The future of German agriculture – A task for society as a whole

The future of German agriculture – A task for society as a whole

by | Jul 12, 2021 | Background

“German Commission on the Future of Agriculture” (“Zukunftskommission Landwirtschaft”) presented its final report to Chancellor Angela Merkel on July 6, 2021. Various stakeholders unanimously state their commitment to strengthen efforts of environmental and climate action and to improve animal welfare. The Commission stipulates that for the successful transition to a more sustainable agricultural production, economic viability is an indispensable prerequisite. Farmers can only provide environmental services if the farms can secure a sufficient income. Stakeholders also agreed that the transition is a task for the whole of society and that politics needs to provide a conducive policy environment to enable change.

 

Germany as a trailblazer for future-oriented thinking?

Germany already has developed standards that are considerably higher than the EU average regarding various sectors, particularly in the field of animal welfare: It is the world’s first country to ban the culling of male chicks (offspring of laying hens) by the end of 2021. This follows the ban on castrating piglets without anesthesia at the start of 2021. Almost in passing, a leading discounter recently announced that it would only sell meat that was produced in line with higher animal welfare standards by 2023. These new trends ask for quite significant adjustments in livestock keeping. Therefore, they raise the question, if the legal requirements (e.g. construction law, clean air act) will be adjusted to support the modifications needed for higher animal welfare and if there will be enough incentive for livestock farmers in Germany to make it happen.

A diverse committee acknowledging various interests

The final report of the Commission on the Future of Agriculture, a toughly negotiated agreement, runs in a similar vein and summarizes pragmatic concessions from different interest groups for the sake of the greater good. Thirty-one committee members representing agriculture, trade, animal welfare, consumer organizations, environmental protection and science, were asked to develop a shared vision, recommendations and guidelines for a sustainable and future-oriented German agriculture. Established in September 2020 by Chancellor Angela Merkel the committee met regulary. Ideas how to reduce external costs and to preserve nature for future generations while at the same time maintaining food security in Germany were exchanged. The report presents pathways for sustainable agricultural production systems that consider economic, ecological, and social objectives as well as animal welfare.

Transformation needs support from the society as a whole

Traditionally, perspectives on controversial topics, such as animal welfare standards and the economic compensation for farmers who carry out additional conservation practices, differ widely between agriculture and nature conservation. Considering the partially hardened positions of the two professions, it is commendable that the Commission on the future of agriculture reached a consensus under a constructively supporting chairmanship. Guiding principle and starting point for the committee’s work was the notion that environmental efforts must translate into economic success and societal recognition. Support of the whole society is necessary for a successful transformation. Putting responsibility only on farmers will not do the job. More likely, it will lead to the exhaustion of families and abandonment of farms.

Key outcomes

The 190-page document combining the diverse expertise of the committee members is worth a read. It features familiar ideas as well as progressive thinking.

Most significant outcomes from a farmer’s perspective are the following:

  • The German agri-food sector continues to walk the path towards a more sustainable future.
  • Agriculture alone cannot bear the massive cost necessary for the transformation process.
  • Both, companies and society need to invest in German agriculture.
  • Only sufficient income will secure the future viability of farms and motivate new agricultural practitioners.
  • A shift of agricultural production abroad (leakage effects) through unbalanced (and underfinanced) regulations needs to be prevented.
  • The Common Agricultural Policy (CAP) should be further developed and (together with national funding) support the transformation while securing the urgently needed planning and investment certainty for farmers.
  • New breeding techniques should be used to develop plant varieties adapted to challenges posed by climate change and pests.
  • Requirements for animal welfare should be (financially) supported to secure the perspective for high-quality livestock farming in Germany.
  • Research and innovation should provide the knowledge base for resource-, animal-, and climate-friendly practices.
  • Digitalization offers the potential to reduce the use of fertilizer and plant protection products through precision agriculture.
A Common Agricultural Policy

CAP support will play a key role in financing and managing the transition to a sustainable food system in Germany. Provided that farms can operate sufficiently competitive, CAP support has to enable farmers to contribute to additional ecological and social achievements. The uphill struggle in the course of the EU trialogue negotiations on the CAP 2023-2027 has shown how hardened positions of different interest groups can endanger the necessary financial support for farmers. At the end of June 2021 a compromise was reached, just in time to not fail the millions of European farmers relying on the CAP’s financial income support.

