmentalconditionsandlanduse.
10-yearagreementsinclude:Creationofarangeofhabitatsincludingcoastalsanddunes,vegetatedshingle,wetgrasslandforbreedingwaders,winteringwadersandwildfowl,reedbed,fen,traditionalorchards,species-richgrassland,grasslandfortargetfeatures,heathland,woodland,woodpasture;Raisedwaterlevelsupplement;Managementofmoorland;Restorationofspecies-richgrassland,lowlandheathlandfromforestryandwoodland,woodpastureandparkland;Allagreementsoncommonsandsharedgrazingland.
20-yearagreementsincludecreationofinter-tidalandsalinehabitatonarableland,onintensivegrassland,andbynon-intervention,andmakingspaceforwater.
Annualpaymentratesarefixedforthedurationoftheagreement.
Capitalitemsreceiveoneoffpaymentsfor2-yearprogrammesofcapitalworksandtherearenoongoingconditions–e.
g.
restorationandplantingofhedgerows,blockingofgrips,plantingofwoodlands.
EnvironmentalFarmingScheme,NorthernIrelandTheEnvironmentalFarmingSchemeissuescontractswitha5-yearduration.
Fortheestablishmentofnativewoodland,applicantsmustbepreparedtoretainnativewoodlandforaperiodof15yearsafterthescheme,whileEFSpaymentswillbemadeforthesuccessfulestablishmentandmanagementofthewoodlandinitsfirst5years.
AECSandForestryGrantScheme,ScotlandTheAgri-EnvironmentClimateSchemeinvolvesastandardcontractperiodoffiveyears.
TheForestryGrantSchemeoffersinitialpaymentsforcreationofwoodland,aswellasannualmanagementpaymentsforaperiodoffiveyears.
Glastir,WalesGlastiragreementsareforacontractperiodof5years.
Maintenancepaymentsfornewlycreatedwoodlandsaremadeforaperiodof12years.
PayingforPublicGoodsfromLandManagement345.
3Potentialmechanismstosecurelong-termbenefitsLongtermcontractsTheprevioussectionindicatesthatmostagri-environmentandwoodlandmanagementschemesintheUKinvolve5-yearagreements.
Longer10-or20-yearagreementsareappliedtolongtermhabitatcreationandrestorationoptionsinEngland,aswellasmanagementofmoorlandandcommonland.
Maintenancepaymentsaremadefor12yearsfornewlycreatedwoodlandsinWales.
Evenforextendedagreements,thetimescalesareshortcomparedtothoseoverwhichhabitatcreationandrestorationarelikelytoachievetheirfullpotential,whichformosthabitatsislikelytotakeseveraldecades.
Forexample,Morrisetal(2006)foundthat,whilesomewetlandcreationandrestorationprojectsmaytakejustafewyears,creationofgrasslandhabitatsofnatureconservationvaluemaytakearound80years,whilenewwoodlandsmaytakehundredsofyearstoreachtheirfullnatureconservationpotential.
Capitalpaymentsareusuallymadeonsatisfactorycompletionoftheagreedworksandarenotsubjecttoongoingconditions.
However,newlycreatedwoodlandsaresubjecttorelevantlegislation(e.
g.
treefellinglicences).
Thesearrangementsprovidelittlesecuritythatthebenefitsofhabitatcreationandrestorationwillbemaintainedoverthelongterm.
Moreover,uncertaintyforlandmanagersregardingfuturepaymentsmaybeadisincentiveforthemtoenteragreements.
Thecurrentmid-termEUfundingcycle,wherebybudgetsfortheEuropeanAgriculturalFundforRuralDevelopment(EAFRD)andotherfundsareprogrammedovera7-yearperiod,maypresentbarriersforlongtermfinancialagreements.
AreportbyRollettetal(2008)highlightedtheimportanceoflong-termcontractsforensuringthatagri-environmentmeasuresdeliverlongtermbenefits.
Itnotedthatagri-environmentschemesaretypicallyshorttomediumterminduration.
Schemesthatcommitfarmersforonlyfiveyearsmayfailtodeliverenvironmentalbenefits,especiallysincethedesiredpracticesmayceaseattheendoftheagreement.
ThereporthighlightedtheVittelcasestudy,France,asagoodexampleofaschemewhichdeliveredbenefitsviaalong-termapproach,offeringcontractsofbetween18and30years,therebyalsohelpingtosecurethequalityofacommerciallyvaluablenaturalresource.
Inordertosecurethebenefitsoflong-terminvestmentsincreationandrestorationofhabitatsandlandscapefeatures,schemeswouldideallyinvolvelongertermcontractsofmorethan30,andperhaps50or100years.
Extendingcontractdurationsinthiswaywouldalsolikelyrequirechangesinpaymentratestoreflectvariationsincostsandincomeforgoneovertime,e.
g.
throughperiodicpaymentreviewsthatprovidedsomecertaintytolandmanagersandtheauthoritieswhileenablingpaymentstochangetoreflectfinancialconditions.
Alternatively,paymentscouldbedesignedtoprovideincentivesforlongtermmanagementorlinkedtothedeliveryofoutcomesovertime.
IncentivesforlongtermmanagementIncentivestructurescouldbedesignedtosecurelongtermchangesinlandmanagement.
Thiscouldinvolve,forexample:Tieredpaymentstructures,withincreasingpaymentlevelsovertime;Loyaltybonuses,offeringrewardsformaintainingtheagreedmanagementregime,paidforexampleevery10years;Performancebonusesortop-ups,wheresupplementarypaymentsaremadeforachievingspecifiedmilestones(e.
g.
inrelationtospecies-richnessofgrassland,treeheight,vegetationstructure,waterlevelsetc.
).
Thesecouldbesimilartoresults-basedpayments(seebelow)butofferedasasupplementtobasicpaymentsbasedPayingforPublicGoodsfromLandManagement35oncostsandincomeforgone,therebyreducingriskstoparticipants(Schwartzetal,2008;OECD,2016)orapplyinginsituationswithcomplexoutcomesorsituations(Waldonetal,2017).
Suchincentivescouldbeofferedaspartoflong-termcontractsorasanalternativetothem.
Forexample,contractscouldberenewedperiodically,withincentivesbeingofferedforcontractrenewal.
Results-basedpaymentsesteemMovingthebasisofpaymentsfromcostsincurredandincomeforgonetoenvironmentaloutcomeswouldhelptoincentiviselongtermchangesinlandmanagement,particularlyforoptionswhichtakemanyyearstodelivertheirintendedoutcomes.
Forexample,Schwarzetal(2008)gavetheexampleofgrasslandrestorationpayments,whereapaymentbyresultsapproachwouldbeexpectedtoskewpaymentstowardsthelatteryearofanagreement.
Increasingpaymentsovertimewouldtendtoencouragelongtermparticipationinschemes.
ASwedishstudy(Franzenetal,2016)examiningfarmers'willingnesstoenterlongtermwetlandcreationschemesfoundthatoneofthemainreasonsgivenfornon-participationwerethehighcostsinvolved.
Aswellasincreasesinfinancialsupportforparticipation,theresearcherssuggestedthatresults-basedagri-environmentschemescouldbeusefulinincreasingparticipation,wherepaymentisgivenforprovisionofanecosystemservice,suchasnutrientretention,ratherthanaspecificmanagementaction.
Itwasarguedthatresult-basedschemescouldencouragefarmerstoinnovateinordertomanagetheirfarmsmoresustainablybecausetheywillbepaidforwhattheyproduce,ratherthanpaidforanactionwithanuncertainoutcome.
Mostresults-basedschemesinEuropecurrentlyhavearelativelylimitedhistory,andthereisthereforelimitedevidenceoflong-termenvironmentaloutcomes(Allenetal,2014).
Inordertoincentiviselongtermoutcomes,along-termcommitmenttopaymentforoutcomesovertimeislikelytobeneeded.
Adisadvantageofpureresults-basedschemes,particularlywhereoutcomestakemanyyearstomaterialise,isthattheycanincreaseriskstolandmanagers,requiringup-frontinvestmentswhichmayyielduncertainfuturereturns.
Theserisksanduncertaintiescouldbereducedbycombiningpaymentsforactionswithresults-basedbonuses(seeprevioussection).
ConservationcovenantsAconservationcovenantisaprivate,voluntaryagreementbetweenalandowneranda"responsible"body,suchasaconservationcharity,governmentbodyoralocalauthority.
Itdeliverslastingconservationbenefitforthepublicgood.
Acovenantsetsoutobligationsinrespectofthelandwhichwillbelegallybindingnotonlyonthelandownerbutonsubsequentownersoftheland(Defra,2019).
Therecentgovernmentconsultationonconservationcovenantsarguedthatleavingourenvironmentinabetterstatethanwefounditrequireslong-terminvestmentandstability,thatthereiscurrentlynoadequatemechanismforlandownerstosecurelongtermenvironmentaloutcomes,andthatanewlegaltoolisneededtoachievethis.
Thegovernmentproposesthatcovenantswoulddeliveraconservationpurposewhichisforthepublicgood,suchastoconservethenaturaland/orhistoricenvironmentoftheland.
Theywouldcontainobligationswhichcouldbeeitherpositive(managingthelandtosecureaconservationoutcome)orrestrictive(requiringthelandownernottodosomethingtosecureaconservationoutcome).
Thecovenantwouldbebindingonallfutureownersofthelandafterthecurrentownerhasdisposedofitandwouldbeindefiniteunlessagreedforashorterperiod),andenforceablethroughthecourts(Defra,2019).
PayingforPublicGoodsfromLandManagement36Conservationcovenantscouldpotentiallybeusedalongsideagri-environmentandwoodlandgrantagreementstoensurethattheyachievelongtermconservationbenefits–effectivelyrequiringacommitmenttolong-termconservationmanagement.
TherecentDefraconsultationpaperstatedthatconservationcovenantswouldbeenteredvoluntarilyandwouldthereforenotimposeadditionalcostsonlandmanagers.
However,whilesomelandownersmayagreetoaconservationcovenantforaltruisticreasons,manywouldlikelyrequirecompensationforthepotentialopportunitycostsofagreeingtolongtermchangesinlanduse.
Thepapernotedthatconservationcovenantsenteredbylandownerscouldbeusedtosecurethebenefitsofpaymentsforecosystemserviceschemes,withpaymentscomingfromeitherthepublicorprivatesector.
TheLawCommission(2014)reportonconservationcovenantsnotedthattheycanbeusedtoenhancethesecurityoflong-termoutcomesfromagri-environmentschemesorpaymentsforecosystemservices(Box5.
1).
Thereportnotedthatconservationcovenantsareabletosecurelongertermbenefitsthancanusuallybeachievedbyagri-environmentschemes,particularlysincetheyarelegallybindingeveniftheownershipoflandchanges.
Box5.
1:ExampleofroleofconservationcovenantsinsecuringlongtermenvironmentaloutcomesAwatercompanywishestopaylandmanagerstoblockdrainageditchesonanuplandmireinordertomakethemireretainmorewater,whichshouldmitigatefloodriskandimprovewaterqualityfurtherdownthecatchment.
Theproposalwouldchangethefarmingpracticesonthelandintheverylongterm,ifnotpermanently.
Theprivateindividualmaybethelandownerwhofarmsthelandhimself,thetenantwhodoesso,orthelandlordofsuchtenants.
Heiswillingtoprovidethenecessarymanagementofthelandinreturnforpayments,butatpresenttheproposallacksasuitablelegalvehiclewhichwillbindthepartiesfortheappropriatelengthoftime.
Aconservationcovenantwouldsuitthissituationverywell.
Source:TheLawCommission(2014)TheLawCommissionreportsuggestedthatconservationcovenantsareunlikelytoinvolvelongtermpaymentarrangements;instead,aone-offpaymentforenteringaconservationcovenantislikelytobemadeatthetimethecovenantisagreed,withsubsequentmanagementrequirementsbestsecuredthroughanappropriatemanagementagreement.
Covenantscanrepresentacost-effectivemeansofsecuringlongtermconservationcommitments,whencomparedtoacquisitionoflandorproperty.
Someothercountriesofferincentivesthroughtaxreliefsorgrantstolandownerstotakeoutcovenants.
Forexample,reductionsinincomeand/orcapitalgainstaxareofferedintheUS,AustraliaandCanada,andgrantsinNewZealand(GreenBalance,2008).
TaxincentivesThetaxsystemhasthepotentialtoinfluencedecisionsaboutlongtermlanduse.
AgriculturallandandpropertyqualifiesforAgriculturalReliefforInheritanceTax10.
LandwhichistransferredfromagriculturetootherusespotentiallybecomessubjecttoInheritanceTax,andthismaydiscouragechangesinlanduse.
However,landenteredintolongtermhabitatcreationschemesremainseligibleforagriculturalrelief,evenwherethisinvolvescessationofagriculturalproductionoverextendedtimeperiods.
HMRCguidanceisprovidedonthisissue.
11Inaddition,relieffromInheritanceTaxandCapitalGainsTaxisalsoprovidedfornationalheritageassets,includingsomebuildings,land,worksofartandotherobjectsofheritagevalue,providingthenewownerundertakestoconservethemandmakethemaccessibletothegeneralpublic.
Thisincludeslandofoutstandingnaturalbeautyandspectacularviewsandlandof10https://www.
gov.
uk/guidance/agricultural-relief-on-inheritance-tax11https://www.
gov.
uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm24065PayingforPublicGoodsfromLandManagement37outstandingscientificinterestincludingspecialareasfortheconservationofwildlife,plantsandtrees12.
Maintainingthesetaxreliefswillclearlybeimportantinensuringthatthereisnodisincentivetoenterlongtermhabitatcreationandrestorationschemes.
Considerationcouldbegiventoextendingtaxreliefsasanincentiveforlandownerstotakeoutconservationcovenants,asoccursintheUS,AustraliaandCanada.
5.
4AssessingthecostsofsecuringlongtermenvironmentalbenefitsMeasuresdesignedtosecurelongtermbenefitspotentiallyincreasethecostsofagri-environmentandwoodlandgrantschemes.
ExpansionofPriorityHabitatsTheexistingmodelestimatesthecostsofexpansionofpriorityhabitatsintheUKasfollows(Table5.
1).
Table5.
1:Estimatedbasecostsofexpansionofpriorityhabitats(000perannum,adjustedcostsmodel,averageover10years)EnglandNorthernIrelandScotlandWalesUKCapitalcosts14,6421,82928,8393,94649,256Annualcosts22,1402,46418,3714,83147,806Total36,7824,29347,2098,77797,061Thelatestestimatesforthecostsofexpansionofpriorityhabitatsamounttoaveragecapitalcostsof49millionandannualcostsof48millionperyearover10years,givinganannualaveragecosttotalof97millionperyear.
Assumingnofurtherexpansionactivityaftertheinitial10years,butongoingmaintenanceofthenewlycreatedhabitats,thenetpresentvalueofthesecostsovera100-yearperiodamountsto2,636million,usingthestandardsocialdiscountrateof3.
5%(HMTreasury,2018).
Box5.
2:CalculatingtheNetPresentValueoftheCostsoverTimeLongterminvestmentsinthecreationandrestorationofhabitatsandotherfeaturesincurup-frontcapitalcostsandongoingcostsofannualmaintenance,whichalsotakeaccountoftheopportunitycosts(incomeforgone)fromchangesinlanduse.
Theconceptoftimepreferencemeansthateach1ofcostincurredtodayhasahighervaluethan1ofcostincurredinthefuture,becausewewouldprefertohavemoneynowratherthannextyear.
Discountratesareusedtocalculatethepresentvalueoffutureflowsofcostsandbenefits.
TheHMTreasuryGreenBookspecifiesastandardsocialdiscountrateof3.
5%,whichmeansthateach1todayisworththesameas1.
035nextyear,and1.
41intenyears'time(1x1.
03510).
Overallcostsovertimeofdifferentoptionscanbecomparedbyusingdiscountratestocalculatethepresentvalueoffutureflowsofcostsandsummingthemtogivethenetpresentvalue.
Forexample,ifthecreationofahectareofreedbedincursanup-frontcapitalcostof1800perhectarethenanannualmaintenancecostof440everyyearfor10years,thenetpresentvalueofthecostsofcreationandongoingmaintenanceover10yearswouldbe1800+440/1.
035+440/1.
0352+…+440/1.
03510=5459.
Theestimatesaboverelatetothecostsincurredandincomeforgoneofundertakingtherequiredlandmanagementpractices.
Introducingadditionalsafeguardstosecurelongterm12https://www.
gov.
uk/guidance/tax-relief-for-national-heritage-assetsPayingforPublicGoodsfromLandManagement38changesinlanduseandlandmanagementcanbeexpectedtoincreasethesecosts,iflandmanagersdemandadditionalcompensationtoenterlongtermcontractsorconservationcovenants.
Theseincreasesincostsdependontheindividualattitudesandcircumstancesoffarmersandaredifficulttoestimateingeneralterms.
Quantifyingthemwouldideallyinvolveinterviewswithlandmanagerstosurveytheirwillingnesstoacceptcompensationforlongtermchangesinlanduse.
However,potentialincreasesincostshavebeenillustratedthroughasimplemodellingapproachusingthefollowingscenarios:Scenario1:Enhancedincentivesforlongtermmanagement,throughlongtermcontract.
Inthefirstscenario,itisassumedthatlandmanagersareofferedanincentivetoenterlongterm(100year)contracts.
Thisinvolvesastandard%increase(inrealterms)inallannualmaintenancepaymentsmadetolandmanagersoverthedurationofthe100-yearcontract.
Thisismodelledasastandard%upliftincostsandincomeforgoneforannualmanagementoverthe100-yearperiod,withcapitalcostsofexpansionremainingunchanged.
Scenario2:Longtermloyaltybonusorperformancetopup.
Inthisscenario,enhancedannualpaymentswouldbemadetolandmanagersformaintainingtheagreedlandusepracticesovertime.
Thesewouldbeincreasedperiodicallyandcumulativelyoverthecourseofthe100-yearperiod(e.
g.
a%upliftevery10years).
Theseincreasesinpaymentscouldbeperformancerelated–e.
g.
conditionalonachievingsetthresholdsrelatingtotheconditionofthenewlycreatedhabitats.
