National Differences in the Uptake of EU Agri-environmental Schemes: An Explanation

The number of agri-environmental programs launched under EU Regulation 1257/99, as well as the share of agricultural land covered under these programs, varies significantly between EU member states. National differences in the uptake of agri-environmental schemes would be economically efficient if they accounted for differences in countries' natural capacity to assimilate pollution and reflected the social value attributed to environmental quality. However, political decisions are unlikely to be influenced only by efficiency consideration. This paper assesses the distributional, budgetary and welfare effects of agri-environmental programs and analyses how this may explain the pattern of agri-environmental policy in Europe. The study is based on an environmental externality model which accounts for a country's economic, environmental and political situation. The conceptual analysis is supplemented by a regression model. Theoretical results suggest that the extent of agri-environmental programs increases as 1) the importance attributed to farm income increases; 2) the costs for the implementation of agri-environmental programs are lowered; 3) environmental benefits are valued higher; 4) the national budgetary pressure decreases; 5) the share of EU co-funding for agri-environmental schemes is raised. Empirical results indicate that countries attributing a high weight to farm income are more likely to implement agri-environmental schemes than others. The uptake of agri-environmental programs is higher the more important the role of landscape features for the domestic tourist industry. On the other hand, the uptake of agri-environmental policy is negatively correlated to land productivity and depends also on countries' wealth and their relative contribution to the EU budget.