Cooperation is the key to success

In the long term, the “Zukunftskommission Landwirtschaft” suggests for Germany that area-based direct payments should be gradually converted into payments supporting specific measures to reach societal goals (such as clean water or sustaining biodiversity) within the next two CAP funding periods. The committee emphasizes that during the transition process, farmers should not suffer a net loss to their income. Furthermore, instead of regulation, cooperation should be fostered to motivate farmers to implement ecologically effective measures on their farms. To increase the effectiveness of agri-environment-climate measures (AECM) a collective implementation (e.g.  Dutch collective model) is specifically mentioned as being a promising solution due to its landscape scale approach. The report also emphasizes the necessity for consumers to accept fair prices for agricultural products. They should integrate the higher production costs, to maintain the profitability of agricultural enterprises.

A blueprint for a greener future?

Although not a legally binding document, policy makers will hardly be able to ignore the report. In the eyes of the committee members, the recommendations of the commission  should serve as a blueprint for policy innovation. The next German government is likely to be judged according to its efforts regarding the support of the transformation process. The recommendations have the potential to get politics moving and motivate society to live up to the commitment to make this ambitious vision come true.

Contracts2.0 at the EAERE conference

Contracts2.0 at the EAERE conference

by | Jun 28, 2021 | Workshops & Events

Researchers from the Contracts2.0 project participated in the European Association of Environmental and Resource Economics Conference (EAERE), presenting the food industry’s preferences for environmentally-friendly practices in food production. The virtual congress took place in Berlin from 23–25 June 2021.

Contracts2.0 contributions to the conference

We presented work on developing value chain approaches for the increased provision of environmental public goods by farmers. Our work focused on the food industry’s preferences for product labelling for the provision of ecosystem services. We carried out qualitative interviews with experts in the food industry to explore different labelling options. Labels could signal to consumers the kinds of public goods farmers can provide and allow the industry to sell its products with a price premium. They would also add transparency to the purchasing process as consumers usually cannot observe farm work and fields. The study’s final results will be published later this year.

Further, Christoph Schulze introduced the Q-methodology approach, which he used to explore stakeholder preferences for agri-environmental contract design. Related to these findings, our latest Deliverable synthesises practitioners’ evaluations of innovative contract approaches and provides insight into ideal contracts.

Presentations given by Jens Rommel (SLU), Julian Sagebiel (SLU), Mikołaj Czajkowski (Universtiy of Warsaw), and Wiktor Budziński (University of Warsaw) focused on methodological aspects of stated preference methodology. We will use this methodology to inquire about farmers’ environmental preferences. In this line, early research results on the potential to introduce collaborative agri-environmental contracts are now available. Soon, we will launch an international study on farmers’ preferences for result-based contracts to protect biodiversity that we hope to present during the next EAERE conference!

Written by Katarzyna Zagórska (University of Warsaw) and Laszlo Beer (ZALF), Photo Title: ©Ingo Joseph on Pexels

Willingness to collaborate in agriculture? A behavioural experiment shows positive results

Willingness to collaborate in agriculture? A behavioural experiment shows positive results

by | Jun 11, 2021 | Results, Work progress

Many environmental objectives in agriculture can be better achieved at larger spatial scales through cooperation among farmers. In the Netherlands agri- environmental measures are implemented exclusively within farmer collectives (“Dutch modell”), which develop regional management plans together with the authorities. In a behavioural experiment, we investigated German farmers’ willingness to collaborate with the aim to introduce such an approach to Germany.

