that the researchers do not investigate further heterogeneity among different farms within a region -- they confine themselves to exploiting differences in biodiversity trade-offs across regions). Thus, the optimal policy is compared to a successive series of policy simplifications -- no sliding payment to farmers within regions for incremental increases in biodiversity reflecting the non-linear costs of achieving higher biodiversity targets; no price variation between regions; and no preferential allocation of contracts to regions where biodiversity can be produced most effectively. Including all policy simplifications resulted in a 49-100% reduction in the amount of biodiversity provided for a given level of investment. The single most important contributor to this loss is the failure to discriminate pricing spatially so that all farmers are paid at the rate of the most expensive region in which biodiversity is being produced. Of course, implementation costs would be much higher with these more targeted interventions, but the efficiency gains to be made are so substantial that much higher administrative costs are warranted in order to reap the full potential benefits of AEMs. Further issues Despite the regular calls for simplification of the CAP, the message of this paper is that more complex schemes are required if public funds are to be used to encourage more environmentally-sustainable farming in a cost-effective way. Despite the apparently clear policy recommendations of this study, some implementation questions remain. One is that it assumes that policy makers have a clear objective in terms of the level of environmental services from