Receptiveness of Japanese farmers towards an environmental payment scheme: An analysis of the determining factors behind participation and land enrolment in an environmentally friendly farming practices

The Agri-Environmental Scheme (AES) is one of a series of agri-environmental preservation measures that is consistent with WTO regulations. Through the scheme, the government compensates farmers for part of the costs incurred by participating in activities that contribute to increased benefits and reduced burdens on the environment. Such schemes have been introduced in the U.S. and Europe. As the agri-environmental payment is decoupled from production and price, the payment amount and the degree of participation determine the total budget that the government needs for the scheme. This study estimated the participation probability of farmers and the enrolment land ratio within AES through an application of the contingent valuation method (CVM). Our focus is consumers' economic behavior, which they use to determine purchase quantities according to the price (value) of the product or service. As such an economic behavior is a normal behavior, this study attempts to consider both price (value) and the quantity under the price (value) which previous CVM studies had not fully taken into account. First, this study's results showed that when the use of a practice is associated with the burden of labor, the agri-environmental payment will not be the exclusive factor that farmers will consider in deciding whether to participate and how much land area they will put into the scheme. Next, it became clear that the positive factors that determine farmers' participation are farmers' previous experience with agri-environmentally friendly practices and their general interest towards the environment. The factor that negatively affected both participation and the degree of participation was the ratio of income from paddy rice farming out of the total household income; the higher the degree of dependence on rice production the less likely that farmers would participate in the scheme and the less land area they would put into it. Furthermore, regional location also influenced farmers' decisions to participate and the land area to be enrolled in the scheme. This indicates that opportunity costs and differences in farmers' management conditions according to locations affected farmers' decisions. While it is likely that a one-for-all payment approach is to be set for the AES, these findings suggest that these differences among regions will appear in the participation rate and the enrolment land ratio.