Agro Environmental Schemes (AESs) as part of the second pillar of the Common Agricultural Policy (CAP) mainly

Tools to design and implement Agro Environmental Schemes", or ITAES, is a Research Project which explores the technological, behavioural and institutional factors of the reliability and predictability of AESs. In New Member States, the budget allocation between the first and the second pillar of the CAP suggests that AESs may have a much higher impact on farm income and on farming orientations than they have in most old members, where the first pillar of the CAP still prevails in farm income supports. In old and new member states, institutional adjustments are required for AES implementation. The related costs encourage the design of horizontal large scale schemes, offering simple attractive contracts for farmers. Indeed preliminary results show that private transaction costs are significant in farmers' behaviour and may hamper AES uptake if they are not taken into account in the calculation of contract payments. Between large horizontal schemes that mainly distribute income support for minimal practice restrictions and whole farm tailored management contracts with very high, usually unforeseen, transaction costs implying low uptake, the AES environmental effectiveness is questionable in most cases. It requires to better take into account cause and effect relationships between practices, local conditions and objectives. lt means that schemes should be carefully prepared with much higher mobilisation of knowledge and public management, than the usual distribution of CAP payments.

Résumé:

Les programmes agro-environnementaux (PAE) du deuxième pilier de la Politique Agricole Commune (P AC) dépendent principalement de choix politiques aux niveaux nationaux ou régionaux. Le projet de recherche 1T AES ("Integrated Tools to design and implement Agro Environmental Schemes") explore les facteurs technologiques, comportementaux et institutionnels de la fiabilité et de la prédictibilité de ces programmes. Dans les nouveaux pays membres, le budget du second pilier de la PAC est comparable à celui du premier pilier. Les P AE ont donc potentiellement un impact beaucoup plus fort sur le revenu et les orientations techniques des exploitations que dans les anciens pays membres où les dépenses du premier pilier restent prépondérantes dans le soutien au revenu agricole. Dans les deux cas, l'application des PAE nécessite des ajustements institutionnels coûteux dont la minimisation milite en faveur de grands programmes horizontaux, basés sur des contrats incitatifs et simples offerts aux agriculteurs. En effet, nos premiers résultats montrent que les coûts de transactions privés ont un impact significatif sur le comportement des agriculteurs et peuvent restreindre leur participation aux PAE s'ils ne sont pas pris en compte dans le calcul des rémunérations des contrats. Entre les grands programmes horizontaux, qui essentiellement distribue une aide au revenu contre des engagements minimaux, et les contrats adaptés à chaque exploitation comme les contrats territoriaux d'exploitation en France, dont les coûts de transaction élevés et mal anticipés conduisent à une faible adoption, l'efficacité environnementale des P AE est incertaine dans la plupart des cas. Elle requiert une meilleure prise en compte des relations causales entre les pratiques agricoles, les conditions locales et les objectifs environnementaux. Cela signifie que les programmes doivent être préparés soigneusement avec une mobilisation adaptée des connaissances et de l' administration, fort différente qualitativement et quantitativement de celle qui prévaut dans la distribution des aides PAC.

Brief presentation of ITAES

Agricultural production affects the environrnent in many ways, generating negative and positive effects. Neither reduction of negative extemalities nor simulation of po::,;;:, .• ,:,nes can be achieved at a satisfactory level on the basis of market activities, there is therefore a need for agri-environrnental programmes. They are often considered as a means to bath support farm incarne and comply with WTO provisions. Indeed, there is a shift from price support towards Agro-Environrnental Schemes (AESs). However the results of such schemes have proved difficult to predict, and sometimes difficult to understand in retrospect.

AESs are policy schemes based on a voluntary approach. Contracts are offered to farmers to change their practices or improve their environrnental impacts. The eligibility of farms and farmland may be restricted according to farm characteristics, land use or location. According to EU regulations (2078/92 and then 1257/99) the payment is based on the forgone profit or the additional costs of compliance with contract terms. Different territorial levels are involved according to the different tasks of design and implementation. This is obvious for AESs which are co-financed by the EU. Different types of organisations interact: governrnents, associations and farms. Therefore institutional arrangements and transaction costs are key issues in the success of AESs.

"Integrated Tools to design and implement Agro Environrnental Schemes", or IT AES, is a Research Project of the EU Sixth Framework Programme. lt mobilises 600 person-months over three full years (2004)(2005)(2006). The team of partners from nine countries has been assembled to develop an integrated framework for the assessment of AESs, integrating biophysical and socio-economic indicators to support and justify the actions of policy-makers. Farmers' behaviour and institutional arrangements are scrutinised to identify cost-effective schemes.