The participants’ willingness to collaborate was high and exceeded the expectations of experts. These results provide first positive indications regarding the potential of collaborative agri-environmental schemes (AES) in Germany.

(German version /deutsche Version)

Motivation and goals

There is great interest in the “Dutch approach” of collectively implementing agri-environmental schemes (AES) , since many measures are more effective, when coordinated on a landscape scale, e.g. rewetting of peatlands, protection of habitats or erosion control. The  2019 report of the Scientific Advisory Council at the Federal Ministry of Food and Agriculture therefore also recommends: “(1) Examine the extent to which elements of the Dutch system of collective nature conservation arrangements could also be applicable in Germany; (2) improve the institutional prerequisites for the implementation of collective models of environmental and climate action; (3) in pilot projects in the current finance period, support the grouping of relevant local actors into ‘biodiversity-generating communities”.

However, little is known, about the willingness of farmers to collectively pursue environmental goals. We have investigated this basic willingness in a so-called public goods game.

The public goods game

The public goods game is a concept from game theory (theoretical framework within the field of economics). Players have an initial monetary endowment that must be divided between a private account and a group account. The money in the group account is multiplied by a number that is lower than the number of participants but greater than one. Thus, although it is in the interest of the group, players have no individual incentive to contribute to the group account, although this is in the interest of the group. The game can be used to abstractly study free-rider behaviour and cooperation. Thousands of laboratory experiments show that many people are willing to cooperate with strangers. A typical result is that participants contribute about half of their initial endowment to the group. The figure (above) shows an example with four players and an initial endowment of 10 euros.

The experiment and the survey of experts

Public goods games have already been carried out in many different versions in the laboratory. In our study, we discussed a selection of possible treatments against the background of collaborative agri-environmental schemes at a workshop during the Green Week 2020 in Berlin. In addition to a baseline version, four treatment versions of the game were selected from 17 alternatives for a study with German farmers:

(1) Baseline: four participants must allocate 50 euros between a group account and a private account. The amount on the group account is doubled and divided equally among all players.

(2) Heterogeneous initial endowment: participants have either a high or a low initial endowment;

(3) Leading by example: three participants can first see the decision of the first player and only then make their decision;

(4) Social norm: participants receive the information that many other participants have contributed high amounts to the group account;

(5) Social optimum: participants receive the information that it is in the interest of the group that everyone contributes as much as possible to the group account.

More than 350 farmers participated in our online experiment. Participants were randomly presented with one of the five options. Every tenth participant received a real payment depending on his/her own behaviour and the behaviour of the other participants.

Parallel to the study with the farmers, we asked more than 200 experts from science and practice to predict the behaviour of the farmers in our experiment. Three participants were randomly selected and received a payment depending on the accuracy of their estimate.

Results

For each of the five treatments the figure shows in orange the distribution of the percentage that participants contributed to the group account. In all treatments the average is higher than 50% and, thus, higher than in typical laboratory experiments. The contributions do not differ between the treatments, with the only exception of the social optimum, where contributions are significantly higher and reach 80% of the initial endowment.

The distribution of experts’ predictions is shown in green. Experts underestimate the contributions of farmers by an average of more than twenty percentage points.

Diagram showing farmers' contributions to public good and expert predictions of farmers' contributions to the public good.

Figure 1 Distribution of contributions (orange) and expert predictions (green) Source: own calculations

First conclusions and outlook

The most important conclusion is that participating farmers show a high basic willingness to cooperate under experimental conditions. It has also been shown that experts assess the cooperation behaviour of the participants too pessimistically. In the Contracts2.0 project, we will now discuss these results with practice partners and gather insights into the potential of collaborative agri-environmental schemes and the so-called “Dutch model” in further studies. Among others, similar studies are planned in the Netherlands, Hungary and Poland. An English-language report describing this process is available for download:

Rommel, J., van Bussel, L., le Clech, S., Czajkowski, M., Höhler, J., Matzdorf, B., … & Zagórska, K. (2021). Environmental Cooperation at Landscape Scales: First Insights from Co-Designing Public Goods Games with Farmers in Four EU Member States. https://pub.epsilon.slu.se/23419/

