From dry to wet: economic assessments of peatland rewetting scenarios in German agriculture

Abstract

The process of rewetting previously drained peatlands holds significant promise in aiding efforts to reduce greenhouse gas emissions within the agricultural sector. Consequently, measures to support rewetting were introduced as part of the 2021 European CAP reform. The implementation of CAP rewetting measures has been studied mainly from a nature conservation perspective. However, little research has focused on economic effects at farm-level. This study provides an initial analysis of rewetting costs for 25 farms operating on organic soils in six German states, based on a modelled approach underpinned by specific assumptions. The costs were examined under two rewetting scenarios, considering variations in location, structure, and size of farms. Our results indicate that current state-specific CAP funding is insufficient to cover costs of rewetting grassland, whereas the rewetting of arable land pays off in 14 of 25 farms. The opportunity costs calculated with total gross margin losses vary depending on factors such as (1) farms’ structure and location, (2) farm specialisation and size and (3) funding measures. The ability of farms to offset rewetting costs through higher value-added activities is crucial. We conclude that due to variable economic consequences of implementing measures, rewetting requires funding adapted to regional and farm-specific conditions. KEY POLICY HIGHLIGHTS: Specific costs of rewetting are considerably higher than the CAP funding provided Local land prices are a key factor driving the rewetting costs There is a striking north–south gradient in the greenhouse gas abatement costs of farms Investigation into additional management options for rewetted areas is needed to generate added value.