1T AES identifies the following key-factors of the "reliability and predictability of AESs": -Technological factors relating farming practices and environrnental impacts: Importance of the targeting, reaching a critical mass, and the use of knowledge about them.

-Behavioural factors relating incentives to farmers' participation and compliance levels.

-Institutional factors expressing the social demand and the way in which they are tuned to adjust the provision of environrnental services.

The project aims two entangled objectives:

-Build an integrated tool to analyse the interaction between the institutional process and the environrnental outcome, -Build an integrated tool to analyse and simulate farmers' environrnental supply, which depends on a range of different govemance mechanisms.

Policy relevance and relevance for New Member States

The farmers' participation in AESs highly varies across countries and, within some countries, across regions. Farm heterogeneity can only explain a small part of these huge variations. They mainly depend on policy choices at the national or regional levels. In accordance with the subsidiary principle, the different countries assign different budget shares and different objectives to AESs. In NMS, the budget allocation between the first and the second pillar of the CAP suggests that AESs may have a much higher impact on farm incarne and on farming orientations than they have in most old members, where the first pillar of the CAP still prevails in farm income supports.

Rural development expenditures in EU-15

AESs consume 50% of the EU-15 budget expenditures devoted to the CAP second pillar; it was 30% of corresponding expenditures in the early nineties. Taking into account the national co-funding expenditures, AESs represent a quarter of total public support of the second pillar. However, this share differs a lot from a member state to another (Graph 1). Significantly, it is higher than 50% in Austria and Sweden. These countries entered the EU in 1995. Apart from environmental aspects, they use AESs to compensate the former farm support which was ruled out by EU integration. Finland did the same in combination with LF A payments: 95% of Finnish farms participate in AESs.

Introduction of AESs in New Member States

The Phare programme was set up in 1989 to support Poland and Hungary. It became after December 1994, the financial instrument of the pre-accession strategy leading ultimately to the accession to the EU. In the initial stages of the transition, the programme focused on providing know-how and technical assistance. Then there was a shift towards investment aid in a number of areas, including the environrnent. After publication of Agenda 2000, Phare was redirected towards preparing the candidate countries for accession. Two priorities were defined:

• Helping the administrations to acquire the capacity to implement the Community acquis, • Helping the candidate countries to adjust and develop their industries and basic infrastructures up to Community standards in a number of areas, including the environrnent.

Two

Comparison between former and new Members

The division of the total agricultural budget available from EU funds to the ten acceding countries (EU-10) shows the emphasis put on the second pillar compared to the former members (EU-15). Although the overall support of agricultural support per hectare is considerably lower in the new members than in the EU-15, available budgets for the rural development plans are comparable (Table 1). Under certain conditions the new Members can divert up to 20% of their rural development allocation to increase direct payment under the first pillar. Ail measures included in the RDR are very relevant to rural development in accession countries, although they face far deeper socio-economic problems than most regions in the former EU. Rural unemployment and hidden agricultural unemployment is a central challenge for rural development mainly where there are high levels of agricultural employment, especially in Latvia, Lithuania and Poland. Diversification of farms, development of green tourism and environmental protection should offer new job opportunities. But given the scale of the problem, they should only contribute to a reduction of this excess labour. The decrease in rural unemployment will mostly result from the ageing of rural population and people's retirement.

New members have drafted national rural development plans for the 3-year period (2004)(2005)(2006) based on experience gained from the implementation of the pre-accession SAP ARD fund. Agri-environmental schemes are the only obligatory measures over the EU. Although, agri-environmental schemes have been proposed in all accession countries either nationally or in the SAP ARD framework, new Members have a limited practice with respect to their implementation.

CAP budget distribution for the new members gives scope for considerable higher relative spending on agri-environmental measures than in the EU-15. Although, these measures will compete with a number of other measures for a limited funding. In a number of cases, governments are likely to prioritise schemes directly targeting socio-economic issues such as the semi-subsistence aid or directed towards less-favoured areas. Otherwise, given the complexity of EU procedures there is a risk that the new Members would not be able to spend the total allocated EU budget.

