Integrated assessment of water framework directive nitrate reduction measures

This article illustrates a statistical approach for deriving farm economic impacts of policy options aiming to reduce nitrate diffuse pollution. Building upon Fezzi et al. (2008) , who assess the costs of Water Framework Directive‐related measures on farm accounts data, we estimate regression models allowing such costs to be predicted for any region for which land use patterns and livestock numbers are known. We derive economic impacts in terms of changes in farm gross margin for (a) reducing inorganic fertilizer application, (b) reducing livestock stocking rates, and (c) converting arable land to ungrazed grassland. A case study of the agriculturally diverse Yorkshire Derwent catchment, in the North of England, demonstrates the overall approach. In addition, for this illustration, we combine these cost estimates with prediction of the water quality changes arising from each measure, derived via an integrated hydrological model of the Derwent. This allows a comparison of cost‐effectiveness. Finally, we implement our spatially explicit approach to target the measures to specific subcatchments identified as being of particular environmental policy interest.     

Green Light for Green Agricultural Policies? An Analysis at Regional and Global Scales

This paper analyses the effects of introducing biodiversity‐targeted ecological focus area (EFA) requirements on all farms with arable land in the EU by quantifying their global, regional, economic and environmental impacts in a mutually consistent way. To capture these impacts, different spatial scales need to be considered – ranging from on‐farm decisions regarding the EFA in the EU, to supply response around the world. In order to address this challenge, we combine the supply side of the CAPRI model, which offers high spatial, farm and policy resolution in the EU, with the GTAP model of global trade and land use. Both models are linked through a multi‐product, restricted‐revenue function for the EU crop sector. The results predict improved environmental status in the high‐yielding regions of the EU. However, output price increases lead to intensification in the more marginal areas of the EU where little or no additional land is taken out of production. The decrease in arable land in the EU is partially compensated by an increase of crop land, as well as increased fertiliser applications, in other regions of the globe. Thus, the improvement of environmental status in the EU comes at the price of global intensification, as well as the loss of forest and grassland areas outside the EU. Overall, we find that every hectare of land that is taken out of production in the EU increases greenhouse gas emissions in the rest of the world by 20.8 tonnes CO₂ equivalent.     

The Effect of Mandatory Agro‐Environmental Policy on Farm Fertiliser and Pesticide Expenditure

EU farmers are subject to mandatory cross‐compliance measures, requiring them to meet environmental conditions to be eligible for public support. These obligations reinforce incentives for farmers to change their behaviour towards the environment. We apply quasi‐experimental methods to measure the causal relationship between cross‐compliance and some specific farm environmental performance. We find that cross‐compliance reduced farm fertiliser and pesticide expenditure. This result also holds for farmers who participated in other voluntary agro‐environmental schemes. However, the results do not support our expectations that farmers who relied on larger shares of public payments had a stronger motivation to improve their environmental performance.     

Farm Type Effects of an EU‐wide Direct Payment Harmonisation

In this study, we analyse how three scenarios involving different levels of harmonisation of common agricultural policy (CAP) decoupled payments in the EU affect the distribution of farm income across regions and farm types. We use the farm type extension of the common agricultural policy impact (CAPRI) model, which captures farm heterogeneity across the EU. The first scenario (NUTS1) assumes uniform per‐hectare payments at the NUTS1 level. The second scenario (MS‐CONV) equalises the per‐hectare rates inside each Member State (MS) and partially harmonises the single payment scheme (SPS) across MS in line with the 2011 Commission proposal. The third scenario simulates a uniform per‐hectare payment at the EU level. Depending on the implementation of the SPS, the NUTS1 flat rate induces a substantial redistribution of payments across farm types and NUTS2 regions, particularly in regions that apply the historical SPS. The MS‐CONV and EU flat‐rate schemes have more significant impacts at the EU‐wide level. In the EU‐15, almost all farms lose payments from MS‐CONV and EU‐wide flat rates, whereas in the EU‐10, almost all farm types gain from these scenarios. Our conservative estimates indicate that the flat‐rate payments could redistribute up to €8.5 billion. Lower land rental costs partially offset the losses of farm income in the EU‐15 from payment redistribution. Land rents drop for all flat‐rate scenarios across most sectors and farm sizes in the EU‐15. In the less productive new MS, the landowners’ rental income is largely unaffected by the introduction of the flat rate.     