Thisdiffersfromscenario1inthatpaymentswouldincreaseonlyat10-yearintervalsbutwouldrisecumulativelyovertime.
Scenario3:Oneoffincentivefortakingoutaconservationcovenant.
Inthisscenario,landmanagerswouldbepaidanup-frontsumasanincentivefortakingoutaconservationcovenant.
ThiscouldbesimilartoScenario1,i.
e.
basedonaset%ofongoingmaintenancecostsandincomeforgonebutpaidasaone-offcapitalsumratherthanasanannualpayment,reflectingthebindingandperpetualnatureofthecommitment.
TheeffectofthesethreescenariosonthecostsofhabitatcreationissummarisedinTable5.
2.
Table5.
2:Summaryofcostincreasesforhabitatcreationunderthreescenarios,NetPresentValueover100years,UKNPV(m)%changecomparedtobaselineBaselinecosts2,636-Scenario1:Incentivetoenterlongtermcontract5%upliftonannualmanagementcosts2,7474.
2%10%upliftonannualmanagementcosts2,8588.
4%15%upliftonannualmanagementcosts2,97012.
7%Scenario2:Longtermloyaltybonus5%upliftonannualmanagementcosts2,94011.
5%10%upliftonannualmanagementcosts3,30325.
3%15%upliftonannualmanagementcosts3,73741.
8%Scenario3:Oneoffincentivetotakeoutconservationcovenant5%upliftonannualmanagementcosts2,7474.
2%10%upliftonannualmanagementcosts2,8588.
4%15%upliftonannualmanagementcosts2,97012.
7%Scenarios1and3increasetheoverallnetpresentvalueofcostsbybetween4%and13%overa100yearperiod,basedonanupliftofbetween5%and15%inannualmanagementPayingforPublicGoodsfromLandManagement39costs.
Thenetpresentvalueissimilarunderthesetwoscenarios,sincetheyinvolveasimilaroverallupliftincosts,theonlydifferencebeingthatScenario1involvesaset%increaseinannualmanagementpaymentsoverthewholeperiodwhereasScenario3convertsthisintoaone-offcapitalsum.
Scenario2,whichhassimilarcoststothebaselinescenarioinyears1-10buttheninvolvescumulativeincreasesincostsevery10years,increasesthenetpresentvalueofcostsbybetween12%and42%overthe100-yearperiod,foracostupliftofbetween5%and15%every10years.
Becausethecostupliftsinscenario2arecumulative,theyincreasecostscomparedtoscenarios1and3,asannualmanagementcostsrisesteeplyinthelatterdecadesofthe100-yearperiod.
A3.
75%costupliftevery10yearsunderScenario2hasasimilareffectonoverallcostsasaone-off10%increaseincostsforthewhole100-yearperiodunderScenarios1and3.
Box5.
3presentsaworkedexamplefortheexpansionofreedbedsintheUK.
Box5.
3:NetPresentValueofReedbedCreationThecostingsmodelestimatesthat356hectaresofreedbedswillneedtobecreatedeachyearacrosstheUKtomeethabitatexpansiontargetsinthefourcountries.
Thecapitalcostsofcreationareestimatedat1802perhectareandsubsequentannualcostsat440perhectareperyear(usingadjustedunitcostestimates).
Thisgivesanannualaveragecostof1.
43millionperyearatUKlevelforthenext10years.
Assumingnofurtherexpansionofreedbedsafter10yearsbutincludingtheongoingannualcostsofmanagementofthe3560hectaresofnewlycreatedreedbed,thenetpresentvalueofexpansionamountsto41.
9millionover100years.
Theeffectofdiscountingmeansthatthepresentvalueofannualmaintenancefallsfrom1.
1millioninyear11to0.
3millioninyear50and0.
05millioninyear100,underthebaselinescenario.
Scenario1:Enhancedincentivesforlongtermmanagement,throughlongtermcontractinvolvesastandard%upliftincostsandincomeforgoneforannualmanagementoverthe100-yearperiod,withcapitalcostsofexpansionremainingunchanged.
A10%upliftinannualmanagementpaymentsto484perhectareperyearoverthewhole100-yearperiodwouldincreasethenetpresentvalueofcostsoverthe100-yearperiodto45.
5million,anoverallincreaseof8.
7%.
Whileannualmanagementcostsincreaseby10%overall,capitalcostsofexpansionremainunchanged.
Scenario2:Longtermloyaltybonusorperformancetopup,involvesaperiodicandcumulativeincreaseinannualmanagementpaymentsoverthecourseofthe100-yearperiod.
Forexample,annualpaymentsforreedbedmanagementcouldbeincreasedby10%every10years,from440perhectareperyearinyears1-10to484perhectareperyearinyears11-20,532inyears21-30,uptoamaximumof1037inyears91-100.
Thesecumulativeincreasesmeanthatthenetpresentvalueofoverallcostswouldincreaseto52.
8millionoverthe100-yearperiod,anincreaseof26.
1%comparedtothebaselinescenario.
Scenario3:Oneoffincentivefortakingoutaconservationcovenant,wouldinvolveasimilarupliftinannualincentivestoScenario1,butwiththeextraincentivepaidasaone-offcapitalsumratherthanasanannualpayment,reflectingthebindingandperpetualnatureofthecommitment.
Landmanagerswouldreceiveanannualmanagementpaymentof440perhectareperyearasunderthebaselinescenario,plusa%upliftpaidasacapitalsumup-frontontakingoutthecovenant.
A10%upliftwouldamountto44perhectareperyear,whichwouldequatetoanup-frontcapitalvalueof1216perhectare.
ThenetpresentvalueoftotalcostsatUKlevelbethesameasScenario1,at45.
5million.
RestorationofPriorityHabitatsTheexistingmodelestimatesthecostsofrestorationofpriorityhabitatsintheUKasfollows(Table5.
3).
Thecostsofmaintenanceofhabitatsrestoredorundergoingrestorationareincludedintheoverallestimatesofhabitatmaintenancecostsinthemodel,ratherthanbeingitemisedseparately.
PayingforPublicGoodsfromLandManagement40Table5.
3:Estimatedbasecostsofrestorationofpriorityhabitats(000perannum,adjustedcostsmodel,averageover10years)EnglandNorthernIrelandScotlandWalesUKCapitalcosts278,50417,028163,09158,862517,485Annualmaintenancecosts95,82411,13875,02823,043205,032Total374,32728,166238,11981,904722,517Thelatestestimatesforthecostsofrestorationofpriorityhabitatsamounttoaveragecapitalcostsof517millionandannualcostsof205millionperyearover10years,givinganannualaveragecosttotalof723millionperyear.
Assumingnofurtherrestorationactivityaftertheinitial10years,butongoingmaintenanceoftherestoredhabitats,thenetpresentvalueofthesecostsovera100-yearperiodamountsto9,974million,usingthestandardsocialdiscountrateof3.
5%(HMTreasury,2018).
Potentialincreasesincostsinsecuringlongtermlandmanagementcanbeillustratedthroughasimilarmodellingapproachasforhabitatcreation,above.
TheeffectofthesethreescenariosonthecostsofhabitatrestorationissummarisedinTable5.
4.
Table5.
4:Summaryofcostincreasesforhabitatrestorationunderthreescenarios,NetPresentValueover100years,UKNPV(m)%changecomparedtobaselineBaselinecosts9,974-Scenario1:Incentivetoenterlongtermcontract5%upliftonannualmanagementcosts10,2572.
8%10%upliftonannualmanagementcosts10,5415.
7%15%upliftonannualmanagementcosts10,8258.
5%Scenario2:Longtermloyaltybonus5%upliftonannualmanagementcosts10,6266.
5%10%upliftonannualmanagementcosts11,40414.
3%15%upliftonannualmanagementcosts12,33723.
7%Scenario3:Oneoffincentivetotakeoutconservationcovenant5%upliftonannualmanagementcosts10,2572.
8%10%upliftonannualmanagementcosts10,5415.
7%15%upliftonannualmanagementcosts10,8258.
5%Scenarios1and3increasetheoverallnetpresentvalueofcostsbybetween3%and9%overa100-yearperiod,basedonanupliftofbetween5%and15%inannualmanagementcosts.
Thenetpresentvalueissimilarunderthesetwoscenarios,sincetheyinvolveasimilaroverallupliftincosts,theonlydifferencebeingthatScenario1involvesaset%increaseinannualmanagementpaymentsoverthewholeperiodwhereasScenario3convertsthisintoaone-offcapitalsum.
Scenario2,whichhassimilarcoststothebaselinescenarioinyears1-10buttheninvolvescumulativeincreasesincostsevery10years,increasesthenetpresentvalueofcostsbybetween7%and24%overthe100-yearperiod,foracostupliftofbetween5%and15%every10years.
Becausethecostupliftsinscenario2arecumulative,theyincreasecostsPayingforPublicGoodsfromLandManagement41comparedtoscenarios1and3,asannualmanagementcostsrisesteeplyinthelatterdecadesofthe100-yearperiod.
A4.
4%costupliftevery10yearsunderScenario2hasasimilareffectonoverallcostsasaone-off10%increaseincostsforthewhole100-yearperiodunderScenarios1and3.
PlantingofHedgerowsTheexistingmodelestimatesthecostsofplantingofhedgerows,andmaintenanceofnewlyplantedhedgerows,intheUKasfollows(Table5.
5).
Thecostsofmaintenanceofnewlyplantedhedgerowsareincludedintheoverallestimatesofhedgerowmaintenancecostsinthemodel,ratherthanbeingitemisedseparately.
Table5.
5:Estimatedbasecostsofplantinghedgerows(000perannum,adjustedcostsmodel,averageover10years)EnglandNorthernIrelandScotlandWalesUKCapitalcostsofplanting24,7036,9841,2903,31836,295Annualmaintenancecostsofnewlyplantedhedgerows1,313371691761,929Total26,0167,3551,3593,49538,225Thelatestestimatesfortheplantingofhedgerowsamounttoaveragecapitalcostsof36millionandannualcostsof2millionperyearover10years,givinganannualaveragecosttotalof38millionperyear.
Assumingnofurtherhedgerowcreationactivityaftertheinitial10years,butongoingmaintenanceofthenewlycreatedhedgerows,thenetpresentvalueofthesecostsovera100-yearperiodamountsto390million,usingthestandardsocialdiscountrateof3.
5%(HMTreasury,2018).
Potentialincreasesincostsinsecuringlongtermlandmanagementcanillustratedthroughasimilarmodellingapproachasforhabitatcreation,above.
TheeffectofthesethreescenariosonthecostsofhabitatrestorationissummarisedinTable5.
6.
Table5.
6:Summaryofcostincreasesforhedgerowcreationunderthreescenarios,NetPresentValueover100years,UKNPV(m)%changecomparedtobaselineBaselinecosts390-Scenario1:Incentivetoenterlongtermcontract5%upliftonannualmanagementcosts3941.
1%10%upliftonannualmanagementcosts3992.
3%15%upliftonannualmanagementcosts4033.
4%Scenario2:Longtermloyaltybonus5%upliftonannualmanagementcosts4023.
1%10%upliftonannualmanagementcosts4176.
9%15%upliftonannualmanagementcosts43411.
4%Scenario3:Oneoffincentivetotakeoutconservationcovenant5%upliftonannualmanagementcosts3941.
1%10%upliftonannualmanagementcosts3992.
3%15%upliftonannualmanagementcosts4033.
4%PayingforPublicGoodsfromLandManagement42Scenarios1and3increasetheoverallnetpresentvalueofcostsbybetween1%and3%overa100-yearperiod,basedonanupliftofbetween5%and15%inannualmanagementcosts.
Thenetpresentvalueissimilarunderthesetwoscenarios,sincetheyinvolveasimilaroverallupliftincosts,theonlydifferencebeingthatScenario1involvesaset%increaseinannualmanagementpaymentsoverthewholeperiodwhereasScenario3convertsthisintoaone-offcapitalsum.
Scenario2,whichhassimilarcoststothebaselinescenarioinyears1-10buttheninvolvescumulativeincreasesincostsevery10years,increasesthenetpresentvalueofcostsbybetween4%and14%overthe100-yearperiod,foracostupliftofbetween3%and11%every10years.
Becausethecostupliftsinscenario2arecumulative,theyincreasecostscomparedtoscenarios1and3,asannualmanagementcostsrisesteeplyinthelatterdecadesofthe100-yearperiod.
A3.
7%costupliftevery10yearsunderScenario2hasasimilareffectonoverallcostsasaone-off10%increaseincostsforthewhole100-yearperiodunderScenarios1and3.
PayingforPublicGoodsfromLandManagement436OverallimplicationsforthecostsofmeetingenvironmentallandmanagementprioritiesThissectionsummarisestheoverallestimatesofthecostsofmeetingenvironmentallandmanagementprioritiesintheUK,combiningtheanalysisinsections2to5ofthisreport.
Table6.
1presentsthecombinedcostestimates,bringingtogetherupdatedestimatesofthecostsintheenvironmentallandmanagementcostingsmodel(Section2)withtheadditionalcostelementsforenvironmentaladvice(Section3),securingvulnerablehighnaturevaluefarmingandassociatedfarmbusinessadvice(Section4),andsecuringlongtermchangesinlanduse.
Table6.
1:EstimatedoverallcostsofmeetingenvironmentallandmanagementprioritiesintheUK(mperannumover10years)LandmanagementcostsEnglandNorthernIrelandScotlandWalesUKPriorityhabitats518423811201,061Boundaryfeatures261507749437Historicenvironment504398102Arableland48618475556Grassland187547540356Organic1703526Totallandmanagement1,5201686222272,538AdditionalelementsEnvironmentallandmanagementadvice34321462Securingvulnerablehighnaturevaluefarming112158040247BusinessadvicetovulnerableHNVfarms30115Securinglongtermchangesinlanduse614112Sub-total:Additionalcostelements1541910746326Total1,6741887292732,864Proportionoftotal60%7%25%9%100%TheseadditionalcostelementsincreasetheoverallestimatedannualcostofmeetingenvironmentallandmanagementprioritiesintheUKto2.
9billionperannumoverthenext10years.
ThisfigurerepresentsanupdatedoverallestimateofthecostsofmeetingenvironmentallandmanagementprioritiesintheUK,asdefinedinthe2017report.
Thelargestincreasesarisefromtheinclusionofestimatesofthecostsofmaintainingvulnerablehighnaturefarmingsystems,whichwerenotincludedinthepreviousestimates.
Asbefore,somecareisneededininterpretingthefigurespresented.
Theexercisehashighlightedthatthereisnosinglecorrectanswertothequestion,andthatthecostestimatesaresensitivetotheassumptionsandinputsusedinthemodel.
Onemajorvariablerelatestotheoveralllevelofambitionappliedinestimatinglandmanagementneeds,andthemodelwasthereforedesignedtoallowthepolicychoicesandassumptionsregardingthescaleofneedtobevaried.
Whiletheworkinvolvedadetailedandwide-rangingassessment,andextensiveconsultationswithexpertsandstakeholders,thepreviousreportnotedthatthemodelwouldbenefitfromfurtherdevelopmentandrefinementinseveralareas.
Theseincludethespecificationofneedsforwaterquality,soilmanagementandthehistoricenvironment.
PayingforPublicGoodsfromLandManagement44AswellasprovidingabroadassessmentofthefinancialneedsforachievingenvironmentallandmanagementprioritiesintheUK,themodelcanbeusedtomakealternativeestimatesoffinancialneeds,basedondifferentinputs,assumptions,andpolicyandeconomicscenarios.
Itishopedthattheassessmentandthemodelcanbefurtherrefinedanddeveloped,basedonpeerreview,expertinputandfurthertargetedresearch,andthatthemodelwillbehelpfulininformingfurtherdiscussionregardingfinancialneedsforenvironmentallandmanagementafterBrexit.
PayingforPublicGoodsfromLandManagement457PotentialalternativeELMpaymentmethodologies7.
1TheIssueUntilnow,agri-environmentpaymentsandwoodlandgrantsintheUKhavemostlypaidlandmanagersforundertakingprescribedactivitiesdesignedtoprotectandenhancetheenvironment.
Paymentshavebeencalculatedbasedonthecostsincurredandincomeforgoneinundertakingthedefinedlandmanagementpractices,inaccordancewithEUrules.
Thecostingsmodeldescribedinthisreportusesasimilarapproach,estimatingtheextentoflandmanagementactivitiesrequiredtodeliverenvironmentalpriorities,andassessingthecostsofdeliveringtheseactivitiesbasedoncostsincurredandincomeforgone(basedonaverageyieldsandcoststructures).
DefraandtheWelshGovernmentarebothcurrentlyexploringpotentialoptionsfornewpaymentmethodologieswhichincentivisethedeliveryofpublicgoodsbyrewardingoutcomesandreflectthevalueofnaturalcapitalandecosystemservicesinthepaymentsmade.
Thissectionexaminesalternativemethodologiesforenvironmentallandmanagementpayments,andtheirpotentialadvantages,disadvantages,applications,limitationsandcosts.
7.
2CurrentthinkingonELMpaymentmethodologiesinEnglandandWalesDefraandtheWelshGovernmenthavebothannouncedanintentiontochangethewaythatlandmanagersarepaidforenvironmentalpublicgoodsandarereviewingthemethodsusedtocalculatepayments.
NosuchproposalshavebeenannouncedsofarinScotlandorNorthernIreland.
EnglandInHealthandHarmony,itsconsultationonthefutureforfood,farmingandtheenvironmentinaGreenBrexit(Defra,2018a),theGovernmentannounceditsintentiontointroduceamore'userfriendly'designforenvironmentallandmanagementpaymentsinEngland,whichwillaimtoreduceprescriptionandbureaucracy,whileencouragingparticipationandenablingenvironmentalimprovementstooccurcountrywide.
Italsopledgedtoinvestigateinnovativemechanismswiththepotentialtoachievebetterenvironmentaloutcomesandimprovevalueformoney.
Suchmechanismscouldincludereverseauctions,tendering,conservationcovenantsandactionswhichencourageprivateinvestmentinnaturalcapital.