IT AES Background and methodology

Past research outcomes

The first generation of agri-environmental schemes (AESs) was based on contractual agreements between the state and farmers who received premiums in retum for certain environmental services. The rationale for this was to provide incentives to farmers for a voluntary limitation of farming practices which have a negative influence upon water resources, wildlife and landscape. This policy orientation implicitly acknowledges that farmers benefit from presumptive property rights on the environment. Indeed, through these schemes the taxpayer purchases the public goods provided by farming. Other policies, e.g. cross compliance, could achieve the same environmental benefits, provided that the legal boundaries and reference points defining positive and negative extemalities were different [START_REF] Gatto | The economic nature of stewardship: complementarity and trade-offs with food and fibre production[END_REF]. According to the subsidiarity principle, the design of individual programmes was left to the member states or regional authorities. This normally ensures the tailoring of contracts to local conditions and concems. lt is therefore not surprising that, within a common framework, the schemes applied varied greatly from country to country according to local conditions. This diversity is also influenced by the particular historical and social context of member states, and by the culture and traditions of the relevant institutions. Despite a huge diversity between and within countries, a number of studies, based on the maximisation of farmers utility, have shown that the participation in AESs depends on farm characteristics and the preferences of farm households. Uptake by farmers depends in the first place on the economic incentive offered: the higher the compensation payment, the greater a farmer's willingness-to-accept the required constraints of the scheme. The success of such schemes is strongly dependent upon social context. Indeed farmers are more likely to participate if they know someone who already participates. This a clear indication that networking matters [START_REF] Dupraz | The environmental supply of farm households : a flexible willingness to accept mode![END_REF]. Other characteristics of the farm, including size, labour requirements and enterprise type are also significant explanatory factors of farmers' enrolment in agri-environment schemes. For instance, farmers who have woodland on their holdings are more likely to join landscape maintenance schemes, while those with the largest farms are more likely to select extensification programmes. Uptake is also higher among better educated and informed farmers and among those with a positive attitude towards the environment [START_REF] Morris | Recruiting the New Conservationists: Farmers' Adoption of the Agri-environmental Scheme in the UK[END_REF]. This indicates that education, information and extension are ail important in explaining participation and that these influencing these factors can gradually shift farmers' behaviour [START_REF] Dupraz | Farmers' participation in European agri-environmental policies[END_REF].

Positive cost complementarities between different environmental outputs have been estimated [START_REF] Bonnieux | Farmer's supply of environmental benefits[END_REF]. For an individual farmer cost complementarities may make it profitable to participate in several schemes simultaneously. For a given scheme, the difference between the premium offered and the marginal cost of compliance, d:r c.1<.i ; upon participation in other schemes. Participation is positively correlated with the level of compensation offered and is conditioned by involvement in other schemes.

Cost complementarities may therefore lead to an increase in participation rates, encouraging the provision of environmental goods. Enabling farmers to participate in ail available schemes may result in an increase in both private and public benefits. Due to the phenomenon of asymmetric information, farmers tend to capture the majority of the benefits provided by cost complementarities. Therefore, the fine tuning of agri-environment policy is likely to result in a sharing of benefits between farmers and the general public. Theoretically compensation payments can be minimised by a better targeting of policies through tighter specifications of prescriptions, in particular when there is a strong jointness between environmental goods. Complex schemes, however, always involve an increase in administrative costs. Farmers are highly diverse, and the institutions responsible for the implementation of agrienvironment policy may not always hold the relevant information about those of their characteristics that influence participation. Contracts incur direct public costs in compensating farmers, plus information costs. Research effort has been devoted to contract design based on the principle-agent model which takes into account the asymmetry of information between the regulator and the farmer, whereby the regulator is unable to observe precisely the farmer's compliance costs [START_REF] Moxey | Efficient Contract Design for Agri-Environmental Policy[END_REF]. The total costs of AESs include the compensation given to farmers and transaction costs. The first component is a monetary transfer to ensure the provision of public goods. The second is associated with several processes and are borne by the public agency and the eligible farmers. Public transaction costs include the design and notification of contracts, the promotion of agri-environment policy, implementation, monitoring, and the enforcement of farmer compliance. Empirical evidence demonstrates that these costs can amount to a significant proportion of total public expenditures. Although the success of AESs requires a minimal level of administrative costs, there are opportunities to reduce them. In a sample of British AESs, significant size economies, with regard to the numbers of contractors per scheme, were observed, as well as a significant effect of scheme age in exerting downwards-pressure on administrative costs. These economies derive from the set-up costs of schemes (e.g. design, overhead costs of the implementation agency). The effect of the age of the scheme is related to the administrative leaming curve and to economies made over time from fine-tuning procedures [START_REF] Falconer | An investigation of policy administrative costs using panel data for the English Environmentally sensitive areas[END_REF].

Scientific and technological objectives

AESs have developed across the EU since the 1980s in order to encourage the provision of environmental goods, following concems that agricultural support has led to rising levels of land use intensity, threatening widely-valued characteristics of the countryside. The economic justification for these policies has two principal rationales: first, the existence of externalities, both positive and negative; and second, the public good nature of the targeted environmental goods (such as biological diversity or landscape), the consumption of which is neither rival nor excludable at low cost. Thus, environmental goods are unlikely to be provided through the market at their socially-optimal levels, and existing cost-benefit analyses of AESs have indicated positive net social welfare outcomes (see [START_REF] Hanley | Assessing the Success of Agri-Environmental Policy in the UK[END_REF]. Basically AESs are designed and implemented to ensure that the environmental goods supplied by farmers meets social demand. This objective necessarily includes several interrelated tasks: the expression of this social demand at more or less decentralised levels, the knowledge acquisition of the agrienvironmental technology and the design of appropriate policy tools and institutional settings.

