Result-based Agri-environmental Payments: How They Are Designed Affects Biodiversity

A study on result-based agri-environmental payments in Switzerland shows how payment design can affect biodiversity.

Governments worldwide use agri-environmental payments as a key instrument for promoting biodiversity on agricultural land, and Switzerland is no exception. One form of these payments is result-based agri-environmental payments which compensate the results achieved rather than the implementation of a measure. This approach is intended to boost the effectiveness of agricultural policy measures, with farmers receiving payments when specific environmental targets are met. The attainment of the target is usually measured by means of a specific threshold. In Switzerland, for example, payments for grasslands can be claimed if at least six plant species from a defined list of indicator species are present.

Focus on the payment design

An Agroscope study evaluated the effect of result-based payments on grassland biodiversity in Switzerland. The number of indicator plants was used as a measure of biodiversity. Furthermore, for the evaluation, a dataset was used that includes information on plant vegetation over 20 years across a large number of randomly selected plots in Switzerland (‘The Swiss Biodiversity Monitoring Data’). The focus of the study was on the impact of the threshold  (i.e. the number of indicator species to be reached) on biodiversity. To measure a causal effect of result-based payments, Agroscope experts used temporal and spatial variations in the level of these amounts triggered by a reform of Swiss agricultural policy in 2014.

Influence of the threshold

The Agroscope study yields two key findings: firstly, that the number of indicator species on plots falling just short of the threshold prior to the reform increased to a greater extent than on plots previously already surpassing this threshold and hence already eligible for payments. In other words, payment reform incentivised farms to deliberately promote biodiversity on plots that almost reached the threshold. By contrast, plots already eligible for payments showed fewer changes. Secondly, biodiversity improvement on plots with an initially significantly lower number of indicator species, and which would therefore have had higher adjustment costs, was less strongly incentivised by the reform.

Potential ways forward

The findings highlight a key feature of result-based agri-environmental payments: they lead to biodiversity changes primarily on plots where biodiversity is close to the threshold value. Consequently, the introduction of several or continuous thresholds instead of a single threshold might improve the effectiveness of these payments.

Improving the efficiency of result-based agri-environmental programmes is vital as the importance of these programmes for the agricultural policy of European countries is growing and financial resources are limited.