Regulation of relationships between heterogeneous farmers and an aquifer accounting for lag effects

Many environmental problems are due to damage caused by pollutants that accumulate with a time lag following their emission. In this study, we focus on nitrates used in agriculture, which can pollute groundwater many years after their initial application. A dynamic optimal control problem with heterogeneous farmers is proposed. The usual structural parameters such as the discount rate, the natural clearing rate and the lagged time interval between the occurrence of soil‐level pollution and the impact on groundwater are taken into account. We also examine pollution as caused by a continuous set of farms characterised by their individual performance index and by their individual marginal contribution to the pollution. The issue is further investigated by taking account of change in the information context, successively related to perfect information and to asymmetric information. As a result, when the delay between the spreading of N‐fertilizer and the impact on the aquifer increases, that is, the longer the lag, the steady‐state pollution stock and the steady‐state shadow price of the stock both increase. Moreover, we show that the optimal regulation may require a decreasing amount of fertilizer over time, even in the case of initial underpollution.     

Geographical downscaling of outputs provided by an economic farm model calibrated at the regional level

There is a strong need for accurate and spatially referenced information regarding policy making and model linkage. This need has been expressed by land users, and policy and decision makers in order to estimate both spatially and locally the impacts of European policy (like the Common Agricultural Policy) and/or global changes on farm-groups. These entities are defined according to variables such as altitude, economic size and type of farming (referring to land uses). European farm-groups are provided through the Farm Accountancy Data Network (FADN) as statistical information delivered at regional level. The aim of the study is to map locally farm-group probabilities within each region. The mapping of the farm-groups is done in two steps: (1) by mapping locally the co-variables associated to the farm-groups, i.e. altitude and land uses; (2) by using regional FADN data as a priori knowledge for transforming land uses and altitude information into farm-groups location probabilities within each region. The downscaling process focuses on the land use mapping since land use data are originally point information located every 18 km. Interpolation of land use data is done at 100 m by using co-variables like land cover, altitude, climate and soil data which are continuous layers usually provided at fine resolution. Once the farm-groups are mapped, European Policy and global changes scenarios are run through an agro-economic model for assessing environmental impacts locally.     

Improvement of a Bio-Economic Mathematical Programming Model in the Case of On-Farm Source Inputs and Outputs

We present a two-step process for solving nonlinear farm activity models inside a linear framework under the assumption that market prices approximate the shadow prices of the model’s constraints. In the event of market imperfections or missing prices (for example non-marketed outputs), the previous assumption is not justified and the derived solution is not optimal. To circumvent this problem and to avoid nonlinear algorithms that may prove unwieldy for large models, we propose an iterative computation method, based on the re-estimation of shadow prices in each step until a converging solution is found. The method is applied to the bio-economic model AROPAj, which consists of a number of linear programming (LP) farm sub-models representing different farming systems across the European Union. For most of LPs producing non-marketed outputs a converging solution is obtained in two iterations, while the remaining LPs lead to periodic solutions of very low amplitude.

     

Capital indivisibility and tax competition: Are there too many business areas when some of them are empty?

In this paper, we propose a model where local jurisdictions must engage a development cost before competing for hosting a firm with uncertain preferences among possible sites. We first show that even an optimizing central planner managing all the jurisdictions develops more sites than there are plants to host. Doing so, he diversifies his supply and has a higher probability of hosting the firm. Then, we show that, if every jurisdiction is managed by a local government, there are more developed sites than with the central planner, which implies excess supply.     

Marginal abatement costs of greenhouse gas emissions from European agriculture, cost effectiveness, and the EU non-ETS burden sharing agreement

We propose a quantitative assessment of the marginal abatement costs (MAC) of greenhouse gas emissions from European agriculture and analyze the implications of the non-ETS burden-sharing agreement (BSA) for this sector. This assessment is based on MAC reduced forms, the generic specification of which enables simple parameterization and numerical computations. Such MAC curves are parameterized for each Member State using the outputs of a detailed model of the European agricultural supply. They are then used to compute total and marginal abatement costs involved by the BSA targets, as well as the cost-effective effort sharing, the corresponding emission price and abatement costs. The main findings are: (i) flexibility mechanisms such as a cap-and-trade system for agricultural emissions could reduce the total costs of meeting the 10% EU abatement target by a factor two to three relative to the strict implementation of each country's target, (ii) the corresponding equilibrium emission price is found to be 32-42 €/tCO₂eq depending on the assumption regarding business-as-usual emissions, and (iii) a cap-and-trade system with allowances based on the BSA targets would involve substantial transfers from EU-15 countries to New Member States, an important share of which being made of ‘hot air’.     

Economic and environmental effects of decoupled agricultural support in the EU

This article reports findings from a simulation model representing the European farming system disaggregated at different scales. This modeling experiment explores the effects of various decoupling options associated with the 2003 European agreement on gross margins, land use, shadow cost of land, and greenhouse gas emissions. Our results show increases in the farmers’ gross margins when decoupled support is maintained equal to the amount of direct aid previously attributed to agricultural production, assuming unchanged prices. Land used for pasture increases at the expense of land used for cereals and protein crops. The extent to which these effects materialize depends on the policy options selected by Member States when implementing the Luxembourg agreement. When they opt for some recoupling of support, adverse net economic impacts occur for producers. Regional differences in impacts are more pronounced than the analysis aggregated at European and national scales suggests. This highlights the need for further work based on geostatistical downscaling.     

Methane and Nitrous Oxide Emissions from Agriculture in the EU: A Spatial Assessment of Sources and Abatement Costs

Agriculture significantly contributes to emissions of greenhouse gases in the EU. By using a farm-type, supply-side oriented, linear-programming model of the European agriculture, the baseline levels of methane and nitrous oxide emissions are assessed at the regional level in the EU-15. For a range of CO₂-equivalent prices, we assess the potential abatement, as well as the resulting optimal mix of emission sources in the total abatement. Furthermore, we show that the spatial variability of the abatement achieved at a given carbon price is large, indicating that abatement cost heterogeneity is a fundamental feature in the design of a mitigation policy. The cost savings permitted by market-based instruments relative to uniform standard are shown to be large.