Evaluating the potential contribution of contract auctions to Agri-Environmental Policy efficiency: A simulation model for Emilia-Romagna (Italy)

Auctions are a potentially suitable policy tool for increasing the efficiency of Agri- Environmental Schemes (AES) through an improved allocation of contracts. In theory, through the auction mechanism, farmers have incentives to reveal their compliance costs, helping to reduce information rents and increase policy cost-effectiveness. The aim of this paper is to simulate the potential contribution of auction mechanisms to the efficiency of AES in Emilia-Romagna (Italy). The results show advantages for auctions compared with traditional flat rate payments based on average compliance costs. However, their performance is worse than flat payments based on marginal compliance costs.Auction, Contract, Agri-Environmental Policy, Information asymmetry, Agricultural and Food Policy, Environmental Economics and Policy, Q15, Q18,

EX-ANTE EVALUATION OF AGRI-ENVIRONMENTAL SCHEMES: COMBINING ELEMENTS OF PRIVATE AND PUBLIC DECISION MAKING

The objective of this paper is to set a complete ex-ante evaluation to support Decision Makers in designing more efficient and effective agri-environmental contracts, through an integrated modelling of elements of private and public decision making. Ex-ante comparison of policy design options in terms of overall effectiveness requires both simulations of farmers' behaviour and evaluation of the farms simulations outcomes. An intermediate step is the aggregation of single farms impacts at territorial level, in order to identify the aggregate impact of each alternative. Alternatives are several contract design, based on different levels of payments. Farm level analysis is based on a real options approach including in the simulations the timing of choice and the uncertainty in the future about price and decoupled payments. Aggregate policy impact is identified through the quantification of economic, social and environmental impacts at territorial level and the weights are elicited with Multiple-Criteria Robust Interactive Decision Analysis (MCRID). Simulations in the case study show that relevant opportunities to improve policy design are available. Multicriteria Analysis is then used to aggregate impacts of many criteria, including not only effects on the environment, but also economic and social impacts.Agri-environmental schemes, Real Options, Investments, Decoupled payments, Uncertainty, Agricultural and Food Policy, Environmental Economics and Policy, Risk and Uncertainty,

Real option models for simulating digester system adoption on livestock farms in Emilia-Romagna

Innovation and new technology adoption represent two central elements for the enterprise and industry development process in agriculture. The objective of this paper is to develop a farm-household model able to simulate the impacts of uncertainty in SFP, the selling price of energy and agricultural product prices parameters on the adoption of methane digester for biogas production. The model implemented is based on a real option approach that includes investment irreversibility and stochasticity in relevant parameters. The results show the relevance of uncertainty in determining the timing of adoption and emphasise the importance of predictability as a major component of policy design.real options, methane digester, biogas, investment, uncertainty, Agricultural and Food Policy, Farm Management, Land Economics/Use,

Contract Design and Targeting for the Production of Public Goods in Agriculture: The Impact of the 2003 Cap Reform

The objective of this paper is to compare different ways of designing agri-environmental contracts and to set targeting under adverse selection, comparing conditions before and after CAP reform 2003. The results suggest that the present contract structure may be relevantly improved through a more accurate design and a clearer target. The reform, through the decoupling mechanism, will contribute to reduce the opportunity cost of the adoption of agri-environmental measures. This may increase the optimal amount of public goods produced by agriculture and will encourage participation by farmers. However, in order to properly exploit the new conditions brought by the 2003 reform, it is necessary to review the way agri-environmental payments are assigned and their structure, in terms of targeting, contract differentiation and payment allocation.agri-environmental schemes, contracts, multifunctional agriculture, CAP reform, Agricultural and Food Policy, Environmental Economics and Policy, Q1, Q18, Q2,

WATER POLICY AND THE SUSTAINABILITY OF IRRIGATED SYSTEMS IN ITALY

The management of water resources is today one of the main issues in most countries. In Italy, as in many other European countries, irrigation is the main sector using water and hence it is at the centre of the water policy agenda. Water management for irrigation requires suitable policy tools able to meet social objectives and private behaviour. The legal framework in the European Union is today faced with the new Water Framework Directive (60/2000), that sets up new criteria for water management, regulation and pricing. Among other things, the Water Framework Directive introduces the principle of full cost recovery and the polluter pays principle for water users. For many areas of Italy, this may be a significant shift compared to present payment criteria, based on traditional rights, area prices, and only a partial cost recovery from final users. The objective of this paper is to analyse the problem of water regulation for irrigated agriculture, through a simulation model based on the integration of a mathematical decision making model and a principal agent. The methodology allows to quantify water demand and optimal regulation from the point of view of the policy maker. The results show major impacts of water availability and prices on farm income. The adoption of a mix of pricing instruments related at the same time to charges associated to crop mix, water consumption and pollution can significantly improve water policy efficacy.Resource /Energy Economics and Policy,

