Agri-environment policy has come to play a key role in the rhetoric of agricultural policy, even though it commands a more modest proportion of policy expenditure. This dates back to the mid 1980s, since when a series of agri-environment schemes have been introduced to pay farmers to manage the countryside in particular ways. In this chapter we consider the implementation and operation of agri-environment policy. While following common principles, schemes have differed between countries and here we concentrate on those implemented in England, particularly the Environmentally Sensitive Areas scheme, Countryside Stewardship scheme and, from 2005, Environmental Stewardship. The different schemes illustrate different aspects of the use of environmental contracts and we discuss their potential and limitations towards the end of the chapter. Yet, before we explain the schemes, we might wonder why government became involved in paying farmers to provide an attractive landscape in the first place. This is not something that government had ever attempted to do before, but it has become a major component of agricultural and rural policy. Annual expenditure on agri-environment policy in England currently exceeds £400 million. This is paralleled by the development of agri-environment schemes in other countries, especially across Europe, in the USA and in a growing number of other countries. See Uthes and Matzdorf (2013) and Hodge (2014) for recent reviews. Hanley et al. (2012b) have provided an overview of the economic principles behind incentivising landowners to provide biodiversity.

12.1 The origins of agri-environment policy

In Chapter 9, we discussed the implementation of management agreements on SSSIs following the 1981 Wildlife and Countryside Act. This addressed the problem of controlling agricultural intensification on notified sites of particular conservation value, but it failed to resolve the broader concern for the consequences of agricultural intensification in the wider countryside more generally where similar pressures for environmental damage were underway.