Differentpaymentoptionswillbeexploredthroughthesemechanisms,withthepotentialtoofferfairrewardsandstrongincentivesforparticipation,inreturnforincreasedlevelsofpublicbenefitsfromimprovedenvironmentaloutcomes.
Responsestotheconsultationgenerallysupportedtheideaofoutcome-basedpayments,butalsohighlightedsomeofthechallengesinvolvedinsuchanapproach(Defra,2018b).
ThecommitmenttoexplorethepotentialofalternativepaymentmechanismswasreiteratedintheGovernment'sannouncementinAugust2018thatitwouldextendthePaymentbyResultspilotinEnglandbytwoyears13.
Announcingtheextension,SecretaryofStateMichaelGovecriticisedcurrentagri-environmentschemesasbeingoverlybureaucraticandinflexible,impedinginnovationbyfarmerswhowishtoimprovetheenvironment.
HestatedthatthePaymentbyResultspilotmarksashiftinhowtheGovernmentthinksaboutrewardingfarmersfortheirwork,andanexampleofthefutureoffarmpayments,rewardingdeliveryofenvironmentalpublicgoods.
InDecember2018,DefralaunchedatenderforastudytoidentifyandassessalternativepaymentmethodologiesforthenewELMschemeinEngland14.
Thecontractwillidentifyandappraisefouralternativepaymentmethodologies,oneofwhichwillbetheexisting13https://www.
gov.
uk/government/news/environmental-farming-scheme-given-green-light14Defra(2018)InvitationtoTender-EnvironmentalLandManagementPaymentsMethodologyPayingforPublicGoodsfromLandManagement46methodologybasedoncostsandincomeforgone.
Theadvantages,disadvantages,practicalapplicationsandvalueformoneyofthesealternativemethodologieswillbeassessed.
ThetermsofreferencemakeclearthattheGovernmentfavoursasystemofpaymentsthatislinkedtodeliveryofenvironmentaloutcomesandismoreflexibleandlessprescriptivethanthecurrentapproach,withthecalculationofpaymentslikelytobeinformedbyassessmentsofthevalueoftheenvironmentalbenefitsdelivered.
ThenewELMsystemwillbeunderpinnedbynaturalcapitalprinciples,sothatthebenefitsthenaturalenvironmentprovidestopeopleandwildlifeareproperlyvaluedandusedtoinformlandmanagementdecisions.
Anannextothetermsofreferencelistsfourtypesof"innovativemechanisms"thatcouldbeusedtodeliveragri-environmentbenefits–paymentbyresults,reverseauctions,agglomerationpaymentsandconservationcovenants.
WalesWelshGovernment(2018)thinkingissetoutintheconsultationpaperBrexitandourland:SecuringthefutureofWelshfarming.
ThisproposesaPublicGoodsscheme(providingongoingpaymentsforenvironmentalandsocialoutcomesfromactivelandmanagement)alongsideanEconomicResiliencescheme(supportingeconomicactivitiessuchasfoodandtimberproductionthroughinvestmentinphysicalandhumancapital).
Itisenvisagedthatthepublicgoodsschemewillpayforoutcomesforwhichthereiscurrentlynomarket,suchascarbonsequestration,waterqualityimprovement,publichealth,education,heritagemanagement,habitatandspeciesresilience,communityresilienceandthemaintenanceofruralsocialcapital.
TheconsultationpaperstatesthatthecurrentGlastiragri-environmentschemeislimited,sincefundingisrestrictedtocostsincurredandincomeforgone.
Itisarguedthatthislimitspaymentsinmarginalfarmingsystemswhereincomeforgoneislowornegative,leavinginsufficientincentiveforparticipation.
Schemesarealsorestrictedintheirscope,focusingonenvironmentaloutputsandnotsocialends,andoninputsratherthanoutcomes,suchthatlandmanagersmaymeetschemerequirementswithoutdeliveringthedesiredoutcomes.
TheWelshGovernmentinsteadproposesanoutcome-basedschemethatfocusesonrewardingdelivery.
Landmanagerswillbepaidanappropriatevalueforoutcomesrelatedtodomesticorinternationalcommitments,ratherthanbeingcompensatedforinputcosts.
Theschemewillbeoutcomebasedanditisenvisagedthatproxyoutputswilloftenbeusedtocalculatepayments.
Forexample,'improvedmitigationofclimatechangerisk'couldbepaidforthroughpaymentsforthenumberoftonnesofcarbondioxidesequesteredinnewwoodlandonafarm,estimatedbylandareaandtypeofwoodland.
'Healthyandfunctioninghabitatsandecosystems'couldberewardedthroughanoutputproxybasedonhectaresofhabitatlandunderactivepositivemanagement.
Valuationofoutcomeswillbeimportant,anditisacknowledgedthatnewtoolswillberequiredtodetermineappropriatesocialvaluesfortheoutcomessought,aswellasrobustmethodologiesformeasuringoutcome.
Valuationwillseektoreflectthesocialvalueofkeepinglandactivelymanagedthroughtheretentionofpeopleontheland.
Itisarguedthattheschemewillneedtogobeyondpaymentofcostsincurredandincomeforgone,eventhoughthisisthelimitspecifiedbyWTOrulesonagri-environmentpayments.
Responsestotheconsultationarecurrently(April2019)stillbeingprocessed.
7.
3DefiningatypologyforalternativeELMpaymentmethodologiesToidentifyoptionsforanELMpaymentmethodology,itisfirsthelpfultodefineatypologythatidentifiesandcategorisesthedifferentelements.
AnymethodologyforsettingELMpaymentswillhaveseveraldimensions,assetoutinTable7.
1.
PayingforPublicGoodsfromLandManagement47Table7.
1:DimensionsofanELMPaymentsMethodologyObjectivesoftheELMpaymentTheoverallobjectivesofELMpaymentswilldefinewhatpublicgoodsarepaidforandhowpaymentsshouldbedetermined.
Theseobjectivesmaybesetnationallyand/orlocally,e.
g.
throughnationalpolicies,nationaland/orlocalnaturalcapitalplans.
BasisforpaymentPaymentcanbebasedonactivities(landmanagementpractices)and/orresults(environmentaloutcomes).
Outcomescanbemeasuredatdifferentlevelsandindifferentways,fromdirecteffectsonextentandconditionofecosystems/naturalcapital(e.
g.
wetnessandvegetationstructureofpeatbogs)tolongertermoutcomesandeffectsonecosystemservices(e.
g.
carbonsequestration,waterquality,speciespopulations)PaymentcalculationmethodPaymentsmaybebasedeitheroncostsandincomeforgone,oronthevalueofbenefitsbeingsought,oronacombinationofthese.
Alternatively,theymaybeindividuallydeterminedusingothermethodssuchasreverseauctionsornegotiatedagreements.
PaymentunitsTheunitsusedtocalculatepaymentsvaryaccordingtothepaymentbasisandtakeavarietyofforms(e.
g.
perplan,perhectare,pergripblocked,perpoint,perbreedingpair,pertonneCO2e).
PaymentstructurePaymentsmaycomprisecapitaland/orannualpaymentsandbestructuredthroughfixeduniversalpaymentrates,tieredpaymentstructures,geographicalsupplements,spatiallytargetedpayments,performancerelatedtop-ups,orbyindividualagreementwithlandmanagers.
Otherfactorsincludepaymentfrequency,contractperiodsandwhetherpaymentsarefixedorvariableovertime.
GeographicalscalePaymentschemesmaycoverdifferentspatialscales–e.
g.
local,catchment,regionalornational,orwithrespecttospecificenvironmentalobjectives(e.
g.
withinaspeciesbreedingrangeordesignatedlandscapearea).
StakeholdersRelevantstakeholdersincludeeligiblebeneficiaries(e.
g.
farmers,foresters,landowners,otherbusinesses,NGOs;eitherindividuallyorasgroups),publicauthorities(withresponsibilitiesforsettingobjectivesandpaymentrates,schemeadministration,monitoringandevaluation),advisors,privatebuyers(e.
g.
watercompanies)andwiderinterests(e.
g.
environmentalgroups).
DeliveryarrangementsPaymentsarealsodefinedbyvariouspracticalconsiderationsincludingcontractualarrangements,institutionalstructures,proceduresforadministeringpayments,monitoringandverificationprocesses,andsupportingmeasuressuchasadviceandfacilitation.
Inpracticeindividualpaymentmethodologieswillinvolvedifferentcombinationsofthesedimensions.
Consideringeachofthesedimensionswillhelpindefiningadiscreteandcoherentsetofoptions.
Whilethedifferentdimensionslistedabovewilltogetherdefinethepaymentmethodology,someofthem(e.
g.
deliveryarrangements,paymentunits)mightberegardedasmattersofdetail,whileothersaremorecentralindistinguishingbetweenthemaintypesofpaymentPayingforPublicGoodsfromLandManagement48methodology.
Twoelementsarelikelytobecentralindefiningalternativepaymentmethodologies:1.
Thebasisforpayment(eitheractivitiesorresults);and2.
Themethodologyusedtosetpaymentrates.
Differentmethodologiescaninvolvedifferentcombinationsofthesetwodimensions.
Thecurrentsystemgenerallypaysforprescribedactivities,withpaymentratescalculatedfromestimatesofcostsincurredandincomeforgone.
However,paymentsforthedefinedactivitiesneednotnecessarilybebasedoncostsaloneandcouldtakeaccountofthevalueofthebenefitsthatthoseactivitiesdeliver.
Alternatively,results-basedpaymentscouldbecalculatedfromestimatesofthecostsoftheactivitiesthatwouldbeexpectedtoberequiredtodeliverthetargetresults,and/orthevalueofthetargetoutcomes.
7.
4Optionsforthebasisforsettingpayments–theELMlogicchainPaymentsforenvironmentallandmanagementmaybemadeforprescribedactivitiesorforoutcomes.
Outcomesmaybemeasuredintermsofimprovementsintheextentandconditionofnaturalcapitalassets,ortheireffectonthedeliveryofenvironmentalbenefitsandecosystemservices.
Figure7.
1presentsalogicchainlinkingELMactivitiesandenvironmentaloutcomes,usingtheexampleofpeatlandrestoration.
Figure7.
1:LogicchainforELMpaymentsThecurrentagri-environmentschemesineachcountryoffercapitalpaymentsforgripblockingandannualpaymentsfortheprescribedactivitiesofmoorlandmanagementandre-wetting,subjecttoconditionsformanagementoflivestock,deerandvegetation.
Paymentrates(perhectareandpergripblocked)arecalculatedbasedoncostsandincomeforgone.
Analternativeapproachcouldbetobasepaymentsontheoutcomesofpeatlandrestorationactivity,eitherinrelationtotheconditionofthepeatlanditselfortheecosystemservicesitdelivers.
Peatlandconditionmaybeassessedusingappropriateindicatorsrelatingtowetness,vegetationcoverandstructure.
Relevantecosystemservicesmayincludeenhancedcarbonstorageandsequestration,improvedwaterqualityand/orincreasesinspeciespopulations.
PayingforPublicGoodsfromLandManagement49Basingpaymentsonenvironmentaloutcomeshasthepotentialtoincentiviselandmanagerstomaximisetheenvironmentaloutcomesfromecosystemrestoration,ratherthanmerelyadheringtotheprescribedpractices.
Itmayalsoallowmoreflexibilitytolandmanagersintheirchoiceofmanagementpractices,andencourageinnovationdesignedtoenhanceenvironmentaloutcomes.
However,basingpaymentsonoutcomesintroduceschallengesrelatingtothequantification,monitoring,verificationandvaluationofoutcomes,aswellasthetimescalesanduncertaintiessurroundingtheirdelivery.
Figure7.
2illustratestherangeofoutcomesexpectedfromactivitiesspecifiedintheenvironmentallandmanagementcostingsmodel.
PayingforPublicGoodsfromLandManagement50Figure7.
2:Activitiesspecifiedintheenvironmentallandmanagementcostingsmodel,andtheirexpectedoutcomesActivitiesspecifiedinELMcostsmodel1stleveloutcomes–Changesinnaturalcapitalcondition2ndleveloutcomes–EnvironmentalpublicgoodsPriorityhabitatsMaintenanceofpriorityhabitatsRestorationofpriorityhabitatsExpansionofpriorityhabitatsExtentofeachpriorityhabitat(hectares)Proportionofeachhabitatinfavourablecondition(%)Conditionindicatorsforeachhabitatbasedonvegetationstructureanddiversity,hydrology,soilconditionetc.
e.
g.
speciesrichnessofhaymeadows;wetness,vegetationcoveranddiversityofbogsBiodiversity,e.
g.
speciespopulationsLandscapeandvisualamenityRecreationCarbonstorageandsequestrationWaterqualitymanagementAirqualitymanagementFloodmanagementPollinationBoundaryfeaturesMaintenanceofhedgerowsRestorationofhedgerowsandwallsCreationofhedgerowsExtentofhedgerowsandwalls(km)Proportionofhedgesandwallsinfavourablecondition(%)Structure,heightandspeciesdiversityofhedgerowsStructure,heightandstateofrepairofwallsLandscapeandvisualamenityCulturalheritagevaluesBiodiversity,e.
g.
numbersofnestingbirdsCarbonstorageandsequestrationWaterqualitymanagementAirqualitymanagementFloodmanagementHistoricenvironmentfeaturesManagementofgrasslandClearanceofscrubManagementofarableland(minimumtillage)ReversionofarabletograsslandConditionofhistoricenvironmentfeaturesProportionofhistoricenvironmentfeaturesatriskCulturalheritagevaluesEducationalandscientificvaluesLandscapeandvisualamenityManagementofarablelandManagementfornectarandpollinatorsDensityanddiversityofnectarandpollinatorplantsNumbersofseedheadsofplantsprovidingwinterbirdfoodBiodiversity,e.
g.
numbersofbreedingandwinteringbirdsLandscapeandvisualamenityPayingforPublicGoodsfromLandManagement51Managementforwinterbirdfood(winterbirdseed,winterstubbles)Managementfornesting,hibernationandshelterforinsectsandbirdsReversiontograssland(higherosion/pollutionriskanddeeppeatsoils)WintercovercropsRiparianbufferstripsManagementoffieldcorners,overwintertramlines,springcultivationforresourceprotectionArablefallowQualityofhabitatfornesting/hibernation/shelterSoilcoverandvegetationstructureRecreationPollinationCarbonstorageandsequestrationWaterqualitymanagementControlofsoilerosionFloodmanagementManagementofgrasslandManagementfornectarandpollinatorsManagementforwinterbirdfood(winterbirdseed,winterstubbles)Managementfornesting,hibernationandshelterforinsectsandbirdsSeasonallivestockremovalBufferstripsTakefieldcornersoutofmanagementLowinputgrasslandmanagementNumbersanddiversityofnectarandpollinatorplants/lengthoffloweringseasonNumbersofseedheadsofplantsprovidingwinterbirdfood/lengthoftimeseedisavailableQualityofhabitatfornesting/hibernation/shelterSoilcoverandvegetationstructureVegetationspeciesdiversityandswardstructureBiodiversity,e.
g.
numbersofbreedingandwinteringbirdsLandscapeandvisualamenityRecreationPollinationCarbonstorageandsequestrationWaterqualitymanagementControlofsoilerosionFloodmanagementOrganicfarmingOrganicmanagementoflandOrganicconversionSoilstructure,formationandfunctionWaterretentionVegetationcoverNumberanddiversityofplantspecies,includingnectar/pollinatorplantsandseedsourcesBiodiversityPollinationservicesCarbonstorageandsequestrationWaterqualitymanagementControlofsoilerosionFloodmanagementPayingforPublicGoodsfromLandManagement527.
5MethodsforsettingpaymentratesWhetherbasedonactivitiesoroutcomes,paymentratescanbesetindifferentways,basedon:Thecostsandincomeforgoneforundertakingthemanagementpracticesrequired(orassumedtoberequiredtodeliverthetargetoutcomes);Thevalueofoutcomesdelivered;Individualagreementsbetweenthebuyer(thestate)andsellers(landmanagersorgroupsoflandmanagers),whichsetmutuallyacceptablepaymentrates.
Thiscouldbeachievedthroughnegotiationortenderingprocessessuchasreverseauctions.
Acombinationoftheseapproachesisalsopossible,forexamplesettingcorepaymentratesbasedoncostsandincomeforgonewithtop-upstoreflectnaturalcapital/ecosystemservicevalues.
7.
6TheprosandconsofalternativepaymentmethodologiesPaymentsforactivitiesvspaymentforoutcomesThecurrentapproachtopayingforenvironmentallandmanagementactivitieshasseveraladvantages:Itistriedandtested–havingbeenimplementedsincethefirstagri-environmentschemesinthe1980s;Throughaprocessoftrialling,monitoringandevaluatingdifferentprescriptions,wehaveanincreasing(thoughstillincomplete)knowledgebaseonwhatworksandwhatprescriptionswilldelivertherequiredoutcomes;Itisrelativelyeasytounderstand–clearrulescanbesetaboutthepracticesrequired,permittedandnotpermitted–asabasisforeligibilityforpayments;Thesystemprovidescertaintytolandmanagersaboutthelevelsofpaymentstheyreceive,providingtheyundertakethepracticesrequired–thisreducesriskandprovidesastablesourceofincome;Basingpaymentsonspecifiedactivitiesmakespaymentcalculationsrelativelystraightforwardusingthecosts+incomeforgoneapproach,asthereisaclearlinkbetweentheprescribedactivitiesandthecostsincurredandincomeforgone;Paymentforactivitiesgivesbudgetarycertainty,asthelevelsofpaymentsareknownatthetimetheagreementisestablished.
However,thecurrentsystemalsohasseverallimitations:Ithasbeencriticisedasbeinginflexibleandbureaucratic,requiringlandmanagerstofollowasetofpre-determinedrulestobeeligibleforpayments;Nationallydeterminedrulesaboutlandmanagementpracticesmayfailtoreflectlocalvariationsinfarmingconditionswhichmayinfluenceenvironmentalneedsandoutcomes;Paymentsrequirelandmanagersonlytodeliveraminimumlevelofenvironmentalactivitytoqualifyforthepayment–thereisnoincentivetogobeyondthisortostrivetodeliveradditionalenvironmentaloutcomes;Arules-basedsystemofferslimitedopportunityforlandmanagerstoapplylocalknowledgeortrynewapproachestoenhanceenvironmentaloutcomes;Monitoringcompliancewithmanagementprescriptionsmaynotalwaysbeeasy.