Water Policy and Sustainability of Irrigated Farming Systems in Italy

The objective of this paper is to provide an analysis of the sustainability of irrigated agriculture in Italy in the context of CAP reform and Water Framework Directive. The work combines scenario analysis, multicriteria mathematical programming simulation models and economic, social and environmental indicators. Five irrigated farming systems were considered: cereals, rice, fruit, vegetables and citrus. The results show the diversity of Italian irrigated farming systems and the trade-off between socio-economic and environmental performance. This highlights the need for a differentiated application of the Water Framework Directive, balancing water conservation and rural development objectives.water framework directive, irrigation, economic models, sustainability indicators, scenarios, Land Economics/Use, Resource /Energy Economics and Policy, Q1, Q2, Q25,

Understanding the Determinants of Investment Reactions to Decoupling

The objective of this paper is identify the determinants of reaction to decoupling, focusing, in particular, on farm strategies and investment behaviour both on-farm and offfarm investment. The paper analyses a sample of 248 farm-households located in 8 EU countries, using decision tree algorithms. The factors emerging as determinants of an increase of on-farm investment as a reaction to decoupling are the existence of a successor, age, farm size, part time vs. full time head of farm. Allowing for the use of country variables, these tend to account already for the factors listed above and become the main predictors, followed by labour endowment, specialisation and expectations.JRC.J.5-Agriculture and Life Sciences in the Econom

Modelling the Effect of EU Policy Reforms on Farm Investment Behaviour

The objective of this paper is to analyse farm strategies and investment behaviour in a sample of selected Italian farm-households facing different scenarios, with a particular focus on the effects of the 2003 CAP reform. Models were built for individual households using multi-criteria dynamic programming, including investment choice. A total of 24 farms were selected for modelling, all located in Emilia Romagna (Italy). The simulations show a strong effect of both policy and markets scenarios on household investment, though the latter seems more relevant than the former. However, decoupling itself shows minor effects in the majority of cases. The models offer useful insights about the mechanisms of adaptation and their implications for the effects of policies. The main drawbacks are in the heavy data collection and computational requirements, and in the related difficulties to achieve a satisfactory degree of representativeness.JRC.J.5-Agriculture and Life Sciences in the Econom

Investment Behaviour in Conventional and Emerging Farming Systems under Different Policy Scenarios

Objective of this study is to carry out an analysis of investment behaviour among farming systems of selected EU regions, and to assess the impact of the 2003 CAP reform on producers' investment behaviour, and on their sustainability. The study includes a review of the literature, a description of the methodology, the results of the empirical analysis and policy recommendations. The review of the literature on farm investment behaviour focuses on: a) the determinants of investment behaviour; b) the effects of policy on investment behaviour; c) the classification of quantitative tools for analysing farm investment behaviour; and d) the choice of methodology for the empirical analysis of farm investment behaviour. The methodology adopted is based on the integration of empirical primary information collected through a survey of about 250 farm households with a modelling exercise of the individual farms surveyed. The core model is a multi-criteria dynamic programming model of farm households. The model is calibrated on primary data from a survey of single farms through a questionnaire. Case studies were developed for France, Germany, Greece, Hungary, Italy, Poland, Spain and The Netherlands. In the majority of cases, farmers stated they were indifferent to decoupling. Where any change occurred, the impact of decoupling was highly differentiated. Scenario analysis showed that CAP as a whole is very important for the sustainability of farming systems. However, prices (in the range simulated) appeared to be more important than policy and adaptation of farm activities more important than investment as a reaction to both policy and prices. Post-decoupling CAP appeared from the interviews to be very much a ¿policy with multiple objectives¿ that takes on very different roles depending on the context in which it is cast. In particular it seems to tend to reinforce the strategy already adopted by farm-households, either in terms of expansion or abandonment. The results confirm the need for better empirical information, contextualized within the present stage of EU agriculture and policy.JRC.J.5-Agriculture and Life Sciences in the Econom

Regole pratiche per la valutazione degli arboreti da frutto

The paper provides some practical rules for the choice of the evaluation procedure for orchards, in relation to different environmental situations. In particular, different evaluation approaches are illustrated distinguishing areas with specialised production systems and areas with mixed production systems. The problems related to the application of the income approach and the market comparison approach are illustrated in the different cases. The paper is completed by some examples concerning the evaluation of pear orchards in specialised systems and peach orchards in mixed production systems. In conclusion, some critical notes are reported about the methodology proposed by Ribaudo for the synthetic evaluation of vineyards of different age. The paper argues that the age relation approach has weak scientific bases, is difficult to apply and does not guarantee the reliability of the results, compared to analytical approaches