Nitrate Pollution Control Under Soil Heterogeneity Yolanda Martínez a , Ben White b and José Albiac a,* a Centro de Investigación y Tecnología Agroalimentaria. Gobierno de Aragón. P.O.Box 727. 50080 Zaragoza. Spain. b School of Agricultural and Resource Economics. University of Western Australia. Crawley WA 6009. Australia. Abstract This article presents results on measures to abate corn nitrogen pollution when soil heterogeneity is considered. A dynamic economic model is used with control variables for both nitrogen fertilizer and irrigation water, which incorporates the influence of soils on corn production and nitrate leaching dynamics. The economic model yields the profit- maximizing nutrient and water management plans for three soil types in the Flumen- Monegros irrigation area of the Ebro basin in Spain. Several policy options to control nitrate leaching pollution in the area are examined; water taxes, nitrogen taxes, a standard on nitrogen fertilizer, and a nitrogen pollution discharge tax. These measures to abate nitrogen pollution are evaluated by their cost efficiency, and results show that a quantitative limit on applied fertilizer is the preferred second best measure, after the first best nitrogen emission tax. Differentiating control measures by soil type for corn enhances welfare, although welfare gains are small. Keywords: dynamic optimization, soil heterogeneity, nitrate pollution abatement, efficiency of measures by soil type. * Corresponding author. Tel.: +34 976716351. email: [email protected]
Transcript
Nitrate Pollution Control Under Soil Heterogeneity
Yolanda Martiacuteneza Ben Whiteb and Joseacute Albiaca
a Centro de Investigacioacuten y Tecnologiacutea Agroalimentaria Gobierno de Aragoacuten POBox 727 50080 Zaragoza Spain
b School of Agricultural and Resource Economics University of Western Australia Crawley WA 6009 Australia
Abstract
This article presents results on measures to abate corn nitrogen pollution when soil
heterogeneity is considered A dynamic economic model is used with control variables for
both nitrogen fertilizer and irrigation water which incorporates the influence of soils on
corn production and nitrate leaching dynamics The economic model yields the profit-
maximizing nutrient and water management plans for three soil types in the Flumen-
Monegros irrigation area of the Ebro basin in Spain Several policy options to control
nitrate leaching pollution in the area are examined water taxes nitrogen taxes a standard
on nitrogen fertilizer and a nitrogen pollution discharge tax These measures to abate
nitrogen pollution are evaluated by their cost efficiency and results show that a quantitative
limit on applied fertilizer is the preferred second best measure after the first best nitrogen
emission tax Differentiating control measures by soil type for corn enhances welfare
although welfare gains are small
Keywords dynamic optimization soil heterogeneity nitrate pollution abatement efficiency of measures by soil type Corresponding author Tel +34 976716351 email maellaunizares
2
1 Introduction
The twentieth century was a period of accelerated technological change and innovation
in agricultural production with large gains in productivity and expanded use of inputs such
industrial fertilizers and pesticides In developed countries these technological advances
coupled with agricultural policies supporting domestic agriculture were responsible for an
impressive increase in production and resulted finally in a problem of excess supply for
several agricultural commodities These high yield production technologies based on
intensive use of fertilizers and pesticides created also a severe problem of soil degradation
and water resources pollution The European Environment Agency identifies fertilizers and
pesticides as the first cause of water quality deterioration in many European Union
watersheds (EEA 1999)
In Spain agricultural mechanization in the nineteen sixties and the subsequent
introduction of high yield crop varieties led to a strong increase in the use of mineral
fertilizers between 1960 and 1990 leveling off in the last decade Average use of fertilizers
per hectare is well below other European countries around half the consumption in France
or Germany or a fifth of Netherlands However excessive fertilizer application is a
problem that generates nutrient pollution in some specific watersheds One important
problem in non-point source pollution is caused by nitrate fertilization in agricultural
activities These activities have negative effects on water quality and constitute a serious
risk to fluvial ecosystem habitats and species and to human health
The new Water Framework Directive enacted by the European Union defines the
mandatory objective of reaching ldquogood condition of waterrdquo over all waters The Directive
promotes water prices at full recovery costs including environmental costs Management
of water irrigation in Spain is going to acquire a key role as a consequence of this Directive
which establishes emission restrictions and quality standards management of water based
on watersheds and user participation and user water prices close to full costs The National
Hydrologic Plan approved by the Spanish Parliament in 2001 is going to be the
fundamental norm shaping water management and water quality in Spain In the
agricultural sector the Plan introduces measures to modernize irrigation and large water
transfers to the Southeast regions in order to solve the critical problems of overuse scarcity
and degradation of water resources This expansion of water supply through inter-basin
transfers to solve water scarcity and quality degradation has been severely criticized by
water experts (Albiac et al 2002 Hanemann 2003 Howitt 2003)
3
Nitrate pollution in Spain affects specially the Southeast Mediterranean coast and the
Ebro and Guadalquivir watersheds inside the country Nitrate loads depend on different
factors such as input use type of crops and soil characteristics The studies by Feijooacute et al
(2000) and Martiacutenez (2002) indicate the importance of considering these factors in
environmental policy analysis Cost efficient abatement of leaching emissions depends
critically on the correct evaluation of different pollution control measures Several studies
have examined the cost-efficiency of alternative measures for some crops corn (Yadav
1997 Vickner et al 1998) wheat and barley (Miettinen 1998 Schmid 2001) corn wheat
barley rice sunflower and alfalfa (Martiacutenez 2002) and cotton (Khanne et al 2000)
Ranking of measures is contingent not only upon crop type but also upon soils since the
effect of soils on the cost-efficiency of measures may be significant Information on these
effects is scarce and limited to corn and alfalfa with three soil classes (Thomas and Boisvert
1994) and lettuce with two soils (Helfand and House 1995)
This study analyzes the cost-efficiency of several policy instruments to curb nitrogen
pollution and the effects of soil heterogeneity on the cost-efficiency of measures This
procedure gives information on the robustness of cost-efficiency rankings when
instruments are applied to different soil types The policy instruments examined are water
use taxes nitrate use taxes fertilization limits and taxes on nitrate emissions An important
feature of this study is the use of optimal control techniques since nitrogen pollution is an
intertemporal process The dynamics of nitrogen pollution is driven by soil nitrogen
content which affects yields and nitrogen leaching throughout the planning horizon
2 Study area
The Flumen-Monegros irrigation district includes sixteen villages with important
irrigation agricultural activities The area has an extension of 77841 ha with 60000 ha
cultivated and 45898 ha (75) under irrigation (Table 1)
Table 1 Land use in the study area (ha)
Source DGA (1999)
Dryland Irrigated acreage Total district
Cultivated land 14250 45781 60031 Pastures 1418 0 1418 Forest 4924 117 5041 Other 11351 0 11351 Total acreage 31943 45898 77841
a Water-holding capacity (m3ha) b Irrigation efficiency () c Salinity (Electric conductivity dSm) Source Nogueacutes (2002)
The climate is semi-arid with insufficient rain throughout the entire year and clearly
irrigation is essential for agricultural production The water resources origin is the Gaacutellego
river through the Sotonera dam with 187 hm3 of capacity and the Cinca river through the
Cinca canal system Surface irrigation is the common irrigation system although sprinkle
irrigation is being introduced in some locations A map of soils from Noguumleacutes (2002) and
Noguumleacutes et al (1999) has been used so corn yield water and fertilizer application and
percolation and leaching can be differentiated by soil type The main crops in the zone are
winter cereals (barley and wheat) corn sunflower rice and alfalfa for which statistical data
are available on crop acreage (Gobierno de Aragoacuten 1999) Another source on crop spatial
distribution is Casterad and Herrero (2003) and their procedure combines remote-sensing
information with estimations from field surveys Crop costs are published by MAPA
(2000) and other information has been collected on agronomic data and crop management
operations weather information and water management practices by irrigation user
associations
The physical and socio-economic characteristics of the irrigation district are described
in Martiacutenez (2002) Five soil types are identified in the district as defined by Noguumles (2002)
with the parameters shown in table 2 Corn is planted only in soils Chacilla (AG0)
Planteros (AG1) and Corraletes (AG2) and the analysis focus on these three soils which
cover 27300 ha Valfonda (AG3) and dryland Planteros (AG4) soils are not suitable for
corn cultivation because Valfonda is the most salt affected and Planteros (AG4) is dryland
Figure 1 shows corn location by soil type 1560 ha on Corraletes soils 1180 ha on Chacilla
and 490 ha on Planteros
Although there is not specific data about nitrate concentrations in the irrigation district
the RICA network (Water Quality Integrated Network) provides water quality data on
some adjacent locations that approximates the pollution emission levels Figure 2 shows
nitrate concentration in the River Flumen at Sarintildeena located at the end of the irrigation
5
Figure 2 Map of corn by soil type in the Flumen-Monegros irrigation district
Source Casterad and Herrero (2003)
6
Figure 2 Nitrate pollution from the irrigation district (1982-2002)
Flumen at Sarintildeena
0
5
10
15
20
25
30
35
40
45
50
Period
Nit
rate
con
cent
rati
on m
gl
Source CHE (2003)
district The time series include 42 observations for the 1982-2002 period with one day
nitrate concentration measurements in January and September of each year These data
show that nitrate concentration levels throughout the period move between 15 and 30 mg
NO3l with extreme values reaching 35 and 10 mgl in some periods
3 Methodology
The study analyzes the effects of several pollution control policy measures on corn
crop in a dynamic context The economic model developed includes a pollution function
that allows to assess the importance of water pollution due to agricultural activities in the
Flumen-Monegros irrigation district of the Ebro Basin in Spain
Corn yield functions and nitrate pollution functions by soil type have been estimated
using the EPIC crop growth package (Mitchell et al 1998) incorporating local information
on climate soils and tillage and operation activities The procedure consist in generating
with the package yield and leaching data series for different levels of water and nitrogen
fertilization in order to estimate the yield and pollution functions The corn yield response
function and the pollution function are then used to define the dynamic model that is
driven by the control variables water and nitrogen fertilization The EPIC simulator has
been validated in the study area after calibration using survey information from farmers
7
and corn field experimental data on yields and nitrogen leaching (Saad and Quiacutelez 1998
Saad 1999)
31 Dynamic model
The problem is stated as the maximization of welfare from corn production and
welfare is the sum of corn quasi-rent and the damage cost of nitrogen leaching In absence
of nitrogen pollution measures farmers maximize the private corn quasi-rent selecting the
amount of nitrogen fertilizer and irrigation throughout the time planning horizon (t = 1hellip
T) subject to the dynamics of nitrogen content in the soil Under discrete time the model
is the following
[ ] sum=
sdotλminus+minusminusminussdot+
T
1tttntxtyt
nx)le()sknpxpyp(
)r1(1
Maxtt
[1]
subject to
tttttt uvlengg minusminusminus+=+1 [2]
The objective function has two components the first term in parenthesis is quasi-rent
and the second term λ let is the damage cost from nitrogen leaching The sum is social
welfare through the planning horizon from corn production activities The constraint
captures the dynamics of soil nitrogen content and is defined as the balance of nitrogen
entering and leaving the soil Quasi-rent is equal to revenue minus variable and fixed costs
of corn per hectare1 and nitrogen damage is defined as a linear function of leaching
The constraint equation [2] is the motion equation for nitrogen in soil or soil nitrogen
balance Soil nitrogen in period t+1 is equal to nitrogen in period t plus fertilization minus
leaching volatilization and nitrogen uptake by corn The inclusion of the stock of nitrogen
in the soil is a key feature in order to represent the dynamic relationships among time
periods In absence of intertemporal relations the nitrogen stock in the soil yields and
nitrogen leaching would be static and constant for all periods This dynamic aspect is
crucial to adequately represent the biophysic processes leading to nitrogen pollution
Corn yield and leaching are assumed to be quadratic functions of water applied
nitrogen fertilization and the stock of nitrogen in soil The corn yield function is defined as
1 Costs include direct and indirect expenditures costs from hired labor and machinery and amortization Water and nitrogen costs are shown separately in the objective function
8
Table 3 Estimated yield and pollution functions by soil type
Under the second scenario the price of active nitrogen increases from 06 eurokg to 09
and 12 eurokg These higher nitrogen prices diminish the water and fertilizer application less
than the water price increase For Planteros and Corraletes soils the leaching reduction is
larger than under the higher water prices scenario but not for Chacilla soil A 12 eurokg
nitrogen price reduces nitrogen emissions 63 kgha for Corraletes-type soil 30 kgha for
Planteros and only 8 kgha for Chacillan For the whole district welfare losses are
between 023 and 045 million euros much lower than taxing water and with a much larger
leaching abatement Therefore a tax on nitrogen is more cost efficient than a tax on water
The third scenario introduces a limit or standard on applied nitrogen which is fixed at
250 kgha following the Extension Service recommendations (Oruacutes et al 2000) This
instrument is similar to the Code of Good Agricultural Practices established by the
European Nitrate Directive and the advantage of this measure is that costs to farmers in
terms of quasi-rent are reasonable and there are welfare gains for society in Planteros and
Corraletes soils Leaching abatement is above 40 percent in every soil and quasi-rent losses
are always below 5 percent This is a second best type of instrument and our results show
that the cost-efficiency is superior to taxes on inputs because the large abatement of
nitrogen emissions and the moderate reduction in quasi-rent Welfare increases under the
standard for the whole district (Table 5) although the standard reduces welfare in Chacilla
soils indicating that no standard is needed in this soil
The main obstacle to implement a quantitative limit is the difficulty to control
farmer compliance The introduction of a subsidy system for farmers who reduce fertilizer
application is a method to implement the standard provided that subsidies are coupled
with emissions verification These controls could be implemented and enforced by
irrigation user associations through measurement of nitrogen content in return water flow
canals Another method of implementing the standard is licensing fertilizer application to a
12
specialist a figure known as ldquoenvironmental doctorrdquo The measure of establishing a
standard has been recommended in the literature (Knickel 1998 Miettinen 1998 Weinberg
y Wilen 2000) and in studies analyzing the same irrigation district by Martiacutenez et al (2001)
and Martiacutenez (2002)
The last scenario considers the first best instrument of taxing nitrogen emissions