Forexample,itmaybemoredifficulttocheckcompliancewithprescribedlimitsonfertiliserapplicationsthantoassesschangesinvegetationstructureandcomposition;andThesystemasawholehassofarfailedtoaddressenvironmentallandmanagementprioritiesintheUK.
Forexample,farmlandwildlifecontinuestodecline,andwaterqualitytargetshavenotbeenmet.
ItcanbedebatedwhetherthePayingforPublicGoodsfromLandManagement53paymentsmethodologyhascontributedtothisfailure,alongwithotherfactorssuchaslimitationsonfundingandthescaleofactivitysupported.
ThemodellingestimatesinthisstudysuggestasignificantupscalinginactionandresourcesisneededifenvironmentallandmanagementprioritiesintheUKaretobefullyaddressed.
Resultsbasedpaymentsthereforeofferpotentialadvantagescomparedtoactivity-basedpayments.
Bypayingforresultsratherthanactions,theyprovidemorefreedomandincentivetolandmanagerstovarylandmanagementactions,toadaptapproachestolocalconditionsandknowledge,totestnewapproaches,andtoseektoenhanceenvironmentaloutcomesovertime.
Providingmeasurableoutcomescanbedefined,theypotentiallyofferadvantagesinmonitoring,becauseresultscanbeobservedandthereisnoneedtoverifycompliancewithrules.
Challengeswiththeresults-basedapproachinclude:Itismoreuncertainforparticipants,becausetheresultsoflandmanagementactionsmaynotbepredictable.
Aswellasgapsinknowledgeandskills,uncertaintymaybeincreasedbychangesinexternalvariablessuchasweatherconditionsorwiderenvironmentalpressures;Theremayalsobeuncertaintiesfortheauthorities,asbudgetarycostswillbeaffectedbyuncertaintiesinschemeresults;Timelagsmayaffectthedeliveryofenvironmentaloutcomes.
Theconditionofecosystemsmaytaketimetorespondtochangesinmanagementpractice.
Forexample,itmaytakedecadesforpeatlandstoreachfavourableconditionfollowingrestorationactivities.
Dependingonthepaymentstructure,thismaycreatelargetimelagsbeforelandmanagersarepaidforresults;Someoutcomes(e.
g.
waterquality,speciespopulations)maybebeyondthedirectcontrolofindividuallandmanagers.
The"firstleveloutcomes"illustratedinFigure7.
1abovearelikelytorespondmoredirectlytochangesinlandmanagement,andbesubjecttolessuncertaintyregardingexternalinfluences,thanthe"secondleveloutcomes";Theabilitytosetpaymentsanddetermineeligibilityisdependentontheabilitytodefinerobustresults-basedindicators.
Thismayvarybetweendifferentenvironmentaloutcomes.
Resultsbasedpaymentswillbedifficulttoimplementifresultsaredifficulttomeasureortomonitororaresubjecttofluctuations.
Forexample,whilethenumberofplantspeciesinameadowmightberelativelyeasytomeasureandverify(withappropriateskills),numbersofbutterfliesfluctuategreatlyfromdaytodayandyeartoyearinresponsetoweatherconditionsandothervariables.
Someoutcomes(e.
g.
carbonsequestration)mightneedtobemodelledratherthanmeasureddirectly,introducingpotentialuncertaintiesregardingestimationmethods.
WithreferencebacktothelogicchaininFigure7.
1,thechoiceofoutcomesonwhichpaymentsarebasedislikelytobeanimportantfactorwhenseekingtoaddressthechallengesassociatedwithresults-basedpayments.
Linkingpaymentstofirstleveloutcomes(naturalcapitalcondition)mayreduceuncertaintyandtimelagsandmayhelpindefiningrobustandmeasurableindicatorsonwhichtobasepayments.
Thisapproachhasbeenusedinresults-basedpaymentschemesinEurope,suchas:PaymentsforflowerrichgrasslandsinGermany,whicharebasedonthepresenceofindicatorspecies15;15http://ec.
europa.
eu/environment/nature/rbaps/articles/2_en.
htmPayingforPublicGoodsfromLandManagement54TheBurrenFarmingforConservationProgramme,Ireland16,whichcombinesresults-basedpaymentsbasedonconditionscoresforgrasslandandotherhabitatswithpaymentsforcapitalworks;TheErgebnisorientierterNaturschutzplan(ENP-'Results-basednatureconservationplan')inAustria,whichoffersresults-basedpaymentsforeachparceloflandbasedonmeasurableindicatorsforhabitatsandspecies17;RAPCA(ReddereasPasto-CortafuegosdeAndalucía)18inAndalucía,Spain,whichbasespaymentsdesignedtocontrolwildfiresonassessmentsofvegetationstructureEcologicalcompensationareas–forspeciesrichvineyardsandspeciesrichgrasslandsinSwitzerland19,wherepaymentsaresetatastandardperhectareratebutconditionalonachievingaminimumecologicalconditionscore;GrasslandmanagementschemesinFrance20,wherepaymentismadeforachievingaminimumlevelofecologicalconditionorthepresenceofindicatorspecies.
Theseexamplesindicatethatresults-basedpaymentsmaybevariedaccordingtoanindicatorscore(asintheBurrenscheme)ormerelyconditionalonachievingaminimumlevelofecologicalcondition(asinthecaseoftheFrenchandSwissgrasslandschemes).
AsimilarapproachisbeingadoptedintheEnglandRBAPSpilots(LePage,2018):Inthearablepilot,paymentsaretieredbythenumberofplantspeciesprovidingseedheadsaswinterbirdfoodandthenumberofsummerfloweringplantspeciesbenefitingpollinators;andIntheWensleydalepilot,paymentsarebasedonhaymeadowconditionscore(includingnumbersofpositiveandnegativeplantspeciespresent,andwhethertherearedamagingactivities),andahabitatscoreforbreedingwaders(basedonvegetationheight,rushcover,scaleandqualityofwetfeaturesandpresenceofdamagingoperations).
ExperiencefromtheEnglandpilotstodatesuggeststhatresultshavebeenpromisinginincentivisingenvironmentalmanagementandencouraginglandmanagerstoenhanceresultsovertimeandinbuildingknowledgeandbuy-in.
Theyarealsomoreflexibleandcanbelessbureaucraticthanrules-basedschemes.
Asignificantup-frontinvestmentisrequiredtoprovideadvicetolandmanagersandtobuildconfidence.
Externalvariablessuchastheweathercanaffectresultsandintroducerisks.
Anotherchallengerelatestothescalabilityoflocallybasedschemesandwhetheritisfeasibleandpracticabletousethemasthebasisforanationalprogramme.
ElsewhereinEurope,schemeshavealsobasedpaymentsonthepresenceandnumberofpairsofbreedingspecies(e.
g.
harriersinGermany,goldeneaglesinFinland,wadersintheNetherlands,andlargecarnivoresinSweden)(IEEP,2014).
However,thereisoftenanelementofcompensationintheseschemes(i.
e.
theycouldbeseenaspaymentsfortoleratingthespeciesandadaptingtoitspresence),anditisarguablehowcloselypaymentslinktoresults(sincelowpopulationdensityspeciesarelikelytobeinsensitivetomanagementpractices).
16http://ec.
europa.
eu/environment/nature/rbaps/fiche/burren-farming-conservation-programme-bfcp_en.
htm17http://ec.
europa.
eu/environment/nature/rbaps/fiche/results-based-nature-conservation-plan-ergebnisori_en.
htm18http://ec.
europa.
eu/environment/nature/rbaps/fiche/rapca-red-de-areas-pasto-cortafuegos-de-andalucia-_en.
htm19http://ec.
europa.
eu/environment/nature/rbaps/fiche/search/country_CH_en.
htm20http://ec.
europa.
eu/environment/nature/rbaps/fiche/search/country_FR_en.
htmPayingforPublicGoodsfromLandManagement55CostsandincomeforgonevspaymentsbasedonnaturalcapitalvaluesCostsincurredandincomeforgoneThecurrentapproachtobasingpaymentsoncostsandincomeforgoneisdefinedinWTOrules,andappliedintheEUthroughtheRuralDevelopmentRegulation.
WTOrulesstatethattobegreenboxcompliant,agri-environmentpaymentsshouldnotexceedcostsincurredandincomeforgone.
TheRDRstatesthatpaymentsshallcompensatebeneficiariesforallorpartoftheadditionalcostsandincomeforgoneresultingfromthecommitmentsmade.
Wherenecessary,theymayalsocovertransactioncostsuptoavalueof20%ofthepremiumpaidfortheagri-environment-climatecommitments.
Wherecommitmentsareundertakenbygroupsoffarmersorotherlandmanagers,themaximumlevelshallbe30%.
ThesepercentagelimitshavebeensetbytheEUratherthanbeingspecifiedbytheWTO.
However,paymentsintheUKhavegenerallynotincludedanallowancefortransactioncosts.
Somecommentators(e.
g.
Bureau,2017)havearguedthattheCommissionhasmadeanoverlystrictinterpretationofWTOrulesintheRDR,andthatmoreflexibilitycouldbeappliedindivergingfromthecostsandincomeforgoneapproachinordertorewardenvironmentaloutcomes.
Theadvantagesofthecurrentapproacharethat:Itisanestablished,triedandtestedsystemthathasbeenimplementedintheUKforthelast30years;Itisarelativelylow-costwaytoprocurelandmanagementactivities-settingpaymentsoncostsandincomeforgonelimitsbudgetarycostswhilestillachievingwidespreaduptake;Thereissomeflexibilitywithinthemethodtovarypaymentratestoenhanceincentivesanduptakewherenecessary,particularlyrelatingtotheassumptionsadoptedregardingthebaselinepractices,costsandincomeforgone.
Applyingmoregenerousassumptionsregardingthesevariablesallowshigherpaymentrates.
Higherratesofuptakecanbeachievedbybasingthecostsandincomeforgonecalculationsonthetypesoffarmsandfarmsystemsthatneedtobeenrolledtoachievethetargetrateofuptake.
Itcouldalsopotentiallybeextendedtotakeaccountofthewholecostsofmanagementofmarginalhighnaturevaluefarms(seeSection4);Themethodispracticable–whiletheremaybesomedebateabouttheassumptionsthatcanbeemployedtoarriveatpaymentrates,theyarerelativelyeasytocalculatebasedonexistingdata;Standardpaymentratescanbeset,providingcertaintytoparticipantsandreducingadministrativeburdens;andItiscompatiblewithWTOrulesongreenboxpayments(andwouldbelikelytoremainso,evenifappliedinamoreflexibleway).
Disadvantagesarethat:Thesystemreliesonanassumptionthatthebenefitsofthepracticessupportedexceedthecosts,whichmaynotnecessarilybethecase;Costsandincomesvarybetweendifferenttypesoffarmandindifferentlocations.
Paymentratesthereforeneedtobesetbasedon"average"businessesandwillinevitablyovercompensatesomewhileundercompensatingothers.
Inconsequence:oSchemeswilltendtoattractparticipantsthatcancomplymosteasilyandcheaplywiththestatedrequirements(oralreadydoso),notnecessarilythosewithpotentialtodeliverthegreatestenvironmentalbenefits;oPaymentratesmaybesufficienttoachieveamoderatelevelofuptakebutmayneedtoincreasesignificantlyastargetlevelsofuptakerise.
Settingstandardpaymentratesmayfailtoachievehighlevelsofuptakewithoutgreatlyovercompensatinglowcostparticipants;PayingforPublicGoodsfromLandManagement56Wherepaymentsdoequatetocostsandincomeforgone,thisofferslittleprofitfortheaveragelandmanager.
AshiftfromdirectpaymentstoELMpaymentsbasedoncostsandincomeforgonewillthereforetendtoreducefarmincomes(otherthingsbeingequal).
ELMpaymentsmadeonthisbasismaynotbesufficienttomaintaintheviabilityofmarginalhighnaturevaluefarms(seeSection4).
Atthesametime,itisimportanttorecognisethatfarmshavedifferentcharacteristicsandcoststructuresandthatpaymentratesbasedoncostsandincomeforgonefortheaveragefarmwillbeprofitableformanyfarms.
Thesecondissuecouldpotentiallybeaddressedbyvaryingpaymentstoreflectdifferencesincostsbetweenregionsandfarmingtypes,thoughthiswouldincreasecomplexityandadministrativeburdenandmightfaceresistancefrombeneficiaries.
NaturalcapitalvaluesandbenefitsRecognisingtheseproblemsandlimitations,DefraandtheWelshGovernmentarebothinterestedinexploringalternativepaymentmethodologiestothecostsandincomeforgoneapproach.
DefrahasindicatedthatthenewELMsystemwillbeunderpinnedbynaturalcapitalprinciples,sothatthebenefitsthenaturalenvironmentprovidestopeopleandwildlifeareproperlyvaluedandusedtoinformlandmanagementdecisions.
Whilerecognisingthatnotallaspectsofnaturalcapitalandthebenefitsprovidedtopeoplecanbeeasilymeasuredandvaluedinmonetaryterms,DefrahasindicatedthatELMpaymentswilllikelyrequiresomeformofestimationofthevalueofenvironmentalbenefitsinordertocalculatepayments.
Similarly,theWelshGovernmenthasproposedthatlandmanagersbepaidanappropriatevalueforoutcomes,ratherthanbeingcompensatedforinputcosts,acknowledgingthatvaluationofoutcomeswillbeimportantandthatnewtoolswillberequired(especiallyforsocialoutcomes).
Paymentsbasedonnaturalcapitalvaluesandbenefitshavethepotentialtoenhanceenvironmentaloutcomesby:Contributingtothedeliveryofthenaturalcapitalapproach,increasingfocusontheimportanceofinvestinginthecreation,restorationandmaintenanceofnaturalcapitalassets,thepublicbenefitsthisdeliversandtheirvaluetosociety;EnhancingtherewardsthatlandmanagersreceivefromparticipatinginELMschemes,helpingtoincentiviseELMactivitieswhilesustaininganddiversifyingincomes;EncouragingthechoiceandlocationofELMpracticeswheretheyhavepotentialtomaximisepublicbenefits;andAttractingprivatesectorfinanceforELM,byprovidingaframeworkinwhichadditionalbuyerscanpayforthedeliveryofdifferentbenefits.
However,thisapproachhasseveralchallengesandpotentiallimitations:Itisnotyetclearhowpaymentsbasedonnaturalcapitalvaluesandbenefitswouldworkinpractice,andhowvaluationevidencewouldbeusedtocalculatepaymentrates;Evidenceofthevalueofnaturalcapitalandecosystemservicesisincomplete.
Someservices(e.
g.
carbonstorageandsequestration)arerelativelyeasilyvalued,whileothersaremuchmoredifficulttovalue(e.
g.
biodiversity)ortoquantify(e.
g.
floodmanagement).
Furthercomplicationsarethatnaturalcapitalvaluesvarygeographically,andthatevidenceofmarginalaswellastotalvaluesislikelytobeneededtoinformcalculationsofpaymentrates;Basingpaymentsonnaturalcapitalvaluesratherthancostspresentsariskthatbudgetarycostswillincreasesignificantly,sincemostevidencesuggeststhatthebenefitsofELMactionsgreatlyexceedtheircosts.
GiventhatpublicbudgetsforELMschemesarelikelytobefinite,basingpaymentsonvaluesratherthancostscouldincreasepaymentratesperhectareandthereforelimitthescaleofELMactionthatcanbedelivered.
PayingforPublicGoodsfromLandManagement57WehaveestimatedtheoverallcostsofmeetingELMprioritiesintheUK–basedoncostsincurredandincomeforgone,ataround2.
5billionannually(Section2).
GiventhatthereismuchevidencethatthebenefitsofELMactiongreatlyexceedthecosts,theoverallcostofbasingpaymentsonenvironmentalbenefitscouldbemuchlargerthanthis.
ConstraintsontheELMbudgetwouldlikelylimitthescaleofELMactionthatcouldbedeliverediflevelsofpaymentincreased.
InitsFutureFarmingandtheEnvironmentEvidenceCompendium,Defra(2018)estimatedabenefitcostratioof3.
2:1forELMpaymentsinEngland–i.
e.
each1spentonschemepaymentsdeliverspublicgoodstothevalueof3.
20.
Thissuggeststhatpaymentratescouldbetripledandstilldelivervalueformoneyforthetaxpayer.
Suchachangewouldsubstantiallyincreaseprofitsforlandmanagers,whilereducingthelevelofELMactivitythatcouldbepaidforwithinafixedbudget.
Forthisreason,itisunlikelythatpaymentrateswouldbebaseddirectlyonestimatesofthevalueofbenefits–itismorelikelythatsettingofpaymentrateswouldbeinformedbyestimatesofvalue.
Studiesofthevalueofenvironmentalbenefitshavebeenusedtoinformevaluationsofschemes,helpingtoassessvalueformoney21.
Theycanalsohelpspatialtargetingofpaymentsbyprovidinginformationabouthowvaluesvarybylocation22.
ExamplesofnaturalcapitalvaluationevidencebeinguseddirectlytocalculateELMpaymentratesare,however,lacking.
Basingpaymentsoncostsorvalues–implicationsforconsumerandproducersurplusAshiftfrompaymentbasedoncostsandincomeforgonetothevalueofoutcomesislikelytoentailashiftinthevalueofconsumerandproducersurplusresultingfromELMschemes.
Consumersurplusisthedifferencebetweentheamountaconsumeriswillingandabletopayforagoodorservice,andthepriceactuallypaid.
InthecaseofELMschemes,thiscanbeseenasthedifferencebetweenthevalueofthebenefitsoftheseschemestosociety,andtheircoststothetaxpayer.
Defra'sestimatethateach1spentonELMpaymentsyieldsbenefitsof3.
20suggeststhatthecurrentsystemdeliverssubstantiallevelsofconsumersurplus–i.
e.
thebenefitstosocietygreatlyexceedcoststothetaxpayer.