The strength and the precision of the social demand function certainly influence both the commitment of public authorities in rewarding actual environmental efforts and farmers' attitudes towards AESs. In contrast the French grassland premium has minimal conservation goals and offers a low level of compensation. This certainly helps the survival of extensive cattle farms in less favoured areas and most of its beneficiaries consider it an additional compensation payment. Although the grassland premium scheme was very successful in terms of farmers' uptake, the incentive it offered was not high enough to prevent further decline in grassland area. In this example, supporting the incomes of a broad category of farmers appears to be a more important, and better targeted, objective than conservation. The Rural Development Regulation (RDR) strengthens the role of AESs as they are, to a large extent, elaborated at decentralised territorial levels. Within this new policy context, local govemance structures get greater opportunities and responsibilities. Implementation of the RDR may suffer from inadequate govemance structures, especially at the local levels. In many cases, they fail to integrate farmers' individual projects in an integrated rural approach. As a result the resulting contracts reflect the opportunistic behaviour of the farmers who benefit from environmental payments imposing relatively few constraints. Moreover few national and regional institutions, especially agricultural organisations and administrations, are able to capitalize on the experience of the previous AESs.

Targeting specific groups of farmers and taking into account their expectations and limitations can increase the efficiency of a given policy. This suggests that eligibility mies based on farm-related characteristics will result in a higher uptake than rules based on geographical designation. However for a particular area, e.g. a river basin, the aggregate provision of environmental goods depends on the density and location of participating farmers. So, for a valid assessment of AESs there is a need to examine the resulting benefits and set them against the costs of schemes. Given the non-separability of the provision of some types of public goods, such as landscape, the efficiency of voluntary measures is questionable because it is very expensive to make ail farmers comply with protection rules. A first possibility is to offer a very high level of compensation within a standard contract to convince the last farmer to participate. This, in effect, passes rents to other farmers. A second route is to negotiate individual contracts in order to adjust them to farmers' characteristics. This leads to an increase in public transaction costs, particularly negotiation costs. Clearly, there is a trade-off between compensation payments and transaction costs. As mentioned previously, the administrative structure and tradition of countries is a major influence on the efficiency of AES. However the various facets of implementation, including application procedures, control and enforcement can be assigned to either centralised or decentralised public agencies or even to the private sector. Clarifying institutional responsibilities is important because environmental problems eut across sector boundaries and involve many different agencies and lobbies. In order to minimise opportunities for conflict and to ensure effective co-operation among actors, it is crucial to clearly define institutional responsibilities. Institutional choice is importance for the success of a policy and should therefore be based on a careful analysis of costs and effects. It is true that in a given context institutional arrangements cannot be drastically modified but there is some room for making adjustments which may lead to significant changes in the long run. This project is based on a comparison of nine case-study regions among which success staries and failures will be identified and analysed. Work packages WP3, WP4 and WPlO study the interactions between the institutional and political process of design and both the participation and environmental outcomes of AESs. The way in which social demand is expressed within the design of AESs also determines certain characteristics of their implementation and evaluation. The material provided by previous relevant publications and the RDR mid-term review will be fully used, in the different participant countries (WP2).

Research structure

Implementation and evaluation of AESs depends on the knowledge of the agri-environmental technology. Compared to food and fibre whose production functions are rather streamlined and well known, the production functions of environmental benefits are often uncertain and site specific. In many cases, farmers fail to master the joint production of environmental benefits any more successfully than the regulation agencies responsible for the implementation of AESs. The distribution of information among institutions, farmers and other stakeholders deeply affects the govemance structures of AESs, the related transaction costs and outcomes. The dynamics of information improvement and distribution depends on the design of agri-environmental contracts and the technical support farmers are offered. For instance, farmers' innovation and leaming by doing processes are expected to be more intensive when the contracts reward the actual provision of environmental benefits rather than adherence to agricultural practice restrictions. The ex ante and ex post evaluations of the environmental impact of AESs are often incomplete or they are carried out with different disciplinary frameworks and are not comparable with each other. WP5 aims to construct and test an innovative assessment method, based on a set of selected indicators. This will enable the comparison of AESs targeting similar environmental objectives across the case-study regions. The measurement of public and private transaction costs is another common weakness of AES design and evaluation. The lack of ex ante evaluation of administrative costs may jeopardize the success of a scheme, beginning with the farmers' uptake, if the allocated administrative resources are revealed to be inadequate. In France the low and slow uptake of the contrats territoriaux d'exploitation (CTEs) is partly due to observed administrative bottlenecks related to the design and administration of these individualised contracts. CTEs are multipurpose farming territorial contracts based on a whole-farm approach. They encompass agri-environmental payments and investment aids within a single contract between the farmer and the state. This example illustrates the clas;; , . -:-• . 1 ti'ade-off between precision and transaction costs, and contrasts with the grassland premium. Moreover the average size of the farms that have taken up a CTE is significantly higher than the French average, while the size of the farms involved in previous AESs was lower. This suggests that CTEs are characterised by fixed private transaction costs which are high at the farm level and build entry barriers. This project pays considerable attention to the transaction cost issue since it does not only influence economic efficiency but also uptake and environmental effectiveness. The case-studies of WP3 will gather available information on administrative costs at the level of individual schemes and the region. Administrative costs are analysed within WP4 which compares how the the tasks of designing and implementing AESs are allocated and carried out by different institutions.

