Modeling a farm population to estimate on-farm compliance costs and environmental effects of a grassland extensification scheme at the regional scale

We used a farm-level modeling approach to estimate on-farm compliance costs and environmental effects of a grassland extensification scheme in the district of Ostprignitz-Ruppin, Germany. The behavior of the regional farm population (n = 585) consisting of different farm types with different production orientations and grassland types was modeled under the presence and absence of the grassland extensification scheme using the bio-economic model MODAM. Farms were based on available accountancy data and surveyed production data, while information on farm location within the district was derived from a spatial allocation procedure. The reduction in total gross margin per unit area was used to measure on-farm compliance costs. A dimensionless environmental index was used to assess the suitability of the scheme to reduce the risk of nitrate-leaching. Calculated on-farm compliance costs and environmental effects were heterogeneous in space and farm types as a result of different agricultural production and site characteristics. On-farm costs ranged from zero up to almost 1500 Euro/ha. Such high costs occurred only in a very small part of the regional area, whereas the majority of the grassland had low on-farm costs below 50 Euro/ha. Environmental effects were moderate and greater on high-yield than on low-yield grassland. The low effectiveness combined with low on-farm costs in large parts of the region indicates that the scheme is not well targeted. The soft scheme design results from an attempt to achieve environmental and rural development objectives with only one scheme. Improving the efficiency of the scheme would require designing separate instruments for the two distinct objectives. This is in line with the Tinbergen rule, which states that consistent economic policy requires that the number of instruments equals the number of targets. (C) 2010 Elsevier Ltd. All rights reserved.