Should we promote grassland ? A microeconomic analysis

Unfavourable or no incentives at all make the farmers use insufficient grassland areas, from the society's and economic efficiency's point of view. On the one hand the CAP premium encourage to exploit more crops and less grasslands than what real profit would imply. On the other hand, the farmer who seeks to maximise his profit does not take into account the effects extemal to the market due to the lack of incentives. However the market could contribute to the provision of grasslands the society needs, because milk and meat produced by grass-feeding have specific characteristics valued by the consumer. Nevertheless, the public good characteristics of grasslands make market failures remain and public policy become necessary