Based on English and Welsh Environmentally Sensitive Areas, Table 3 illustrates the interactions, when a State Agency is responsible for the design and the implementation of con tracts. In fact, it is often the case that several institutions and stakeholders are involved in designing and implementing AESs, resulting in multiple partnerships. These interactions between public and private transaction costs are particularly under-researched. This issue is also interesting for policy makers and farmers' associations. It deals with the design of contractual arrangements, institutional settings and the implementation procedures of AESs. This is why several work packages attempt to fill this gap. Farmer behaviour is studied by WP6 using existing research results conceming farmers' participation in AESs. Here microeconomic and econometric models integrating private transaction costs will be developed and tested. Empirical evidence will be extracted from a survey of farmers in case-study regions (WP8).

The survey questionnaire also aims to elicit farmers' preferences about the attributes of AES govemance structures. These attributes include contract specification, institutional settings and enforcement procedures. In different scenarios, alternative contracts targeting the same environmental outcomes as existing contracts will be offered to farmers. These contingent contracts may differ in length and in recording practices, and may be more or less individualised. Payments may be calculated on the basis of observed enviroru11~1,,-,,; outcomes rather than of restrictions of agricultural practices. The institutional settings may differ in the nature and number of the implementation agencies ( environmental organisation or agricultural institution). Enforcement procedures may differ in the balance between technical support and control, with different levels of sanctions. WP7 develops elicitation methods and the analysis of farmers' preferences. In close collaboration with preceding WPs, WP9 develops theoretical and empirical simulation models taking into account the strategic behaviour of farmers regarding different contractual arrangements, different scheme management attributes and eligibility rules. For instance eligibility may require some minimum level of participation in a designated area, in order to reach a critical mass of environmentally friendly practices. Strategic behaviours, based on asymmetric information and cartel building may deeply affect the uptake and the costs of AESs. The likelihood of such behaviour depends on agrienvironmental technology aspects as well as institutional context and contract design.

The final objective of the IT AES is the integration of the three main tools which are presented above: institutional analysis, environmental appraisal and microeconomic analysis.

Technically this is the challenge of WPlO.

Preliminary results and comments

Institutional innovation in New Member States

Implementing the CAP in NMS, generally implementing the acquis communautaire, leads to institutional innovation. This is particularly true for AESs where the subsidiary principle applies widely. The comparison between Finland and Czech Republic show that the same story repeats itself in a certain extend: A dramatic change in the policy mix applied to the farm sector imposes the AESs as an important tool to support farm income. Horizontal schemes with basic measures and relatively high incentives benefit to most farmers. Their design and implementation involve new collaboration between the Ministries of Agriculture and Environment and introduction of new tools to monitor and enforce the policy schemes.

When new Members joined the EU in 1995, they had to put the acquis communautaire into effect at the national level. This has created a shift in agri-environmental policy as illustrated by the Finnish case. Indeed, Finland experienced an original way to deal with the interface between farming and the environment. Before entering the EU, agricultural policy was jointly designed by agricultural administration and farmers' union, this co-decision process being justified by the concept of 'agricultural policy community' . Farmers were acknowledged as the best guardians of the countryside so the philosophy was to entrust them with the protection of the environment. Severa! policy measures, including a set-aside scheme, fertiliser taxes and an afforestation scheme, were likely to have produced environmental effects although they were primarily aimed at different objectives. A voluntary set-aside scheme was implemented to reduce overproduction. But it was changed into a compulsory scheme in 1991 , then farmers had to setaside at least 15% of their cultivated area. Moreover, they had the opportunity to make an agreement on plant-cover for set-aside area, and an additional compensation was offered to them. A taxon nitrogen fertiliser was collected from 1976 to 1994 as a means to raise funds for export subsidies. In 1990 an environmental tax on phosphorus fertiliser was also introduced. Both fertiliser taxes were abolished in order to comply with EU legislation and therefore facilitate Finland' s membership.

