Greener farming policies are judged by environmental outcomes.
They should also be judged by what they do to farm costs
Štefan Bojnec and Imre Fertő
Agri-environmental schemes are usually assessed by whether they improve biodiversity, reduce pollution, or cut emissions. But for farmers, a more immediate question often comes first: what happens to costs? Evidence from Slovenian farms suggests that these schemes can reduce spending on energy and crop protection, even if some costs rise during the transition.
When governments promote greener agriculture, they tend to justify intervention in environmental terms. The goals are familiar: fewer chemical inputs, cleaner water, healthier soils, lower emissions, and more biodiversity. These are important objectives. But agricultural policy does not succeed on environmental indicators alone. It also succeeds or fails on whether farmers can adopt new practices without putting the economic viability of their farms at risk.
This is why agri-environmental schemes, or AES, deserve closer scrutiny not only as environmental tools, but also as economic instruments. Across the European Union, AES are designed to encourage more sustainable land management by compensating farmers for income losses or additional costs linked to environmentally beneficial practices. Yet while a large body of research examines their ecological effects and broader farm performance, much less attention has been paid to a simpler and more immediate question: how do these schemes affect farms’ day-to-day variable input costs?
Our study addresses that question using farm-level evidence from Slovenia. We focus on three categories of variable costs that sit at the centre of modern agricultural production: energy, fertilizer, and crop protection. The results tell a more nuanced story than the usual policy debate allows. Participation in AES is associated with lower energy and crop protection costs, while fertilizer costs tend to rise in the short term before stabilising or declining over time. The broader implication is clear: greener farming support can improve some parts of the farm balance sheet, but transitions involve adjustment costs that policy needs to recognise.
Why farm costs matter more than policy debates often admit
Environmental policy is often discussed at a high level. Analysts ask whether a scheme improves eco-efficiency, reduces chemical dependence, or delivers public goods. Those are the right questions, but they are incomplete.
For farmers, one of the most practical questions is what happens inside the budget. Input costs shape short-term profitability, influence willingness to enrol in support programmes, and affect whether sustainable farming is perceived as realistic or risky. If agri-environmental schemes reduce some operating costs while temporarily increasing others, that matters for both policy design and policy communication. It changes how such schemes should be explained, targeted, and sequenced.
Slovenia is a useful setting in which to examine this issue. Its agriculture is characterised by small and medium-sized, mostly family-run farms, diverse climatic and ecological conditions, and a strong policy emphasis on sustainability within the EU Common Agricultural Policy framework. The country’s agricultural structure also makes farms especially sensitive to changes in input costs and to the availability of external support. That makes Slovenia a valuable case for understanding how sustainability policy interacts with farm-level economic decisions.
Looking at what changes before and after enrolment
To identify the effects of AES participation, the study uses Slovenian Farm Accountancy Data Network data and a Differences-in-Differences design with staggered adoption. This matters because farms do not all enter AES at the same time. Comparing farms before and after enrolment, while using not-yet-enrolled farms as a comparison group, offers a more credible way to estimate the policy effect than simple cross-sectional comparisons. The analysis is also supported by robustness and sensitivity checks.
This design helps move the debate beyond descriptive claims. It allows us to ask not simply whether AES farms look different, but whether participation itself is associated with a change in input costs over time.
The main finding: greener support can lower some important farm costs
The first clear result is that AES participation is associated with lower energy costs. Farms enrolled in AES experienced a statistically significant reduction of around €187 per hectare in annual energy expenditure. The paper links this pattern to less intensive tillage, lower reliance on synthetic chemical inputs, and more efficient resource use. In other words, some of the same practices that improve environmental performance may also reduce operating costs.
The second result is equally important: AES participation reduces crop protection costs. The study finds that annual spending on crop protection falls significantly, and the event-study evidence suggests that these reductions appear relatively quickly after enrolment and persist over time. This is consistent with greater reliance on integrated pest management, biological control, and more targeted use of pesticides and herbicides. Once again, the environmental and economic effects point in the same direction. Lower dependence on chemical crop protection is associated with lower expenditure.
These results are important because they complicate the common assumption that greener farming necessarily means higher recurring costs. In at least some areas of farm management, environmental schemes can generate cost savings rather than simply impose constraints.
But sustainability transitions still come with adjustment costs
The fertilizer results tell a different story. Rather than falling immediately, fertilizer expenditures increase in the short term after AES adoption. The paper argues that this likely reflects a transition phase in which farms shift toward organic amendments, improved nutrient management, or other practices that initially require different cost structures. Over time, however, these costs stabilise and may decline.
This is a crucial point for both policymakers and researchers. Too often, sustainability policies are judged too quickly. If the evaluation window is too short, temporary adjustment costs can be mistaken for long-term policy failure. The fertilizer findings suggest that some of the economic burden associated with adopting greener practices is transitional rather than permanent. That distinction matters, because it implies that the right response is not to abandon environmental schemes, but to design them in ways that help farmers get through the adjustment period.
What this means for policy design
The policy lesson is straightforward. If agri-environmental schemes are expected to support both environmental goals and farm viability, they need to be designed with transition dynamics in mind.
That means policymakers should think not only about payments for participation, but also about the support systems that make participation workable. Technical advice, knowledge transfer, advisory services, and transitional assistance may be just as important as the formal scheme rules themselves. This is especially true in agricultural systems dominated by smaller farms, where short-term cash-flow pressures can be a major barrier to adoption even when the longer-term case for participation is strong.
More broadly, the study suggests that greener agriculture should not be framed only as an environmental obligation. Under the right conditions, it can also reduce some operating costs. But those benefits may not appear uniformly or immediately, and policy needs to be honest about that.
A wider lesson for research on sustainable agriculture
This study also contributes to the research agenda in a broader way. Much of the existing literature evaluates AES through environmental indicators, eco-efficiency, or overall farm performance. By focusing directly on energy, fertilizer, and crop protection expenditures, the paper shows that these schemes reshape the economics of everyday production decisions. That is an important analytical shift. If we want to understand why environmental policies succeed or fail in practice, we need to pay more attention to the cost channels through which they operate.
The paper is careful not to overstate its claims. It notes that some estimates require cautious interpretation and that future research should connect cost changes more directly to environmental indicators such as biodiversity, soil health, and water quality. But the core pattern is robust enough to matter: AES participation is associated with lower energy and crop protection costs, while fertilizer costs rise initially before settling over time.
For policymakers, the message is simple. Environmental policy works best when it understands the farm balance sheet as well as the ecosystem.
Note: This blog post is based on the article Agri-environmental schemes reduce variable input costs: Evidence from Slovenian farms by Štefan Bojnec and Imre Fertő, published in the Journal of Cleaner Production.
https://doi.org/10.1016/j.jclepro.2026.148054
