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This paper presents a methodology for developing state indicators, reflecting the provision of environmental public goods from agricultural landscapes. The methodology involves a structured use of meta-criteria and criteria for developing indicator variables and indicators, along with a coherent set of indicators. These indicators are aimed at providing a basis for determining agri-environmental payments to farmers. They are estimated at the object level, that is, per field or field element, so payments can be set that lead to an efficient resource allocation, structure of incentives and production. We find that, according to the criteria assessments for the Swedish agri-environmental situation, it is best to use a set of seven composite indicators on arable fields, permanent grasslands, linear elements, point elements, forest edges, bio-rich trees and relics. By estimating the indicators in two case study areas, we show that environmental services vary considerably between objects, indicating that value-differentiated payments may work as an efficient instrument in practical policy making. [ABSTRACT FROM AUTHOR]

Monetary valuation of ecosystem services is a widely used approach to quantify the benefits supplied by the natural environment to society. An alternative approach is the monetary valuation of ecosystem functions, which is defined as the capacity of the ecosystem to supply services. Using two European case-study areas, this paper explores the relative advantages of the two valuation approaches. This is done using a conceptual analysis, a qualitative application, and an overall comparison of both approaches. It is concluded that both approaches can be defended on theoretical grounds, and - if properly applied - will provide the same value estimates. However, valuation of ecosystem services is preferred from a practical point of view. Because there is no one-to-one match between functions and services, researchers should be consistent in their valuation approach. To avoid overlooking or overlapping of values, valuation should either be solely based on functions, or solely based on services. [ABSTRACT FROM AUTHOR]