Governance solution Germany

We investigate possibilities for better PG provision in peatland areas through improved water table management and related land use management. The public goods that are especially affected by the water table management are climate stability, water quantity and biodiversity.

According to stakeholder workshops and in-depth interviews with farmers who manage peatlands we considered and investigated a mix of three governance mechanisms (GMs):

  • 1) agri-environmental measure (AEM) targeted at climate friendly peatland management
  • 2) cooperation among farmers
  • 3) value chain opportunities through market innovations

The aim is on the one hand to protect and re-establish peatlands and to keep water in the landscape system through a raised water table, but on the other hand to allow farmers to manage their land, and to maintain their business activities. As a result several public goods, among them climate stability, water quantity and biodiversity will be enhanced.

Until now, only limited knowledge and experiences are available about the measure uptake, effectiveness and optimal measure design. Effectiveness of the measure requires implementation at larger functional, hydrological scales, e.g. watershed, landscape scale, beyond farm scale. Therefore, coordination between farmers is conditional to reach a better PG provision. We investigate the perception and openness of farmers to coordinate and agree with neighbouring land user for a common measure implementation. Additional value chain opportunities through market innovations (such as a heat power plant based on cut grass from peatlands) or new sales markets (niche products and high quality meat from cattle adjusted to high water tables) contribute to a socially accepted rewetting of peatlands.

The overall mix of compensation for forgone income through an AEM, cooperation with neighbouring land managers and additional value chain opportunities will results in enhanced PG provision, mitigate public bads and would be widely accepted by farmers and society.

Our theoretical approach to assess the governance mechanism (GM) is based on the assumption, that the willingness to accept (WTA) of peatland and water level management change by farmers is increasing when cooperation between neighbours and regional value chain opportunities related to peatland management is enhanced. Accordingly the required amount of financial compensation for the income foregone and increased work efforts can be reduced, when coupling with cooperation and value chain approaches.

These elements are connected through a number of hypotheses:

  • There is a minimum financial compensation for which farmers accept the AES.
  • The cost of financial compensation needed is reduced, when regional cooperation/coordination and regional value chain opportunities are enhanced.
  • Under different scenario settings (BAU, sustainability-oriented, market-oriented) the regional framework conditions (environment/climate, economy, population/demography, technology/innovation, policy/governance) are changing.
  • Changed framework condition affect the likelihood of the GM implementation, also affecting the cost of the AES implementation and thus the cost of PG supply

 

GM 1 – Financial Incentive

The overall average willingness to accept under the current contract conditions (five years; no support for cooperation; medium effort; no acceptance of cut grass assured) is calculated as 522 €/ha*a.

GM 2 – Cooperation

Offering support for cooperation by the water and soil associations would reduce the minimum financial compensation level by 53 €/ha*a. Hence, an average payment of 469 €/ha*a would be needed.

GM 3 – Value Chain Opportunities

The guaranteed purchase of the cut grass would reduce monetary compensations even more by 67 €/ha*a for a fixed price; or 77 €/ha*a for market prices, resulting in an average payment of 445 €/ha*a.

Optimal mix of Governance Mechanisms (GMs)

As a result, under an optimal contract design, combining all three GMs 1) incentive, 2) support for cooperation and 3) value chain opportunities, farmers would be willing to participate in the scheme for an average compensation of 385 €/ha*a. Hence, the optimal governance strategy is a mix of these three GMs leading to the most cost efficient provision of PGs in agriculturally used peatland areas.