with a unit emission cost equal to 123 eurokg that has been chosen equal to the cost of
eliminating nitrogen from water The quasi-rent for this instrument is calculated assuming
that the social planner gives the farmer a subsidy equal to the optimal nitrogen damage
cost provided that pollution is at the social optimum The tax causes a strong leaching
reduction diminishing pollution levels by soil type between 10 and 60 percent Farmer
quasi-rent increases so farmers will embrace this solution provided that the
implementation was feasible
A ranking of policy measures can be defined by comparing the welfare effects of each
measure for the whole irrigation district by soil type (Table 5) The first best measure of
taxing emissions increases welfare in the district by 032 million euro Among the second
best measures a standard on nitrogen application also increases welfare by 007 million
euro while taxes on nitrogen fertilizer reduce welfare between 023 and 045 million euro
Higher water prices are very inefficient since welfare falls between 091 and 143 million
euro with an almost negligible leaching abatement below 4 percent This finding is
important because the recently approved Water Framework Directive of the European
Union relies heavily on higher water prices called full recovery cost in order to reach
ldquogood statusrdquo for all waters
An issue that could modify the effects presented here is that the introduction of
control measures may induce changes in the relative profitability of different crops and
farmers may respond expanding the more profitable crops This question was examined in
the study area by Martiacutenez el al (2001) for a standard limiting nitrogen application The
acreage substitution effect was moderate for all crops and in the case of corn the fall in
acreage was 03 percent
In accordance with the results presented here the studies by Pan and Hodge (1994)
and Johnson et al (1991) find that an emission tax equal to the cost of nitrogen removal is
the social optimum measure Jonhson el al (1991) evaluate the cost of the emission tax at 5
percent of quasi-rent with an emission reduction above 30 percent Other studies
examining nitrogen standards by Mapp et al (1994) in USA and Schmid (2001) in Austria
find that the abatement costs to reduce nitrogen leaching are somewhat higher than the
13
costs calculated here2 Mapp et al recommend a standard that reduces leaching by 67
percent at a cost of 22 percent of quasi-rent and Schmid states that a standard reduces
leaching between 40 and 90 percent at a cost to farmers between 5 and 14 percent of quasi-
rent Martiacutenez (2002) calculates a 2 percent loss of quasi-rent to curb leaching by 44
percent assuming homogeneous soil
Helfand and House (1995) examine the cost-efficiency of control measures under two
soil types in the case of lettuce production in order to abate nitrogen leaching by 20
percent Their findings are that quasi-rent losses derived from using uniform instruments
are small so perfect instruments are not necessary and may entail significant transaction
costs3 They indicate also that a nitrogen tax and a nitrogen standard are both very
inefficient measures which have very high welfare costs a finding contrary to the results
obtained here for corn Our results indicate that a nitrogen standard is the second best
preferred measure in accordance with economic theory and most of the empirical
literature Also our empirical evidence indicates that a tax on nitrogen is much more cost
efficient than a tax on water The finding on the nitrogen standard efficiency by Helfand
and House is questionable because the dynamic aspect of nitrogen content in the soil is
not considered When the level of nitrogen input changes the nitrogen content in the soil
adjust over several periods They force a 20 percent leaching abatement within the
production period reducing nitrogen fertilization by 90 percent so costs of a nitrogen
standard or a tax are prohibitive In contrast our results indicate that the standard reduces
nitrogen fertilization in the district by 20 percent abating leaching by more than half4 As
indicated above a tax of water is a very inefficient measure in our case with leaching
abatement below 4 percent and very high costs in terms of quasi-rent and welfare
Thomas and Boisvert (1994) simulate the introduction of a market for nitrogen
pollution permits and estimate that a permit price reducing 10 percent nitrogen emissions
reduces gross income by 15 percent5 This pollution permit instrument can be compared
with the emission tax examined here The cost calculated by these authors is much higher
2 For the whole district the nitrogen standard abates leaching by 176 tons (-52) with a cost of 015 million euro (-37) in quasi-rent 3 The loss of quasi-rent for any uniform measure is below 2 percent compared with 016 losses under a first-best heterogeneous measure 4 For the whole district nitrogen fertilization is 1020 tons and the standard reduces fertilization by 212 tons These figures come from table 4 and corn acreage by soil 5 Thomas and Boisvert (1994) use a procedure different from the present study They consider nitrogen pollution as a fraction of the remaining nitrogen that is not taken by the plant or degraded by denitrification
14
than the cost obtained in table 5 for an emission tax which abates leaching by 50 percent
in the region increasing welfare and quasi-rent6
The results of the present study on nitrate pollution control under soil heterogeneity
indicate the possibility of differentiating application of control by soil type The preferred
second best instrument is a standard but the instrument will be applied only in vulnerable
soils Corn leaching in Chacilla soils is only 45 kgha which is below the leaching levels in
the other soil types applying any abatement measure An alternative for nitrogen leaching
control would be to implement control instruments only in Planteros and Corraletes soils
which have high pollution potential For the whole district implementing a nitrogen
standard in Planteros and Corraletes soils but not in Chacilla improves welfare by 1
percent over a homogeneous nitrogen standard in the district This small loss in welfare
from using a homogeneous instead of an heterogeneous standard confirms the finding by
Helfand and House (1995) that losses from uniform instruments are small and perfect
instruments are not necessary
Discrimination of control measures could depend also on the particular crop planted
so control could be linked to the land use decision by the farmer for each soil type
Information on nitrogen leaching in the district indicates that wheat barley sunflower and
alfalfa have all leaching levels below 45 kgha in absence of abatement measures (Martiacutenez
2002) so these crops would not be subject to abatement while other more polluting crop
production activities such as corn and rice would be subject to control in vulnerable soils
This discrimination by crop and soil could be implemented using a land use tax adapted to
crop and soil provided that the land tax has adequate cost efficiency and transaction costs
5 Conclusions
The evaluation of efficiency for alternative nitrogen abatement measures requires the
consideration of biophysical aspects such soil class and crop type The effects of selected
abatement measures have been examined through a dynamic model for corn production in
three different soils of the Flumen irrigation district in the Ebro basin This evaluation is
useful to rank different instruments by their efficiency as a contribution to the policy
decision process The results agree with previous literature and indicate that a fertilizer
standard is the more efficient second best measure to control nitrogen pollution
6 As indicated above the emission tax instrument is linked to a subsidy equal to optimal nitrogen damage cost Therefore quasi-rent under the emission tax is above quasi-rent under the base scenario
15
The observed farmer behavior differs from the optimal solution of the model under
the base scenario because there is an excess input utilization that aggravates the nitrogen
pollution problem in the district Alternative emissions reduction measures have been
simulated and compared to the base scenario
An increase in water prices reduces only slightly nitrogen discharges at very large costs
to farmers and society A tax on nitrogen utilization results in more significant pollution
reduction at much lower costs A standard on nitrogen application curbs emissions by
more than half with a very moderate impact on quasi-rent and gains in welfare The
introduction of subsidies linked to the standard could be a good second best alternative to
achieve nitrogen pollution control
The original contribution of this study is the following a quantitative assessment has
been performed that demonstrates that abatement measures may be taken only in
vulnerable soils with crops that have high pollution potential So the results show that
differentiating the application of control by soil type enhances welfare although this
welfare gain from a differentiated standard is small compared with an homogeneous
standard in the case of corn An important question for the choice of the correct pollution
control instrument is related with the implementation costs of the instrument The more
suitable measures are associated with implementation difficulties and policy makers should
evaluate the trade-off between cost-efficiency and implementation simplicity
Acknowledgements
Support for this research was provided by projects CICYT AGL2001-2333-C02 and
INIA RTA02-090 from the Spanish Ministry of Science and Technology The INIA
funded also research contacts with the Department of Agricultural Economics of the
University of Newcastle upon Tyne This study was made possible by the technical
assistance of Joseacute Cavero Jesuacutes Noguumles Dolores Quilez Juan Herrero and Auxi Casterad
from the Laboratorio Asociado de Agronomiacutea y Medio Ambiente (CSIC-CITA Aula Dei
Campus Zaragoza)
16
References Albiac J Uche J Valero A Serra L Meyer A Tapia J 2003 The Economic
Unsustainability of the Spanish National Hydrologic Plan International Journal of Water Resources Development 19 (3) 437-458
Casterad A Herrero J 2003 Irrivol database Unidad de Suelos y Riegos Servicio de Investigacioacuten Agroalimentaria Gobierno de Aragoacuten Zaragoza
Confederacioacuten Hidrograacutefica del Ebro 2003 Water quality data series CHE Ministerio de Medio Ambiente Zaragoza Available at wwwchebroes
Gobierno de Aragoacuten 1999 Base de datos 1T de superficie de cultivos por teacutermino municipal para Aragoacuten 1987-99 Servicio de Estudios y Planificacioacuten Secretariacutea General Teacutecnica Departamento de Agricultura Gobierno de Aragoacuten Zaragoza
Feijooacute M Calvo E Albiac J 2000 Economic and environmental policy analysis of the Flumen-Monegros irrigation system in Huesca Spain Geographical Analysis 32 (3) 187-204
Hanemann M 2003 Economics Findings and Recommendations Appendix C Economics In Horne A Dracup J Hanemann M Rodriguez-Iturbe I Means E Roth J (The US Technical Team) A Technical Review of the Spanish National Hydrological Plan (Ebro River Out-of-basin Diversion) Fundacioacuten Universidad Politeacutecnica de Cartagena University of Cartagena Cartagena
Helfand G House B 1995 Regulating Nonpoint Source Pollution Under Heterogeneous Conditions American Journal of Agricultural Economics 77 1024-1032
Howitt R 2003 A Review of Economic Hydrologic Planning Pertaining to the Ebro River Transfer Proposal In Biswas A (Ed) Spanish National Hydrologic Plan Reports of International Experts Gobierno de Aragoacuten Zaragoza
Johnson S Adams R Perry G 1991 The On-Farm Costs of Reducing Groundwater Pollution American Journal of Agricultural Economics 73 1063-1073
Khanna M Isik M Zilberman D 2000 Incentive-based Policies for Conservation Technology Adoption Implications for Pollution and Output Paper presented at the annual meeting of the American Agricultural of Economics Association Tampa Florida
Knickel K 1998 First Results of Model Calculations In Gazzola L Roest K (Eds) Economic Instruments for Nitrogen Control in European Agriculture Research Center on Animal Production Reggio Emilia
Mapp H Bernardo D Sabbagh S Geleta S Watkins K 1994 Economic and Environmental Impacts of Limiting Nitrogen Use to Protect Water Quality A Stochastic Regional Analysis American Journal of Agricultural Economics 76 889-903
Martiacutenez Y Uku S Albiac J 2001 El control de la contaminacioacuten por nitratos en el regadiacuteo Economiacutea Agraria y Recursos Naturales 2 (2) 115-131
Martiacutenez Y 2002 Anaacutelisis econoacutemico y ambiental de la contaminacioacuten por nitratos en el regadiacuteo Doctoral dissertation Department of Economic Analysis University of Zaragoza Zaragoza
Miettinen A 1993 The Effectiveness and Feasibility of Economic Incentives of Input Control in the Mitigation of Agricultural Water Pollution Agricultural Science in Finland 2 453-464
Ministerio de Agricultura Pesca y Alimentacioacuten 1999 Anuario de Estadiacutestica Agraria MAPA Madrid
Ministerio de Agricultura Pesca y Alimentacioacuten 2000 Hechos y Cifras del Sector Agroalimentario Espantildeol 2000 Secretariacutea General Teacutecnica MAPA Madrid
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
2
1 Introduction
The twentieth century was a period of accelerated technological change and innovation
in agricultural production with large gains in productivity and expanded use of inputs such
industrial fertilizers and pesticides In developed countries these technological advances
coupled with agricultural policies supporting domestic agriculture were responsible for an
impressive increase in production and resulted finally in a problem of excess supply for
several agricultural commodities These high yield production technologies based on
intensive use of fertilizers and pesticides created also a severe problem of soil degradation
and water resources pollution The European Environment Agency identifies fertilizers and
pesticides as the first cause of water quality deterioration in many European Union
watersheds (EEA 1999)
In Spain agricultural mechanization in the nineteen sixties and the subsequent
introduction of high yield crop varieties led to a strong increase in the use of mineral
fertilizers between 1960 and 1990 leveling off in the last decade Average use of fertilizers
per hectare is well below other European countries around half the consumption in France
or Germany or a fifth of Netherlands However excessive fertilizer application is a
problem that generates nutrient pollution in some specific watersheds One important
problem in non-point source pollution is caused by nitrate fertilization in agricultural
activities These activities have negative effects on water quality and constitute a serious
risk to fluvial ecosystem habitats and species and to human health
The new Water Framework Directive enacted by the European Union defines the
mandatory objective of reaching ldquogood condition of waterrdquo over all waters The Directive
promotes water prices at full recovery costs including environmental costs Management
of water irrigation in Spain is going to acquire a key role as a consequence of this Directive
which establishes emission restrictions and quality standards management of water based
on watersheds and user participation and user water prices close to full costs The National
Hydrologic Plan approved by the Spanish Parliament in 2001 is going to be the
fundamental norm shaping water management and water quality in Spain In the
agricultural sector the Plan introduces measures to modernize irrigation and large water
transfers to the Southeast regions in order to solve the critical problems of overuse scarcity
and degradation of water resources This expansion of water supply through inter-basin
transfers to solve water scarcity and quality degradation has been severely criticized by
water experts (Albiac et al 2002 Hanemann 2003 Howitt 2003)
3
Nitrate pollution in Spain affects specially the Southeast Mediterranean coast and the
Ebro and Guadalquivir watersheds inside the country Nitrate loads depend on different
factors such as input use type of crops and soil characteristics The studies by Feijooacute et al
(2000) and Martiacutenez (2002) indicate the importance of considering these factors in
environmental policy analysis Cost efficient abatement of leaching emissions depends
critically on the correct evaluation of different pollution control measures Several studies
have examined the cost-efficiency of alternative measures for some crops corn (Yadav
1997 Vickner et al 1998) wheat and barley (Miettinen 1998 Schmid 2001) corn wheat
barley rice sunflower and alfalfa (Martiacutenez 2002) and cotton (Khanne et al 2000)