An Economic Analysis of Groundwater Contamination from Agricultural Nitrate Emissions in Southern Ontario

This paper analyzes the costs and benefits of controlling groundwater pollution from agricultural use of nitrogen fertilizer in southwestern Ontario. The Village of Hensall, where nitrate concentrations have been observed above 10 mg/L in recent years, is selected as the study site.'The CREAMS simulation model is used to estimate the effect of reducing nitrogen fertilizer on nitrate leaching and consequently on nitrate groundwater pollution. Estimates of the value of groundwater are obtained from the literature and are used to calculate the off-farm cost of groundwater contamination. This procedure results in a wide range of values for the benefits of reducing nitrate pollution. Estimated annual benefits of improved ground-water quality range from less than $1,000 to more than $30,000 for the village. The off-farm benefits of nitrate groundwater pollution abatement outweigh the cost of using bottled water and also exceed the on-farm cost of reducing nitrogen fertilizer application rates. Placing a tax on nitrogen fertilizer would reduce the level of nitrogen applications, but the farm cost of compliance to a nitrogen tax policy is substantially higher than the compliance cost under a regulatory policy that imposes a quantitative ceiling on nitrogen application rates over the part of the aquifer from which the village draws its water supply.     

Irrigation water pricing: differential impacts on irrigated farms

European water policy, as set out in the Water Framework Directive (WFD), requires all EU Member States to implement volumetric water pricing at rates that roughly cover the total costs of providing water services. The objective of this paper is to develop a methodology that, for the different types of farm in an irrigable area, will enable us to analyse the differential impact that a pricing policy for irrigation water would have. For this purpose, Multi-Attribute Utility Theory (MAUT) mathematical programming models were used. The methodology is implemented on a representative area in the Duero Valley in Spain. Our results show the usefulness of differential analysis in evaluating the impact of a water pricing policy. This allows significant differences in the evolution of agricultural incomes to be observed, as well as the recovery of costs by the State, demand for agricultural employment and the consumption of agrochemicals resulting from rising prices of irrigation water in various groups of farmers within a given irrigated area.     

Evaluating Input Standards for Non‐Point Pollution Control under Firm Heterogeneity

The efficacy and cost of input standards for reducing nitrate pollution from New Zealand dairy production are evaluated. In contrast to previous studies, firm heterogeneity is explicitly considered through the novel integration of efficient techniques for the calibration and decomposition of large optimisation models. Nitrogen fertiliser application should not be targeted by policy given its minor role in determining emissions. In contrast, livestock intensity is an appropriate base for regulation given its strong correlation with pollutant load. Abatement cost increases as stocking rate declines, but this can be offset at low levels of regulation through utilising slack feed resources to improve per‐cow milk production. Both uniform and differentiated input standards based on livestock intensity achieve substantial decreases in pollutant load at moderate cost. However, because of disparity in the slopes of abatement cost curves across firms, a differentiated policy is more cost‐effective at the levels of regulation required to achieve key societal goals for improved water quality.     

Estimating the range of economic impacts on farms of nutrient leaching reduction policies

Declining agricultural incomes, increasing concern over rural poverty and sporadic crises such as those of Bovine Spongiform Encephalopathy (BSE) and Foot and Mouth Disease mean that the imposition of further costs on U.K. agriculture are likely to be politically and socially sensitive. Such additional costs are however on the agenda with the implementation of the Water Framework Directive (WFD; European Commission, 2000 ). The WFD aims to achieve “good ecological status” in EU water bodies reducing, inter alia, diffuse pollution from agriculture. In this study, we assess four possible WFD measures proposed to the U.K. Department for Environment, Food, and Rural Affairs: reducing inorganic fertilizer application, conversion of arable land to ungrazed grassland, reducing livestock stocking rates, and reducing livestock dietary N and P intakes. For each measure, changes in farm gross margins (FGMs) are estimated using a dataset of over 2000 farms. In contrast to previous analyses, which have focussed upon mean responses on stylized farms, our approach allows the analysis of the range of impacts across a wide variety of real‐world farms and farm types. Findings reveal high variability in impacts. Cost‐effectiveness analysis indicates that, on average, cropping farms seem capable of reducing nutrient leaching in a more cost‐efficient way than livestock or dairy enterprises.     

