Investigating the potential and economic feasibility for a compensation in advance scheme
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This case study focuses on one activity of the project in the Upper Lusatia in Saxony, one of Germany's largest pond regions, consisting of around 1000 ponds. The project investigated the possibility of providing compensation in advance to fish farmers, where payments are made based on estimated expected losses, rather than payments after the damage had occurred (ex-post compensation). It was found that the compensation in advance scheme would eliminate the need for damage verification, resulting in the total cost of EUR 230 000. This is significantly cheaper than the ex-post compensation scheme due to the high transaction costs associated with the latter. In response to concerns from fish pond farmers about the challenges with the current scheme, the project provided evidence for policy-makers and wildlife managers on the most economically suitable compensation scheme for the Upper Lusatia region. A compensation in advance scheme for otter damage was ultimately not implemented. Convincing the authorities to compensate fish farmers before the damage happened proved challenging because they were worried about potential wastage of funds if damage did not actually occur, as the proposed scheme would have already disbursed payments to the farmers.