Ranking of measures is contingent not only upon crop type but also upon soils since the
effect of soils on the cost-efficiency of measures may be significant Information on these
effects is scarce and limited to corn and alfalfa with three soil classes (Thomas and Boisvert
1994) and lettuce with two soils (Helfand and House 1995)
This study analyzes the cost-efficiency of several policy instruments to curb nitrogen
pollution and the effects of soil heterogeneity on the cost-efficiency of measures This
procedure gives information on the robustness of cost-efficiency rankings when
instruments are applied to different soil types The policy instruments examined are water
use taxes nitrate use taxes fertilization limits and taxes on nitrate emissions An important
feature of this study is the use of optimal control techniques since nitrogen pollution is an
intertemporal process The dynamics of nitrogen pollution is driven by soil nitrogen
content which affects yields and nitrogen leaching throughout the planning horizon
2 Study area
The Flumen-Monegros irrigation district includes sixteen villages with important
irrigation agricultural activities The area has an extension of 77841 ha with 60000 ha
cultivated and 45898 ha (75) under irrigation (Table 1)
Table 1 Land use in the study area (ha)
Source DGA (1999)
Dryland Irrigated acreage Total district
Cultivated land 14250 45781 60031 Pastures 1418 0 1418 Forest 4924 117 5041 Other 11351 0 11351 Total acreage 31943 45898 77841
a Water-holding capacity (m3ha) b Irrigation efficiency () c Salinity (Electric conductivity dSm) Source Nogueacutes (2002)
The climate is semi-arid with insufficient rain throughout the entire year and clearly
irrigation is essential for agricultural production The water resources origin is the Gaacutellego
river through the Sotonera dam with 187 hm3 of capacity and the Cinca river through the
Cinca canal system Surface irrigation is the common irrigation system although sprinkle
irrigation is being introduced in some locations A map of soils from Noguumleacutes (2002) and
Noguumleacutes et al (1999) has been used so corn yield water and fertilizer application and
percolation and leaching can be differentiated by soil type The main crops in the zone are
winter cereals (barley and wheat) corn sunflower rice and alfalfa for which statistical data
are available on crop acreage (Gobierno de Aragoacuten 1999) Another source on crop spatial
distribution is Casterad and Herrero (2003) and their procedure combines remote-sensing
information with estimations from field surveys Crop costs are published by MAPA
(2000) and other information has been collected on agronomic data and crop management
operations weather information and water management practices by irrigation user
associations
The physical and socio-economic characteristics of the irrigation district are described
in Martiacutenez (2002) Five soil types are identified in the district as defined by Noguumles (2002)
with the parameters shown in table 2 Corn is planted only in soils Chacilla (AG0)
Planteros (AG1) and Corraletes (AG2) and the analysis focus on these three soils which
cover 27300 ha Valfonda (AG3) and dryland Planteros (AG4) soils are not suitable for
corn cultivation because Valfonda is the most salt affected and Planteros (AG4) is dryland
Figure 1 shows corn location by soil type 1560 ha on Corraletes soils 1180 ha on Chacilla
and 490 ha on Planteros
Although there is not specific data about nitrate concentrations in the irrigation district
the RICA network (Water Quality Integrated Network) provides water quality data on
some adjacent locations that approximates the pollution emission levels Figure 2 shows
nitrate concentration in the River Flumen at Sarintildeena located at the end of the irrigation
5
Figure 2 Map of corn by soil type in the Flumen-Monegros irrigation district
Source Casterad and Herrero (2003)
6
Figure 2 Nitrate pollution from the irrigation district (1982-2002)
Flumen at Sarintildeena
0
5
10
15
20
25
30
35
40
45
50
Period
Nit
rate
con
cent
rati
on m
gl
Source CHE (2003)
district The time series include 42 observations for the 1982-2002 period with one day
nitrate concentration measurements in January and September of each year These data
show that nitrate concentration levels throughout the period move between 15 and 30 mg
NO3l with extreme values reaching 35 and 10 mgl in some periods
3 Methodology
The study analyzes the effects of several pollution control policy measures on corn
crop in a dynamic context The economic model developed includes a pollution function
that allows to assess the importance of water pollution due to agricultural activities in the
Flumen-Monegros irrigation district of the Ebro Basin in Spain
Corn yield functions and nitrate pollution functions by soil type have been estimated
using the EPIC crop growth package (Mitchell et al 1998) incorporating local information
on climate soils and tillage and operation activities The procedure consist in generating
with the package yield and leaching data series for different levels of water and nitrogen
fertilization in order to estimate the yield and pollution functions The corn yield response
function and the pollution function are then used to define the dynamic model that is
driven by the control variables water and nitrogen fertilization The EPIC simulator has
been validated in the study area after calibration using survey information from farmers
7
and corn field experimental data on yields and nitrogen leaching (Saad and Quiacutelez 1998
Saad 1999)
31 Dynamic model
The problem is stated as the maximization of welfare from corn production and
welfare is the sum of corn quasi-rent and the damage cost of nitrogen leaching In absence
of nitrogen pollution measures farmers maximize the private corn quasi-rent selecting the
amount of nitrogen fertilizer and irrigation throughout the time planning horizon (t = 1hellip
T) subject to the dynamics of nitrogen content in the soil Under discrete time the model
is the following
[ ] sum=
sdotλminus+minusminusminussdot+
T
1tttntxtyt
nx)le()sknpxpyp(
)r1(1
Maxtt
[1]
subject to
tttttt uvlengg minusminusminus+=+1 [2]
The objective function has two components the first term in parenthesis is quasi-rent
and the second term λ let is the damage cost from nitrogen leaching The sum is social
welfare through the planning horizon from corn production activities The constraint
captures the dynamics of soil nitrogen content and is defined as the balance of nitrogen
entering and leaving the soil Quasi-rent is equal to revenue minus variable and fixed costs
of corn per hectare1 and nitrogen damage is defined as a linear function of leaching
The constraint equation [2] is the motion equation for nitrogen in soil or soil nitrogen
balance Soil nitrogen in period t+1 is equal to nitrogen in period t plus fertilization minus
leaching volatilization and nitrogen uptake by corn The inclusion of the stock of nitrogen
in the soil is a key feature in order to represent the dynamic relationships among time
periods In absence of intertemporal relations the nitrogen stock in the soil yields and
nitrogen leaching would be static and constant for all periods This dynamic aspect is
crucial to adequately represent the biophysic processes leading to nitrogen pollution
Corn yield and leaching are assumed to be quadratic functions of water applied
nitrogen fertilization and the stock of nitrogen in soil The corn yield function is defined as
1 Costs include direct and indirect expenditures costs from hired labor and machinery and amortization Water and nitrogen costs are shown separately in the objective function
8
Table 3 Estimated yield and pollution functions by soil type
Under the second scenario the price of active nitrogen increases from 06 eurokg to 09
and 12 eurokg These higher nitrogen prices diminish the water and fertilizer application less
than the water price increase For Planteros and Corraletes soils the leaching reduction is
larger than under the higher water prices scenario but not for Chacilla soil A 12 eurokg
nitrogen price reduces nitrogen emissions 63 kgha for Corraletes-type soil 30 kgha for
Planteros and only 8 kgha for Chacillan For the whole district welfare losses are
between 023 and 045 million euros much lower than taxing water and with a much larger
leaching abatement Therefore a tax on nitrogen is more cost efficient than a tax on water
The third scenario introduces a limit or standard on applied nitrogen which is fixed at
250 kgha following the Extension Service recommendations (Oruacutes et al 2000) This
instrument is similar to the Code of Good Agricultural Practices established by the
European Nitrate Directive and the advantage of this measure is that costs to farmers in
terms of quasi-rent are reasonable and there are welfare gains for society in Planteros and
Corraletes soils Leaching abatement is above 40 percent in every soil and quasi-rent losses
are always below 5 percent This is a second best type of instrument and our results show
that the cost-efficiency is superior to taxes on inputs because the large abatement of
nitrogen emissions and the moderate reduction in quasi-rent Welfare increases under the
standard for the whole district (Table 5) although the standard reduces welfare in Chacilla
soils indicating that no standard is needed in this soil
The main obstacle to implement a quantitative limit is the difficulty to control
farmer compliance The introduction of a subsidy system for farmers who reduce fertilizer
application is a method to implement the standard provided that subsidies are coupled
with emissions verification These controls could be implemented and enforced by
irrigation user associations through measurement of nitrogen content in return water flow
canals Another method of implementing the standard is licensing fertilizer application to a
12
specialist a figure known as ldquoenvironmental doctorrdquo The measure of establishing a
standard has been recommended in the literature (Knickel 1998 Miettinen 1998 Weinberg
y Wilen 2000) and in studies analyzing the same irrigation district by Martiacutenez et al (2001)
and Martiacutenez (2002)
The last scenario considers the first best instrument of taxing nitrogen emissions
with a unit emission cost equal to 123 eurokg that has been chosen equal to the cost of
eliminating nitrogen from water The quasi-rent for this instrument is calculated assuming
that the social planner gives the farmer a subsidy equal to the optimal nitrogen damage
cost provided that pollution is at the social optimum The tax causes a strong leaching
reduction diminishing pollution levels by soil type between 10 and 60 percent Farmer
quasi-rent increases so farmers will embrace this solution provided that the
implementation was feasible
A ranking of policy measures can be defined by comparing the welfare effects of each
measure for the whole irrigation district by soil type (Table 5) The first best measure of
taxing emissions increases welfare in the district by 032 million euro Among the second
best measures a standard on nitrogen application also increases welfare by 007 million
euro while taxes on nitrogen fertilizer reduce welfare between 023 and 045 million euro
Higher water prices are very inefficient since welfare falls between 091 and 143 million
euro with an almost negligible leaching abatement below 4 percent This finding is
important because the recently approved Water Framework Directive of the European
Union relies heavily on higher water prices called full recovery cost in order to reach
ldquogood statusrdquo for all waters
An issue that could modify the effects presented here is that the introduction of
control measures may induce changes in the relative profitability of different crops and
farmers may respond expanding the more profitable crops This question was examined in
the study area by Martiacutenez el al (2001) for a standard limiting nitrogen application The
acreage substitution effect was moderate for all crops and in the case of corn the fall in
acreage was 03 percent
In accordance with the results presented here the studies by Pan and Hodge (1994)
and Johnson et al (1991) find that an emission tax equal to the cost of nitrogen removal is
the social optimum measure Jonhson el al (1991) evaluate the cost of the emission tax at 5
percent of quasi-rent with an emission reduction above 30 percent Other studies
examining nitrogen standards by Mapp et al (1994) in USA and Schmid (2001) in Austria
find that the abatement costs to reduce nitrogen leaching are somewhat higher than the
13
costs calculated here2 Mapp et al recommend a standard that reduces leaching by 67
percent at a cost of 22 percent of quasi-rent and Schmid states that a standard reduces
leaching between 40 and 90 percent at a cost to farmers between 5 and 14 percent of quasi-
rent Martiacutenez (2002) calculates a 2 percent loss of quasi-rent to curb leaching by 44
percent assuming homogeneous soil
Helfand and House (1995) examine the cost-efficiency of control measures under two
soil types in the case of lettuce production in order to abate nitrogen leaching by 20
percent Their findings are that quasi-rent losses derived from using uniform instruments
are small so perfect instruments are not necessary and may entail significant transaction
costs3 They indicate also that a nitrogen tax and a nitrogen standard are both very
inefficient measures which have very high welfare costs a finding contrary to the results
obtained here for corn Our results indicate that a nitrogen standard is the second best
preferred measure in accordance with economic theory and most of the empirical
literature Also our empirical evidence indicates that a tax on nitrogen is much more cost
efficient than a tax on water The finding on the nitrogen standard efficiency by Helfand
and House is questionable because the dynamic aspect of nitrogen content in the soil is
not considered When the level of nitrogen input changes the nitrogen content in the soil
adjust over several periods They force a 20 percent leaching abatement within the
production period reducing nitrogen fertilization by 90 percent so costs of a nitrogen
standard or a tax are prohibitive In contrast our results indicate that the standard reduces
nitrogen fertilization in the district by 20 percent abating leaching by more than half4 As
indicated above a tax of water is a very inefficient measure in our case with leaching
abatement below 4 percent and very high costs in terms of quasi-rent and welfare
Thomas and Boisvert (1994) simulate the introduction of a market for nitrogen
pollution permits and estimate that a permit price reducing 10 percent nitrogen emissions
reduces gross income by 15 percent5 This pollution permit instrument can be compared
with the emission tax examined here The cost calculated by these authors is much higher
2 For the whole district the nitrogen standard abates leaching by 176 tons (-52) with a cost of 015 million euro (-37) in quasi-rent 3 The loss of quasi-rent for any uniform measure is below 2 percent compared with 016 losses under a first-best heterogeneous measure 4 For the whole district nitrogen fertilization is 1020 tons and the standard reduces fertilization by 212 tons These figures come from table 4 and corn acreage by soil 5 Thomas and Boisvert (1994) use a procedure different from the present study They consider nitrogen pollution as a fraction of the remaining nitrogen that is not taken by the plant or degraded by denitrification
14
than the cost obtained in table 5 for an emission tax which abates leaching by 50 percent
in the region increasing welfare and quasi-rent6
The results of the present study on nitrate pollution control under soil heterogeneity
indicate the possibility of differentiating application of control by soil type The preferred
second best instrument is a standard but the instrument will be applied only in vulnerable
soils Corn leaching in Chacilla soils is only 45 kgha which is below the leaching levels in
the other soil types applying any abatement measure An alternative for nitrogen leaching
control would be to implement control instruments only in Planteros and Corraletes soils
which have high pollution potential For the whole district implementing a nitrogen
standard in Planteros and Corraletes soils but not in Chacilla improves welfare by 1
percent over a homogeneous nitrogen standard in the district This small loss in welfare
from using a homogeneous instead of an heterogeneous standard confirms the finding by
Helfand and House (1995) that losses from uniform instruments are small and perfect
instruments are not necessary
Discrimination of control measures could depend also on the particular crop planted
so control could be linked to the land use decision by the farmer for each soil type
