Remuneration for the environmental benefits of organic farming

Background and Objective

Organic farming stands for a holistic concept of land use, with the aim particularly to recognise and respect natural constraints. For the environmental benefits they deliver, organic farms currently receive a land area-based payment. The level of this environmental payment has so far been calculated on the basis of regional averages for increased costs and reduced output of organic farms compared with conventional farms.

This approach has two disadvantages. Firstly, the support payments bear no relationship to the value of the environmental benefits delivered. And secondly, the support payments to not provide any financial incentive to adopt farming practices that go beyond the minimum requirements of organic regulations. The Thünen Institut and partner organisations have therefore, in the context of a research project, set the goal of developing a differentiated and coherent approach to the remuneration of the environmental benefits of organic farming.

To make the subsequent implementation of the remuneration concept easier, the expectations and experiences of agricultural practitioners and policy administrators will be considered from the outset. In addition, the concept development will ensure that the remuneration approach could be applicable to all farmers at a later date.

Results

As part of this work the suitability of various indicator-based approaches for a differentiated remuneration of environmental services was assessed. A total of 556 agri-environmental indicators were considered for the protection of soil, water, climate/air and biodiversity. A detailed assessment was carried out for 17 individual indicators based on the criteria of relevance, legal defensibility/susceptibility to fraud, transaction costs, and communicability. The evaluation of the individual indicators in the context of this work shows that it remains a challenge to use practicable, results-oriented approaches across the board for remuneration. However, the results also indicate in which areas and under which conditions progress is conceivable in coming years (e.g. nutrient balances).

In addition to the question of whether action-orientated or result-orientated approaches are more suitable for a remuneration system, the possibility of graduating the level of support more strongly in future and thus enabling a differentiated assessment of performance should be examined for both options. In order to adequately reward organic farming in this context, it is particularly important to take appropriate account of the multi-annual management practices and the combination and synergy effects resulting from the system approach (e.g. through the creation of fallow land and the avoidance of chemical-synthetic pesticides).

The results of this and other studies show how public funds can be spent in a more targeted manner in future for the provision of politically desirable public goods. They therefore make an important contribution to the debate on the reorientation of agricultural policy after 2027.

See the cover report for the individual final reports of the project:
Sanders J, Lampkin N (2023) Honorierung von Umweltleistungen unter besonderer Berücksichtigung des ökologischen Landbaus: UGÖ-Schlussbericht Teil II. Braunschweig: Thünen-Institut für Betriebswirtschaft, IV, 16 p. https://literatur.thuenen.de/digbib_extern/dn067271.pdf