The collective provision of environmental goods: a discussion of contractual issues

Abstract

Although many species have a larger range than the average sized farm, most agri-environment schemes (AES) involve contracts with individual land managers. However, in the Netherlands ‘collective contracts’ allow neighbouring land managers to co-ordinate environmental management at the landscape rather than the farm-scale. Findings from a study of Dutch Environmental Co-operatives (ECs) are used to discuss how collective contracts for environmental goods affect the following contractual issues associated with AES: transaction costs, asymmetry of information, the ‘hold-up’, ‘end-of-contract’ and ‘assurance’ problems and incomplete contracts. As a prerequisite for effective collective contracts requires land managers holding communal aims and interests, the techniques used by ECs to form like-minded groups are also reviewed. Government support for collective contracts can be justified because they: (1) reduce transaction costs; (2) improve ecological effectiveness; and (3) increase the policy options available. Government support for ECs can be justified (1) as compensation to members for the additional costs they incur co-ordinating group actions; (2) to assist collectives buy-in expert advice; and (3) because they increase participation rates by (a) helping counter the ‘hold-up’, ‘assurance’ and ‘incomplete contract’ problems, and (b) by framing decisions in ways that shift attitudes, values and aspirations among members.