Incentives, Rewards or Both in Payments for Ecosystem Services: Drawing a Link Between Farmers' Preferences and Biodiversity Levels

Agri-environmental-climate schemes provide payments for ecosystem services by compensating farmers to implement management actions or obtain ecological results. To compare farmers' preferences for action-based schemes, result-based schemes, or a hybrid, we conduct a discrete choice experiment in a case study from Germany. We elicited farmers' preferences for alternative grassland biodiversity payments through an in-person survey and measured farm ecological performance using a biodiversity index. Our findings indicate that farmers are more reluctant to accept action-based schemes. However, the payment mechanism is not the only driver of farmers' decision-making. The applicability of the prescribed management practice to the farming system, and the achievability of the outcome, are also key for adoption. Intensive farmers are more likely to choose hybrid solutions than extensive farms, which prefer a result-based approach. Farms with higher biodiversity tend to accept result-based schemes more frequently and are willing to enrol a greater share of their land. Our findings suggest a potential lack of additionality, but also that farmers' awareness about their farms' ecological potential influences the adoption of result-based payments. To encourage farmers to participate and enrol more land in these schemes, policy-makers should tailor the payment-mechanism to different farmers and provide on-site technical advice.