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Guidelines for Cost-effective Agri-environmental Policy Measures

image of Guidelines for Cost-effective Agri-environmental Policy Measures

Improving the environmental performance of agriculture is a high priority in OECD and many non-OECD countries. This will be of increasing concern in the future given the pressure to feed a growing world population with scarce land and water resources. Policy has an important role to play where markets for many of the environmental outcomes from agriculture are absent or poorly functioning.   

This study focuses on the design and implementation of environmental standards and regulations, taxes, payments and tradable permit schemes to address agri-environmental issues. It deals with the choice of policy instruments and the design of specific instruments, with the aim of identifying those that are most cost-effective in very different situations across OECD countries.  

Key conclusions from the study are that: there is no unique instrument that promises to achieve all agri-environmental policy goals; the cost effectiveness of payments systems could be improved by using performance-based measures; and policy mixes need to combine policy instruments that complement and not conflict with each other.

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Objectives of agri-environmental policy instruments and criteria for policy evaluation

The fundamental purpose of agri-environmental policy instruments is to achieve environmental policy objectives that would otherwise not be achieved given the absence or poor functioning of markets. Achieving those objectives requires either controlling environmental stress, such as polluting emissions, or inducing farmers to undertake pro-environmental activities to increase the flow of ecological services, such as management of agricultural practices and land to enhance desired wildlife habitat. In either case, achieving the desired end requires changes in producer decisions consistent with the achievement of the agri-environmental policy objectives.

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