A locally designed payment scheme for agricultural landscape services

Traditional nationwide agri-environmental policy measures are not always efficient to ensure the provision of environmental services that would match peoples’ preferences. This study suggests a landscape value trade (LVT) scheme to be locally implemented so as to ensure the supply of agricultural landscape attributes demanded by local citizens. The feasibility of LVT, a ‘user-financed’ payment for environmental services (PES) scheme, is analysed in a local case from the southern part of Finland. We examine the disposition of both landowners (sellers) as well as residents (buyers). Of the landowners 43% were hesitant towards LVT, and for improvement of most of the attributes they demanded compensation exceeding their expenses. To examine the preferences of buyers for certain landscape attributes and also the existence of heterogeneity, we employed a random parameters logit (RPL) model with interactions. Buyers’ preferences were found to be spatially heterogeneous, and transaction costs are therefore expected to significantly determine the performance of LVT. However, a LVT plan that would incorporate the most significant landscape attributes, i.e. the presence of grazing animals, water buffer zone management in a natural state and the renovation of production buildings, was evaluated to be feasible to put into practice, while the aggregate benefits were almost twice as high as the anticipated costs.

► A locally designed payment scheme is proposed as a feasible solution for the provision of agricultural landscape services.
► Local residents would compensate landowners for the provision of certain landscape attributes.
► Landowners were more reluctant towards the payment scheme and demanded compensation that exceeded the expenses.
► Residents’ preferences were heterogeneous resulting to high transaction costs.
► Aggregate welfare benefits outweighed the cost of improving the most significant attributes.