Agri-environmental payment schemes which operate as voluntary programmes that pay farmers to achieve certain environmental criteria have gained increasing interest and popularity amongst policy makers and farmers. There is growing evidence, however, that the majority of such schemes that have been implemented have had little environmental effectiveness. Building on past OECD work, this report identifies and discusses “best practice” design principles for cost-effective agri-environmental payment schemes. To this end, the report reviews the literature, develops a Policy Spectrum Framework that classifies payment types based on key design features for achieving cost-effective outcomes, and presents policy simulations undertaken to assess the cost-effectiveness of different payment designs and a multi-country choice experiment conducted with farmers to explore their preferences for different types of payments, ranging from practice-based to results-based payments.