Publication update: The full study has now been published (August 2022).  https://academic.oup.com/qopen/advance-article/doi/10.1093/qopen/qoac023/6677430?login=false

Title Photo by Warren Wong on Unsplash

Innovation in the field: The Bornholm CIL visit farms to explore Carbon Farming

Innovation in the field: The Bornholm CIL visit farms to explore Carbon Farming

by | Jun 8, 2021 | Workshops & Events

On May 26, the CIL of Bornholm arranged visits to farms practicing non-tillage faming, Conservation Agriculture and holistic grazing. Twelve participants, farmers, advisors, authorities and researchers, visited three farms to learn more on these practices in relation to Carbon Farming. The participating farmers, both hosts and others, were very enthusiastic about these farming practices in relation to reducing the impact of farming on climate and for making future farming on Bornholm more resilient to climate changes. However, when discussing trade with CO2-certificates as a tool to support the farmers economically in adopting these practices, the farmers were very skeptical. They identified six major reasons for not contracting reductions in emissions and increased storage of carbon in order to sell CO2-certificates:

  • The economic incentive is far too low with currently expected prices of certificates
  • The administrative work is too time-consuming
  • Long-term contracts limit the room to maneuver in the strategic management
  • The model-based calculation of certificates is not reliable
  • The reduced emissions and increased storage of Carbon should be kept in the farming sector
  • Uncertainty of fit of certificates with future changes in the subsidies and regulations
Simplicity is key for an attractive scheme

Instead, the farmers want simplicity. They would like to see non-tillage systems, Conservation Agriculture and holistic grazing acknowledged as practices contributing to climate-neutral and climate-resilient farming and included in a Carbon Farming eco-scheme in the next generation of support under the Common Agricultural Policy. A few ticks in the right boxes of the yearly application for support should be sufficient paperwork.

In need for fresh ideas

In the CIL of Bornholm, we had the idea of developing new innovative contracts as an add-on/extension to an existing scheme on CO2-certificates, improving and adding elements to increase the uptake and the outcomes in terms of climate impacts of the contracts. However, the farmers currently do not see contracts based on the sale of CO2-certificates as an option for funding farming practices contributing to the development towards a climate-neutral agriculture. Therefore, for the Bornholm CIL the next steps of the Carbon Farming track is currently unclear. Bottom-up innovation is challenging and not always a straightforward process. 

Written by Erling Anders (University of Copenhagen), Photo: © Vivi Granby

Exploring feasibility of novel approaches – A Delphi study

Exploring feasibility of novel approaches – A Delphi study

by | Jun 3, 2021 | Results, Work progress

The team from ESSRG, overseeing the policy work package in Contracts2.0, conducted a Delphi-survey to highlight limitations of the current agri-environmental schemes as well as to gauge the perception of innovative approaches for the delivery of public goods amongst policy makers, farmers/advisors, researchers and NGO’s across Europe.

The Delphi method is based on structured expert surveys and draws on experiences and knowledge of the participants in form of empirical, predictive and normative aspects. Its core concept is to facilitate discussions and develop consensual ideas among participants via several correlated rounds allowing experts to reconsider their opinion in each round.

It is planned to run altogether three rounds of the Delphi survey, to assess the knowledge base and to stimulate a discussion regarding the adoption of innovative contractual solutions for a farmer- and eco -friendly agriculture. The first round of the survey, conducted in March/April 2021, was completed by 41 stakeholders form 17 European countries. The aim was to first depict the limitations of current agri-environmental schemes, followed by an assessment of the knowledge base and experiences regarding the four novel approaches being at the heart of contracts2.0: results-based payments, collective action as well as value chain and land tenure approaches. In the following some of the results are summarized:

Limitations of the current schemes are evident

Regarding the limitations the results suggest, that financial (e.g. transaction cost, compensation vs. reward) and institutional (e.g. bureaucracy, lack of flexibility) factors are the most relevant. But knowledge-related aspects (e.g. lack of robust scientific evidence, limited access to advisory services) as well as the need for improved monitoring and regional differentiation were also mentioned as hindering an effective implementation of agri-environmental measures.

