The influence of market, socio-cultural, institutional and policy drivers in our case studies

amarechal

by Francesco Mantino (CREA)

The report on “Socio-political, economic and institutional drivers. A cross-country comparative analysis” concludes an important phase for the PEGASUS project.  We sought to understand better the main market, institutional, policy and other socio-economic settings that influence the provision of environmental and social benefits from agriculture and forestry in a variety of different situations in ten different EU countries. A draft of this report was first discussed at an EU-level seminar in Brussels (April 2016), where the authors received many useful inputs and comments from a wide range of stakeholders.

To investigate the range of drivers and factors which may influence the provision of environmental and social benefits, we looked at the situation in 34 case studies in ten different countries, and complemented the findings with a literature review.

Influential “market factors” investigated included: (i) drivers linked to the demand for sustainable food (such as organic, integrated, healthy food) and (ii) drivers linked to certification schemes that farms and agri-food firms may adopt to differentiate their products. By looking at 34 different situations in the case studies, it is clear that understanding what influences the provision of environmental and social outcomes from farming and forestry activities cannot be explored and analysed only by looking at the production sphere and at the primary sector, but must also consider the relationship that farming and forestry has with the processing industry, retailers, the public sector as well as with final consumers. In addition, in many of the case studies examined, private and ‘public’ goods and services are produced jointly. Creating the right market signals is key to achieving win-win solutions, generating economic, social and environmental outcomes from farming and forestry systems.

A further set of socio-cultural drivers were identified which can be grouped as follows: (i) social and cultural dynamics, (ii) institutional change and (iii) demand for leisure/recreation, health and education. A favourable social and cultural context may lead to increased awareness and knowledge from local communities about environmental and social issues faced by farmers and foresters. In turn, this may empower local actors to take responsibility for the development of local initiatives aiming to enhance the provision of environmental and social benefits. These drivers show that it is too simplistic to suggest that the provision of environmental and social outcomes from farming and forest systems are supported by the government while private goods are delivered by the market. Often, it is necessary to adopt more innovative approaches, based on mixed public-private arrangements and on solutions which directly involve the population in the definition and delivery of environmental and social benefits. One example of this is the increasing demand for leisure/recreation, health and education which provides opportunities for rural tourism, which in turn could be a source of potential growth for rural areas.

The role of policy in providing environmental and social benefits is a complex matter: in a same area or territory, several institutional actors as well as different types of policies may have overlapping competences. This is true, for example, in the tomato food chain in Italy where in spite of high productivity and intensive production practices, this supply chain as a whole organised itself to collectively initiate the changes needed to address pressing water and soil issues in the area and to ensure long term compliance with European and national rules on water, nitrates and pesticides use. There is a broad spectrum of policy instruments used by farmers and the tomato industry in this area to support the process of reorganisation towards more sustainable practices and technologies, especially through structural measures in the regional Rural Development Programme. This is also true in a radically different situation such as the extensive Landscape Protected Area of the White Carpathians in Czech Republic. Here, dry meadows support local beef production while national law regulates the intensity of fertilisers and pesticide use and grazing. The maintenance of dry meadows is strongly related to the continuation of beef production over time. Farmers can receive payments for tailored management of the most environmentally valuable sites in this protected area. The role of different policies is pivotal in many of the PEGASUS case studies, including for instance in the Slovenian municipalities of Ljubljana and Celje, where peri-urban forests are developed and used for public health and leisure. In this case, the initiative has been driven by the national regulatory framework (the Forest Act grants free access even to private forest land) as well as by the national forest management plan, and is included as a priority in the plans of the two municipalities. The most relevant difference with the previous case studies is that in this peri-urban setting, local municipalities play a major role in the definition and the management of policy instruments targeted to ensure access to all recreation facilities. The case studies show that the relevant policy mix may vary according to the type of “socio-ecological” system and the type of environmental or social benefit targeted.  Within a given policy mix, overarching regulatory frameworks often play a crucial role, not only at the European level, but also at national/regional level and sometimes at local level too.

Public policies are not the only available mechanism to enhance the provision of environmental and social benefits. There is a wealth of literature on the different types of market-based mechanisms and in particular on the use of payments for ecosystem services (PES). We can distinguish at least four market-based mechanisms:

a)      Premium price payments;

b)      Compensation for additional costs;

c)       Certification schemes;

d)      Integrated conservation and development projects (ICDPs).

The co-existence of public and private payment schemes in the same area is very frequent in PEGASUS case studies. According to our classification, premium price payments and compensation for higher costs can be defined as types of private PES. Private schemes are not only driven by market forces, but also by civil society demands for public participation, natural resource conservation and social cohesion. These motivations are more evident in ICDPs. Both in PES and in certification schemes a crucial variable emerges as a key to success: the capability of setting up better contractual agreements between producers within the supply chain and between producers and final markets. This implies that PES or certification schemes alone are unlikely to be sufficient to influence sustainable outcomes.

Finally, the effectiveness of both regulating public policies and market-based mechanisms is highly dependent on institutional and governance settings - some of those we have found are quite innovative - and on the different ways in which public and private actors cooperate. Regarding the concrete provision of environmental and social benefits, collective action involving groups of citizens, farmers, environmental stakeholders and institutional actors were often found to be particularly beneficial. According to institutional economists, collective action becomes advantageous when the potential benefits of cooperating outweigh the transaction costs of developing and setting up the new form of organisation. The initiatives studied in the PEGASUS case studies are characterised mainly by the presence of multiple cooperating actors with a will to enhance the provision of public goods and ecosystem services in their area. An important difference is in the type of actors promoting/coordinating the action, and the setting up of the organisation needed to carry out the project. In the private-driven cases NGOs and supply chain actors (in partnership) often play dominant roles, suggesting that farmers and food industries may create new alliances to cope with environmental challenges and competitiveness. These cases are of considerable interest in the next steps of the research.