Towards Sustainable Agriculture: Implementing a Market for Payments for Environmental Services in Agri-Food Systems

This study examines the impact of a Payments for Environmental Services (PES) market, supplemented by public subsidies for ecological transition, on the sustainability of an agri-food supply chain. We focus on the challenges of climate change and biodiversity loss and emphasise the need for fair compensation for farmers who adopt sustainable practices. We use a multi-objective optimisation framework coupled with a variational inequality approach to analyse supply chain equilibrium in a PES market. This approach ensures optimal coordination between supply chain participants, balancing economic and environmental objectives. Machine learningenhanced simulations show that a well-designed PES market can help achieve or even surpass carbon and biodiversity neutrality targets. The results demonstrate that combining PES with government subsidies is an effective way to promote ecological transitions and substantially mitigate the global ecological footprint. Importantly, the study finds no conflict between public and private efforts. Instead, it shows that supply chain participants are motivated to increase their contributions to environmental neutrality when rewarded for reducing their environmental impacts.