Producersurplusisthedifferencebetweenthepriceaproducerispaidforsupplyingagoodorserviceandtheminimumpriceatwhichtheywouldbewillingtosupplyit.
AssumingthatlandmanagersrequirefinancialcompensationtoadoptELMpractices,theminimumpaymenttheywouldbepreparedtoacceptwouldbeequivalenttothecostsincurredandincomeforgone.
ProducersurplusisthereforethedifferencebetweentheELMpaymentandthecostandincomeforgonefortheindividualfarm.
21E.
g.
Defravaluationstudiesofenvironmentallandmanagementschemes,BiodiversityActionPlan,SSSIsetc22Forexample,usingtoolssuchasNaturalCapitalValuationOnline(NEVO)PayingforPublicGoodsfromLandManagement58Thefigureaboveillustratesthepotentialeffectsonproducerandconsumersurplusinchangingthepaymentmethodology.
Letusassume,forsimplicity,thatenvironmentallandmanagersallhavesimilarcoststructuresandincurcostsandincomeforgoneofcperhectareinundertakingELMpractices.
InexampleA,thegovernmentisthereforeabletoprocureELMpracticesoverqhectaresatacosttothetaxpayerofqc.
Ifwealsoassumethatforeachhectare,environmentallandmanagementdeliversbenefitsofb,thebenefitstothetaxpayeramounttobqandthereisaconsumersurplusofqx(b-c).
However,thereisnoproducersurplusandlandmanagersreceivetheminimumrewardfortheirefforts.
Thegovernmentcanpaylandmanagersmorethancanduptobperhectare,resultinginareductioninconsumersurplusandanincreaseinproducersurplus,enhancingtheincomesoflandmanagers.
Apaymentofbperhectarewouldshifttheentireconsumersurplustoproducers(exampleB).
Aswellasaffectingthebalanceofcostsandbenefitsbetweenproducersandconsumers,thechoiceofpaymentratealsoaffectsthebudgetarycostoftheELMschemeandtheamountoflandmanagementactivitythatcanbeprocured.
Intheexampleabove,theincreaseinpaymentratefromctobresultsinamajorincreaseinthecosttothetaxpayer(fromqctoqb)forthesamelevelofenvironmentallandmanagementactivity(q).
Inreality,theELMbudgetislikelytobelimited,sothehigherpaymentratewouldreducetheextentofELMactivitythatcouldbeprocured.
Ontheotherhand,theassumptionofaflatsupplycurveisunrealistic,soevenpaymentsbasedoncostsandincomeforgonewouldlikelyhavetoincreasetoenhanceuptake.
Furthermore,achangeinthepaymentmechanismandlevelmightbeexpectedtoincentivisehighervaluelandmanagementactivities,helpingtoenhancebenefitsaswellascosts.
Theexampleaboveisanoversimplification,sinceenvironmentallandmanagersvarywidelyintheircoststructures,knowledgeandskills,motivationsandlocalcircumstances,sotheassumptionofahorizontalsupplycurve(wherethegovernmentcanprocureanyamountofELMactivityatpricec)isfarfromthereality.
Thecosts,incomeforgone,andbenefitsofELMactivitiesvarywidelyandaredifficulttoquantifyandstandardise.
ThebenefitsfromELMactivitycanalsobeexpectedtovarywidelyinrelationtolocalcircumstancesandlandmanagementpractices.
ThemarginalbenefitswouldalsonormallydeclineasELMactivitiesincrease–forexampletheaddedbenefitofanextrahectareofhabitatorlandscapemightbeexpectedtodeclineassupplyincreased.
PayingforPublicGoodsfromLandManagement59Whilehighlysimplified,theexampledoeshelptoillustratethepotentialeffectsofchangingthepaymentmechanismonproducerandconsumersurplus,budgetarycostsandlandmanagers'incomes.
AnimportantconsiderationishowtheserelationshipsmaychangeasELMpaymentsareupscaledandmovefromthesecondpillaroftheCAPtoplaythecentralroleinpublicsupportforlandmanagement.
Todate,therehasbeengenerallywidespreaduptakeofagri-environmentschemesbasedoncostsandincomeforgone,thoughthishasbeenconstrainedbythepaymentratesofferedforsomeoptions,andtherehavealsobeensomefluctuationsinuptakefollowingintroductionofnewschemes.
However,wemightexpectasignificantupscalingofELMactivitytorequireincreasesinratesofpayment-i.
e.
thesupplycurvewouldslopeupwards.
Thiswouldenablelandmanagerswithlowercoststoprofitmorefromthedeliveryofenvironmentalpublicgoods,henceincreasingproducersurplus.
AmajorlimitationofthecostingsmodelisthatitisbasedentirelyonexistingELMpaymentrates–itassumesthatthelevelsofenvironmentallandmanagementactivityrequiredtomeetenvironmentalprioritiescanbeachievedatexistinglevelsofpayment.
Wemightexpect,however,thatincreasingELMactivityoverallwouldrequirepaymentratestoincrease,inordertoattractlandmanagerswhoarelessmotivatedtojoinschemesorincurhighercostsindoingso.
EvidencethatthereisalargegapbetweenthecurrentcostsofELMschemesandthebenefitsdeliveredsuggeststhatpaymentratescouldincrease,enhancingrewardstolandmanagersandincentivisinguptake,whilestilldeliveringgoodvalueformoneyforthetaxpayer.
Atthesametime,budgetaryconstraintswillmeanthatcareneedstobetakentolimitELMpaymentratestoenablebroadparticipationandtomaximisethecontributionofschemestoenvironmentalobjectives.
Allofthissuggestsaneed–whensettingpaymentrates-tofindanappropriatebalancebetweencosts/incomeforgoneandthevalueofbenefits.
Valuationofbenefitsisatoolwhichcanhelpinfindingthisbalance,ratherthanadirectmeansofdeterminingratesofpayment.
Boththecosts/incomeforgoneandnaturalcapitalvalues-basedapproachesthereforepresentchallengesinsettingpaymentratesthatareacceptabletolandmanagers,reflectvariationsinlocalconditionsandbusinessstructures,takeaccountofenvironmentalbenefitsandvalues,andfindtherightbalancebetweenthecostsofservicedeliveryandthevalueofbenefitsdelivered.
Itshouldbenotedthatcombinedmethodologies–whichcalculatepaymentswithreferencetobothcostsandincomeforgoneandthevalueofbenefits–couldalsobeconsidered.
Forexample,oneapproachwouldbetousecostsandincomeforgoneasthestartingpointincalculatingpaymentratesbutvaryingthemtoincentiviseenvironmentaloutcomesandreflectvariationsinnaturalcapitalvalues.
ReverseauctionsReverseauctionshavethepotentialtoaddressmanyofthesechallengesandtoestablishpricesforELMdeliverythatbalancecostsandbenefitsandareacceptabletobothbuyersandsellers.
Reverseauctionsarecompetitivebiddingsystemsinwhichmultiplesellerscompetetosupplyaservice,biddingdownpricesandenablingbuyerstolocatethemostcompetitivesellers,therebyhelpingtoallocatebudgetsefficiently(WorldResourcesInstitute,2007).
TheycanpotentiallybeusedtoprocureELMactivities(i.
e.
landmanagementpractices)and/orpublicgoodoutcomes.
Oneofthebest-knownexamplesinternationallyistheBushTenderauctionforvegetationprotectioninVictoria,Australia,begunintheearly2000s,whichhassubsequentlyfollowedbynumerousotherexamplesinthatcountry(Rolfeetal,2017).
IntheUK,EnTrade-anonlinereverseauctionsplatformusedbyWessexWater,UnitedUtilitiesandNaturalEngland-hadrunsixauctionsineightcatchmentsbyDecember2017,receivingbidsforover150tonnesofnitrogenatacostofover300,000(Peacock,2017).
Advantagesofreverseauctionsarethatthey:PayingforPublicGoodsfromLandManagement60Helptosetpricesthatareacceptabletobothbuyersandsellers,helpingtoovercomeproblemsassociatedwithimperfectandasymmetricinformation;Addresstheproblemsassociatedwithfixedpaymentratesandvaryingcoststructures,byprovidingflexibilityforlandmanagerstovarytheirbidsaccordingtotheircircumstances;andHavebeenshowntodeliverenvironmentallandmanagementactivitiescost-effectivelywheretheyhavebeenapplied.
Potentiallimitationsarethatthey:Havemostlybeenimplementedonalimitedscaleonly,toaddressspecificlocalneeds.
AccordingtoRolfeetal(2017),theoryandexperimentsclearlysuggestthatuniformpricesarelikelytobemoreefficientinlargescale,repeattendersettings;Mayhavehighadministrativeandtransactioncosts,becauseofthetimeneededbylandmanagerstopresentbidsandbytheauthoritiestoevaluatethemandselectsuccessfulbidders;Maypresentchallengesinallocatingresourcesacrosscompetingbidswhichpromisedifferentcombinationsondisparateenvironmentaloutcomes;andAreunfamiliartomostlandmanagers;aprocessoflearningandsupporttobuildconfidencemayberequiredtosecureparticipation.
7.
7CasestudiesofthepotentialforalternativepaymentmethodologiesThefollowingcasestudiesexplorethepotentialtoconsideralternativepaymentmethodologiesintwodifferentenvironmentallandmanagementsettings:A.
Managementandrestorationofblanketbog;andB.
Managementofarablelandforfarmlandbirdsandpollinators.
A.
ManagementandrestorationofblanketbogELMneedsandprioritiesBlanketbogisawetpeatlandhabitatthatdominatesmuchofuplandBritainandisoneofthemostextensiveremainingsemi-naturalhabitatsintheUK,coveringatotalofaround2.
25millionhectaresofwhich80%areinScotland.
MuchoftheUKresourcehasbeendegradedthroughdrainage,burning,afforestation,overgrazing,peatcuttingand/orairpollution,andlessthan20%isestimatedtobeinanaturalornear-naturalcondition(Tayloretal,2015).
Thisadverselyaffectsitshabitatvalueandthedeliveryofecosystemservices(suchasregulationofclimate,waterflowsandwaterquality).
Actionisneededtorestoredegradedblanketbogs,byblockingdrainstoraisewaterlevels,reducinggrazingpressure,removingplantationsandrevegetatingbarepeat.
Ongoingmanagementdependsonavoidingovergrazingandotherdamagingoperationssuchasburning(JNCC,2008).
Currentagri-environmentpaymentprescriptionsandratesAgri-environmentschemesinallfourcountriesoftheUKofferpaymentsformaintenanceandrestorationofblanketbog,aswellascapitalgrantsforblockinggripsanddrainagechannelsanderectingfencingtoexcludelivestock.
Basicmanagementpaymentsrangefrom1.
24/ha/yr(Scotland,formanagingdeeronly)to58/ha/yr(Wales).
Varioussupplementsareprovidedformanagementofvegetation,rewettingand/orexcludinglivestock,whichmeanthatannualpaymentscanvarybetween1and100perhectareperyeardependingonthemanagementadopted.
FurtherdetailsofpaymentratesaregiveninAnnex1.
FinancialneedsidentifiedinenvironmentallandmanagementcostingsmodelThecostingsmodelestimatestheannualcostsofmaintainingblanketboghabitatsatbetween34millionand109millionperyear,withadditionalrestorationcostsat56-62PayingforPublicGoodsfromLandManagement61millionperyearovera10-yearperiod.
Evidenceinthewiderliteraturesuggestsawiderangeofrestorationcostsfrom200-7,000perhectare,dependingontheconditionoftheecosystem,andsuggeststhattheaboveestimatesmaybeconservative.
SomefurtherdetailsofthecostsofblanketbogrestorationandmanagementaregiveninAnnex1.
BenefitsofELM–outcomes,ecosystemservicesandvaluesBlanketbogdeliversvaluableecosystemservices.
Themostimportantoftheseinclude:Climateregulation;Waterqualityregulation;Floodprevention;andBiodiversity.
Thedeliveryoftheseservicesisgreatlyinfluencedbynaturalcapitalcondition.
Degradationofpeatlandscanchangethenfromacarbonsinktoacarbonsource,underminetheiradaptivecapacitytoclimaticandotherchangesandcompromisethedeliveryofthecriticalservicestheyprovide(GlenkandMartin-Ortega,2018).
Avarietyofstudieshavevaluedblanketbogsandtheservicesthattheyprovide:Climateregulationserviceshavebeenassessedbyestimatingthevalueofcarbonstoredandsequestered,andvaluingthisusingthenon-tradedpriceforcarbon.
Studieshaveestimatedawiderangeofperhectarebenefitsofrestoration,dependingontheconditionoftheecosystemandtherestorationmethod.
eftec(2015)estimatedbenefitcostratiosofaround2:1formostrestorationworks,basedoncarbonvaluesalone,butrisingto20:1forlowcostmeasuressuchascessationofburningandreductionofovergrazing.
TheNaturalCapitalCommittee(2015)foundthatpeatlandrestorationonaround140,000hectaresinuplandareaswoulddelivernetbenefitsof570millionover40years,basedoncarbonvaluesalone.
Waterqualityimprovementscanbeassessedthroughestimatesofreducedwatertreatmentcosts,withpeatlandrestorationimprovingwaterqualitybyreducingsediment,phosphateanddissolvedorganiccarbon.
Benefitsvarybylocationsoarelesseasilyestimatedthroughstandardisedassessments.
eftec(2015)estimatedthewaterqualitybenefitsofrestorationofpeatlandsatKeighleyMoorat97/ha/yearandsuggestedthatthisfigurecouldbeextrapolatedtootheruplandareaswithhighrainfallclosetocentresofpopulation.
ThewaterqualitybenefitsofaPESprojectatPumlumon(CambrianMountains)wereestimatedat75/ha/year.
Floodmanagementbenefitsarepotentiallysignificantandseenthroughreductionsinthecostsoffloodingandexpendituresonflooddefencemeasures.
However,theyvarywidelybylocationandscientificuncertaintiesmakethemdifficulttoestimate.
Biodiversitybenefitshavebeenestimatedusingsurveysofthepublic'swillingnesstopaytoprotectandrestoreblanketboghabitats.
Thesestudieshavetypicallyassessedbiodiversityvaluesincombinationwithotherecosystemservices(suchasclimateandwaterqualityregulation).
GlenkandMartin-Ortega(2018)estimatedthebenefitsofimprovingScottishpeatlandsfrompoortogoodconditionat242-302perhectareperyear,andfromintermediatetogoodfrom0to414perhectareperyear.
Itwasestimatedthata10,000-hectarerestorationprogrammewoulddeliveranetpresentvalueof7.
9millionandabenefit:costratioof1.
39.
Christieetal.
(2011)estimatedthebenefitsofblanketbogintheUKat275/haperyear,risingbyafurther136/ha/yeariftheUKBiodiversityActionPlanwerefullyimplemented.
Furtherdetailsofthevalueofbenefitsofblanketbog,andassociatedrestorationactivities,areincludedinAnnex1.
Overall,evidenceofthevalueofblanketbogandtheservicesitprovidesisrelativelystrongcomparedtomostotherecosystems,reflectingthescaleoftheasset,thestrengthoftheinvestmentcaseandtherelativeeaseofvaluation(especiallyinrelationtocarbon).
PayingforPublicGoodsfromLandManagement62PotentialforalternativepaymentmethodologiesThecurrentapproachThecurrentrules-basedapproachisrelativelysimpletoadministerandhasachievedhighratesofuptakeinEngland,withanestimated205,000hectares(92%ofthepriorityhabitatarea)coveredbybasicmoorlandmanagementandrestorationoptionsunderCountrysideStewardship,morethanforanyotherpriorityhabitat(Atkins,2018).
Noinformationontheeffectivenessofschemesforblanketbogecosystemsisavailable.
Possibledrawbacksofthecurrentsystemare:Thestandardrules-basedapproachmaynotreflectthediversityoflocalconditions,driversandneedsofblanketbogecosystems;Landmanagersarerequiredtofollowbasicprescriptionstoqualifythemforpayments.
Thereisnoincentivetogobeyondthesebasicrequirementsortotrynewapproachesdesignedtoenhancetheconditionofbogsandtheservicestheyprovide;Theincomeforgoneapproachresultsinlowpaymentratesforannualmanagement.
Thesemaylimitincentivesforuptake(e.
g.
inScotlandwherepaymentratesperhectareareverylow)orthelevelofenvironmentalimprovementsachieved(e.
g.
inEngland,wheretherearehighratesofuptakebutlessevidenceofenvironmentaleffectiveness);Capitalpaymentscoveralimitedrangeofworkssuchasgripblockingandfencing.
However,blanketbogrestorationoftenrequiresawiderrangeofinterventionssuchasre-seedingandplanting.
Theseareoftenaddressedthroughmorespecialistpeatbogrestorationprojects(e.
g.
thosefundedundertheEULIFEprogrammeandSNHPeatlandActionprogramme).
Results-basedpaymentsResults-basedpaymentsofferthepotentialtoaddresssomeoftheselimitationsbyincreasingtheflexibilityforlandmanagerstovarymanagementpracticestoenhancetheconditionofpeatbogecosystems,andbyincentivisingmanagementactionsdesignedtoenhanceecosystemoutcomes.
Thiswouldhelptorewardthedeliveryofpublicbenefits,andhencetoensurethatpaymentsdeliveredtheirintendedresults.
Landmanagerswouldbeencouragedtotailormanagementandrestorationpracticestolocalconditionsandneedstoachievespecifiedoutcomes.
Paymentscouldbebasedeitheron:Ecosystemcondition-assessedonthebasisofwetness,vegetationcoverand/orvegetationspeciesdiversity.
Thesecriteriacouldbeusedtoestablishecosystemconditionscores,withpaymentmadeonaperpointbasis,ormadeonabandedbasis(withhigherpaymentsforlandjudgedtofallwithindifferentconditionscorebands).
Ecosystemservices-assessedthroughchangesincarbonsequestration,effectsonwaterqualityandflooding,enhancementsinlandscapequalityandvisualamenity,and/orpopulationsoftargetspecies(e.
g.
numbersofpairsofbreedingwaders).
