Alternative approaches to supporting HNV farming systems
A report published by the UK Land Use Policy Group (LUPG) could help inform thinking on the development of HNV farming system support policies, frameworks and strategies (Alternative payment approaches for non-economic farming systems delivering environmental public goods).
The main objective of this work was to consider the scope for developing alternative types of payment that would be compliant with the WTO Green Box rules, and to test these as possible models for environmental support. In order to satisfy WTO rules, any changes to the framework for payment calculations in agri-environmental and other area-based rural development measures need to demonstrate only limited production and trade effects. But this may be less of a problem for ‘non-economic’ farming systems which generally have rather little market impact, if the environmental objectives of these farming systems are clearly defined and linked to government policy.
The LUPG work involved financial modelling of farm types and the testing of three alternative payment approaches:
- an agri-environment type, site-specific payment, which would be justifiable where a management activity is unprofitable. The calculations were based on the full cost of management, including a proportion of the fixed costs;
- based on assistance for disadvantaged regions where farming systems provide environmental public goods. This approach explored the scope to develop holding-level payments based on a whole farm agri-environment undertaking and was based on estimated gross margins;
- also involved a holding-level approach, but was based on the opportunity cost of farming expressed in the form of alternative income options within areas subject to natural handicaps.
Testing the approaches directly for a selection of Scottish and English farms with HNV farming system characteristics tended to generate much higher levels of payment than received under the present agri-environment and Less Favoured Area support mechanisms. The report highlighted that this should not be seen by policy makers as a disincentive to explore these payments mechanisms further, since it can, and should, be argued that such farms are a special case for protection, provide important ecosystem services and therefore merit a higher level of support from society.
It is important to note, however, that the European datasets from which the farm level financial information was drawn do not include data from small-scale or part-time farming systems. Hence, further work will be required to test the applicability of these approaches at a wider European level. Nevertheless, an additional important conclusion from the report was that there is scope under the current WTO rules for taking the absence of land management (or cessation of specific land management activities) as the baseline for calculating agri-environment payments in certain circumstances.
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