Since the 1950s, intensification and scale enlargement of agriculture have changed agricultural landscapes across Europe. The intensification and scale enlargement of farming was initially driven by the large-scale application of synthetic fertilizers, mechanization and subsidies of the European Common Agricultural Policy (CAP). Then, after the 1990s, a further intensification and scale enlargement, and land abandonment in less favored areas was caused by globalization of commodity markets and CAP reforms. The landscape changes during the past six decades have changed the flows and values of ecosystem services. Here, we have reviewed the literature on agricultural policies and management, landscape structure and composition, and the contribution of ecosystem services to regional competitiveness. The objective was to define an analytical framework to determine and assess ecosystem services at the landscape scale. In contrast to natural ecosystems, ecosystem service flows and values in agricultural landscapes are often a result of interactions between agricultural management and ecological structures. We describe how land management by farmers and other land managers relates to landscape structure and composition. We also examine the influence of commodity markets and policies on the behavior of land managers. Additionally, we studied the influence of consumer demand on flows and values of the ecosystem services that originate from the agricultural landscape.

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Agri-environmental schemes (AESs) and cross-compliance (CC) are the two main components of the common agricultural policy (CAP) that address environmental issues. Under regulation 1698 ⁄ 2005, agri-environmental scheme design has been established in such a way as to use CC as the baseline against which prescriptions and payments are identified. In this framework, agri-environmental payments to farmers are justified only for the component of public goods produced (if any) above the CC prescription level. This constraint has become a major determinant of the design of agri-environmental schemes in all EU Member States in which both instruments are implemented. This paper investigates farmer participation, compliance choices and the socially optimal level of monitoring when CC and agri-environmental schemes are jointly considered, and when information about compliance is asymmetrically distributed between farmers and the public regulator. The results show that the two policy instruments interact with each other, with agri-environmental payments actually providing incentives for CC, when the CC monitoring and sanction system does not guarantee full compliance. However, the numerical example in Emilia-Romagna (Italy) demonstrates that with the present combination of controls and sanctions, farmers have very little incentive to be compliant with both cross compliance and agri-environmental schemes. Hence, the results highlight that monitoring in CC or in AES does not have the same effect on the farmers' compliance. This underscores the need for further research in this field, particularly as provision of environmental goods becomes more important in the future CAP.

The viability of irrigated systems in Southern Europe is closely linked to efficient institutional settings and water-allocation mechanisms. A significant, although not widely used, mechanism for water allocation is an intra-sectorial water market. The objective of this paper is to evaluate to what extent water markets may contribute to the improvement of the efficiency of water allocation and to the profitability of irrigated agriculture. The related issues of water allocation among farm types and farm specialisation are also addressed. The analysis is based on a basin-level linear programming model, comparing the situation with and without a market. It includes both fixed and variable transaction costs and estimates their combined effects on market performances. The model is applied in two areas in Southern Italy and Spain, and simulates the behaviour of different farm types, derived from cluster analysis on a sample of farms in each area. The paper confirms that water markets could potentially improve the economic efficiency of water use, in terms of higher profit per hectare, given limited water availability. The potential improvements are associated with a more intense specialisation of farms and are strongly differentiated among farmers, particularly where significant restrictions to water availability occur. This corroborates the expectations of institutional difficulties in implementing water markets. However, the exchanges, and consequently the potential effects of water markets, are heavily affected by the actual level of water availability, as well as the size and the structure (fixed vs. proportional) of transaction costs. The paper calls for a more in-depth analysis of the connections between market performances and institutional settings, as related to the issue of water-agriculture policy design and coordination.

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