Annex A. Agri-environmental policy components and policy mechanisms

The policy cycle shown in conceptual framework for analysing use of digital technologies for better agricultural and agri-environmental policies (Figure 2.1 of the main report) is a stylised representation of the broad components undertaken to design, successfully implement, and evaluate an agri-environmental policy. In that figure, the components are set out linearly; it is acknowledged that the particular components and ordering of components for a particular policy will depend on context – the emphasis here is on considering the usefulness of digital technologies for each component. The components, drawn from the literature on agri-environmental policy design (see for example, OECD (2008[1]) and OECD (2010[2]), are:

• Policy design: identification of policy issues and definition of policy objectives. Specific operational objectives or targets which will achieve the broad objectives are then identified. Having defined the objective(s), the next step is the selection and specification of a particular policy mechanism (or suite of mechanisms) to achieve the objective(s).

• Initial outreach and enrolment in policy mechanism is the preliminary step for implementation. It is the process of raising awareness of the policy mechanism with potential participants, soliciting (voluntary) or requiring (regulatory) participation, gathering baseline data and checking eligibility criteria are met (if applicable) and enrolling participants. Depending on mechanism design, this may consist of informing the regulated community of requirements; registering programme participants in a database; gathering baseline information; performing preliminary eligibility checks; setting up a process to accept tenders or auctions, etc.

• Implementing policy mechanism: This entails the practical implementation of the policy mechanism. Depending on mechanism choice, this could involve, for example, administering payments provided to eligible farmers; executing contracts; administering tradeable permit programmes.

• Monitoring and enforcement (if relevant) of participation in policy mechanism in order to be able to assess whether they are in compliance (examples include: auditing for regulatory compliance in a mandatory scheme; in a voluntary pay-for-practice programme, verifying whether contracted best management practices (BMPs) have been implemented and are being maintained as per the terms of the contract). Further, if non-compliance is identified, carrying out enforcement protocols (e.g. requiring remedial action, fines, legal action).

• Policy evaluation involves monitoring the achievements of the policy mechanism, relative to its objective (effectiveness) and also in terms of the costs of implementing the policy mechanism (efficiency), including transaction costs.1

• Communication with broader public about policy involves sharing information about the policy mechanism, including progress toward achieving the objectives and the results of evaluations, with the broader public. Further, feedback from interested stakeholders is sought. This 'component' could be performed throughout the policy cycle - e.g. initial consultation during the policy design component; ongoing communication and consultation about implementation progress; participation of stakeholders in policy evaluation.

This report notes that digital technologies are useful for a range of different agri-environmental policy mechanisms. Table A A.1 provides an overview of such mechanisms: this was used in the OECD questionnaire conducted to support this work (Annex B).

Table A A.1. Agri-environmental policy mechanism classifications
Category	Instrument	Examples
Regulatory instruments	Environmental standards	Chemical bans
		Agricultural input standards
		Performance (output) standards (e.g. agricultural waste management standards)
		Technology standards
	Activity prohibitions	Permanent outright bans on undertaking an environmentally damaging activity in an agricultural area
		Temporary outright bans on undertaking an environmentally damaging activity in an agricultural area
	Environmental property rights	Regulations to assign minimum environmental flow
Economic Instruments		Purchase of water rights from agricultural enterprises, with purchased rights being allocated to the environment
	Environmental taxes	Performance or emissions taxes
		Input taxes (e.g. fertiliser taxes)
	Environmental subsidies (Agri-environmental payment schemes)	Cost share programmes
		Payments for ecosystem services
		Subsidies for agri-environmental technology innovation or public investment in structural adjustment towards “greener” agricultural systems
	Extension services	Mandatory training requirements
		Voluntary training programmes
	Tradeable allowances	Emissions trading schemes and pollution reduction credit trading
		Tradeable offset schemes
		In lieu fee programmes
Hybrid instruments	Environmental “cross-compliance” requirements	Cross-compliance mechanisms; baseline eligibility requirements
Source: Adapted from OECD (2010[2]) and Hardelin and Lankoski (2018[3]).

References

[3] Hardelin, J. and J. Lankoski (2018), “Land use and ecosystem services”, OECD Food, Agriculture and Fisheries Papers, No. 114, OECD Publishing, Paris, https://dx.doi.org/10.1787/c7ec938e-en.

[2] OECD (2010), Guidelines for Cost-effective Agri-environmental Policy Measures, OECD Publishing, Paris, https://doi.org/10.1787/9789264086845-en.

[1] OECD (2008), Agricultural policy design and implementation: a synthesis, OECD Publishing, https://www.oecd.org/tad/agricultural-policies/40477848.pdf.

Note

← 1. OECD (2010[2]) defines the “environmental effectiveness” of policies as their success (or otherwise) in achieving their stated environmental objectives, and “cost-effectiveness” as the degree to which the policy instrument achieves its objective at minimum cost.

Annex A. Agri-environmental policy components and policy mechanisms