A model of shifting cultivation: can soil conservation reduce deforestation?

Shifting cultivators manage soil not only by adjusting soil use on already‐cleared lands, as in continuous cultivation, but also by clearing forests to obtain new fertile soils. This study examines the crucial link between on‐farm soil conservation and deforestation in shifting cultivation by modeling forest clearing as an investment in soil for a private farmer. More generally, by doing so the study attempts to integrate deforestation and soil conservation models which have been separately developed in the literature. Our policy goal is to arrest tropical deforestation—as destruction of global commons—caused by land degradation in shifting cultivation while improving the well‐being of poor shifting cultivators. Our integrated approach enables joint policy analyses of deforestation and land degradation. Three welfare‐enhancing policies are considered. The first is agricultural and nonagricultural subsidies affecting farm and nonfarm income opportunities. The second is fiscal and tenure policies affecting discount rates. Our question is whether the link between forest clearing and soil fertility alters the outcomes of these two standard macroeconomic policies commonly found in the literature. The third policy (or program) is various soil conservation measures affecting soil regeneration and erosivity on already‐cleared lands. This article examines a very important question which has received little attention in previous theoretical works: can soil conservation reduce deforestation? This study confirms anti‐deforestation effects of the promotion of nonfarming activities—a common and often emphasized finding in previous works—among shifting cultivators. More importantly, it also demonstrates that improving various soil conservation measures not only discourages forest clearing among shifting cultivators but also tends to have greater effects on forest protection than promoting nonfarming activities. Contrarily, agricultural price subsidy or technological progress gives rise to the opposite outcome, and lowering the farmer's discount rate or improving tenure security encourages him/her to clear more forests just to accumulate soil.     

Assessing CAP Reform: Sensitivity of Modelling Decoupled Policies

The European Union reformed farm policy in June 2003 towards the decoupling of farm income support instruments. Available impact studies find that this reform reduces production incentives substantially for beef and to a lesser extent for arable crops. However, these studies assume that the previous reform, under Agenda 2000, already decoupled arable crop direct payments to a considerable extent, while beef premiums were linked more closely to production. Our main objective in this paper is to test the sensitivity of these results to this questionable modelling of Agenda 2000 direct payments, which neglects eligibility rules and land market imperfections. Our analysis reveals that the effects of the reform on both arable crop and beef production are always negative, however the Agenda 2000 direct payments are modelled. On the other hand, we show that, when the eligibility rules and land market imperfections are acknowledged, the production reducing effects may be much larger for arable crops than for beef. Policy implications of these results are noted.     

Diet,trade and land use: a socio-ecological analysis of the transformation of the olive oil system

Within only two decades olive oil developed from a niche product which could hardly be found in food stores outside the producing regions towards an integrated component in the diets of industrial countries. This paper discusses the impacts of the promotion of the “healthy Mediterranean diet” on land use and agro-ecosystems in the producing countries. It examines the dynamics of olive oil production, trade and consumption in the EU15 in the period 1972–2003 and the links between dietary patterns, trade and land use. It analyses the underlying socio-economic driving forces behind the increasing spatial disconnect between production and consumption of olive oil in the EU15 and in particular in Spain, the world largest producer during the last three decades.     

Cost-effective nitrogen leaching reduction as influenced by linkages between farm-level decisions

This article focuses on how the linkages between various farm‐level decisions affect the choice of measures to reduce nitrogen leaching from crop production. A mathematical programming model is developed. The model considers not only management decisions that affect nitrogen leaching directly, but also other decision variables such as scheduling of field operations and machinery investments. A simplified analysis that ignores the latter management decisions, and the linkages between the various decisions, may result in abatement policies that are not cost‐effective because the policies will have other effects than expected. As an example, the empirical results show that subsidies to catch crops and spring ploughing may contribute to increased nitrogen load, quite contrary to the purpose of these subsidies. Further, it is noted that the characteristics of the production system make it costly to change land use, tillage practices, or fertilizer use drastically. Instead, cost‐effective nitrogen abatement includes a mix of various adjustments of farm‐level production practices. The EU set‐aside payment appears to reduce abatement costs.     

