Innovative Contract Solutions for the Provision of Agri-Environmental Climatic Public Goods: A Literature Review

Abstract

Lack of public funding and environmental deterioration are promoting the search for innovative mechanisms enabling to boost farmers’ provision of agri-environmental climate public goods. This work aims to contribute to the current debate by highlighting the role of innovative contractual solutions through a systematic review of more than 60 articles. The review analyses the potential of result-based and collective contracts as innovative solutions compared to action-based instruments, which are those currently most used. The design of innovative contracts and other mechanisms, e.g., auction and screening contracts, can reduce the policy failures due to asymmetric information. The paper emphasises the trade-off between an accurate design of agri-environmental schemes and the related administrative burden, highlighting the need for a better understanding of the role of mechanisms design into the policy cycle. Some new instruments were not analysed in the review, due to the scarcity of literature, and there is the need of more case studies providing information on the effectiveness of instruments when implemented in different contexts. We fill the gap in empirical evidence through a SWOT analysis that evaluates the effectiveness and acceptability of innovative instruments for policy purposes.