Results- vs. action-based payments

Concerning the innovative approaches, results-based payments were perceived as potentially (highly) effective in achieving the ecological objectives (especially biodiversity related) due to the agreement of clear and measurable outcomes. Respondents highlighted that rewarding farmers for their environmental performance (instead of compensating for their lost income or increased costs) contributes to the attractiveness of this approach. While the increased flexibility and autonomy for farmers are additional advantages, issues like monitoring (e.g. definition of robust indicators, use of IT or farmers expertise to bring down cost) and risk mitigation (uncertainty due to external factors) still pose a challenge and need some further attention when refining/adapting this approach. Many respondents state that setting up such schemes would require initially large investments (management, monitoring, trainings), which might serve as a barrier for the adoption. As a potential middle ground some experts suggest a combination of results-based payment as a bonus on top of an action-based implementation to reward more ambitious efforts.

Collective Action

Many respondents agreed that the collective approach (or group contracts) can effectively deliver on the (mostly biodiversity related) objectives when adequate ecological expertise is involved. The main argument in favor of cooperation is the positive effect on the connectivity of habitats through a coordinated management of suitable measures on landscape scale. The decreased (real or perceived) transaction cost on the farmers’ side is another advantage. While some respondents argue a long-lived tradition with cooperation amongst farmers helps to succeed when collectively implementing measures, others highlight the importance of a feeling of trust within a collective and/or contractual elements for regulating individual behavior being the key factors for success. Regarding the transaction cost of the collective approach respondents acknowledge a shift from public transaction cost (administrations) to the private sector (mainly the collective itself or their management respectively).

Value chain approach

The value chain approach is well received by most respondents, since it seems well suited to reward farmers for their environmental performance, independently from public funding. The generation of income through an adequate market price is also more in line with farmers’ business logic (instead of relying on public funds). This approach seems to work well with shorter value chains and a more regionalized marketing, while large retailers do often not engage so easily in such programs. A key factor of this approach is the labeling of the extra effort to simplify the decision to purchase for the environmentally conscious customers. Given the already large variety of labels, special attention needs to be paid to a transparent and clear communication of the environmental performance throughout the value chain. Respondents recognize no significant (institutional, cultural or social) barriers to implement this approach, however it is perceived to require an extensive infrastructure and a broad knowledge base.

Land tenure contracts

The Land tenure approach is the one with the most uncertainty among the respondents, possibly due to a potential lack of experience with this type of contract. It could be a well-suited approach for large landowners, especially when intermediaries (National Parks, Church, NGO’s) are involved. The comparatively longer contract periods of land-tenure approaches not only contributes to the environmental effectiveness but also benefits the farmer by provided a sound and predictable financial base, where uncertainty and risks are comparatively low.

How does the ideal contract look like?

The last block of the survey addressed the question of the ideal contract. Interestingly the (assumed) most effective type of contracts across all respondents were by far the publicly funded agri-environmental scheme (AES). Regarding the characteristics of a contract the opinions differ a bit more. Bi-laterally agreed and publicly funded contracts with a flexible length and a mix of results- and action-based payments earned the highest approval rate. Although the results of this survey are far from being representative, the glimpse into the minds of different stakeholder groups involved with the discussion of agricultural policy issues, has provided us with some valuable insights. Especially the open-ended questions have generated a rich pool of ideas, to guide us on our path towards the development of contractual solutions that benefit farmers and nature. The third and last round of the Delphi will be completed in September 2021.

For a more detailed and comprehensive interpretation of the results check out this report.

Figure 2. Differences of the characteristics of the ideal contract according to the background of the respondents. Source: own compilation based on the 1st round of the Delphi survey.