Integrating spatial econometric information and optimisation models to improve agri-Environmental payment design: A resource allocation model for emilia-Romagna (Italy)

The efficiency and cost-effectiveness of the European Agri-Environmental Measures (AEMs) depends on policy design variables, spatial targeting and participant selection process. This paper develops an optimisation model jointly aimed at optimal AEMs targeting and payment setting. The model tests the potential integration of spatial information into optimisation models simulating spatially differentiated payment mechanism for AEMs in Emilia-Romagna (Italy). The results highlight a significant cost saving with differentiated payments. Spatial information modelled as a proxy of the willingness to accept the payment supports the fine-tuning of the model. The study highlights the importance of using the information on spatial differentiation in optimisation tools searching for optimal incentive-compatible targeting.