Information on nitrogen leaching in the district indicates that wheat barley sunflower and
alfalfa have all leaching levels below 45 kgha in absence of abatement measures (Martiacutenez
2002) so these crops would not be subject to abatement while other more polluting crop
production activities such as corn and rice would be subject to control in vulnerable soils
This discrimination by crop and soil could be implemented using a land use tax adapted to
crop and soil provided that the land tax has adequate cost efficiency and transaction costs
5 Conclusions
The evaluation of efficiency for alternative nitrogen abatement measures requires the
consideration of biophysical aspects such soil class and crop type The effects of selected
abatement measures have been examined through a dynamic model for corn production in
three different soils of the Flumen irrigation district in the Ebro basin This evaluation is
useful to rank different instruments by their efficiency as a contribution to the policy
decision process The results agree with previous literature and indicate that a fertilizer
standard is the more efficient second best measure to control nitrogen pollution
6 As indicated above the emission tax instrument is linked to a subsidy equal to optimal nitrogen damage cost Therefore quasi-rent under the emission tax is above quasi-rent under the base scenario
15
The observed farmer behavior differs from the optimal solution of the model under
the base scenario because there is an excess input utilization that aggravates the nitrogen
pollution problem in the district Alternative emissions reduction measures have been
simulated and compared to the base scenario
An increase in water prices reduces only slightly nitrogen discharges at very large costs
to farmers and society A tax on nitrogen utilization results in more significant pollution
reduction at much lower costs A standard on nitrogen application curbs emissions by
more than half with a very moderate impact on quasi-rent and gains in welfare The
introduction of subsidies linked to the standard could be a good second best alternative to
achieve nitrogen pollution control
The original contribution of this study is the following a quantitative assessment has
been performed that demonstrates that abatement measures may be taken only in
vulnerable soils with crops that have high pollution potential So the results show that
differentiating the application of control by soil type enhances welfare although this
welfare gain from a differentiated standard is small compared with an homogeneous
standard in the case of corn An important question for the choice of the correct pollution
control instrument is related with the implementation costs of the instrument The more
suitable measures are associated with implementation difficulties and policy makers should
evaluate the trade-off between cost-efficiency and implementation simplicity
Acknowledgements
Support for this research was provided by projects CICYT AGL2001-2333-C02 and
INIA RTA02-090 from the Spanish Ministry of Science and Technology The INIA
funded also research contacts with the Department of Agricultural Economics of the
University of Newcastle upon Tyne This study was made possible by the technical
assistance of Joseacute Cavero Jesuacutes Noguumles Dolores Quilez Juan Herrero and Auxi Casterad
from the Laboratorio Asociado de Agronomiacutea y Medio Ambiente (CSIC-CITA Aula Dei
Campus Zaragoza)
16
References Albiac J Uche J Valero A Serra L Meyer A Tapia J 2003 The Economic
Unsustainability of the Spanish National Hydrologic Plan International Journal of Water Resources Development 19 (3) 437-458
Casterad A Herrero J 2003 Irrivol database Unidad de Suelos y Riegos Servicio de Investigacioacuten Agroalimentaria Gobierno de Aragoacuten Zaragoza
Confederacioacuten Hidrograacutefica del Ebro 2003 Water quality data series CHE Ministerio de Medio Ambiente Zaragoza Available at wwwchebroes
Gobierno de Aragoacuten 1999 Base de datos 1T de superficie de cultivos por teacutermino municipal para Aragoacuten 1987-99 Servicio de Estudios y Planificacioacuten Secretariacutea General Teacutecnica Departamento de Agricultura Gobierno de Aragoacuten Zaragoza
Feijooacute M Calvo E Albiac J 2000 Economic and environmental policy analysis of the Flumen-Monegros irrigation system in Huesca Spain Geographical Analysis 32 (3) 187-204
Hanemann M 2003 Economics Findings and Recommendations Appendix C Economics In Horne A Dracup J Hanemann M Rodriguez-Iturbe I Means E Roth J (The US Technical Team) A Technical Review of the Spanish National Hydrological Plan (Ebro River Out-of-basin Diversion) Fundacioacuten Universidad Politeacutecnica de Cartagena University of Cartagena Cartagena
Helfand G House B 1995 Regulating Nonpoint Source Pollution Under Heterogeneous Conditions American Journal of Agricultural Economics 77 1024-1032
Howitt R 2003 A Review of Economic Hydrologic Planning Pertaining to the Ebro River Transfer Proposal In Biswas A (Ed) Spanish National Hydrologic Plan Reports of International Experts Gobierno de Aragoacuten Zaragoza
Johnson S Adams R Perry G 1991 The On-Farm Costs of Reducing Groundwater Pollution American Journal of Agricultural Economics 73 1063-1073
Khanna M Isik M Zilberman D 2000 Incentive-based Policies for Conservation Technology Adoption Implications for Pollution and Output Paper presented at the annual meeting of the American Agricultural of Economics Association Tampa Florida
Knickel K 1998 First Results of Model Calculations In Gazzola L Roest K (Eds) Economic Instruments for Nitrogen Control in European Agriculture Research Center on Animal Production Reggio Emilia
Mapp H Bernardo D Sabbagh S Geleta S Watkins K 1994 Economic and Environmental Impacts of Limiting Nitrogen Use to Protect Water Quality A Stochastic Regional Analysis American Journal of Agricultural Economics 76 889-903
Martiacutenez Y Uku S Albiac J 2001 El control de la contaminacioacuten por nitratos en el regadiacuteo Economiacutea Agraria y Recursos Naturales 2 (2) 115-131
Martiacutenez Y 2002 Anaacutelisis econoacutemico y ambiental de la contaminacioacuten por nitratos en el regadiacuteo Doctoral dissertation Department of Economic Analysis University of Zaragoza Zaragoza
Miettinen A 1993 The Effectiveness and Feasibility of Economic Incentives of Input Control in the Mitigation of Agricultural Water Pollution Agricultural Science in Finland 2 453-464
Ministerio de Agricultura Pesca y Alimentacioacuten 1999 Anuario de Estadiacutestica Agraria MAPA Madrid
Ministerio de Agricultura Pesca y Alimentacioacuten 2000 Hechos y Cifras del Sector Agroalimentario Espantildeol 2000 Secretariacutea General Teacutecnica MAPA Madrid
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
3
Nitrate pollution in Spain affects specially the Southeast Mediterranean coast and the
Ebro and Guadalquivir watersheds inside the country Nitrate loads depend on different
factors such as input use type of crops and soil characteristics The studies by Feijooacute et al
(2000) and Martiacutenez (2002) indicate the importance of considering these factors in
environmental policy analysis Cost efficient abatement of leaching emissions depends
critically on the correct evaluation of different pollution control measures Several studies
have examined the cost-efficiency of alternative measures for some crops corn (Yadav
1997 Vickner et al 1998) wheat and barley (Miettinen 1998 Schmid 2001) corn wheat
barley rice sunflower and alfalfa (Martiacutenez 2002) and cotton (Khanne et al 2000)
Ranking of measures is contingent not only upon crop type but also upon soils since the
effect of soils on the cost-efficiency of measures may be significant Information on these
effects is scarce and limited to corn and alfalfa with three soil classes (Thomas and Boisvert
1994) and lettuce with two soils (Helfand and House 1995)
This study analyzes the cost-efficiency of several policy instruments to curb nitrogen
pollution and the effects of soil heterogeneity on the cost-efficiency of measures This
procedure gives information on the robustness of cost-efficiency rankings when
instruments are applied to different soil types The policy instruments examined are water
use taxes nitrate use taxes fertilization limits and taxes on nitrate emissions An important
feature of this study is the use of optimal control techniques since nitrogen pollution is an
intertemporal process The dynamics of nitrogen pollution is driven by soil nitrogen
content which affects yields and nitrogen leaching throughout the planning horizon
2 Study area
The Flumen-Monegros irrigation district includes sixteen villages with important
irrigation agricultural activities The area has an extension of 77841 ha with 60000 ha
cultivated and 45898 ha (75) under irrigation (Table 1)
Table 1 Land use in the study area (ha)
Source DGA (1999)
Dryland Irrigated acreage Total district
Cultivated land 14250 45781 60031 Pastures 1418 0 1418 Forest 4924 117 5041 Other 11351 0 11351 Total acreage 31943 45898 77841
a Water-holding capacity (m3ha) b Irrigation efficiency () c Salinity (Electric conductivity dSm) Source Nogueacutes (2002)
The climate is semi-arid with insufficient rain throughout the entire year and clearly
irrigation is essential for agricultural production The water resources origin is the Gaacutellego
river through the Sotonera dam with 187 hm3 of capacity and the Cinca river through the
Cinca canal system Surface irrigation is the common irrigation system although sprinkle
irrigation is being introduced in some locations A map of soils from Noguumleacutes (2002) and
Noguumleacutes et al (1999) has been used so corn yield water and fertilizer application and
percolation and leaching can be differentiated by soil type The main crops in the zone are
winter cereals (barley and wheat) corn sunflower rice and alfalfa for which statistical data
are available on crop acreage (Gobierno de Aragoacuten 1999) Another source on crop spatial
distribution is Casterad and Herrero (2003) and their procedure combines remote-sensing
information with estimations from field surveys Crop costs are published by MAPA
(2000) and other information has been collected on agronomic data and crop management
operations weather information and water management practices by irrigation user
associations
The physical and socio-economic characteristics of the irrigation district are described
in Martiacutenez (2002) Five soil types are identified in the district as defined by Noguumles (2002)
with the parameters shown in table 2 Corn is planted only in soils Chacilla (AG0)
Planteros (AG1) and Corraletes (AG2) and the analysis focus on these three soils which
cover 27300 ha Valfonda (AG3) and dryland Planteros (AG4) soils are not suitable for
corn cultivation because Valfonda is the most salt affected and Planteros (AG4) is dryland
Figure 1 shows corn location by soil type 1560 ha on Corraletes soils 1180 ha on Chacilla
and 490 ha on Planteros
Although there is not specific data about nitrate concentrations in the irrigation district
the RICA network (Water Quality Integrated Network) provides water quality data on
some adjacent locations that approximates the pollution emission levels Figure 2 shows
nitrate concentration in the River Flumen at Sarintildeena located at the end of the irrigation
5
Figure 2 Map of corn by soil type in the Flumen-Monegros irrigation district
Source Casterad and Herrero (2003)
6
Figure 2 Nitrate pollution from the irrigation district (1982-2002)
Flumen at Sarintildeena
0
5
10
15
20
25
30
35
40
45
50
Period
Nit
rate
con
cent
rati
on m
gl
Source CHE (2003)
district The time series include 42 observations for the 1982-2002 period with one day
nitrate concentration measurements in January and September of each year These data
show that nitrate concentration levels throughout the period move between 15 and 30 mg
NO3l with extreme values reaching 35 and 10 mgl in some periods
3 Methodology
The study analyzes the effects of several pollution control policy measures on corn
crop in a dynamic context The economic model developed includes a pollution function
that allows to assess the importance of water pollution due to agricultural activities in the
Flumen-Monegros irrigation district of the Ebro Basin in Spain
Corn yield functions and nitrate pollution functions by soil type have been estimated
using the EPIC crop growth package (Mitchell et al 1998) incorporating local information
on climate soils and tillage and operation activities The procedure consist in generating
with the package yield and leaching data series for different levels of water and nitrogen
fertilization in order to estimate the yield and pollution functions The corn yield response
function and the pollution function are then used to define the dynamic model that is
driven by the control variables water and nitrogen fertilization The EPIC simulator has
been validated in the study area after calibration using survey information from farmers
7
and corn field experimental data on yields and nitrogen leaching (Saad and Quiacutelez 1998
Saad 1999)
31 Dynamic model
The problem is stated as the maximization of welfare from corn production and
welfare is the sum of corn quasi-rent and the damage cost of nitrogen leaching In absence
of nitrogen pollution measures farmers maximize the private corn quasi-rent selecting the
amount of nitrogen fertilizer and irrigation throughout the time planning horizon (t = 1hellip
T) subject to the dynamics of nitrogen content in the soil Under discrete time the model
is the following
[ ] sum=
sdotλminus+minusminusminussdot+
T
1tttntxtyt
nx)le()sknpxpyp(
)r1(1
Maxtt
[1]
subject to
tttttt uvlengg minusminusminus+=+1 [2]
The objective function has two components the first term in parenthesis is quasi-rent
and the second term λ let is the damage cost from nitrogen leaching The sum is social
welfare through the planning horizon from corn production activities The constraint
captures the dynamics of soil nitrogen content and is defined as the balance of nitrogen
entering and leaving the soil Quasi-rent is equal to revenue minus variable and fixed costs
of corn per hectare1 and nitrogen damage is defined as a linear function of leaching
The constraint equation [2] is the motion equation for nitrogen in soil or soil nitrogen
balance Soil nitrogen in period t+1 is equal to nitrogen in period t plus fertilization minus
leaching volatilization and nitrogen uptake by corn The inclusion of the stock of nitrogen
in the soil is a key feature in order to represent the dynamic relationships among time
periods In absence of intertemporal relations the nitrogen stock in the soil yields and
nitrogen leaching would be static and constant for all periods This dynamic aspect is
crucial to adequately represent the biophysic processes leading to nitrogen pollution
Corn yield and leaching are assumed to be quadratic functions of water applied
nitrogen fertilization and the stock of nitrogen in soil The corn yield function is defined as
1 Costs include direct and indirect expenditures costs from hired labor and machinery and amortization Water and nitrogen costs are shown separately in the objective function
8
Table 3 Estimated yield and pollution functions by soil type
Under the second scenario the price of active nitrogen increases from 06 eurokg to 09
and 12 eurokg These higher nitrogen prices diminish the water and fertilizer application less
than the water price increase For Planteros and Corraletes soils the leaching reduction is
larger than under the higher water prices scenario but not for Chacilla soil A 12 eurokg
nitrogen price reduces nitrogen emissions 63 kgha for Corraletes-type soil 30 kgha for
Planteros and only 8 kgha for Chacillan For the whole district welfare losses are
between 023 and 045 million euros much lower than taxing water and with a much larger
leaching abatement Therefore a tax on nitrogen is more cost efficient than a tax on water
The third scenario introduces a limit or standard on applied nitrogen which is fixed at
250 kgha following the Extension Service recommendations (Oruacutes et al 2000) This
instrument is similar to the Code of Good Agricultural Practices established by the
European Nitrate Directive and the advantage of this measure is that costs to farmers in
terms of quasi-rent are reasonable and there are welfare gains for society in Planteros and
Corraletes soils Leaching abatement is above 40 percent in every soil and quasi-rent losses
are always below 5 percent This is a second best type of instrument and our results show
that the cost-efficiency is superior to taxes on inputs because the large abatement of
nitrogen emissions and the moderate reduction in quasi-rent Welfare increases under the
