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Incentive Contracts for Natura 2000 Implementation in Forest Areas

Author

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  • Signe Anthon

    ()

  • Serge Garcia

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  • Anne Stenger

    ()

Abstract

The implementation of nature conservation policy is often based on contracts between public authorities and landowners. In this article, we model incentive contracts in forest areas in the presence of adverse selection and moral hazard when the conservation outcome is uncertain ex ante but observable ex post. The results show that agents who are likely to achieve a higher level of conservation should be offered a contract where transfers depend on the final outcome, with a bonus for a high ecological level of the forest. When conservation measures are correlated with forest management, we show that the contractual measures involve distorted transfers. We analyse the payment mechanisms used in France and Denmark in the context of the Natura 2000 policy. These mechanisms result in overcompensation and under-performance since they do not take the problem of moral hazard and natural variability into account.
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Suggested Citation

  • Signe Anthon & Serge Garcia & Anne Stenger, 2010. "Incentive Contracts for Natura 2000 Implementation in Forest Areas," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 46(3), pages 281-302, July.
  • Handle: RePEc:kap:enreec:v:46:y:2010:i:3:p:281-302
    DOI: 10.1007/s10640-009-9341-1
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    References listed on IDEAS

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    1. Guesnerie, Roger & Picard, Pierre & Rey, Patrick, 1989. "Adverse selection and moral hazard with risk neutral agents," European Economic Review, Elsevier, vol. 33(4), pages 807-823, April.
    2. Bourgeon, Jean-Marc & Jayet, Pierre-Alain & Picard, Pierre, 1995. "An incentive approach to land set-aside programs," European Economic Review, Elsevier, vol. 39(8), pages 1487-1509, October.
    3. Boyer, Marcel & Laffont, Jean-Jacques, 1997. "Environmental risks and bank liability," European Economic Review, Elsevier, vol. 41(8), pages 1427-1459, August.
    4. Laffont, Jean-Jacques & Rochet, Jean-Charles, 1998. "Regulation of a Risk Averse Firm," Games and Economic Behavior, Elsevier, vol. 25(2), pages 149-173, November.
    5. Moyle, Brendan, 1998. "Species conservation and the principal-agent problem," Ecological Economics, Elsevier, vol. 26(3), pages 313-320, September.
    6. Wu, JunJie & Babcock, Bruce A., 1995. "Optimal Design Of A Voluntary Green Payment Program Under Asymmetric Information," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(02), December.
    7. Rob Hart, 2005. "Combating moral hazard in agri-environmental schemes: a multiple-agent approach," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 32(1), pages 75-91, March.
    8. Andrew Moxey & Ben White & Adam Ozanne, 1999. "Efficient Contract Design for Agri-Environment Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(2), pages 187-202.
    9. Smith, Rodney B. W. & Shogren, Jason F., 2002. "Voluntary Incentive Design for Endangered Species Protection," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 169-187, March.
    10. Crepin, Anne-Sophie, 2005. "Incentives for wetland creation," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 598-616, November.
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    Citations

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    Cited by:

    1. repec:eee:ecoser:v:9:y:2014:i:c:p:44-53 is not listed on IDEAS
    2. Nick Hanley & Simanti Banerjee & Gareth D. Lennox & Paul R. Armsworth, 2012. "How should we incentivize private landowners to ‘produce’ more biodiversity?," Oxford Review of Economic Policy, Oxford University Press, vol. 28(1), pages 93-113, Spring.
    3. Vedel, Suzanne Elizabeth & Jacobsen, Jette Bredahl & Thorsen, Bo Jellesmark, 2015. "Contracts for afforestation and the role of monitoring for landowners’ willingness to accept," Forest Policy and Economics, Elsevier, vol. 51(C), pages 29-37.
    4. Hily, Emeline & Garcia, Serge & Stenger, Anne & Tu, Gengyang, 2015. "Assessing the cost-effectiveness of a biodiversity conservation policy: A bio-econometric analysis of Natura 2000 contracts in forest," Ecological Economics, Elsevier, vol. 119(C), pages 197-208.
    5. repec:eee:forpol:v:82:y:2017:i:c:p:3-13 is not listed on IDEAS

    More about this item

    Keywords

    Adverse selection; Conservation contracts; Forest; Incentives; Limited liability; Moral hazard; Natura 2000; Uncertain outcome; D82; Q23; Q57;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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