Impacts of Decoupled Agricultural Support on Farm Structure,Biodiversity and Landscape Mosaic: Some EU Results

The decoupling of direct payments from production represents a substantial reform of the Common Agricultural Policy (CAP). Farmers are no longer required to produce commodities to be entitled to support but only to keep land in Good Environmental and Agricultural Condition. If output declines as a result, there is concern that landscape services produced jointly with commodities will also decline. The aim of this paper is to assess the long‐term effects of the 2003 reform on farm structure, landscape mosaic and biodiversity for a sample of EU regions. Impacts are quantified using a spatial agent‐based modelling approach by simulating agricultural development with links to indicators of landscape value. Our results demonstrate that eliminating the link between support payments and production has possible negative consequences for the landscape, but only under particular circumstances. It is shown that these effects could be offset by strengthening (Pillar II) agri‐environmental schemes. Further the single payment scheme results in higher land rental prices which reduces its ability to achieve its goal of providing income security for farmers. Implications of these results for the direction of continued CAP reform are discussed.     

Metamodelling phosphorus best management practices for policy use: a frontier approach

This article presents a modelling system for synthesising heterogeneous productivity and nutrient loading potentials inherent in agricultural cropland for policy use. Phosphorus abatement cost functions for cropland farmers in a southeastern Minnesota watershed are metamodelled using frontier analysis. These functions are used to evaluate policies aimed at reducing nonpoint phosphorus discharges into the Minnesota River. Results indicate an efficiently targeted policy to reduce phosphorus discharge by 40% would cost US$167,700 or 844 per farm.     

LAND USE PERMITS AS AN ALTERNATIVE TO FERTILISER AND LEACHING TAXES FOR THE CONTROL OF NITRATE POLLUTION

Legislation emanating from the European Community is establishing pressures to take action to reduce the level of nitrates in water, and the principles established towards environmental management indicate an emphasis on prevention rather than treatment. This paper analyses three possible approaches by means of controls on fertilisers, on nitrate leaching and on land use. These are incorporated into a linear programming model of a catchment in Cambridgeshire. The results indicate the superior cost-effectiveness of controls over leaching and the severe impact which taxes would have on farm incomes. A system of permits on land use is found to be relatively cost-effective and to offer an administratively feasible alternative.     

A quantitative assessment of policy options for no net loss of biodiversity and ecosystem services in the European Union

The Biodiversity Strategy of the European Union includes a target to “ensure no-net-loss of biodiversity and ecosystem services by 2020”. Many policy options can be envisioned to achieve such a no-net-loss target, mainly acting on land use and land management. To assess the effectiveness of such policies at a European Union (EU) scale, we simulated land use changes and their impacts on biodiversity and ecosystem services indicators. We analysed a Business–as-Usual scenario, and three no-net-loss scenarios. The no-net-loss scenarios included measures that aim to reduce negative impacts of land use change on biodiversity and ecosystem services, by better implementation of existing biodiversity conservation measures (Scenario 1); and enhancement of existing measures (Scenario 2); and offsetting residual impacts on areas of high biodiversity and ecosystem service value (Scenario 3).Results show that none of the scenarios achieved overall no-net-loss. Compared to a Business-as-Usual scenario, the no-net-loss scenarios reduced the overall degree of land cover change at EU level, hence reducing impacts on biodiversity and ecosystem services in large parts of the EU. The more comprehensive no-net-loss scenarios resulted in a gain of natural land cover. Moreover, natural areas became better connected, especially in peri-urban areas as a result of impact avoidance and offsetting. Richness of farmland bird species was projected to increase. Measures included in the no-net-loss scenarios had net positive effects on pollination and carbon sequestration, neutral effects on crop production, erosion prevention and flood regulation, and negative effects on nature-based recreation, compared to Business-as-Usual. In particular circumstances policy measures invoked displacement effects in land use allocation, reducing the effectiveness of the measures. This was primarily the case for flood regulation services throughout the EU.This study differentiates the potential effectiveness of a no-net-loss policy framework in three manners: (i) considering biodiversity and ecosystem services simultaneously; (ii) in the light of existing policies and land use pressures; and (iii) in different land use contexts across the EU. Taken together, we conclude that achieving no-net-loss for biodiversity and ecosystem services throughout the EU remains challenging given high land use demands. Nevertheless, in large parts of Europe there appears room for improvement for certain kinds of biodiversity and ecosystem services compared to Business-as-Usual, while still meeting other land use demands.     