However,whileoutcomesforlandscapeandbiodiversitycouldbeobserveddirectly,otherecosystemservices(suchascarbonsequestrationandeffectsondownstreamwaterqualityandfloodrisk)wouldneedtobemodelledbasedonchangesinecosystemcondition.
Therefore,ecosystemconditionwouldlikelyserveasaproxymeasureforecosystemservicedelivery.
Paymentratescouldbesetbasedoneithercostsandincomeforgone,orinrelationtothevalueofnaturalcapitaloutcomes.
Paymentsbasedoncostsandincomeforgonecouldadoptoneoftwoapproaches:Settingtheaveragepaymentbasedonaveragecostsandincomeforgone,andofferinghigherorlowerratesofpaymentforaboveaverageoutcomes;orEstimatingthedifferencesinthecostsofalternativepracticeslikelytobeassociatedwithdifferentlevelsofecosystemcondition.
PayingforPublicGoodsfromLandManagement63Therewouldbeseveralchallengesinapplyingresults-basedpaymentstoblanketbogrestorationandmanagement.
Technicalknowledgeandskills.
Landmanagersmaylacktheknowledgeandskillstobeabletodeliverthechangesinlandmanagementpracticeandthespecificrestorationmethodsneededtoenhanceecosystemcondition.
Therewillonlybebenefitsinmovingfromthecurrentrules-basedapproachiflandmanagersareabletodeliverenvironmentalenhancementswithoutfollowingspecifiedprescriptions.
Provisionofexpertadviceandguidancemayhelpbutislikelytobecostlytodeliver.
Timescalesforecosystemrestoration.
Thetimescalesforrestorationofdegradedblanketbogcanbeverylong,andareoftenuncertain(NaturalEngland,2013).
Resultsbasedpaymentsforrestorationactivitiesmaythereforebereceivedonlyaftermanyyears,followingup-frontcapitalcosts;Uncertaintiesinecosystemresponse.
Theresponsesoftheecosystemtomanagementandrestorationmeasuresaresubjecttoscientificuncertaintyandarelikelytovarybylocation.
Uncertaintiesmakeitdifficulttoassesstheinvestmentcaseforrestorationandcreaterisksforlandmanagersinvestinginblanketbogrestoration.
Thesearemajorchallengesandmaymakeanapproachfocusedpurelyon(long-term)ecosystemoutcomesinfeasible.
Theremaybeaneedtosharetherisksbetweenthelandmanagerandpaymentauthorities,andtoensureanappropriatebalancebetweenshorttermandlong-termreturns.
Thiscouldbeachievedbyanapproachwhichcombinescapitalgrantswithpaymentsforlongtermoutcomes.
Alternatively,aresults-basedapproachcouldseektoensurethatsufficientrewardwasprovidedtoshorttermoutcomes(e.
g.
changesinwaterlevels),whilealsorewardinglongertermimprovementsincondition(e.
g.
vegetationstructureanddiversity).
PaymentsbasedonnaturalcapitalvaluesAnalternativetothecostsandincomeforgonemethodforcalculatingpaymentswouldbetobasetheminsomewayonthevalueofimprovementsinnaturalcapitalandtheecosystemservicesitprovides.
EvidenceofnaturalcapitalandecosystemservicevaluescouldpotentiallybeusedtosetELMpaymentrates,eitheronthebasisof:PaymentforELMactions.
Evidenceofthevalueofbenefitssuggeststherewouldbeacaseforenhancingpaymentratesforbogrestorationandmaintenanceincaseswherecurrentpaymentsareinsufficienttoincentiviseuptake.
Thevalueofpaymentratescouldbeinformedbyestimatesoftheexpectedvalueofoutcomesfromtheactionssupported.
Paymentforecosystemoutcomes.
Valuationevidencecouldpotentiallybeuseddirectlyinsettingthevalueofoutcome-basedpayments.
Forexample,paymentratescouldbeinformedbyestimatesofincreasesinthevalueofservicesdelivered(based,forexample,onthevalueofenhancedcarbonsequestrationestimatedtoresultorestimatesofsociety'swillingnesstopayforenhancedservicedelivery).
EvidenceofnaturalcapitalandecosystemservicevaluescanbeusedtoidentifyupperlimitsonELMpaymentrates,toensurethatthebenefitsofELMschemesexceedthecosts.
Paymentratesneedtobesetbelowestimatesofthevalueofbenefitstoensurethatschemesdelivernetbenefitstosociety.
SettingpaymentratesatorclosetoestimatedbenefitvalueswouldincreasereturnstolandmanagersbutcouldsignificantlyincreasethecostsofELMschemes,whichinturnwouldreducetheextentoflandmanagementactivitythatcouldbefundedfromafixedbudget.
AbandoningthecostandincomeforgoneapproachtocalculatingpaymentswouldalsocontraveneWTOrulesongreenboxagri-environmentpayments.
Theadvantageofthisapproachisitspotentialtoincentiviseactionwhereithaspotentialtodelivergreatestbenefit.
Forexample,paymentsthatreflectthevalueofblanketbogsforwaterqualityandfloodregulationwillencouragerestorationinthoseareaswheretheseserviceshavegreatestvalue(especiallythoselocatedclosetocentresofpopulation).
Potentialchallengesanddisadvantagesofthisapproachare:PayingforPublicGoodsfromLandManagement64Therearesignificantgapsanduncertaintiesinvaluationevidence–afullandrobustestimateofthebenefitsofblanketbogrestorationandmaintenanceisnotyetpossible;Thereisstrongerevidenceofthevalueofsomeservices(e.
g.
climateregulation)thanothers(e.
g.
floodregulation),andthereforeariskthatvaluationprioritisessomeservicesoverothers.
Paymentsbasedoncarbonvaluesshoulddeliverwiderecosystemservicebenefits,thoughtheyareunlikelytoincentiviseactioninlocationswhereotherservicesaremaximised;Strongevidencethatthebenefitsofbogrestorationexceedthecosts(withbenefitcostratiosupwardsof2:1)raisesariskthatpaymentsbasedonvaluationevidencecouldbehigherthanatpresent,potentiallylimitingtheextentofactionthatcanbefunded.
Forthisreason,paymentratesaremorelikelytobeinformedbyvaluationevidence,ratherthansolelybasedonestimatesofvalues.
Theabilitytomapcurrentandpotentialnaturalcapitalvaluestoreflectawiderangeofecosystemserviceswouldenablepaymentstobedifferentiatedspatially.
However,intheabsenceofcomprehensivevaluationevidence,alternativeapproachescouldbeconsidered(e.
g.
locationalsupplementsinareasprioritisedforthedeliveryofparticularservices,basedonphysicalmappingoffloodriskorspecies'ranges).
Paymentsbasedonthevalueofcarbonstorageandsequestrationaremoreeasilycalculatedthanforotherservices,althoughestimatesofnetchangesincarbonvarywidelybylocationandrestorationundertaken.
RewildingBritain(2019)suggestsanannualpaymentof292/haforrestoredheathlandandpeatlands,basedonamid-levelestimateofnetgainof2tonnesofcarbon(7.
3tonnesofCO2e)perhectareperyearandapriceof40/tonne/CO2e.
ReverseauctionsReverseauctionsofferstrongpotentialasameansofsettingpaymentratesforcapitalrestorationworksforblanketbog,providinganopportunityforbidderstotendertodeliverarangeofrestorationactionssuitedtolocalconditionsandneeds(e.
g.
revegetationaswellasrewettingofdegradedbogs).
Usingreverseauctionstosetpaymentsforecosystemoutcomesispotentiallymorechallenging.
Uncertaintiesintheecologicalresponsestorestorationandmanagementactivitiesmakeitdifficultandriskyforlandmanagerstosubmitbidstodeliveroutcomesbasedonchangesinnaturalcapitalconditionorecosystemservicedelivery.
Combinedapproaches–usingreverseauctionstopricecapitalrestorationworks–followedbyresults-basedpaymentsbasedonlongertermchangesinnaturalcapitalcondition–couldthereforebeconsidered.
IllustrationofpotentialpaymentoptionsandratesTable7.
2summarisesthepotentialpaymentstructuresandpaymentratesthatmightapplytotheoptionsdiscussedabove.
Thereareuncertaintiesabouthowpaymentrateswouldbecalculated,particularlyiftheywerebasedonthevalueofbenefitsratherthancosts,makingitpossibletospecifyonlythelikelydirectionandbroadrangeofestimateswithinwhichtheywouldbelikelytofall.
Table7.
2:Optionsforpaymentmechanisms,paymentstructuresandcostsOptionPaymentStructurePaymentRatesCurrentapproach:paymentforblanketbogrestorationandmanagementactivities,Annualmanagementpayments-fixedratepaymentsforblanketbogmanagementBasicpaymentrates/ha/yrvaryfrom1.
24(Scotland)to58(Wales),increasingto30-100+includingsupplementsPayingforPublicGoodsfromLandManagement65withpaymentratescalculatedbasedoncostsincurredandincomeforgone.
-supplementsforrevegetation,rewetting,livestockexclusionCapitalgrantsforgripblocking,fencingtoexcludelivestockCapitalgrantspaidperdam,permetrefenceetc.
atstandardrates.
Restorationcostsperhectarevarywidely(200-7,000perhectare),average830/haPaymentforresults:changesinnaturalcapitalcondition,calculatedbasedoncostsandincomeforgoneAnnualpaymentswouldbevariedtoreflectblanketbogcondition,e.
g.
tieredpaymentstoreflectwetness,vegetationcoverandpresenceofkeyplantspecies.
Paymentsbasedoncostsandincomeforgoneofassumedmanagementpractices–e.
g.
assumptionthatminimumconditionwouldrequireverybasicmanagementandhighlevelconditionwouldrequiremoreinterventionandlowerstockinglevelsetc.
Capitalpaymentsforrestorationmightstillbeoffered;ifpaymentswerepurelyresultsbasedwithnocapitalgrants,higherannualpaymentswouldbeneededTieredannualpaymentsbasedonblanketbogcondition,e.
g.
minimumpaymentof20/ha/yrforachievingbasicconditionscorerisingto100/ha/yrforhighestconditionscoreCapitalgrantscouldstillbeofferedascurrently;ifnot,ahigherannualpaymentwouldbeneededinapureresults-basedscheme.
Paymentforresults:changesinecosystemservices,calculatedbasedonvalueofservicesAnnualpaymentsreflectingvalueofservicesdeliveredbyblanketbog.
Paymentscouldreflectvalueofcarbonsequestrationandstorage–thiswouldlikelyhavetobemodelledbasedonnaturalcapitalcondition.
Valueofotherservices–waterquality,floodmanagement,biodiversity–couldalsobeincorporated,wherevaluationispossible.
Annualpaymentswouldreflectestimatedvalueofthesebenefitsbasedonextentandconditionofnaturalcapital.
Notstraightforward.
Paymentswouldneedtoreflect–butbesetsomewherebelow–estimatedvalueofbenefitsforcarbon,water,floodmanagement,biodiversity.
Costbenefitratiosbasedoncarbonaloneare2:1formostcapitalrestorationworksandupto20:1forlowcostmeasures(ceasingburningandovergrazing)–thissuggestspaymentscouldbehigherthanatpresent.
Annualbenefitsofrestorationactivitiesmayrangewidely,e.
g.
100to1427perhectareperyearbasedonnetchangesinCO2eof1.
5to21.
3tonnesperhectareandcurrentnon-tradedcarbonpriceof67/teCO2e.
RewildingBritain(2019)suggestsanannualpaymentof292/ha/yrforrestoredpeatbogs,basedoncarbonvaluesalone.
Evidenceofwater,floodpreventionandbiodiversitybenefitsispatchy–possibilitytovarypaymentswheretheseservicesareimportant.
ReverseauctionsLandmanagersbidtomaintainandrestoreblanketboghabitats,specifyingapaymentrateforactivities(e.
g.
specifiedcapitalandannualmanagementworks)and/oroutcomes(e.
g.
achievingaspecifiedlevelofnaturalcapitalcondition).
Paymentrateswouldbeuniquetoindividualbiddersandcouldbelowerorhigherthanundercurrentsystem.
ConclusionsonthepotentialforalternativeapproachesThereisastronginvestmentcasetoenhanceandupscaleactiontorestoreandmanageblanketbogintheUK.
PayingforPublicGoodsfromLandManagement66Results-basedpaymentmechanismsofferpotentialtoincentiviseactiontoenhancetheoutcomesfromblanketbogrestorationandmanagement.
However,theypresentsignificantchallengesbecauseofthelongtimescalesanduncertaintiesrelatedtothedeliveryofoutcomes.
Inviewofthesechallenges,theremaybemeritsincombiningcapitalgrantswithresults-basedpaymentslinkedtoecosystemcondition,orinstructuringresults-basedpaymentstorewardshorttermoutputsaswellaslongertermecosystemoutcomes.
Reverseauctionsofferpromiseasameansofestablishingandpricingcapitalrestorationworks.
Evidenceofnaturalcapitalandecosystemservicevaluescanhelptoinformdecisionsaboutpaymentrates,helpingtoprovideguidanceaboutmaximumpotentialpaymentrates.
Itcanalsohelptoinformvariationofpaymentratestoincentiviseactionwhereitdeliversgreatestvalue,thoughevidenceofmonetaryvaluesisnotnecessarilyrequiredtoenablethis.
TherearegoodreasonsnottobaseELMpaymentratesdirectlyonestimatesofnaturalcapitalvalue.
Aswellaspresentingpracticaldifficultiesinvaluation,suchanapproachcouldresultinlargeincreasesinpaymentrates,transferringconsumersurplusentirelytoproducers,andlimitingthelevelofELMactivitythatcouldbefundedfromafixedbudget.
Paymentsexceedingcostsandincomeforgonewouldnolongerbeclassifiedinthegreenbox,underWTOrules.
B.
ManagementofarablelandforfarmlandbirdsandpollinatorsELMneedsandprioritiesDeclinesinfarmlandbirds,pollinatorsandwiderarablebiodiversityareawidelyunderstoodissueandaddressingthemisanationalpolicypriority;thisisreflectedinthedesignofagri-environmentschemesinallfourcountries.
Currentagri-environmentprescriptionsandratesAgri-environmentschemesinallfourcountriesoftheUKincludeoptionsforfarmlandbirdsandpollinatorsinarableland.
ThesearemorenumerousinEngland,whichhasthelargestareaofarableland.
Thereisafocusonannualmanagementpayments,becausearablelandmanagementfollowsshorttermcyclesratherthanrequiringlongtermrestorationorhabitatcreationwork.
InEngland,CountrysideStewardshipincludesoptionsfornectarandpollensourcesforinsectpollinatorsandinsect-richforagingforbirds(511-539/ha/yr),winterbirdfood(640/ha/yr)andadditionalresourcesandhabitats(paymentsrangingfrom18/ha/yrforskylarkplotsto532/ha/yrforcultivatedareasforarableplants).
Arangeofarableoptionsisalsoavailableintheagri-environmentprogrammesinNorthernIreland,ScotlandandWales.
FurtherdetailsaregiveninAnnex2.
FinancialneedsidentifiedinenvironmentallandmanagementcostingsmodelThecostingsmodeldefinesapackageofmeasuresdesignedtobenefitbiodiversityandlandscapeinarablefarmlandareas.
Intotal,theseentailagri-environmentprescriptionscovering1.
1millionhectares,atanannualcostof460to560millionperannumintheUK.
Thefocusisonannualmanagementoptions,withnocostingofcapitalitems(maintenance,creationandrestorationoflandscapefeaturessuchashedgerowsiscostedseparately).
FurtherdetailsaregiveninAnnex2.
BenefitsofELM–outcomes,ecosystemservicesandvaluesFarmlandbirdsandthewiderbiodiversityofarablelandarewidelyrecognisedasvaluablepublicgoods.
However,marketsforthesegoodsarelacking,andevidenceoftheirvaluecanonlybegainedbyaskingpeopleabouttheirwillingnesstopaytoprotectthem.
Perhapssurprisinglygiventheprominenceofthefarmlandbirdconservationissue,valuationevidenceisverylimitedandconfinedtoolderstudies:PayingforPublicGoodsfromLandManagement67FosterandMourato(2000)estimatedawillingnesstopayof13.
50perhouseholdperyeartopreventthelossofasinglespeciesoffarmlandbird;Defra(2013)usedtheestimatesofFosterandMouratotoestimatethepotentialbenefitsofproposedecologicalfocusareas(EFAs)undertheCAPataround1,300m(presentvalue,2013prices)overtheperiod2015-2020.
Christieetal(2006)estimatedthatpeoplewerewillingtopay74peryearforconservationofbiodiversitythroughagri-environmentschemesinCambridgeshireandNorthumberland.
Overallwillingnesstopaytoavoidthedeclineof"bothrareandcommonfamiliarspecies"wasestimatedat95perhectareperyearinbothareas.
eftec(2015)upscaledthisfiguretoestimateawillingnesstopayofapproximately2.
2billionperyeartopreventbiodiversitydeclineinEngland.
Boatmanetal(2010)usedacontingentvaluationstudytoestimatethatthepublicwaswillingtopayanaverageof35perhouseholdperyeartosecurethebiodiversityandlandscapebenefitsofEnvironmentalStewardship.
Thisgaveanoverallestimateofbenefitsof818millionperyearacrossEngland(2009prices),andabenefit:costratioof1.
80.
Includingcarbonvaluesincreasedthemidpointbenefitcostratioto2.
38.
Annex2givesfurtherdetailsofthesestudies.
Whiletherearelargeestimatesofthetotalvalueofpollinationservicesnationally,evidenceofthemarginalvalueofbenefitsresultingfromspecificmanagementpracticesoroptionsislacking.
Thesevaluescanbeexpectedtovarywidelylocallydependingonotherfoodsourcesandpresenceofcropsbenefitingfrompollinationservices.
Theavailablevaluationevidenceillustratestheoverallbenefitsofagri-environmentmeasuresforbiodiversity,intermsofthepublic'swillingnesstopayforthembutsayslittleaboutthevalueofbenefitsofspecificagri-environmentactions.