standard for the whole district (Table 5) although the standard reduces welfare in Chacilla
soils indicating that no standard is needed in this soil
The main obstacle to implement a quantitative limit is the difficulty to control
farmer compliance The introduction of a subsidy system for farmers who reduce fertilizer
application is a method to implement the standard provided that subsidies are coupled
with emissions verification These controls could be implemented and enforced by
irrigation user associations through measurement of nitrogen content in return water flow
canals Another method of implementing the standard is licensing fertilizer application to a
12
specialist a figure known as ldquoenvironmental doctorrdquo The measure of establishing a
standard has been recommended in the literature (Knickel 1998 Miettinen 1998 Weinberg
y Wilen 2000) and in studies analyzing the same irrigation district by Martiacutenez et al (2001)
and Martiacutenez (2002)
The last scenario considers the first best instrument of taxing nitrogen emissions
with a unit emission cost equal to 123 eurokg that has been chosen equal to the cost of
eliminating nitrogen from water The quasi-rent for this instrument is calculated assuming
that the social planner gives the farmer a subsidy equal to the optimal nitrogen damage
cost provided that pollution is at the social optimum The tax causes a strong leaching
reduction diminishing pollution levels by soil type between 10 and 60 percent Farmer
quasi-rent increases so farmers will embrace this solution provided that the
implementation was feasible
A ranking of policy measures can be defined by comparing the welfare effects of each
measure for the whole irrigation district by soil type (Table 5) The first best measure of
taxing emissions increases welfare in the district by 032 million euro Among the second
best measures a standard on nitrogen application also increases welfare by 007 million
euro while taxes on nitrogen fertilizer reduce welfare between 023 and 045 million euro
Higher water prices are very inefficient since welfare falls between 091 and 143 million
euro with an almost negligible leaching abatement below 4 percent This finding is
important because the recently approved Water Framework Directive of the European
Union relies heavily on higher water prices called full recovery cost in order to reach
ldquogood statusrdquo for all waters
An issue that could modify the effects presented here is that the introduction of
control measures may induce changes in the relative profitability of different crops and
farmers may respond expanding the more profitable crops This question was examined in
the study area by Martiacutenez el al (2001) for a standard limiting nitrogen application The
acreage substitution effect was moderate for all crops and in the case of corn the fall in
acreage was 03 percent
In accordance with the results presented here the studies by Pan and Hodge (1994)
and Johnson et al (1991) find that an emission tax equal to the cost of nitrogen removal is
the social optimum measure Jonhson el al (1991) evaluate the cost of the emission tax at 5
percent of quasi-rent with an emission reduction above 30 percent Other studies
examining nitrogen standards by Mapp et al (1994) in USA and Schmid (2001) in Austria
find that the abatement costs to reduce nitrogen leaching are somewhat higher than the
13
costs calculated here2 Mapp et al recommend a standard that reduces leaching by 67
percent at a cost of 22 percent of quasi-rent and Schmid states that a standard reduces
leaching between 40 and 90 percent at a cost to farmers between 5 and 14 percent of quasi-
rent Martiacutenez (2002) calculates a 2 percent loss of quasi-rent to curb leaching by 44
percent assuming homogeneous soil
Helfand and House (1995) examine the cost-efficiency of control measures under two
soil types in the case of lettuce production in order to abate nitrogen leaching by 20
percent Their findings are that quasi-rent losses derived from using uniform instruments
are small so perfect instruments are not necessary and may entail significant transaction
costs3 They indicate also that a nitrogen tax and a nitrogen standard are both very
inefficient measures which have very high welfare costs a finding contrary to the results
obtained here for corn Our results indicate that a nitrogen standard is the second best
preferred measure in accordance with economic theory and most of the empirical
literature Also our empirical evidence indicates that a tax on nitrogen is much more cost
efficient than a tax on water The finding on the nitrogen standard efficiency by Helfand
and House is questionable because the dynamic aspect of nitrogen content in the soil is
not considered When the level of nitrogen input changes the nitrogen content in the soil
adjust over several periods They force a 20 percent leaching abatement within the
production period reducing nitrogen fertilization by 90 percent so costs of a nitrogen
standard or a tax are prohibitive In contrast our results indicate that the standard reduces
nitrogen fertilization in the district by 20 percent abating leaching by more than half4 As
indicated above a tax of water is a very inefficient measure in our case with leaching
abatement below 4 percent and very high costs in terms of quasi-rent and welfare
Thomas and Boisvert (1994) simulate the introduction of a market for nitrogen
pollution permits and estimate that a permit price reducing 10 percent nitrogen emissions
reduces gross income by 15 percent5 This pollution permit instrument can be compared
with the emission tax examined here The cost calculated by these authors is much higher
2 For the whole district the nitrogen standard abates leaching by 176 tons (-52) with a cost of 015 million euro (-37) in quasi-rent 3 The loss of quasi-rent for any uniform measure is below 2 percent compared with 016 losses under a first-best heterogeneous measure 4 For the whole district nitrogen fertilization is 1020 tons and the standard reduces fertilization by 212 tons These figures come from table 4 and corn acreage by soil 5 Thomas and Boisvert (1994) use a procedure different from the present study They consider nitrogen pollution as a fraction of the remaining nitrogen that is not taken by the plant or degraded by denitrification
14
than the cost obtained in table 5 for an emission tax which abates leaching by 50 percent
in the region increasing welfare and quasi-rent6
The results of the present study on nitrate pollution control under soil heterogeneity
indicate the possibility of differentiating application of control by soil type The preferred
second best instrument is a standard but the instrument will be applied only in vulnerable
soils Corn leaching in Chacilla soils is only 45 kgha which is below the leaching levels in
the other soil types applying any abatement measure An alternative for nitrogen leaching
control would be to implement control instruments only in Planteros and Corraletes soils
which have high pollution potential For the whole district implementing a nitrogen
standard in Planteros and Corraletes soils but not in Chacilla improves welfare by 1
percent over a homogeneous nitrogen standard in the district This small loss in welfare
from using a homogeneous instead of an heterogeneous standard confirms the finding by
Helfand and House (1995) that losses from uniform instruments are small and perfect
instruments are not necessary
Discrimination of control measures could depend also on the particular crop planted
so control could be linked to the land use decision by the farmer for each soil type
Information on nitrogen leaching in the district indicates that wheat barley sunflower and
alfalfa have all leaching levels below 45 kgha in absence of abatement measures (Martiacutenez
2002) so these crops would not be subject to abatement while other more polluting crop
production activities such as corn and rice would be subject to control in vulnerable soils
This discrimination by crop and soil could be implemented using a land use tax adapted to
crop and soil provided that the land tax has adequate cost efficiency and transaction costs
5 Conclusions
The evaluation of efficiency for alternative nitrogen abatement measures requires the
consideration of biophysical aspects such soil class and crop type The effects of selected
abatement measures have been examined through a dynamic model for corn production in
three different soils of the Flumen irrigation district in the Ebro basin This evaluation is
useful to rank different instruments by their efficiency as a contribution to the policy
decision process The results agree with previous literature and indicate that a fertilizer
standard is the more efficient second best measure to control nitrogen pollution
6 As indicated above the emission tax instrument is linked to a subsidy equal to optimal nitrogen damage cost Therefore quasi-rent under the emission tax is above quasi-rent under the base scenario
15
The observed farmer behavior differs from the optimal solution of the model under
the base scenario because there is an excess input utilization that aggravates the nitrogen
pollution problem in the district Alternative emissions reduction measures have been
simulated and compared to the base scenario
An increase in water prices reduces only slightly nitrogen discharges at very large costs
to farmers and society A tax on nitrogen utilization results in more significant pollution
reduction at much lower costs A standard on nitrogen application curbs emissions by
more than half with a very moderate impact on quasi-rent and gains in welfare The
introduction of subsidies linked to the standard could be a good second best alternative to
achieve nitrogen pollution control
The original contribution of this study is the following a quantitative assessment has
been performed that demonstrates that abatement measures may be taken only in
vulnerable soils with crops that have high pollution potential So the results show that
differentiating the application of control by soil type enhances welfare although this
welfare gain from a differentiated standard is small compared with an homogeneous
standard in the case of corn An important question for the choice of the correct pollution
control instrument is related with the implementation costs of the instrument The more
suitable measures are associated with implementation difficulties and policy makers should
evaluate the trade-off between cost-efficiency and implementation simplicity
Acknowledgements
Support for this research was provided by projects CICYT AGL2001-2333-C02 and
INIA RTA02-090 from the Spanish Ministry of Science and Technology The INIA
funded also research contacts with the Department of Agricultural Economics of the
University of Newcastle upon Tyne This study was made possible by the technical
assistance of Joseacute Cavero Jesuacutes Noguumles Dolores Quilez Juan Herrero and Auxi Casterad
from the Laboratorio Asociado de Agronomiacutea y Medio Ambiente (CSIC-CITA Aula Dei
Campus Zaragoza)
16
References Albiac J Uche J Valero A Serra L Meyer A Tapia J 2003 The Economic
Unsustainability of the Spanish National Hydrologic Plan International Journal of Water Resources Development 19 (3) 437-458
Casterad A Herrero J 2003 Irrivol database Unidad de Suelos y Riegos Servicio de Investigacioacuten Agroalimentaria Gobierno de Aragoacuten Zaragoza
Confederacioacuten Hidrograacutefica del Ebro 2003 Water quality data series CHE Ministerio de Medio Ambiente Zaragoza Available at wwwchebroes
Gobierno de Aragoacuten 1999 Base de datos 1T de superficie de cultivos por teacutermino municipal para Aragoacuten 1987-99 Servicio de Estudios y Planificacioacuten Secretariacutea General Teacutecnica Departamento de Agricultura Gobierno de Aragoacuten Zaragoza
Feijooacute M Calvo E Albiac J 2000 Economic and environmental policy analysis of the Flumen-Monegros irrigation system in Huesca Spain Geographical Analysis 32 (3) 187-204
Hanemann M 2003 Economics Findings and Recommendations Appendix C Economics In Horne A Dracup J Hanemann M Rodriguez-Iturbe I Means E Roth J (The US Technical Team) A Technical Review of the Spanish National Hydrological Plan (Ebro River Out-of-basin Diversion) Fundacioacuten Universidad Politeacutecnica de Cartagena University of Cartagena Cartagena
Helfand G House B 1995 Regulating Nonpoint Source Pollution Under Heterogeneous Conditions American Journal of Agricultural Economics 77 1024-1032
Howitt R 2003 A Review of Economic Hydrologic Planning Pertaining to the Ebro River Transfer Proposal In Biswas A (Ed) Spanish National Hydrologic Plan Reports of International Experts Gobierno de Aragoacuten Zaragoza
Johnson S Adams R Perry G 1991 The On-Farm Costs of Reducing Groundwater Pollution American Journal of Agricultural Economics 73 1063-1073
Khanna M Isik M Zilberman D 2000 Incentive-based Policies for Conservation Technology Adoption Implications for Pollution and Output Paper presented at the annual meeting of the American Agricultural of Economics Association Tampa Florida
Knickel K 1998 First Results of Model Calculations In Gazzola L Roest K (Eds) Economic Instruments for Nitrogen Control in European Agriculture Research Center on Animal Production Reggio Emilia
Mapp H Bernardo D Sabbagh S Geleta S Watkins K 1994 Economic and Environmental Impacts of Limiting Nitrogen Use to Protect Water Quality A Stochastic Regional Analysis American Journal of Agricultural Economics 76 889-903
Martiacutenez Y Uku S Albiac J 2001 El control de la contaminacioacuten por nitratos en el regadiacuteo Economiacutea Agraria y Recursos Naturales 2 (2) 115-131
Martiacutenez Y 2002 Anaacutelisis econoacutemico y ambiental de la contaminacioacuten por nitratos en el regadiacuteo Doctoral dissertation Department of Economic Analysis University of Zaragoza Zaragoza
Miettinen A 1993 The Effectiveness and Feasibility of Economic Incentives of Input Control in the Mitigation of Agricultural Water Pollution Agricultural Science in Finland 2 453-464
Ministerio de Agricultura Pesca y Alimentacioacuten 1999 Anuario de Estadiacutestica Agraria MAPA Madrid
Ministerio de Agricultura Pesca y Alimentacioacuten 2000 Hechos y Cifras del Sector Agroalimentario Espantildeol 2000 Secretariacutea General Teacutecnica MAPA Madrid
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
a Water-holding capacity (m3ha) b Irrigation efficiency () c Salinity (Electric conductivity dSm) Source Nogueacutes (2002)
The climate is semi-arid with insufficient rain throughout the entire year and clearly
irrigation is essential for agricultural production The water resources origin is the Gaacutellego
river through the Sotonera dam with 187 hm3 of capacity and the Cinca river through the
Cinca canal system Surface irrigation is the common irrigation system although sprinkle
irrigation is being introduced in some locations A map of soils from Noguumleacutes (2002) and
Noguumleacutes et al (1999) has been used so corn yield water and fertilizer application and
percolation and leaching can be differentiated by soil type The main crops in the zone are
winter cereals (barley and wheat) corn sunflower rice and alfalfa for which statistical data
are available on crop acreage (Gobierno de Aragoacuten 1999) Another source on crop spatial
distribution is Casterad and Herrero (2003) and their procedure combines remote-sensing
information with estimations from field surveys Crop costs are published by MAPA
(2000) and other information has been collected on agronomic data and crop management
operations weather information and water management practices by irrigation user
associations
The physical and socio-economic characteristics of the irrigation district are described
in Martiacutenez (2002) Five soil types are identified in the district as defined by Noguumles (2002)
with the parameters shown in table 2 Corn is planted only in soils Chacilla (AG0)
Planteros (AG1) and Corraletes (AG2) and the analysis focus on these three soils which
cover 27300 ha Valfonda (AG3) and dryland Planteros (AG4) soils are not suitable for
corn cultivation because Valfonda is the most salt affected and Planteros (AG4) is dryland
Figure 1 shows corn location by soil type 1560 ha on Corraletes soils 1180 ha on Chacilla
and 490 ha on Planteros
Although there is not specific data about nitrate concentrations in the irrigation district
the RICA network (Water Quality Integrated Network) provides water quality data on
some adjacent locations that approximates the pollution emission levels Figure 2 shows
nitrate concentration in the River Flumen at Sarintildeena located at the end of the irrigation
5
Figure 2 Map of corn by soil type in the Flumen-Monegros irrigation district
Source Casterad and Herrero (2003)
6
