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Scoping the strengths and weaknesses of different auction and PES mechanisms for the next round of agr-environment schemes - LM0105

Defra’s Payments for Ecosystems Action Plan, published in May 2013, committed the Government to:

“Explore the potential for different models of agri-environment delivery including reverse auctions and match-funding mechanisms, in the context of developing the new Rural Development Plan for England; and work with stakeholders to improve targeting and flexibility.

Review the barriers and opportunities to incorporating private funding alongside Rural Development Programme funding.”

This project partially fulfils this commitment through original research using economic modelling, experimentation and desk-based research. It explores whether value for money of Rural Development funding can be improved through the leveraging of third-party funding and auctioning.

This study will review the current literature to explore potential public-private combined funding mechanisms, along with any barriers to and opportunities for incorporating private funding alongside RDP funding, and suggest ways of overcoming any barriers identified. In addition, the policy, practical and legal implications of different reverse auction designs will be assessed within the context of the new RDPE, with a specific focus on application within agri-environment schemes. This will include the ability to achieve scheme objectives cost-effectively.

Through simulation modelling, economic experiments and farmer workshops further evidence on the impacts of different auction designs will be provided. These strands of work will inform several potential reverse auctions for Defra to trial on the ground within the new round of agri-environment schemes. In addition, initial guidance will be provided on how these might be carried out and evaluated. Detailed implementation, however, is outside the scope of this project.

The findings will be published in the form of a report which will detail the objectives, approaches used, results, and possible future work.
Project Documents
• FRP - Final Report : LM0105 final report   (2176k)
• ANX - Annex : PES and Auctions Annex 1 Review of AES final   (752k)
• ANX - Annex : PES and Auctions Annex 2 Experiments final   (1466k)
• ANX - Annex : PES and Auctions Annex 3 Simulation final   (1094k)
• ANX - Annex : PES and Auctions Annex 4 Farmer Worshops final   (982k)
• ANX - Annex : PES and Auctions Annex 5 PES consultations final   (606k)
Time-Scale and Cost
From: 2014

To: 2014

Cost: £60,950
Contractor / Funded Organisations