PotentialforalternativepaymentmethodologiesCurrentapproachThecurrentapproachofferspaymentstomanagersofarablelandforundertakingprescribedactivities,withpaymentratesbasedonestimatedcostsandincomeforgone.
Landmanagersareofferedarangeofoptionsandcanapplythosethatfitwithlocalconditions,croprotationsandfarmbusinesspriorities.
Thereisevidencethatarableagri-environmentoptionscanbeeffectiveinreversingdeclinesintargetspecieswheneffectivelyappliedatthelocallevel,eveniftheyhavenotbeensufficienttoreversedeclinesinthebiodiversityofarablefarmlandnationally.
Forexample,targetedapplicationofarableoptionsinagri-environmentschemesinEnglandhasbeeneffectiveinreversingpopulationdeclinesinbirdssuchasthecirlbuntingandstonecurlew.
Otherfarmlandbirds,arablefloraandinvertebrateshaveshownpositiveresponsestoarablemanagementprescriptionsatfieldscale,butnotnationally(Boatman,2011;NaturalEngland,2009).
Limitationsofthecurrentapproachinclude:Whilearableoptionshavebeenshowntobeeffectiveatfieldscaleandwhentargetedlocallyandbackedbyadvice,theyhavenotbeenappliedonasufficient(landscape)scaletoreversedeclinesinfarmlandbirdsandpollinatorsregionallyornationally;Therecanbeatendencyforlandmanagerstoselecteasier,lowercostoptions,includingmanagementofboundariesratherthanin-fieldoptions,ratherthanoptionsthatdelivergreatestbiodiversitybenefits;Thecurrentsystemoffersnoincentivetogobeyondtheminimumconditionsrequiredtoreceivethepayment.
Results-basedpaymentsThereispotentialforresults-basedtoworkatoneoftwolevels:PayingforPublicGoodsfromLandManagement68Paymentsforchangesinhabitatcondition–e.
g.
abundanceanddiversityofnativeplantspecies,qualityofnestinghabitat,presenceandabundanceofsummerandwinterfood;Paymentsforchangesinbiodiversityoutcomes–e.
g.
breedingpairsoffarmlandbirds,diversityandabundanceofpollinators.
ThefirstapproachistakenintheEnglandRBAPsarablepilot,whichsetsconditionscoresforwinterbirdfood(basedonnumbersofseedheadsoftargetplantspecies,withtieredpaymentsof0-842/hectare)andnectarandpollinators(basedonnumberandcoverageofplantspecies,withtieredpaymentsfrom0to705perhectare).
Noprescriptionshavebeenspecified,butadvicehasbeenprovidedtofarmerstohelpthemachievethetargetedresults.
Theearlyresultsfromthepilotappeartobepositive,helpingtoachieveincreasesinwinterbirdfoodandnectarandpollinatorspecies.
Otheradvantagesoftheapproacharethatithasprovidedlandmanagerswithflexibilityandfreedom,enabledthemtouselocalknowledge,providedanincentivetodeliverbetterresults,andenhancedfarmerknowledgeandbuy-in.
Disadvantagesaretheriskoffailuretodelivertheintendedresults,increasedadministrativeandtransactionscosts,andthereforeuncertaintyregardingthescalabilityoftheapproach(Robinson,2018).
Arableagri-environmentmeasuresseemparticularlyamenabletoaresults-basedapproach,giventhatresultsmaybeexpectedmorequicklythanforotherecosystemssuchaspeatlands.
Thisreducesrisks,uncertaintiesandtimelagsinmeasuringresultsandallocatingpayments.
Ontheotherhand,shorttermrisksmaybeincreasedbecauseoftherecurrentnatureofactionsrequired–forexamplethefailureofanannualnectarcropduetoadverseweatherorpestsmayreducepayments.
Basingpaymentsonhabitatconditionappearstobemorefeasiblethanpaymentsbasedontheoutcomesforfarmlandbirdpopulationsorpollinationservices,giventhechallengesinmonitoringandevaluatingbiodiversityoutcomes.
Whereresults-basedschemeshavemadepaymentforbirdspeciesoutcomesintheEU,thesehavetendedtofocusonrarerspeciessuchasbreedingharriers(inGermany)andwaders(intheNetherlands).
PaymentsbasedonnaturalcapitalvaluesItdoesnotseemfeasibletobasepaymentsforarablebiodiversityoptionsonthevalueofbenefitsfornaturalcapitalandecosystemservicebenefits,giventhattherearesubstantialgapsinvaluationevidence.
Whilethereisgeneralevidencethatbenefitsforbiodiversityandpollinationarevaluable,andthatthepublic'swillingnesstopayexceedsthecostsofschemes,fine-grainedevidencewhichenablesvaluationofthebenefitsofspecificactionsandtheiroutcomesappearstobelacking.
However,asforotherdifficulttovalueecosystemservices,theremaybemeritsinvaryingpaymentstoreflectdifferencesinexpectedvalues,basedonnon-monetaryindicators,eitherquantitativeorqualitative.
Thiscouldinvolvehigherratesofpaymentsinareaswithhigh–orpotentiallyhigh–biodiversityvalue,suchashotspotsforfarmlandsbirdorarableplants,orthecorerangesoftargetspeciessuchasturtledoveorcirlbunting.
Landscapescaleapproaches–forexampleincludingpremiumpaymentsfordeliveryofactiononneighbouringfarms–couldalsoberewarded,basedontheexpectedvalueofagglomerationbenefitscomparedtosinglefarmapproaches.
Paymentratescouldalsobevariedtoreflectvariationsinthevalueofpollinationservices,withhigherratesinareaswherethesearemorevariable(forexample,duetothepresenceofinsectpollinatedcrops).
Suchanapproachcouldinvolvesettingpaymentpremiums(e.
g.
a%increaseinpaymentratesintargetareas)toreflectdifferencesintheexpectedvalueoftheservicesdelivered,ratherthanseekingtovalueecosystemserviceoutcomes.
ReverseauctionsReverseauctionscouldpotentiallybeappliedtoarableoptions,askinglandmanagerstobidtodeliverpackagesofarablemanagementactionsand/oroutcomes(e.
g.
specifyingPayingforPublicGoodsfromLandManagement69paymentratesfordeliveringimprovementsinarablehabitats).
Thiscouldhelptoenhancethecost-effectivenessofdeliverybysettingpaymentratescompetitivelyinawaythatisacceptabletobothbuyersandsellers.
However,itcouldbearguedthatthecaseforconsideringreverseauctionsisperhapslessthaninthecaseofblanketbogrestoration,whereconservationneeds,costsandbenefitsarelikelytovarywidelyandcallforbespokeapproaches.
Bycomparison,arableagri-environmentoptionstendtobemorestandardisedandbetterunderstood,soafixedpricemenuworksrelativelywell.
Thecaseforreverseauctionswouldneedtoweighupthepotentialsavingsthroughcompetitivebiddingwiththelikelyincreaseinadministrativeandtransactioncostsintheprocessofinviting,submittingandevaluatingbids.
IllustrationofpotentialpaymentoptionsandratesTable7.
3summarisesthepotentialpaymentstructuresandpaymentratesthatmightapplytotheoptionsdiscussedabove.
Thereareuncertaintiesabouthowpaymentrateswouldbecalculated,particularlyiftheywerebasedonthevalueofbenefitsratherthancosts,makingitpossibletospecifyonlythelikelydirectionandbroadrangeofestimateswithinwhichtheywouldbelikelytofall.
Table7.
3:Optionsforpaymentmechanisms,paymentstructuresandcostsOptionPaymentStructurePaymentRatesCurrentapproach:paymentformanagementoptionsonarableland,withpaymentratescalculatedbasedoncostsincurredandincomeforgone.
Annualmanagementpayments-paymentsforprovisionofnectarandpollinators,andwinterbirdseed,atfixedrateperhectareperyearPaymentratesforprovisionofnectarandpollinatorsrangefrom465/ha/yrinNorthernIrelandto539/ha/yrinEnglandPaymentratesforwinterbirdseedmixesare322.
63/ha/yrinScotland,590/ha/yrinNorthernIrelandand640/ha/yrinEnglandPaymentforresults:changesinnaturalcapitalcondition,calculatedbasedoncostsandincomeforgoneAnnualpaymentswouldbevariedtoreflectqualityofhabitatforbirdsandpollinators.
Paymentscouldbebandedwithhigherpaymentsforgreaternumberanddiversityofplantsfornectar/pollinatorsandwinterbirdseed–asinarableresults-basedpilotinEnglandPaymentsbasedoncostsandincomeforgoneofassumedmanagementpractices–e.
g.
assumptionthatminimumconditionwouldrequirebasicmanagementandhighlevelconditionwouldrequiremoremanagement.
EnglandArableResultsBasedAgri-EnvironmentPilotofferspaymentsasfollows:Winterbirdfood.
6tiersofpaymentbasedonnumberofestablishedsownspeciesproducingseed:0-0/ha/yr;1-168/ha/yr;2-337/ha/yr;3-505/ha/yr;4-674/ha/yr;5+-842/ha/yrPollenandnectar.
10tiersofpaymentbasedonnumberofsownfloweringspeciespresentandpercentagecoveroffloweringsownspecies.
Paymentratesrangefrom0(Tier1)to141/ha/yr(Tier2),212/ha/yr(Tier3)uptoamaximumof705/ha/yr(Tier10).
Tier10appliesto5+sownspeciespresentand90-100%groundcoverbythesespecies.
Paymentforresults:changesinecosystemservices,calculatedbasedonvalueofservicesAnnualpaymentsreflectingvalueofservicesdeliveredbythearablehabitats.
Annualpaymentswouldreflectestimatedvalueofbenefitsforbiodiversityandpollination.
Calculationofpaymentrateswouldbedifficultgivengapsinevidenceregardingvalueofbiodiversitybenefitsandpollinationservicesfromarableagri-environmentschemes.
PayingforPublicGoodsfromLandManagement70ReverseauctionsLandmanagersbidtoprovideagri-environmentactions(e.
g.
sowingplantsfornectar,pollinatorsandwinterbirdfood)and/oroutcomes(e.
g.
numberandcoverageofnectar,pollinatorandwinterbirdseedplants).
Paymentrateswouldbeuniquetoindividualbiddersandcouldbelowerorhigherthanundercurrentsystem.
ConclusionsonthepotentialforalternativeapproachesArableagri-environmentmeasuresforbiodiversityandpollinatorsappeartobeamenabletopaymentsforoutcomes,measuredthroughhabitatindicatorssuchasabundanceanddiversityofplantspeciesprovidingnectarandwinterbirdfood.
Earlyexperiencefromtheresults-basedarablepilotinEnglandseemstobepositive,thoughtheremaybechallengesinscalabilitygivenadministrativeandtransactioncosts,andadvisorysupportneeds.
Therearemajorgapsinvaluationevidence,whichsuggestitisunlikelythatthiscouldbeusedtosetpaymentrates.
Non-monetaryindicatorscouldbeusedtoinformvariationsinpaymentratesbasedprimarilyonassessmentsofcostsandincomeforgone.
7.
8ConclusionsonalternativepaymentmethodologiesTheUK'sdeparturefromtheEUprovidesamajornewopportunitytochangethesystemoflandmanagementpaymentsineachofthefourcountries,focusingpaymentsonthedeliveryofpublicgoodsandpotentiallychangingthewaythatthesepaymentsarecalculated.
TheadministrationsinEnglandandWaleshavebothsignalledanintentiontochangethecurrentmethodologyforcalculatingenvironmentallandmanagementpayments,whichofferspaymentsforprescribedactivitiesbasedonestimatesofcostsincurredandincomeforgone.
Thecurrentsystemiscriticisedasbeinginflexibleandbureaucratic,anddoingtoolittletoincentivisedeliveryofenvironmentaloutcomes.
AnELMpaymentsmethodologyhasmanydimensions,buttwoimportantdistinguishingfeaturesbetweenthemainoptionsarethequestionofwhatispaidfor(activitiesoroutcomes)andhowthepaymentiscalculated(throughestimatesofcostsandincomeforgone,thevalueofbenefits,orindividuallydeterminedpaymentrates(whichmaybesetbynegotiationorbiddingprocessessuchasreverseauctions).
Basingpaymentsonlandmanagementactivitiesisawell-understoodapproachthatcanworkwellwheredefinedactionsareknowntobeeffectiveandthereisaclearpathwaybetweenactionsandresults.
Itmaybelesseffectivewherethereisaneedforlocallytargetedactionsbasedonlocalconditionsandknowledge.
Amajorlimitationisthatthisapproachrequireslandmanagersonlytofollowtheprescribedactivitiesanddoesnotincentivisethemtodeliverhigherlevelsofenvironmentaloutcomes.
Advicewhichengagesandraisesawarenesslandmanagerscanplayaroleinhelpingtoachievethis.
Outcome-basedpaymentsoffergreaterincentivesforlandmanagerstoincreaseenvironmentaloutcomesovertime,providedthatsuitableoutcomeindicatorsandrelatedcontrolandverificationsystemscanbedevised.
Theymayrequiregreaterinvestmentsinadvice,particularlyintheshortterm,tobeeffective.
Calculatingpaymentsbasedoncostsandincomeforgonehelpstolimitpaymentratesandcontrolthecostsofschemesbutmayofferlimitedprofittotheaveragelandmanagerand–asappliedatpresent-maybeinsufficienttoachievehighratesofuptake.
Nevertheless,thereispotentialtoapplytheapproachinaflexibleway,varyingassumptionsaboutcostsandbaselinepractices,andtoenhanceuptakebyvaryingthecalculationstoreflectthecoststructuresandpracticesoftargetfarms.
VariationsonthecostsandincomeforgonePayingforPublicGoodsfromLandManagement71approachcanbeconsidered,offeringgeographicalorperformancerelatedsupplementsorrewardingcommitmentstodeliverlong-termchangesinpractice.
Costsandincomeforgonemaybeusedasthebasisforcalculatingoutcome-basedpayments,bymakingassumptionsabouttheactivitiesrequiredtodeliverthetargetoutcomes,settingpaymentratesaccordingly,andthengivinglandmanagerstheflexibilitytovarypracticesastheywish.
ThisapproachhasbeenappliedintheEnglishresults-basedpaymentpilots–earlyresultsappeartobepromising,thoughscalabilitymaypresentasignificantchallenge.
Calculatingpaymentsbasedonestimatesofthevalueofenvironmentalbenefitshasthepotentialtoincentiviseactionsthatdeliverthegreatestbenefits.
However,majorgapsinvaluationevidencemeanthatitisnotfeasibletoapplythisapproachtoallecosystemsandtheirservices,asillustratedinthetwocasestudies.
Forreasonsofvalueformoney,wherevaluationevidenceisavailable,itislikelytoinformmethodsofcalculatingpaymentratesratherthanbeusedtocalculatethemdirectly.
Ifavalues-basedapproachisapplied,itislikelytorelyonacombinationofmonetaryandnon-monetaryevidenceofELMbenefitsinordertoguidesettingofpaymentrates.
Combinationsoftheseapproachescanalsobeconsidered.
Forexample,ELMpaymentsmightsupplementpaymentsforactivitieswithbonusestorewardthedeliveryofenvironmentaloutcomes.
Paymentsmaybebasedinitiallyonestimatesofcostsandincomeforgonebutvariedtoreflectdifferencesinthevalueofbenefitsachievedbylocationand/orperformance.
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ConsultationpaperWorldResourcesInstitute(2007)PayingforEnvironmentalPerformance:UsingReverseAuctionstoAllocateFundingforConservationPayingforPublicGoodsfromLandManagement76Annex1:ManagementandRestorationofBlanketBog–FurtherDetailsofCostsandBenefitsA.
1.
1Currentagri-environmentpaymentprescriptionsandratesEnglandInEngland,thefollowingannualmanagementpaymentsareavailableunderHigherLevelStewardship:UP3–Managementofmoorland-43/ha/yrUP4–Managementofmoorland,vegetationsupplement–toencouragerecolonisationofSphagnumandotherkeyspecies-10/ha/yrUP5–Managementofmoorland,rewettingsupplement–inaccordancewithbogrestorationmeasures,includingmaintenanceofgripblocks-18/ha/yearUP6–Uplandlivestockexclusionsupplement–toexcludelivestockfromhabitatunderrestoration-16/ha/yr.
Capitalpaymentsinclude:WN1–Blockinggripsordrainagechannels-14.
80perblockFencing.
NorthernIrelandUndertheEnvironmentalFarmingScheme,HigherLevel,annualmanagementpaymentsareavailablefor:Moorland(blanketbog)remedialmanagement-40/ha/yr(upto50hectares);20/ha/yr(50-100hectares);10/ha/yr(>100ha).
ScotlandUndertheAgri-EnvironmentandClimateSchemeinScotland(wheretheareasofblanketbogaremuchmoreextensive),annualmanagementpaymentsareavailablefor:Moorland(includingpeatland)management-3.
60/ha/yr(managinglivestockonly);1.
24/ha/yr(managingdeeronly);4.
84/ha/yr(managingdeerandlivestock)Stockdisposal-24.
83/ha/yrAwaywinteringsheep-25.
83/ha/yr.
Capitalpaymentsinclude:Ditchblocking–peatdams-13perpeatdam,minimumpayment300;Ditchblocking–plasticpilingdams-62-385perdam,dependingonwidth;Stockbridgesforfen,bogorwetlandmanagement-220-880perbridge,dependingonspan.
WalesTheGlastirAdvancedschemeoffersthefollowingannualmanagementoptions:Option41a–GrazingManagementofOpenCountry(includingblanketbog)-58/ha/yr;Option41b–GrazingManagementofOpenCountrywithMixedGrazing-70/ha/yr;Option403–Additionalmanagementpayment–rewetting-25.
38/ha/yr;Option411–Additionalmanagementpayment–reducestocking-267.
60perlivestockunit.
Capitalgrantsareavailablefor:Gripblocking-124peritemFencing.
PayingforPublicGoodsfromLandManagement77A1.
2CostsandfinancialneedsIntheenvironmentallandmanagementcostingsmodelweestimatethatthereare2.
2millionhectaresofblanketbogintheUK,ofwhichnearly1.
8million(80%)areinScotland.
