Cost-effectiveness of centralized versus decentralized decision-making in agri-environment schemes for biodiversity conservation: Insights from an ecological-economic model

The cost-effectiveness of agri-environment schemes (AES) depends, among other things, on spatial dimensions. Extensive research has been conducted on how to incentivize habitat connectedness, but far less attention has been given to how the spatial level of decision-making affects the outcome of AES. This article contributes to filling this research gap by analyzing the cost-effectiveness of multiple AES under two levels of decision-making, namely centralization and decentralization. For this purpose, a generic ecological-economic model is developed. The model considers two regions, two levels of decision-making, two species, and two AES, each targeting one of the two species under consideration. We analyze different policy scenarios: the central government can either implement a uniform policy, whereby both regions are offered the same compensation payment for the same conservation measure, or it can coordinate the regions by targeting one species per region, exploiting the regions' relative cost-advantages. Under decentralization, the AES are managed purely at the regional level, meaning that the regions design their AES independently. This study aims at identifying how different ecological and economic parameters affect the relative cost-effectiveness of AES under different levels of decision-making. Our model shows that the cost-effective level of decision-making is highly dependent on the ecological and economic context. We find, among other things, that centralized approaches are potentially more suitable for conserving combinations of species with similar environmental requirements, while decentralized approaches are potentially better for combinations of species with different environmental requirements.