An Assessment of the Impact of Implementing the European Commission's Agenda 2000 Cereal Proposals for Specialist Wheatgrowers in Denmark

This paper undertakes an assessment of the impact of implementing the European Commission's Agenda 2000 cereal proposals for specialist wheatgrowers in Denmark. The economic model of a representative farm developed in Rygnestad and Fraser (1996) is extended to include a model of nitrate leaching and then used to simulate the impact of implementing the proposals. The results of this simulation are compared and contrasted with those of the sectoral and regional impact studies reported in European Commission (1998b). In particular, the proposals are shown to have an environmentally-beneficial effect in terms of reduced nitrate leaching, with the magnitude of this effect dependent both on the quality of land and on the ex ante set-aside rate.     

On the foundation of agricultural policy research in the United States

This paper identifies three scientific research programs in agricultural economics. The farm management approach (1870-1933), the farm problem approach (1933-1982) and the domestic and global welfare approach (1982-). In respect to agricultural policy research two competitive research programs developed out of the farm crisis of the 1920s. One program argued for government intervention in agriculture. The other argued for stability in the general economy. The former program degenerated during the 1970s because of countervailing empirical evidence and a change in the understanding of positive economics. The latter program stayed progressive by adding the international dimension and by applying welfare economic analysis. Two other important factors influenced the development of agricultural policy. First, the unique institutional set up of the land grant system in which agricultural economics was founded as an applied science with a bias to help farmers. Second, the convergence of agricultural economics towards general economics that shifted the approach from applied to basic.     

The impact of soil conservation and output diversification on farm income in Central American hillside farming

This article analyzes the determinants of farm income among hillside farmers participating in natural resource management projects in El Salvador and Honduras. The farm income function was evaluated using a system of equations in which income is determined simultaneously by the farmer's decision to adopt soil conservation technologies and by the level of diversification (number of agricultural activities) on the farm. The database used comes from surveys administered to 678 beneficiaries of these projects during 2002. The econometric results suggest that all the variables related directly to land use (i.e., output diversification, soil conservation practices and structures, and the adoption of forestry systems) have a positive and statistically significant association with farm income. Also, farmers who own land enjoy higher farm incomes than those who do not. The results indicate that when investing in natural resource management projects, governments and multilateral development agencies should pay close attention to output diversification, land tenure, and human capital formation as effective instruments in increasing farm income.     

THE POTENTIAL IMPACT OF ENVIRONMENTAL CROSS-COMPLIANCE ON ARABLE FARMING

It is argued that the ongoing CAP/GATT reforms provide a basis for the introduction of environmental cross-compliance (ECC). ECC enables policymakers to restrict output-related direct support payments to those farmers who comply with specified environmental guidelines aimed at reducing the external damage effects of agricultural production. This paper is an exploratory investigation of ECC and presents the results of a farm-level linear programming analysis of 15 North-West England arable farms. The environmental guidelines, which relate to permanent as opposed to rotational set-aside and to levels of fertiliser use, are widely applicable to the extent that ECC can be implemented as a voluntary policy system. They are clearly effective in achieving policy goals since all but one of the farmers investigated would comply with the full range of restrictions considered. Within this range, gross margins are reduced by up to 10 per cent while area and output of seed crops are reduced by around 22 per cent and 12 per cent respectively. Row crops area and output are more robust, each falling by just under 4 per cent.