Figure 2 Nitrate pollution from the irrigation district (1982-2002)
Flumen at Sarintildeena
0
5
10
15
20
25
30
35
40
45
50
Period
Nit
rate
con
cent
rati
on m
gl
Source CHE (2003)
district The time series include 42 observations for the 1982-2002 period with one day
nitrate concentration measurements in January and September of each year These data
show that nitrate concentration levels throughout the period move between 15 and 30 mg
NO3l with extreme values reaching 35 and 10 mgl in some periods
3 Methodology
The study analyzes the effects of several pollution control policy measures on corn
crop in a dynamic context The economic model developed includes a pollution function
that allows to assess the importance of water pollution due to agricultural activities in the
Flumen-Monegros irrigation district of the Ebro Basin in Spain
Corn yield functions and nitrate pollution functions by soil type have been estimated
using the EPIC crop growth package (Mitchell et al 1998) incorporating local information
on climate soils and tillage and operation activities The procedure consist in generating
with the package yield and leaching data series for different levels of water and nitrogen
fertilization in order to estimate the yield and pollution functions The corn yield response
function and the pollution function are then used to define the dynamic model that is
driven by the control variables water and nitrogen fertilization The EPIC simulator has
been validated in the study area after calibration using survey information from farmers
7
and corn field experimental data on yields and nitrogen leaching (Saad and Quiacutelez 1998
Saad 1999)
31 Dynamic model
The problem is stated as the maximization of welfare from corn production and
welfare is the sum of corn quasi-rent and the damage cost of nitrogen leaching In absence
of nitrogen pollution measures farmers maximize the private corn quasi-rent selecting the
amount of nitrogen fertilizer and irrigation throughout the time planning horizon (t = 1hellip
T) subject to the dynamics of nitrogen content in the soil Under discrete time the model
is the following
[ ] sum=
sdotλminus+minusminusminussdot+
T
1tttntxtyt
nx)le()sknpxpyp(
)r1(1
Maxtt
[1]
subject to
tttttt uvlengg minusminusminus+=+1 [2]
The objective function has two components the first term in parenthesis is quasi-rent
and the second term λ let is the damage cost from nitrogen leaching The sum is social
welfare through the planning horizon from corn production activities The constraint
captures the dynamics of soil nitrogen content and is defined as the balance of nitrogen
entering and leaving the soil Quasi-rent is equal to revenue minus variable and fixed costs
of corn per hectare1 and nitrogen damage is defined as a linear function of leaching
The constraint equation [2] is the motion equation for nitrogen in soil or soil nitrogen
balance Soil nitrogen in period t+1 is equal to nitrogen in period t plus fertilization minus
leaching volatilization and nitrogen uptake by corn The inclusion of the stock of nitrogen
in the soil is a key feature in order to represent the dynamic relationships among time
periods In absence of intertemporal relations the nitrogen stock in the soil yields and
nitrogen leaching would be static and constant for all periods This dynamic aspect is
crucial to adequately represent the biophysic processes leading to nitrogen pollution
Corn yield and leaching are assumed to be quadratic functions of water applied
nitrogen fertilization and the stock of nitrogen in soil The corn yield function is defined as
1 Costs include direct and indirect expenditures costs from hired labor and machinery and amortization Water and nitrogen costs are shown separately in the objective function
8
Table 3 Estimated yield and pollution functions by soil type
Under the second scenario the price of active nitrogen increases from 06 eurokg to 09
and 12 eurokg These higher nitrogen prices diminish the water and fertilizer application less
than the water price increase For Planteros and Corraletes soils the leaching reduction is
larger than under the higher water prices scenario but not for Chacilla soil A 12 eurokg
nitrogen price reduces nitrogen emissions 63 kgha for Corraletes-type soil 30 kgha for
Planteros and only 8 kgha for Chacillan For the whole district welfare losses are
between 023 and 045 million euros much lower than taxing water and with a much larger
leaching abatement Therefore a tax on nitrogen is more cost efficient than a tax on water
The third scenario introduces a limit or standard on applied nitrogen which is fixed at
250 kgha following the Extension Service recommendations (Oruacutes et al 2000) This
instrument is similar to the Code of Good Agricultural Practices established by the
European Nitrate Directive and the advantage of this measure is that costs to farmers in
terms of quasi-rent are reasonable and there are welfare gains for society in Planteros and
Corraletes soils Leaching abatement is above 40 percent in every soil and quasi-rent losses
are always below 5 percent This is a second best type of instrument and our results show
that the cost-efficiency is superior to taxes on inputs because the large abatement of
nitrogen emissions and the moderate reduction in quasi-rent Welfare increases under the
standard for the whole district (Table 5) although the standard reduces welfare in Chacilla
soils indicating that no standard is needed in this soil
The main obstacle to implement a quantitative limit is the difficulty to control
farmer compliance The introduction of a subsidy system for farmers who reduce fertilizer
application is a method to implement the standard provided that subsidies are coupled
with emissions verification These controls could be implemented and enforced by
irrigation user associations through measurement of nitrogen content in return water flow
canals Another method of implementing the standard is licensing fertilizer application to a
12
specialist a figure known as ldquoenvironmental doctorrdquo The measure of establishing a
standard has been recommended in the literature (Knickel 1998 Miettinen 1998 Weinberg
y Wilen 2000) and in studies analyzing the same irrigation district by Martiacutenez et al (2001)
and Martiacutenez (2002)
The last scenario considers the first best instrument of taxing nitrogen emissions
with a unit emission cost equal to 123 eurokg that has been chosen equal to the cost of
eliminating nitrogen from water The quasi-rent for this instrument is calculated assuming
that the social planner gives the farmer a subsidy equal to the optimal nitrogen damage
cost provided that pollution is at the social optimum The tax causes a strong leaching
reduction diminishing pollution levels by soil type between 10 and 60 percent Farmer
quasi-rent increases so farmers will embrace this solution provided that the
implementation was feasible
A ranking of policy measures can be defined by comparing the welfare effects of each
measure for the whole irrigation district by soil type (Table 5) The first best measure of
taxing emissions increases welfare in the district by 032 million euro Among the second
best measures a standard on nitrogen application also increases welfare by 007 million
euro while taxes on nitrogen fertilizer reduce welfare between 023 and 045 million euro
Higher water prices are very inefficient since welfare falls between 091 and 143 million
euro with an almost negligible leaching abatement below 4 percent This finding is
important because the recently approved Water Framework Directive of the European
Union relies heavily on higher water prices called full recovery cost in order to reach
ldquogood statusrdquo for all waters
An issue that could modify the effects presented here is that the introduction of
control measures may induce changes in the relative profitability of different crops and
farmers may respond expanding the more profitable crops This question was examined in
the study area by Martiacutenez el al (2001) for a standard limiting nitrogen application The
acreage substitution effect was moderate for all crops and in the case of corn the fall in
acreage was 03 percent
In accordance with the results presented here the studies by Pan and Hodge (1994)
and Johnson et al (1991) find that an emission tax equal to the cost of nitrogen removal is
the social optimum measure Jonhson el al (1991) evaluate the cost of the emission tax at 5
percent of quasi-rent with an emission reduction above 30 percent Other studies
examining nitrogen standards by Mapp et al (1994) in USA and Schmid (2001) in Austria
find that the abatement costs to reduce nitrogen leaching are somewhat higher than the
13
costs calculated here2 Mapp et al recommend a standard that reduces leaching by 67
percent at a cost of 22 percent of quasi-rent and Schmid states that a standard reduces
leaching between 40 and 90 percent at a cost to farmers between 5 and 14 percent of quasi-
rent Martiacutenez (2002) calculates a 2 percent loss of quasi-rent to curb leaching by 44
percent assuming homogeneous soil
Helfand and House (1995) examine the cost-efficiency of control measures under two
soil types in the case of lettuce production in order to abate nitrogen leaching by 20
percent Their findings are that quasi-rent losses derived from using uniform instruments
are small so perfect instruments are not necessary and may entail significant transaction
costs3 They indicate also that a nitrogen tax and a nitrogen standard are both very
inefficient measures which have very high welfare costs a finding contrary to the results
obtained here for corn Our results indicate that a nitrogen standard is the second best
preferred measure in accordance with economic theory and most of the empirical
literature Also our empirical evidence indicates that a tax on nitrogen is much more cost
efficient than a tax on water The finding on the nitrogen standard efficiency by Helfand
and House is questionable because the dynamic aspect of nitrogen content in the soil is
not considered When the level of nitrogen input changes the nitrogen content in the soil
adjust over several periods They force a 20 percent leaching abatement within the
production period reducing nitrogen fertilization by 90 percent so costs of a nitrogen
standard or a tax are prohibitive In contrast our results indicate that the standard reduces
nitrogen fertilization in the district by 20 percent abating leaching by more than half4 As
indicated above a tax of water is a very inefficient measure in our case with leaching
abatement below 4 percent and very high costs in terms of quasi-rent and welfare
Thomas and Boisvert (1994) simulate the introduction of a market for nitrogen
pollution permits and estimate that a permit price reducing 10 percent nitrogen emissions
reduces gross income by 15 percent5 This pollution permit instrument can be compared
with the emission tax examined here The cost calculated by these authors is much higher
2 For the whole district the nitrogen standard abates leaching by 176 tons (-52) with a cost of 015 million euro (-37) in quasi-rent 3 The loss of quasi-rent for any uniform measure is below 2 percent compared with 016 losses under a first-best heterogeneous measure 4 For the whole district nitrogen fertilization is 1020 tons and the standard reduces fertilization by 212 tons These figures come from table 4 and corn acreage by soil 5 Thomas and Boisvert (1994) use a procedure different from the present study They consider nitrogen pollution as a fraction of the remaining nitrogen that is not taken by the plant or degraded by denitrification
14
than the cost obtained in table 5 for an emission tax which abates leaching by 50 percent
in the region increasing welfare and quasi-rent6
The results of the present study on nitrate pollution control under soil heterogeneity
indicate the possibility of differentiating application of control by soil type The preferred
second best instrument is a standard but the instrument will be applied only in vulnerable
soils Corn leaching in Chacilla soils is only 45 kgha which is below the leaching levels in
the other soil types applying any abatement measure An alternative for nitrogen leaching
control would be to implement control instruments only in Planteros and Corraletes soils
which have high pollution potential For the whole district implementing a nitrogen
standard in Planteros and Corraletes soils but not in Chacilla improves welfare by 1
percent over a homogeneous nitrogen standard in the district This small loss in welfare
from using a homogeneous instead of an heterogeneous standard confirms the finding by
Helfand and House (1995) that losses from uniform instruments are small and perfect
instruments are not necessary
Discrimination of control measures could depend also on the particular crop planted
so control could be linked to the land use decision by the farmer for each soil type
Information on nitrogen leaching in the district indicates that wheat barley sunflower and
alfalfa have all leaching levels below 45 kgha in absence of abatement measures (Martiacutenez
2002) so these crops would not be subject to abatement while other more polluting crop
production activities such as corn and rice would be subject to control in vulnerable soils
This discrimination by crop and soil could be implemented using a land use tax adapted to
crop and soil provided that the land tax has adequate cost efficiency and transaction costs
5 Conclusions
The evaluation of efficiency for alternative nitrogen abatement measures requires the
consideration of biophysical aspects such soil class and crop type The effects of selected
abatement measures have been examined through a dynamic model for corn production in
three different soils of the Flumen irrigation district in the Ebro basin This evaluation is
useful to rank different instruments by their efficiency as a contribution to the policy
decision process The results agree with previous literature and indicate that a fertilizer
standard is the more efficient second best measure to control nitrogen pollution
6 As indicated above the emission tax instrument is linked to a subsidy equal to optimal nitrogen damage cost Therefore quasi-rent under the emission tax is above quasi-rent under the base scenario
15
The observed farmer behavior differs from the optimal solution of the model under
the base scenario because there is an excess input utilization that aggravates the nitrogen
pollution problem in the district Alternative emissions reduction measures have been
simulated and compared to the base scenario
An increase in water prices reduces only slightly nitrogen discharges at very large costs
to farmers and society A tax on nitrogen utilization results in more significant pollution
reduction at much lower costs A standard on nitrogen application curbs emissions by
more than half with a very moderate impact on quasi-rent and gains in welfare The
introduction of subsidies linked to the standard could be a good second best alternative to
achieve nitrogen pollution control
The original contribution of this study is the following a quantitative assessment has
been performed that demonstrates that abatement measures may be taken only in
vulnerable soils with crops that have high pollution potential So the results show that
differentiating the application of control by soil type enhances welfare although this
welfare gain from a differentiated standard is small compared with an homogeneous
standard in the case of corn An important question for the choice of the correct pollution
control instrument is related with the implementation costs of the instrument The more
suitable measures are associated with implementation difficulties and policy makers should
evaluate the trade-off between cost-efficiency and implementation simplicity
Acknowledgements
Support for this research was provided by projects CICYT AGL2001-2333-C02 and
INIA RTA02-090 from the Spanish Ministry of Science and Technology The INIA
funded also research contacts with the Department of Agricultural Economics of the
University of Newcastle upon Tyne This study was made possible by the technical
assistance of Joseacute Cavero Jesuacutes Noguumles Dolores Quilez Juan Herrero and Auxi Casterad
from the Laboratorio Asociado de Agronomiacutea y Medio Ambiente (CSIC-CITA Aula Dei
Campus Zaragoza)
16
References Albiac J Uche J Valero A Serra L Meyer A Tapia J 2003 The Economic
Unsustainability of the Spanish National Hydrologic Plan International Journal of Water Resources Development 19 (3) 437-458
Casterad A Herrero J 2003 Irrivol database Unidad de Suelos y Riegos Servicio de Investigacioacuten Agroalimentaria Gobierno de Aragoacuten Zaragoza
Confederacioacuten Hidrograacutefica del Ebro 2003 Water quality data series CHE Ministerio de Medio Ambiente Zaragoza Available at wwwchebroes
