Econometric methods for estimating the additional effects of agri-environmental schemes on farmers' practices

Agri-environmental schemes (AESs) that remunerate farmers who volunteer to adopt practices that are more favourable to the environment are increasingly important policy measures in both the United States and the European Union. Cost-benefit evaluation of an AES requires estimates of the additional impact of the AES and of the extent of windfall effects. This chapter defines these notions and discusses the biases of naive ways of estimating them. We then present an overview of the econometric methods that can be used to estimate additional effects. We illustrate them with examples taken from original results on the evaluation of the French AES programme implemented between 2000 and 2006.