ESS versus NVZ – The Cost-Effectiveness of Command-and-Control versus Agreement Based Policy Instruments

This study empirically investigates the cost-effectiveness of different agri-environmental policyinstruments. We compare the Environment Stewardship Scheme (ESS) as an example for amanagement agreement type instrument, to the Nitrate Vulnerable Zones (NVZ) as an example for acommand-and-control type instrument. Both instruments are currently applied in the UK. Based on asimple cost model considering also relevant transaction costs and risk we use different regression andresampling techniques to estimate the marginal effects of different factors with respect to theinstruments‟ relative cost-effectiveness and to identify factors for cost variation over space and time.We control for the actual level of compliance by using compliance weighted average scheme costratios. The findings suggest that the ESS instrument has a higher cost-effectiveness whereas the NVZinstrument is more expensive on a general level. However, if the focus is on compliance weightedcost ratios, the picture changes somewhat. Further, we find a significant regional variation in the costeffectivenessfor both instruments as well as a significant variation over time.