Increasing public concern about detrimental impact of farrning on the environment combined with scientific evidence showing agriculture as a serious polluter boosted the ," •:-:t!11 of the first national environrnental programme for rural areas approved in 1992. According to this programme environrnental issues in rural areas must be considered at the central governrnental level, with both the Ministry of Agriculture and Forestry and the Ministry of the Environrnent in charge. This is a significant change in policy orientation with a shift from the traditional Finnish concept of 'agricultural policy community'.

Despite the implementation of pre-accession schemes, a dramatic change in public policy result from the last enlargement of the EU to Central and Eastern European countries. Related to agri-environrnental programmes, this point is illustrated with the Czech Republic case.

From 1954 to 1963, nature policy mainly relied on the designation of areas for landscape protection in the Czech Republic. New concerns emerged in the 1980s and a particular attention was paid to organic farrning. An organic scheme was applied from 1990 to 1993 with a support from the Ministry of Agriculture. In 1994, there was a shift of emphasis with the first agri-environrnental launched by the Ministry of Agriculture which offered subsidies for applying a series of specific measures. Unfortunately, this programme suffered a nurnber of drawbacks. First of all, eligible farmers were only offered a one-year firm subsidy, with its renewability being subject to budget variations. Secondly, there was no clear and precise specification of the required actions. Finally, weak or missing monitoring and sanctioning mechanisms undermined the enforceability of this programme. In 1999, the installation of the Czech Republic agrarian policy for the 1999-2003 pre-accession period was launched. It put emphasis on agri-environrnental issues. A Governrnent decree in 2000, intended to harmonise the second Pillar measures. It embedded less-favoured areas and agri-environrnental schemes into a single legislation. Proposed agri-environrnental measures included both measures taken from the former programme and new measures. The contract lengths is still short but the package of measures should be available over several years.

The national programme governance was exclusively in the hands of the Ministry of Agriculture. Programme design was at national level while regional offices were responsible of implementation tasks (contracting, monitoring and enforcement). In addition the Ministry of the Environrnent and its agencies were involved to a very limited extent. A major change which has been associated with the SAPARD programme, was the introduction of a system of evaluation and public control from the 'pre-beginning' to the ' post-end' of projects. A proper specification of monitoring procedures, ex ante, mid-term and ex post evaluation was henceforth required. This orientation was later strengthened with the preparation of the Horizontal Rural Development Plan. For the SAPARD administration, a temporary system (SAPARD Agency) governed by a Managing Authority at the Ministry of Agriculture was set up. On January 1, 2004 it was moved into a new organisation, the State Agricultural Intervention Fund (SAIF) which complies with EU legislation. This is the only contracting and paying agency for all the CAP support programmes in the Czech Republic.

In SAPARD, the introduction of five-year contracts had an important implication for the farmer choosing a production plan. In contrast to the previous simple and horizontal schemes, the new ones were targeted at pilot areas and were area-specific. Experts from the Ministry of the Environrnent and from its landscape and nature protection administration (LAPLA) played an essential part in designing areas and required actions. Otherwise for the national Agricultural Environmental Programme, tasks related to scheme promotion, information, dissemination and technical support are dependent on persona! activities of officers of local agricultural agencies of the Ministry of Agriculture. In an effort to favour a public-private partnership in promoting programmes' implementation, both public officl..'ïS r:a private advisers were trained by the Ministry of Agriculture.

Thus there was an important change in the govemance of agri-environmental policy with a shift from a narrow agricultural perspective to a broader perspective involving environmental interest. Co-operation with the Ministry of the Environment and its conservation agencies should improve the designation of conservation goals and Iead to a better targeting of individual sub-measures. In addition, the establishment of the SAIF should contribute to a better policy control and enforcement. Finally, setting up steering and monitoring committees, and involving independent referees in the evaluation process are likely to empower public control over support programmes and to have a potential to strengthen the Ieaming by doing process. One of the main obstacle to high uptake by farmers is the unfinished process of setting agreements between farmers and land owners (in some cases owner was not even known). The second important obstacle was a significant administrational burden on farmers.