Gobierno de Aragoacuten 1999 Base de datos 1T de superficie de cultivos por teacutermino municipal para Aragoacuten 1987-99 Servicio de Estudios y Planificacioacuten Secretariacutea General Teacutecnica Departamento de Agricultura Gobierno de Aragoacuten Zaragoza
Feijooacute M Calvo E Albiac J 2000 Economic and environmental policy analysis of the Flumen-Monegros irrigation system in Huesca Spain Geographical Analysis 32 (3) 187-204
Hanemann M 2003 Economics Findings and Recommendations Appendix C Economics In Horne A Dracup J Hanemann M Rodriguez-Iturbe I Means E Roth J (The US Technical Team) A Technical Review of the Spanish National Hydrological Plan (Ebro River Out-of-basin Diversion) Fundacioacuten Universidad Politeacutecnica de Cartagena University of Cartagena Cartagena
Helfand G House B 1995 Regulating Nonpoint Source Pollution Under Heterogeneous Conditions American Journal of Agricultural Economics 77 1024-1032
Howitt R 2003 A Review of Economic Hydrologic Planning Pertaining to the Ebro River Transfer Proposal In Biswas A (Ed) Spanish National Hydrologic Plan Reports of International Experts Gobierno de Aragoacuten Zaragoza
Johnson S Adams R Perry G 1991 The On-Farm Costs of Reducing Groundwater Pollution American Journal of Agricultural Economics 73 1063-1073
Khanna M Isik M Zilberman D 2000 Incentive-based Policies for Conservation Technology Adoption Implications for Pollution and Output Paper presented at the annual meeting of the American Agricultural of Economics Association Tampa Florida
Knickel K 1998 First Results of Model Calculations In Gazzola L Roest K (Eds) Economic Instruments for Nitrogen Control in European Agriculture Research Center on Animal Production Reggio Emilia
Mapp H Bernardo D Sabbagh S Geleta S Watkins K 1994 Economic and Environmental Impacts of Limiting Nitrogen Use to Protect Water Quality A Stochastic Regional Analysis American Journal of Agricultural Economics 76 889-903
Martiacutenez Y Uku S Albiac J 2001 El control de la contaminacioacuten por nitratos en el regadiacuteo Economiacutea Agraria y Recursos Naturales 2 (2) 115-131
Martiacutenez Y 2002 Anaacutelisis econoacutemico y ambiental de la contaminacioacuten por nitratos en el regadiacuteo Doctoral dissertation Department of Economic Analysis University of Zaragoza Zaragoza
Miettinen A 1993 The Effectiveness and Feasibility of Economic Incentives of Input Control in the Mitigation of Agricultural Water Pollution Agricultural Science in Finland 2 453-464
Ministerio de Agricultura Pesca y Alimentacioacuten 1999 Anuario de Estadiacutestica Agraria MAPA Madrid
Ministerio de Agricultura Pesca y Alimentacioacuten 2000 Hechos y Cifras del Sector Agroalimentario Espantildeol 2000 Secretariacutea General Teacutecnica MAPA Madrid
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
5
Figure 2 Map of corn by soil type in the Flumen-Monegros irrigation district
Source Casterad and Herrero (2003)
6
Figure 2 Nitrate pollution from the irrigation district (1982-2002)
Flumen at Sarintildeena
0
5
10
15
20
25
30
35
40
45
50
Period
Nit
rate
con
cent
rati
on m
gl
Source CHE (2003)
district The time series include 42 observations for the 1982-2002 period with one day
nitrate concentration measurements in January and September of each year These data
show that nitrate concentration levels throughout the period move between 15 and 30 mg
NO3l with extreme values reaching 35 and 10 mgl in some periods
3 Methodology
The study analyzes the effects of several pollution control policy measures on corn
crop in a dynamic context The economic model developed includes a pollution function
that allows to assess the importance of water pollution due to agricultural activities in the
Flumen-Monegros irrigation district of the Ebro Basin in Spain
Corn yield functions and nitrate pollution functions by soil type have been estimated
using the EPIC crop growth package (Mitchell et al 1998) incorporating local information
on climate soils and tillage and operation activities The procedure consist in generating
with the package yield and leaching data series for different levels of water and nitrogen
fertilization in order to estimate the yield and pollution functions The corn yield response
function and the pollution function are then used to define the dynamic model that is
driven by the control variables water and nitrogen fertilization The EPIC simulator has
been validated in the study area after calibration using survey information from farmers
7
and corn field experimental data on yields and nitrogen leaching (Saad and Quiacutelez 1998
Saad 1999)
31 Dynamic model
The problem is stated as the maximization of welfare from corn production and
welfare is the sum of corn quasi-rent and the damage cost of nitrogen leaching In absence
of nitrogen pollution measures farmers maximize the private corn quasi-rent selecting the
amount of nitrogen fertilizer and irrigation throughout the time planning horizon (t = 1hellip
T) subject to the dynamics of nitrogen content in the soil Under discrete time the model
is the following
[ ] sum=
sdotλminus+minusminusminussdot+
T
1tttntxtyt
nx)le()sknpxpyp(
)r1(1
Maxtt
[1]
subject to
tttttt uvlengg minusminusminus+=+1 [2]
The objective function has two components the first term in parenthesis is quasi-rent
and the second term λ let is the damage cost from nitrogen leaching The sum is social
welfare through the planning horizon from corn production activities The constraint
captures the dynamics of soil nitrogen content and is defined as the balance of nitrogen
entering and leaving the soil Quasi-rent is equal to revenue minus variable and fixed costs
of corn per hectare1 and nitrogen damage is defined as a linear function of leaching
The constraint equation [2] is the motion equation for nitrogen in soil or soil nitrogen
balance Soil nitrogen in period t+1 is equal to nitrogen in period t plus fertilization minus
leaching volatilization and nitrogen uptake by corn The inclusion of the stock of nitrogen
in the soil is a key feature in order to represent the dynamic relationships among time
periods In absence of intertemporal relations the nitrogen stock in the soil yields and
nitrogen leaching would be static and constant for all periods This dynamic aspect is
crucial to adequately represent the biophysic processes leading to nitrogen pollution
Corn yield and leaching are assumed to be quadratic functions of water applied
nitrogen fertilization and the stock of nitrogen in soil The corn yield function is defined as
1 Costs include direct and indirect expenditures costs from hired labor and machinery and amortization Water and nitrogen costs are shown separately in the objective function
8
Table 3 Estimated yield and pollution functions by soil type
Under the second scenario the price of active nitrogen increases from 06 eurokg to 09
and 12 eurokg These higher nitrogen prices diminish the water and fertilizer application less
than the water price increase For Planteros and Corraletes soils the leaching reduction is
larger than under the higher water prices scenario but not for Chacilla soil A 12 eurokg
nitrogen price reduces nitrogen emissions 63 kgha for Corraletes-type soil 30 kgha for
Planteros and only 8 kgha for Chacillan For the whole district welfare losses are
between 023 and 045 million euros much lower than taxing water and with a much larger
leaching abatement Therefore a tax on nitrogen is more cost efficient than a tax on water
The third scenario introduces a limit or standard on applied nitrogen which is fixed at
250 kgha following the Extension Service recommendations (Oruacutes et al 2000) This
instrument is similar to the Code of Good Agricultural Practices established by the
European Nitrate Directive and the advantage of this measure is that costs to farmers in
terms of quasi-rent are reasonable and there are welfare gains for society in Planteros and
Corraletes soils Leaching abatement is above 40 percent in every soil and quasi-rent losses
are always below 5 percent This is a second best type of instrument and our results show
that the cost-efficiency is superior to taxes on inputs because the large abatement of
nitrogen emissions and the moderate reduction in quasi-rent Welfare increases under the
standard for the whole district (Table 5) although the standard reduces welfare in Chacilla
soils indicating that no standard is needed in this soil
The main obstacle to implement a quantitative limit is the difficulty to control
farmer compliance The introduction of a subsidy system for farmers who reduce fertilizer
application is a method to implement the standard provided that subsidies are coupled
with emissions verification These controls could be implemented and enforced by
irrigation user associations through measurement of nitrogen content in return water flow
canals Another method of implementing the standard is licensing fertilizer application to a
12
specialist a figure known as ldquoenvironmental doctorrdquo The measure of establishing a
standard has been recommended in the literature (Knickel 1998 Miettinen 1998 Weinberg
y Wilen 2000) and in studies analyzing the same irrigation district by Martiacutenez et al (2001)
and Martiacutenez (2002)
The last scenario considers the first best instrument of taxing nitrogen emissions
with a unit emission cost equal to 123 eurokg that has been chosen equal to the cost of
eliminating nitrogen from water The quasi-rent for this instrument is calculated assuming
that the social planner gives the farmer a subsidy equal to the optimal nitrogen damage
cost provided that pollution is at the social optimum The tax causes a strong leaching
reduction diminishing pollution levels by soil type between 10 and 60 percent Farmer
quasi-rent increases so farmers will embrace this solution provided that the
implementation was feasible
A ranking of policy measures can be defined by comparing the welfare effects of each
measure for the whole irrigation district by soil type (Table 5) The first best measure of
taxing emissions increases welfare in the district by 032 million euro Among the second
best measures a standard on nitrogen application also increases welfare by 007 million
euro while taxes on nitrogen fertilizer reduce welfare between 023 and 045 million euro
Higher water prices are very inefficient since welfare falls between 091 and 143 million
euro with an almost negligible leaching abatement below 4 percent This finding is
important because the recently approved Water Framework Directive of the European
Union relies heavily on higher water prices called full recovery cost in order to reach
ldquogood statusrdquo for all waters
An issue that could modify the effects presented here is that the introduction of
control measures may induce changes in the relative profitability of different crops and
farmers may respond expanding the more profitable crops This question was examined in
the study area by Martiacutenez el al (2001) for a standard limiting nitrogen application The
acreage substitution effect was moderate for all crops and in the case of corn the fall in
acreage was 03 percent
In accordance with the results presented here the studies by Pan and Hodge (1994)
and Johnson et al (1991) find that an emission tax equal to the cost of nitrogen removal is
the social optimum measure Jonhson el al (1991) evaluate the cost of the emission tax at 5
percent of quasi-rent with an emission reduction above 30 percent Other studies
examining nitrogen standards by Mapp et al (1994) in USA and Schmid (2001) in Austria
find that the abatement costs to reduce nitrogen leaching are somewhat higher than the
13
costs calculated here2 Mapp et al recommend a standard that reduces leaching by 67
percent at a cost of 22 percent of quasi-rent and Schmid states that a standard reduces
leaching between 40 and 90 percent at a cost to farmers between 5 and 14 percent of quasi-
rent Martiacutenez (2002) calculates a 2 percent loss of quasi-rent to curb leaching by 44
percent assuming homogeneous soil
Helfand and House (1995) examine the cost-efficiency of control measures under two
soil types in the case of lettuce production in order to abate nitrogen leaching by 20
percent Their findings are that quasi-rent losses derived from using uniform instruments
are small so perfect instruments are not necessary and may entail significant transaction
costs3 They indicate also that a nitrogen tax and a nitrogen standard are both very
inefficient measures which have very high welfare costs a finding contrary to the results
obtained here for corn Our results indicate that a nitrogen standard is the second best
preferred measure in accordance with economic theory and most of the empirical
literature Also our empirical evidence indicates that a tax on nitrogen is much more cost
efficient than a tax on water The finding on the nitrogen standard efficiency by Helfand
and House is questionable because the dynamic aspect of nitrogen content in the soil is
not considered When the level of nitrogen input changes the nitrogen content in the soil
adjust over several periods They force a 20 percent leaching abatement within the
production period reducing nitrogen fertilization by 90 percent so costs of a nitrogen
standard or a tax are prohibitive In contrast our results indicate that the standard reduces
nitrogen fertilization in the district by 20 percent abating leaching by more than half4 As
indicated above a tax of water is a very inefficient measure in our case with leaching
abatement below 4 percent and very high costs in terms of quasi-rent and welfare
Thomas and Boisvert (1994) simulate the introduction of a market for nitrogen
pollution permits and estimate that a permit price reducing 10 percent nitrogen emissions
reduces gross income by 15 percent5 This pollution permit instrument can be compared
with the emission tax examined here The cost calculated by these authors is much higher
2 For the whole district the nitrogen standard abates leaching by 176 tons (-52) with a cost of 015 million euro (-37) in quasi-rent 3 The loss of quasi-rent for any uniform measure is below 2 percent compared with 016 losses under a first-best heterogeneous measure 4 For the whole district nitrogen fertilization is 1020 tons and the standard reduces fertilization by 212 tons These figures come from table 4 and corn acreage by soil 5 Thomas and Boisvert (1994) use a procedure different from the present study They consider nitrogen pollution as a fraction of the remaining nitrogen that is not taken by the plant or degraded by denitrification
14
than the cost obtained in table 5 for an emission tax which abates leaching by 50 percent
in the region increasing welfare and quasi-rent6
The results of the present study on nitrate pollution control under soil heterogeneity
indicate the possibility of differentiating application of control by soil type The preferred
second best instrument is a standard but the instrument will be applied only in vulnerable
soils Corn leaching in Chacilla soils is only 45 kgha which is below the leaching levels in
the other soil types applying any abatement measure An alternative for nitrogen leaching
control would be to implement control instruments only in Planteros and Corraletes soils
which have high pollution potential For the whole district implementing a nitrogen
standard in Planteros and Corraletes soils but not in Chacilla improves welfare by 1
percent over a homogeneous nitrogen standard in the district This small loss in welfare
from using a homogeneous instead of an heterogeneous standard confirms the finding by
Helfand and House (1995) that losses from uniform instruments are small and perfect
instruments are not necessary
Discrimination of control measures could depend also on the particular crop planted
so control could be linked to the land use decision by the farmer for each soil type
Information on nitrogen leaching in the district indicates that wheat barley sunflower and
alfalfa have all leaching levels below 45 kgha in absence of abatement measures (Martiacutenez
2002) so these crops would not be subject to abatement while other more polluting crop
production activities such as corn and rice would be subject to control in vulnerable soils
This discrimination by crop and soil could be implemented using a land use tax adapted to
crop and soil provided that the land tax has adequate cost efficiency and transaction costs
5 Conclusions
The evaluation of efficiency for alternative nitrogen abatement measures requires the
consideration of biophysical aspects such soil class and crop type The effects of selected
abatement measures have been examined through a dynamic model for corn production in
three different soils of the Flumen irrigation district in the Ebro basin This evaluation is
