Incentivizing afforestation agreements: Institutional-economic conditions and motivational drivers

The main objective of this study is to estimate and compare farmer demand for afforestation agreements in the Netherlands and Germany under different institutional-economic contract design conditions. Farmers’ responsiveness to financial and non-financial incentives to convert part of their land into forest is examined in a discrete choice experiment. Besides landowner and contract characteristics, we test the role of motivational drivers in explaining farmers’ willingness to conclude afforestation agreements. These are expected to lower demand for financial compensation. We fix financial compensation levels in contractual agreements relatively low compared to opportunity costs, but comparable to what farmers currently receive for nature conservation measures. Although we find substantial demand for afforestation agreements in both samples, Dutch and German farmers value contract conditions differently. This has important implications for the effectiveness of varying compensation levels on scheme participation rates. Farmers are willing to trade-off financial compensation against non-financial terms and conditions. However, having a positive environmental disposition towards wildlife conservation does not necessarily result in the acceptance of lower levels of financial compensation.