Alternative policy measures and farmers' participation to improve rural landscapes and water quality: A conceptual framework

The challenge of rural landscape and water quality improvement is investigated as a problem of positive and negative externalities. Based on this analytical background, alternative policy measures are evaluated, and a charge-subsidy scheme with balanced budget is proposed as a cost-effective instrument of pollution control. It earmarks the revenue of a combined land use and fertilizer tax to subsidize farmers for land retirement. In combination with a subsidy for the social benefits of the rural landscape, the charge-subsidy scheme provides a conceptual framework for the design of a voluntary environmental agreement between farmers and the regulator. Moreover, while contributing to an environmental quality improvement in rural areas, it leaves the property right on the land resources with the farmers, gives consumers the right to enjoy water quality at a sufficient and socially agreed level and farmers the right to pollute up to this level.