Itisestimatedthatmorethan40%ofthisareaisinunfavourableconditionandrequiresrestoration.
Annualmanagementcostsareestimatedusingcurrentagri-environmentpaymentrates,andcapitalcostsofrestorationareestimatedatbetween595and662/ha.
Theannualcostsofmaintainingblanketboghabitatsareestimatedatbetween34millionand109millionperyear,andrestorationcostsat56-62millionperyearovera10yearperiod.
eftec(2015)foundawiderangeofestimatesofthecapitalcostsofpeatlandrestoration,from200-7,000perhectare,dependingontheconditionoftheecosystem.
Annualoperationalandopportunitycostswerefoundtorangebetween25and200perhectareperyear,withtheupperestimatesrelatingtochangesinlandusefromgrouseshooting.
GlenkandMartin-Ortega(2018)quotearangeofcapitalcostsfromtheSNHPeatlandActionschemeof300-5000/ha,andsuggestanoverallaveragecostofabout830perhectareforalltypesofrestoration.
A1.
3BenefitsofELM–outcomes,ecosystemservicesandvaluesBlanketbogdeliversvaluableecosystemservices.
Themostimportantoftheseinclude:Climateregulation;Waterqualityregulation;Floodprevention;andBiodiversity.
Thedeliveryoftheseservicesisgreatlyinfluencedbynaturalcapitalcondition.
Degradationofpeatlandscanchangethenfromacarbonsinktoacarbonsource,underminetheiradaptivecapacitytoclimaticandotherchangesandcompromisethedeliveryofthecriticalservicestheyprovide(GlenkandMartin-Ortega,2018).
Avarietyofstudieshavevaluedblanketbogsandtheservicesthattheyprovide:Climateregulationserviceshavebeenassessedbyestimatingthevalueofcarbonstoredandsequestered,andvaluingthisusingthenon-tradedpriceforcarbon;Thevalueofwaterqualityimprovementscanbeassessedthroughestimatesofreducedwatertreatmentcosts.
Thesetendtovarybylocationsoarelesseasilytoestimatethroughstandardisedassessments.
Benefitsforfloodmanagementarepotentiallysignificantandseenthroughreductionsinthecostsoffloodingandexpendituresonflooddefencemeasures.
However,theyvarywidelybylocationandscientificuncertaintiesmakethemdifficulttoestimate.
Studieshaveestimatedsociety'swillingnesstopaytoprotectandenhanceblanketbogecosystems,toassessthevalueofbiodiversityaswellaswiderecosystemservices.
Overall,evidenceofthevalueofblanketbogandtheservicesitprovidesisrelativelystrongcomparedtomostotherecosystems,reflectingthescaleoftheasset,thestrengthoftheinvestmentcaseandtherelativeeaseofvaluation(especiallyinrelationtocarbon).
ClimateregulationThereareestimatedtobe138milliontonnesofcarboninEngland'sblanketbogpeatsoils,buttheirabilitytostoreandsequestercarbondependsontheircondition.
Ithasbeenestimatedthatlessthan20,000tonnesofcarbondioxideayeararesequesteredbyundamagedblanketbogs,whilemostuplandpeatlandsarenetsourcesofgreenhousegases(NaturalEngland,2010).
Restorationandappropriatemanagementofblanketbogthereforeplaysanimportantroleindeliveryofclimateregulationservices.
However,eftec(2015)foundawiderangeofestimatesofpotentialchangesinemissionsaccordingtochangesinpeatlandcondition,aswellaswiderangingestimatesofthetimetablesoverwhichemissionsreductionscouldbeachieved.
PayingforPublicGoodsfromLandManagement78Thebenefitsofactionstorestoreandmaintainblanketbogcanbevaluedbymodellingtheireffectsonnetcarbonemissionsandvaluingtheseusinganappropriatecarbonprice.
TheHMTreasury(2018)toolkitforvaluingchangesinGHGemissionsgivesacentralestimateofthenon-tradedpriceforcarbonof67pertonneCO2ein2019,increasingto79in2030.
Eftec(2015)estimatedthenetpresentvalueofpeatbogrestorationinvestmentsat5461/ha(revegetationofbarepeat),3266/ha(cessationofburning),5970/ha(gullyblockingandrevegetationtorestoreerodedpeat);1113/ha(gripblocking),4030(restorationofMoliniadominatedpeat)and3624/ha(preventionofovergrazing).
Basedoncarbonvaluesalone,thefiguressuggestbenefit:costratiosformostcapitalrestorationworksofaround2:1,butrisingtoashighas20:1forlowcostmeasuressuchascessationofburningandreductionofovergrazing.
TheeftecestimatesdrewonanearlierstudybyNaturalEngland(2010)whichestimatedthenetpresentvalueperhectareofpeatlandrestorationat5690(preventingovergrazing),4892(reseedingbarepeat),3730(stabilisationofbarepeat),2850(blockinggrips),2764(plantingbarepeat)and2246(gullyblocking),and3266(cessationofmoorlandburning),usingacentralestimateoftheshadowpriceofcarbonof52/teCO2e.
TheNaturalCapitalCommittee(2015)foundthatpeatlandrestorationonaround140,000hectaresinuplandareaswoulddelivernetbenefitsof570millionover40years,basedoncarbonvaluesalone.
TheCommitteeconcludedthatfurtherworkisneededtodeterminewaterquality,recreationandwildlifevalues,which,ifincluded,willsignificantlyincreasethenetbenefitsofsuchinvestments.
WaterqualityUplandareasprovideabout70%oftheUK'stotaldrinkingwater.
Degradedpeatlandscanleadtoincreasedsedimentandphosphateloadingsintorivercatchmentsaswellasdissolvedorganiccarbonleadingtowatercolouration,whichresultsinhighertreatmentcosts,whilepeatlandrestorationcanleadtorapidimprovementsinwaterquality(eftec,2015).
Asaresult,watercompanieshaveinvestedinpeatlandrestorationasameansofreducingwatertreatmentcosts.
eftec(2015)estimatedthatthebenefitsofrestorationofpeatlandsatKeighleyMoordeliveredwaterqualitybenefitsequivalentto97/ha/year,andsuggestedthatthisfigurecouldbeextrapolatedtootheruplandareaswithhighrainfallclosetocentresofpopulation.
ThewaterqualitybenefitsofaPESprojectatPumlumon(CambrianMountains)wereestimatedat75/ha/year.
FloodmanagementTheconditionofpeatlandshasasignificantinfluenceontheregulationofwaterflows.
Therateatwhichwaterleavesapeatlandisacceleratedbydrainagechannelsandthelossofvegetation(eftec,2015).
eftec(2015)usedGISanalysistoidentify20,733hectaresofuplandpeatlandareaswithhighrainfallinproximitytocentresofpopulation,thatwouldbeexpectedtodeliversignificantbenefitsthroughimprovementsinfloodregulation.
Valuationofbenefitsisdifficultbecausetheyarelocationspecificandbecausesignificantuncertaintiesmakeestimationofeffectsonfloodriskdifficult.
BiodiversityandwiderecosystemservicesPeatlandscomprisethelargestremainingsemi-naturalhabitatintheUK,hostingarangeofspecialisedplantandanimalspeciesthatareadaptedtowaterlogged,acidicandnutrient-poorconditions.
Peatlandhabitatsare,therefore,recognisedasbeingaconservationpriorityunderUKandEUlawwithmanysitesclassifiedundertheEUHabitatsandSpeciesDirective.
Peatlandspeciesaresensitivetochangesinlandmanagement,manyarerareorthreatened,anddeclineshavebeennotedinpopulationsanddistributionsoftypicalspeciesacrossarangeoftaxaincludingbirdsandinvertebrates.
Restorationofdegradedblanketbogofferspotentialtoenhanceitsbiodiversityvalue(Tayloretal,2015).
GlenkandMartin-Ortega(2018)usedachoice-experimentstudytoestimatethepublic'swillingnesstopayforpeatlandrestorationinScotland.
Participantsweregivenpictorialrepresentationsofchangesinecosystemconditionandecosystemservices(waterquality,carbonandbiodiversity).
Thebenefitsofmovingfrompoortogoodconditionwereestimatedat242-302perhectareperyear,andfromintermediatetogoodfrom0to414perhectareperyear.
Itwasestimatedthata10,000hectarerestorationprogrammewoulddeliveranetpresentvalueof7.
9millionandabenefit:costratioof1.
39.
PayingforPublicGoodsfromLandManagement79Christieetal.
(2011)estimatedtheeconomicbenefitsofecosystemservicesdeliveredbytheUKBiodiversityActionPlan.
Thestudyusedachoiceexperimentstudytoelicitthepublic'swillingnesstopayforarangeofecosystemservicesdeliveredbytheUKBAP,thenallocatedthesevaluestodifferentBAPhabitatsusingthejudgementofanexpertpanel.
Thebenefitsofblanketbogwereestimatedat607millionperannumatcurrentratesofBAPexpenditure;ifexpenditurewasincreasedtoallowfullimplementationoftheUKBAP,itwasestimatedthatthesebenefitswouldriseby300millionperannumannually.
Thebenefitsofcurrentconservationactionsforblanketbogwereestimatedtobeequivalentto275/haperyear(averagedacrossthewholeUKhabitatarea),risingbyafurther136/ha/yeariftheBAPwerefullyimplemented(suchthattargetsforrestorationandmanagementofblanketboghabitatweremet).
Harlowetal(2012),usingvaluesfromChristieandotherstudies,estimatedbenefitcostratiosof3:1forblanketbogrestorationand5:1forexpenditurestopreventfurtherdeteriorationintheKeighleyandWatersheddlescatchment.
PayingforPublicGoodsfromLandManagement80Annex2:Managementofarablelandforfarmlandbirdsandpollinators–FurtherdetailsofcostsandbenefitsA2.
1Currentagri-environmentprescriptionsandratesAgri-environmentschemesinallfourcountriesoftheUKincludeoptionsforfarmlandbirdsandpollinatorsinarableland.
ThesearemorenumerousinEngland,whichhasthelargestareaofarableland.
Thereisafocusonannualmanagementpayments,becausearablelandmanagementfollowsshorttermcyclesratherthanrequiringlongtermrestorationorhabitatcreationwork.
InEngland,theArableOfferunderCountrysideStewardshiprequiresapplicantstopickatleastoneoptionfromeachofthreecategories:-Category1:ImprovenectarandpollensourcesforinsectpollinatorsandinsectforagingbirdsoNectarflowermix-511/ha/yroFlowerrichmarginsandplots-539/ha/yr-Category2:Introduceadditionalwinterfoodsourcesforseed-eathingbirdsoWinterbirdmix-640/ha/yr-Category3:ImprovehabitatsandotherresourcesforspecificspeciesoManagementofhedgerows-8/100m/yroSkylarkplots-18/ha/yr(forminimum2plotsperha)oNestingplotsforlapwingandstone-curlew-524/ha/yroEnhancedoverwinterstubble-436/ha/yroCultivatedareasforarableplants-532/ha/yroSupplementarywinterfeedingforfarmlandbirds-632/tonne/yrforevery2hectareswinterbirdfoodoptiono4mto6mbufferstriponcultivatedland-353/ha/yroBufferingin-fieldpondsandditchesonarableland-501/ha/yrInNorthernIreland,theEnvironmentalFarmingSchemeoffersthefollowingarablebiodiversityoptions:-Pollenandnectarmargins-465/ha/yr-Annualwildflowermargins-2530/ha/yr-Roughgrassmargins-841.
50/hayear1,then707/ha/yrinyears2-5;-Cultivateduncropped-702/ha/yr;-Provisionofwinterfeedcropforwildbirds-590/ha/yr;-Retentionofwinterstubble-85/ha/yr.
InScotland,optionsundertheAgri-EnvironmentandClimateSchemeinclude:-UnharvestedConservationHeadlandsforWildlife-657.
57/ha/yr-WildBirdSeedforFarmlandBirds-322.
63/ha/yr-ForageBrassicaCropsforFarmlandBirds-436.
36/ha/yr-StubblesFollowedbyGreenManureinanArableRotation-498.
49/ha/yr-RetentionofWinterStubblesforWildlifeandWaterQuality-96.
18/ha/yr-Beetlebanks-495.
64/ha/yr-GrassStripsinArableFields-495.
62/ha/yr-WaterMarginsinArableFields-495.
62/ha/yr-CroppedMachair-239.
76/ha/yrInWales,arableoptionsunderGlastirAdvancedinclude:-FallowCropMargin-500/ha/yr-RetainWinterStubbles-122/ha/yr-UnsprayedSpringSownCerealsandPulses-284/ha/yr-UnsprayedSpringSownCerealsRetainingWinterStubbles-440/ha/yr-PlantUnsprayedRootcropsonImprovedLandwithoutDirectDrilling-497/ha/yr-EstablishaWildlifeCoverCroponImprovedLand-604/ha/yrPayingforPublicGoodsfromLandManagement81-UnharvestedCerealHeadland-525/ha/yr-UnfertilisedandUnsprayedCerealHeadland-445/ha/yr-BufferZonestoPreventErosionandRun–OfffromLandunderArableCropping-397.
80/ha/yr-UnsprayedAutumnSownBarleyCropforCornBunting(NestingandFeeding)-325.
81/ha/yr-UnsprayedSpringSownBarleyCropforCornBunting(NestingandFeeding)-455.
88/ha/yr-UnsprayedSpringSownCereals,OilseedRape,LinseedorMustardCropforLapwing(Nesting)-302.
82/ha/yr-Fallowplotsforlapwing(nesting)-497.
02/ha/yr.
A2.
2FinancialneedsidentifiedinenvironmentallandmanagementcostingsmodelThecostingsmodeldefinesapackageofmeasuresdesignedtobenefitbiodiversityandlandscapeinarablefarmlandareas.
BasedonadvicefromRSPBecologists,itisestimatedthathaltingdeclinesinfarmlandbirdsandwiderbiodiversityrequiresapplicationof"middletier"measuresto50%ofthearablelandscape,and"hightier"measurestoafurther30%.
Underthe"middletier",itisassumedthat2hectaresoflandmanagementoptionsdesignedtobenefitnectarandpollinatorsand3hectaresofoptionsdesignedtoprovidewinterbirdfoodarerequiredper100hectaresofarableland.
Thenectarandpollinatoroptionsincludeprovisionofnectarflowermixes;flowerrichmarginsandplots;two-yearsownlegumefallow;autumnsownbumblebirdmixandcultivatedareasforarableplants.
Thewinterbirdfoodoptionsincludesowingofcropsforwinterbirdseedandwinterstubbles.
Intotal,thisamountstoagri-environmentprescriptionsamountingto1.
1millionhectares,atanannualcostof460to560millionperannumintheUK.
Thefocusisonannualmanagementoptions,withnocostingofcapitalitems.
Planting,restorationandmanagementofhedgerowsandotherboundaryfeatureswillalsobenefitfarmlandbirdsandbiodiversity,butiscostedseparatelyinthemodelasalandscapemeasure(withanestimatedannualcostof250millionatUKlevel).
A2.
3BenefitsofELM–outcomes,ecosystemservicesandvaluesFarmlandbirdsandthewiderbiodiversityofarablelandarewidelyrecognisedasvaluablepublicgoods.
However,marketsforthesegoodsarelacking,andevidenceoftheirvaluecanonlybegainedbyaskingpeopleabouttheirwillingnesstopaytoprotectthem.
Perhapssurprisinglygiventheprominenceofthefarmlandbirdconservationissue,valuationevidenceisverylimitedandconfinedtoolderstudies.
FosterandMourato(2000)usedacontingentrankingsurveytoaskmembersofthepublictorankdifferentcombinationsofoptionsinvolvingthepriceofbread,thenumberofcasesofill-healthcausedbypesticideuse,andthenumbersoffarmlandbirdspeciesindecline.
Theyestimatedawillingnesstopayof13.
50perhouseholdperyeartopreventthelossofasinglespeciesoffarmlandbird.
Defra(2013)usedtheestimatesofFosterandMouratotoestimatethepotentialbenefitsofproposedecologicalfocusareas(EFAs)undertheCAP.
UpdatingtheestimatestotakeaccountofinflationandGDPgrowth,multiplyingthembythenumberofhouseholdsintheUK,andapplyingestimatesoftheprobabilitiesofreversingfarmlandbirddeclines(basedonexpertjudgement),DefraestimatedthepresentvalueofEFAmeasuresataround1,300m(2013prices)overtheperiod2015-2020.
AnotherstudybyChristieetal.
(2006)estimatedthepublic'swillingnesstopayforconservationofbiodiversityinCambridgeshireandNorthumberland.
Usingacontingentvaluationapproach,theyestimatedthathouseholdswereonaveragewillingtopay74peryearforbiodiversityconservationactivitiesthroughagri-environmentalschemes.
Theoverallwillingnesstopaytoavoidthedeclineof"bothrareandcommonfamiliarspecies"wasestimatedat95perhectareperyearinbothareas.
eftec(2015)upscaledthisfiguretoestimateawillingnesstopayofapproximately2.
2billionperyeartopreventbiodiversitydeclineinEngland.
PayingforPublicGoodsfromLandManagement82Boatmanetal(2010)usedacontingentvaluationstudytoestimatethatthepublicwaswillingtopayanaverageof35perhouseholdperyear(midpointvalue)tosecurethebiodiversityandlandscapebenefitsofEnvironmentalStewardship.
Thisgaveanoverallestimateofbenefitsof818millionperyearacrossEngland(2009prices),andabenefit:costratioof1.
80.
Includingcarbonvaluesincreasedthemidpointbenefitcostratioto2.
38.
Whiletherearelargeestimatesofthetotalvalueofpollinationservicesnationally,evidenceofthemarginalvalueofbenefitsresultingfromspecificmanagementpracticesoroptionsislacking.
Thesevaluescanbeexpectedtovarywidelylocallydependingonotherfoodsourcesandpresenceofcropsbenefitingfrompollinationservices.
Theavailablevaluationevidenceillustratestheoverallbenefitsofagri-environmentmeasuresforbiodiversity,intermsofthepublic'swillingnesstopayforthem,butsayslittleaboutthevalueofbenefitsofspecificagri-environmentactions.