94 – Environmental stewardship payments

At a conference earlier this month, the Australian Minister for Agriculture, Peter McGauran, announced that the Australian Government has committed itself to a new “environmental stewardship” scheme, under which Australian farmers will be paid for “environmental services” that they provide to the Australian community.

This announcement reinforces signals that have been coming from the government for at least a year. At this stage we know nothing about the details of the scheme, but the use of the term “environmental stewardship” rings some alarm bells for me. The concern is that the government may take a leaf or two out of the European approach to stewardship payments. To be fair, McGauren has said that the scheme is “not in the same vein as the European farm payment environment subsidy program”. I don’t know what he has in mind when he says “the same vein”, but there are various features that he’d be well advised to avoid.

In the UK, the Department of Environment, Food and Rural Affairs launched its Environmental Stewardship program in 2005. This scheme offers payments for an amazing variety of “services” that farmers can perform, starting at £30 (about A$75) per hectare per year for the “entry level” scheme, £60 (A$150) per hectare per year for the second-level, and payments off into the stratosphere for an amazing range of services that farmers can choose to provide under the high-level scheme. For example, farmers can claim £600 (A$1500) per hectare per year for three years for converting an orchard into an organic production system, or £700 (A$1750) per hectare for creation of inter-tidal and saline habitat on arable land.

Many of the options that can generate an “environmental” payment seem remarkable to an Australian, including building new stone walls, planting fruit trees, installing infrastructure to re-introduce livestock to a farm (£538 per cattle grid!), and car parking for visitors. Clearly, some of the things that are deemed to constitute an environmental benefit in the densely populated and long-farmed UK countryside are radically different to what we would count as “environmental” in Australia, where our focus is on naturalness and conservation of natural resources. Many of the UK payments are offered to encourage traditional approaches to farming, or preservation of the UK landscape in a highly modified, but highly valued, state (preserving old farm buildings, using traditional animal breeds).

I don’t think there is any danger of the Australian scheme offering subsidies anywhere remotely near the levels offered in the UK version, and I doubt very much that we’ll start paying farmers to install cattle grids, but there are also other ways that our scheme can be smarter than the UK one.

I particularly dislike the way that the UK scheme has established a schedule of standard payments for specific actions. In doing this, it seemingly ignores the fact that the level of environmental benefits is likely to vary greatly from one case to another, so that the amount it would be worth paying for the same action would vary from place to place. It appears that the payment levels have been set with an eye to the likely cost to farmers, rather than the environmental benefits. For example, they pay more for creation of woodland than for maintenance of woodland. The relationship between payment levels and the value of actual environmental benefits generated is somewhere between loose and non-existent. I expect that many of the payments generate very small environmental benefits.

Even the consideration of farmer costs is pretty loose. There is no attempt to determine how much individual farmers would need to be paid to do one of the desired actions. For example, UK farmers can claim £500 for reversion of cropland by “natural regeneration”, irrespective of the opportunity cost to farmers of the cropland. No doubt, some farmers would be willing to convert some of their crop land for less than £500.

Another concern with the scheme is that it relies on one policy tool: grants to farmers. It ignores the reality that there is a range of different types of policy tools and that that each of them can be the most appropriate tool to use in different situations (e.g. see Pannell, 2006).

Still, the UK government seems happy with the scheme. In 2005, Sustainable Farming Minister Lord Rooker said:

“I am delighted with the success of Environmental Stewardship so far. With over 20,000 agreements, covering 3 million hectares, already in place, this means that over 30% of eligible agricultural land in England is now under some form of funded environmental management”. With the sort of money they are throwing around, it is not surprising that the take up has been impressive.

Overall, from an environmental perspective, the UK version of Environmental Stewardship seems certain to generate much fewer environmental benefits than would be possible for the money on offer. From a financial perspective, it will involve much higher costs to taxpayers than it need do for the environmental benefits generated. It is resulting in big transfers of income from taxpayers to farmers, but I guess that is part of the idea.

I hope that the Australian scheme will be more discerning and better designed. Peter McGauren said, “This is the government and the community purchasing these environmental management services. It’s not about the farmer deriving the benefit.” That is a pretty interesting comment from a Minister for Agriculture, and one that it will be difficult for him to deliver on.

David Pannell, The University of Western Australia

Further Reading

Pannell, D.J. (2006). Public benefits, private benefits, and the choice of policy tool for land-use change, Full paper (150K)

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