Transaction Costs in Agri-Environment-Climate Measures: A Review of the Literature

Agri-environment-climate measures (AECMs) represent a transaction of ecological capital between the government as the buyer of the agri-environmental goods and services produced in the farmland and the farmer as the seller. As such, they involve transaction costs (TC) that serve to safeguard the transaction from opportunistic behavior, problems related measurement, and other risks that can occur in the contractual relationship. These costs are an important factor in the design and implementation of any policy. However, analyzing TC is not easy. Several definitions have been proposed, and different strategies have been used to measure these costs. Despite a growing interest in this topic, research addressing the analysis of TC in AECMs has been rather scarce and lacking a systematic approach to make the different studies comparable and their results generalizable. This review article aims to provide a detailed overview of the current state of research related to the analysis of TC in AECMs by exploring the differences in methodological approaches, objectives, and scope among the most relevant studies available and by summarizing their most significant findings. It was observed that there are differences across the studies linked to their objectives in terms of the geographical context in which they are implemented, the actors involved in the program, and the objectives aimed toward in their analysis. However, the sharpest difference observed across these studies is linked to their methodological approach, which in most cases is focused on quantitative analysis. Most of these studies observed a significant variation in the magnitude and determinants of TC across different AECMs, which often depended on the characteristics of the schemes and the institutional environment in which they were implemented, as well as factors linked to specific characteristics of the farmer and/or their farming business.