Multi-function grasslands : what part for the market and public policy ?

Abstract

Unfavourable or no incentives at all make farmersuse insufficient grassland areas, from the point of viewof the society and economic efficiency. On the one handthe CAP premium encourages exploiting more cropsand less grasslands than what real profit would imply. On the other hand, the farmer who seeks to maximisehis profit does not consider the effects external to themarket due to the lack of incentives. The market could, however, contribute to the provision of grasslands thesociety needs, because milk and meat produced bygrass-feeding have specific characteristics valued bythe consumer. Nevertheless, the public good characteristicsof grasslands make market failures remain and public policy becomes necessary. The conception ofefficient policies for grassland multifunctionality requires the survey of transaction costs and jointness between breeding and grassland. The different kinds ofgrassland premium probably allow to make environmentalbenefits without excessively increasing the transactioncosts in comparison to price support.