The SAP ARD programme introduced a public discussion but there were no serious comments from the farming community. In pilot areas, for farmers even involved in prescription design (in some areas they have been part of the initial working group) some key misunderstanding remained. Especially confusing is the fact that the farmer could not be supported for nature protection (by extensification of farming) in the places with strict prohibition of use of fertilisers and pesticides. This was the main source of confusion during the implementation period. The same factor caused Iower enthusiasm among LAPLA staff in some areas because a significant part of the nature protection issues (land abandonment, etc.) is situated in the most protected localities and thereforc it could not be solved by this measure. In general there was qui te wide acceptance of the AES by farmers and by the public in these areas.

Since 2004, the horizontal rural development plan (HRDP) is mainly based on pre-existing horizontal measures launched in 2000 (grassland maintenance, organic farming support and conversion from arable to grassland), with the growing of catch crop in addition. Total public expenditures of AESs has tripled with EU accession. The uptake is quite unbalanced between the different measures. Farmers positively react for area paid AESs, like grassland maintenance or growing of catch crops. 800 thousand hectares of permanent grassland from 950 thousand potential have been applied in to this schemes -practically all Czech grassland is under AES now. The derived extensification of farming practices in such a large scale may be in contradiction with the national policy goal of maintaining employment in agriculture. It seems that some really big farm holders (10 -20 thousand hectares) are receiving so heavy subsidies, that it is not relevant to re-invest them to agriculture, but they are willing to invest this money to other parts of the economy. Large farms have basic problems to apply for landscape diversification schemes, because there is a relationship to numerous land owners and it is administratively complicated for the big farm management.

Participation in AESs and transaction costs

Whatever the measure, the calculation of AES contract remuneration is based on the assessment of the forgone profit or the additional cost related to the implementation of contract prescriptions. When this assessment is correct the uptake should be rather predictable. This is not true in most cases. An assumption to be tested in 1T AES is that private transaction costs are not taken into account while they are not negligible and may deeply affect participation in AESs. A number of tools are used to measure these private transaction costs and their impact on participation. The survey of farmers collects a number of variables to assess the determinants of private transaction costs which are related to farmer characteristics and situations: information level, involvement in professional ne , _'-~• J.d; s, trust in administration, relationships with extension services. The questionnaire of the survey also includes a choice experiment part which elicits the value of alternative contract attributes, like the contract length, the flexibility of contract prescriptions, the additional administrative burden of the possibility of choosing the land to be contracted. While the choice experiment elicits transaction costs perceived by contractors and non contractors respectively, a one-year follow-up of more than one hundred farmers is undertaken in order to record actual transaction costs born by contractors.

The following preliminary results are obtained in Basse-Normandie (NUTS 2 region of France) using a sarnple of 326 farmers, arnong which 52% are contractors. Contractors were voluntarily over represented. Like in Czech Republic, the extensive management of grassland and the winter coverage of arable land are the two most contracted measures. However less than I 0% of eligible area is under contract.

The choice experiment was designed to value five governance attributes of the contract including the payment per hectare which is needed to calculate the monetary value of other attributes. Every respondent had to make four successive choices between two fictive contracts which on differs in some levels of the attributes; technical prescriptions are unchanged across alternative contracts and are based on a real agro-environmental measure of reference. A sixth attribute corresponds to the situations where the respondents preferred the reference (real) contract rather than any proposed alternative (fictive) contracts. Assuming a random utility mode!, the answers are processed by a multinomial logit. The design of the sets of choices ensure that the assumption of independence of irrelevant alternatives is respected. All attributes are significant [START_REF] Quinio | Analyse des preferences des agriculteurs par la méthode des "choice experiments[END_REF]. Table 4 illustrates the results in term of willingness to accept (WT A) a specified change in the attribute level. It expressed in percentage of the reference measure payment. The WT A is the minimal increase in the annual payment per hectare which maintains the farmer's utility, given the specified change. The respondents would accept an increase in the contract length from 5 to 10 years, meaning they would maintain their participation level in the AES, for a 20% increase of the payment.

An 11 % increase would be necessary to impose which pieces of land are to enter the AES. The results show that the contractors marginally value flexible contracts and the paper work twice as much as non contractors. These differences probably corne from the experience of the contractors who resent more the paper work and the prescription rigi,1:1 _1 th:m non contractors. The status quo estimated values show that both contractors and non contractors reject the existing contract. Consistently, the respondents who did not actually signed this contract have a willingness to accept higher than contractors.

This results only give a partial picture of private transaction costs. For instance, AES attributes related to control procedures and sanction levels are not values. However they prove that govemance attributes significantly affect the farmers' attitude with the expected signs.

