Measuring private transaction costs of European agri-environmental schemes

Abstract

Recent changes in European agri-environmental policy allow farmers' transaction costs (TCs), also called private TCs, to be taken into account when calculating compensation payments for agri-environmental schemes (AESs). This gives rise to questions as to the significance of these costs and the methodologies used to measure them. In this paper, private TCs are measured and analysed using two methodologies: (1) through a survey of general perceptions of TCs and (2) through a one-year registration system for monitoring labour hours, operational and administrative costs and differences in revenue between a parcel of land in an AES and a comparable area of land not in a comparable scheme. The results obtained with both methodologies show that private TCs are significant and not to be underestimated. They represent about 15% of the total AES-related costs and about 25% of the compensation payment. The most important cost factor resulting from an AES-uptake is the income foregone which represents more than 50% of the total costs.