Using the 1T AES survey data base, synthetic continuous variables were built with the correspondence analysis on relevant subsets of qualitative questions respectively related to the farmer's knowledge about AESs, his involvement professional organisations, the frequency of his relationships with extension services, how difficult he perceives the relationships with administrative bodies, his trust in administrations. The unit of the synthetic continuous variables is arbitrary and does not represent anything, but their range represents the variability of the sample for the corresponding items. Preliminary results show that all those synthetic variables, except the trust in administrations, are highly significant to explain the probability of participation in AESs [START_REF] Granval | Comportement des agriculteurs face aux contrats agro-environnementaux et influence des coûts de transaction privés[END_REF]. In particular a 10% increase in farmer's knowledge about AESs or in the frequency of relationships with extension services has an higher effect than a 10% increase in the contract payment. A 1 0% increase in organisation involvement or in easiness of relationships with administration has an effect as large as a 10% increase in the contract payment. These results have to be confirmed and certainly reflect the well known complexity of French schemes. However they show that private transaction costs are far from being negligible. They are contracting barriers which select contractors and AES land without any a priori environmental relevance.

Policy orientations and environmental effectiveness

The importance of AESs highly depends on the national constraints and strategies about farm income support. Nevertheless the AESs introduce new actors, like the Ministry of Environment and NGOs, in the design process of agricultural policy schemes. EU regulations also introduce better govemance principals, such as control, scheme monitoring & evaluation in old as well as in new member States. The compliance with better govemance principles may increase public and private transaction costs. This is an incentive for member States to design large scale and simple schemes, in contradiction with an increasing role of local initiative which is promoted by the proposai of the next rural development regulation, based on the " leader" approach.

For AESs, the environmental effectiveness remains questionable. Even in Finland where 93% of farmland are under contract it is difficult to say if the actual decrease in nitrate and phosphorus runoffs are due to AESs or to the decrease in agricultural prices. In addition no impact on lake eutrophisation has been measured yet. The situation is probably worse for schemes with numerous different measures, low uptake rate and geographic dispersal of lands under contract. In most cases the cause-and-effect relationships between the prescribed farming practices and the stated environmental objectives are not documented. This is certainly a field where exchanges of experience and knowledge accumulation should be enhanced. This is a big challenge in a framework where bottom-up approach and decentralisation prevail.

✓

  -designation of area and designing management ✓ prescriptions -re-design / re-notification of prescriptions

Table 1 . CAP budget in the EU-10 and the EU-15

 1

	EU-JO	EU-15

Table 2 : synthetic presentation of IT AES

 2

		Horizontal tasks	Analysis of specific issues
				Evaluation of methods
			Regional level	Scheme level	Farm Jevel
	lnstitutional settings and	State of the art	Complete description of the case studies
	outcomes of AESs in case-and methods -	(WP 3, INRA-ESR, Rennes, France, each partner]
	studies	9 country reports on AESsand relevant	Analysis of institutional arrangements of AESs [ WP 4, Humboldt Universlly of Berlin, Germanyj Assessment of environmental impacts of AESs
		literature	[WP 5, TEAGASC, Dublin, lreland)
	Governance structures and farmers • behaviour	(WP2, INRA-ESR, Rennes, France, each partner)	Survey of eligible farmers through standardised questionnaires [WP8,	Analysis of private transaction costs through follow-up of farmers, and surveys (WP 6, Ghent University, Belglum) Farmers ' preferences about the governance attributes of AESs [WP 7, University of Newcastle-upon-Tyne, UKJ
			INRA-ESR,	The design of agro environmental contracts and
			Rennes, France,	farmers' strategic behaviour
			each partner]	[WP 9, Wageningen University, Netherlands]
	Integrated analysis of
	institutions, farmers ' behaviour and			Multi-Criteria analysis and recommendations
	environmental impacts

[ WP 10, UNIPADU-CONTRAGAF, Padua and Bologna, llalyj

Table 3 : Categories of Transaction Costs Incurred in the Implementation of Voluntary Schemes Based on Compensated Management Agreements and Cost Incidence

 3

	Main	Sub-Category	State agency costs	Participant costs
	Category
			Fixed at Variable	Fixed at Variable,
			the level with no. of the	e.g., with
			of the participants farm	hectares
			scheme	level	entered
	Information -surveving of the designated area

Table 4 : Choice experiment results in Basse-Normandie (France)

 4

	Change in governance attribute level	Willingness to acce Jt
		Contractors	Non
			Contractors
	Contract lemrth increases from 5 to 10 years.	9.5%	10%
	The pieces of land which are contracted are imposed 11,2%	10,8%
	by the AES agency rather than chosen by the
	contracter.
	The technical prescriptions are partially adaptable at -11 ,1 %	-4,8%
	the farm level rather than fixed (flexible rather then
	rigid contracts).
	The paper work increases from 45 to 90 minutes per 5,4%	2,8%
	month
	Status Quo (the real measure is preferred)	4,0%	8,5%
	Source: Quinio (2005) based on IT AES survey