useful to rank different instruments by their efficiency as a contribution to the policy
decision process The results agree with previous literature and indicate that a fertilizer
standard is the more efficient second best measure to control nitrogen pollution
6 As indicated above the emission tax instrument is linked to a subsidy equal to optimal nitrogen damage cost Therefore quasi-rent under the emission tax is above quasi-rent under the base scenario
15
The observed farmer behavior differs from the optimal solution of the model under
the base scenario because there is an excess input utilization that aggravates the nitrogen
pollution problem in the district Alternative emissions reduction measures have been
simulated and compared to the base scenario
An increase in water prices reduces only slightly nitrogen discharges at very large costs
to farmers and society A tax on nitrogen utilization results in more significant pollution
reduction at much lower costs A standard on nitrogen application curbs emissions by
more than half with a very moderate impact on quasi-rent and gains in welfare The
introduction of subsidies linked to the standard could be a good second best alternative to
achieve nitrogen pollution control
The original contribution of this study is the following a quantitative assessment has
been performed that demonstrates that abatement measures may be taken only in
vulnerable soils with crops that have high pollution potential So the results show that
differentiating the application of control by soil type enhances welfare although this
welfare gain from a differentiated standard is small compared with an homogeneous
standard in the case of corn An important question for the choice of the correct pollution
control instrument is related with the implementation costs of the instrument The more
suitable measures are associated with implementation difficulties and policy makers should
evaluate the trade-off between cost-efficiency and implementation simplicity
Acknowledgements
Support for this research was provided by projects CICYT AGL2001-2333-C02 and
INIA RTA02-090 from the Spanish Ministry of Science and Technology The INIA
funded also research contacts with the Department of Agricultural Economics of the
University of Newcastle upon Tyne This study was made possible by the technical
assistance of Joseacute Cavero Jesuacutes Noguumles Dolores Quilez Juan Herrero and Auxi Casterad
from the Laboratorio Asociado de Agronomiacutea y Medio Ambiente (CSIC-CITA Aula Dei
Campus Zaragoza)
16
References Albiac J Uche J Valero A Serra L Meyer A Tapia J 2003 The Economic
Unsustainability of the Spanish National Hydrologic Plan International Journal of Water Resources Development 19 (3) 437-458
Casterad A Herrero J 2003 Irrivol database Unidad de Suelos y Riegos Servicio de Investigacioacuten Agroalimentaria Gobierno de Aragoacuten Zaragoza
Confederacioacuten Hidrograacutefica del Ebro 2003 Water quality data series CHE Ministerio de Medio Ambiente Zaragoza Available at wwwchebroes
Gobierno de Aragoacuten 1999 Base de datos 1T de superficie de cultivos por teacutermino municipal para Aragoacuten 1987-99 Servicio de Estudios y Planificacioacuten Secretariacutea General Teacutecnica Departamento de Agricultura Gobierno de Aragoacuten Zaragoza
Feijooacute M Calvo E Albiac J 2000 Economic and environmental policy analysis of the Flumen-Monegros irrigation system in Huesca Spain Geographical Analysis 32 (3) 187-204
Hanemann M 2003 Economics Findings and Recommendations Appendix C Economics In Horne A Dracup J Hanemann M Rodriguez-Iturbe I Means E Roth J (The US Technical Team) A Technical Review of the Spanish National Hydrological Plan (Ebro River Out-of-basin Diversion) Fundacioacuten Universidad Politeacutecnica de Cartagena University of Cartagena Cartagena
Helfand G House B 1995 Regulating Nonpoint Source Pollution Under Heterogeneous Conditions American Journal of Agricultural Economics 77 1024-1032
Howitt R 2003 A Review of Economic Hydrologic Planning Pertaining to the Ebro River Transfer Proposal In Biswas A (Ed) Spanish National Hydrologic Plan Reports of International Experts Gobierno de Aragoacuten Zaragoza
Johnson S Adams R Perry G 1991 The On-Farm Costs of Reducing Groundwater Pollution American Journal of Agricultural Economics 73 1063-1073
Khanna M Isik M Zilberman D 2000 Incentive-based Policies for Conservation Technology Adoption Implications for Pollution and Output Paper presented at the annual meeting of the American Agricultural of Economics Association Tampa Florida
Knickel K 1998 First Results of Model Calculations In Gazzola L Roest K (Eds) Economic Instruments for Nitrogen Control in European Agriculture Research Center on Animal Production Reggio Emilia
Mapp H Bernardo D Sabbagh S Geleta S Watkins K 1994 Economic and Environmental Impacts of Limiting Nitrogen Use to Protect Water Quality A Stochastic Regional Analysis American Journal of Agricultural Economics 76 889-903
Martiacutenez Y Uku S Albiac J 2001 El control de la contaminacioacuten por nitratos en el regadiacuteo Economiacutea Agraria y Recursos Naturales 2 (2) 115-131
Martiacutenez Y 2002 Anaacutelisis econoacutemico y ambiental de la contaminacioacuten por nitratos en el regadiacuteo Doctoral dissertation Department of Economic Analysis University of Zaragoza Zaragoza
Miettinen A 1993 The Effectiveness and Feasibility of Economic Incentives of Input Control in the Mitigation of Agricultural Water Pollution Agricultural Science in Finland 2 453-464
Ministerio de Agricultura Pesca y Alimentacioacuten 1999 Anuario de Estadiacutestica Agraria MAPA Madrid
Ministerio de Agricultura Pesca y Alimentacioacuten 2000 Hechos y Cifras del Sector Agroalimentario Espantildeol 2000 Secretariacutea General Teacutecnica MAPA Madrid
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
6
Figure 2 Nitrate pollution from the irrigation district (1982-2002)
Flumen at Sarintildeena
0
5
10
15
20
25
30
35
40
45
50
Period
Nit
rate
con
cent
rati
on m
gl
Source CHE (2003)
district The time series include 42 observations for the 1982-2002 period with one day
nitrate concentration measurements in January and September of each year These data
show that nitrate concentration levels throughout the period move between 15 and 30 mg
NO3l with extreme values reaching 35 and 10 mgl in some periods
3 Methodology
The study analyzes the effects of several pollution control policy measures on corn
crop in a dynamic context The economic model developed includes a pollution function
that allows to assess the importance of water pollution due to agricultural activities in the
Flumen-Monegros irrigation district of the Ebro Basin in Spain
Corn yield functions and nitrate pollution functions by soil type have been estimated
using the EPIC crop growth package (Mitchell et al 1998) incorporating local information
on climate soils and tillage and operation activities The procedure consist in generating
with the package yield and leaching data series for different levels of water and nitrogen
fertilization in order to estimate the yield and pollution functions The corn yield response
function and the pollution function are then used to define the dynamic model that is
driven by the control variables water and nitrogen fertilization The EPIC simulator has
been validated in the study area after calibration using survey information from farmers
7
and corn field experimental data on yields and nitrogen leaching (Saad and Quiacutelez 1998
Saad 1999)
31 Dynamic model
The problem is stated as the maximization of welfare from corn production and
welfare is the sum of corn quasi-rent and the damage cost of nitrogen leaching In absence
of nitrogen pollution measures farmers maximize the private corn quasi-rent selecting the
amount of nitrogen fertilizer and irrigation throughout the time planning horizon (t = 1hellip
T) subject to the dynamics of nitrogen content in the soil Under discrete time the model
is the following
[ ] sum=
sdotλminus+minusminusminussdot+
T
1tttntxtyt
nx)le()sknpxpyp(
)r1(1
Maxtt
[1]
subject to
tttttt uvlengg minusminusminus+=+1 [2]
The objective function has two components the first term in parenthesis is quasi-rent
and the second term λ let is the damage cost from nitrogen leaching The sum is social
welfare through the planning horizon from corn production activities The constraint
captures the dynamics of soil nitrogen content and is defined as the balance of nitrogen
entering and leaving the soil Quasi-rent is equal to revenue minus variable and fixed costs
of corn per hectare1 and nitrogen damage is defined as a linear function of leaching
The constraint equation [2] is the motion equation for nitrogen in soil or soil nitrogen
balance Soil nitrogen in period t+1 is equal to nitrogen in period t plus fertilization minus
leaching volatilization and nitrogen uptake by corn The inclusion of the stock of nitrogen
in the soil is a key feature in order to represent the dynamic relationships among time
periods In absence of intertemporal relations the nitrogen stock in the soil yields and
nitrogen leaching would be static and constant for all periods This dynamic aspect is
crucial to adequately represent the biophysic processes leading to nitrogen pollution
Corn yield and leaching are assumed to be quadratic functions of water applied
nitrogen fertilization and the stock of nitrogen in soil The corn yield function is defined as
1 Costs include direct and indirect expenditures costs from hired labor and machinery and amortization Water and nitrogen costs are shown separately in the objective function
8
Table 3 Estimated yield and pollution functions by soil type
Under the second scenario the price of active nitrogen increases from 06 eurokg to 09
and 12 eurokg These higher nitrogen prices diminish the water and fertilizer application less
than the water price increase For Planteros and Corraletes soils the leaching reduction is
larger than under the higher water prices scenario but not for Chacilla soil A 12 eurokg
nitrogen price reduces nitrogen emissions 63 kgha for Corraletes-type soil 30 kgha for
Planteros and only 8 kgha for Chacillan For the whole district welfare losses are
between 023 and 045 million euros much lower than taxing water and with a much larger
leaching abatement Therefore a tax on nitrogen is more cost efficient than a tax on water
The third scenario introduces a limit or standard on applied nitrogen which is fixed at
250 kgha following the Extension Service recommendations (Oruacutes et al 2000) This
instrument is similar to the Code of Good Agricultural Practices established by the
European Nitrate Directive and the advantage of this measure is that costs to farmers in
terms of quasi-rent are reasonable and there are welfare gains for society in Planteros and
Corraletes soils Leaching abatement is above 40 percent in every soil and quasi-rent losses
are always below 5 percent This is a second best type of instrument and our results show
that the cost-efficiency is superior to taxes on inputs because the large abatement of
nitrogen emissions and the moderate reduction in quasi-rent Welfare increases under the
standard for the whole district (Table 5) although the standard reduces welfare in Chacilla
soils indicating that no standard is needed in this soil
The main obstacle to implement a quantitative limit is the difficulty to control
farmer compliance The introduction of a subsidy system for farmers who reduce fertilizer
application is a method to implement the standard provided that subsidies are coupled
with emissions verification These controls could be implemented and enforced by
irrigation user associations through measurement of nitrogen content in return water flow
canals Another method of implementing the standard is licensing fertilizer application to a
12
specialist a figure known as ldquoenvironmental doctorrdquo The measure of establishing a
standard has been recommended in the literature (Knickel 1998 Miettinen 1998 Weinberg
y Wilen 2000) and in studies analyzing the same irrigation district by Martiacutenez et al (2001)
and Martiacutenez (2002)
The last scenario considers the first best instrument of taxing nitrogen emissions
with a unit emission cost equal to 123 eurokg that has been chosen equal to the cost of
eliminating nitrogen from water The quasi-rent for this instrument is calculated assuming
that the social planner gives the farmer a subsidy equal to the optimal nitrogen damage
cost provided that pollution is at the social optimum The tax causes a strong leaching
reduction diminishing pollution levels by soil type between 10 and 60 percent Farmer
quasi-rent increases so farmers will embrace this solution provided that the
implementation was feasible
A ranking of policy measures can be defined by comparing the welfare effects of each
measure for the whole irrigation district by soil type (Table 5) The first best measure of
taxing emissions increases welfare in the district by 032 million euro Among the second
best measures a standard on nitrogen application also increases welfare by 007 million
euro while taxes on nitrogen fertilizer reduce welfare between 023 and 045 million euro
Higher water prices are very inefficient since welfare falls between 091 and 143 million
euro with an almost negligible leaching abatement below 4 percent This finding is
important because the recently approved Water Framework Directive of the European
Union relies heavily on higher water prices called full recovery cost in order to reach
ldquogood statusrdquo for all waters
An issue that could modify the effects presented here is that the introduction of
control measures may induce changes in the relative profitability of different crops and
farmers may respond expanding the more profitable crops This question was examined in
the study area by Martiacutenez el al (2001) for a standard limiting nitrogen application The
acreage substitution effect was moderate for all crops and in the case of corn the fall in
acreage was 03 percent
In accordance with the results presented here the studies by Pan and Hodge (1994)
and Johnson et al (1991) find that an emission tax equal to the cost of nitrogen removal is
the social optimum measure Jonhson el al (1991) evaluate the cost of the emission tax at 5
percent of quasi-rent with an emission reduction above 30 percent Other studies
examining nitrogen standards by Mapp et al (1994) in USA and Schmid (2001) in Austria
find that the abatement costs to reduce nitrogen leaching are somewhat higher than the
13
costs calculated here2 Mapp et al recommend a standard that reduces leaching by 67
percent at a cost of 22 percent of quasi-rent and Schmid states that a standard reduces
leaching between 40 and 90 percent at a cost to farmers between 5 and 14 percent of quasi-
rent Martiacutenez (2002) calculates a 2 percent loss of quasi-rent to curb leaching by 44
percent assuming homogeneous soil
Helfand and House (1995) examine the cost-efficiency of control measures under two
soil types in the case of lettuce production in order to abate nitrogen leaching by 20
percent Their findings are that quasi-rent losses derived from using uniform instruments
are small so perfect instruments are not necessary and may entail significant transaction
costs3 They indicate also that a nitrogen tax and a nitrogen standard are both very
inefficient measures which have very high welfare costs a finding contrary to the results
obtained here for corn Our results indicate that a nitrogen standard is the second best
preferred measure in accordance with economic theory and most of the empirical
literature Also our empirical evidence indicates that a tax on nitrogen is much more cost
efficient than a tax on water The finding on the nitrogen standard efficiency by Helfand
and House is questionable because the dynamic aspect of nitrogen content in the soil is
not considered When the level of nitrogen input changes the nitrogen content in the soil
adjust over several periods They force a 20 percent leaching abatement within the
production period reducing nitrogen fertilization by 90 percent so costs of a nitrogen
standard or a tax are prohibitive In contrast our results indicate that the standard reduces
nitrogen fertilization in the district by 20 percent abating leaching by more than half4 As
indicated above a tax of water is a very inefficient measure in our case with leaching
abatement below 4 percent and very high costs in terms of quasi-rent and welfare
Thomas and Boisvert (1994) simulate the introduction of a market for nitrogen
pollution permits and estimate that a permit price reducing 10 percent nitrogen emissions
reduces gross income by 15 percent5 This pollution permit instrument can be compared
with the emission tax examined here The cost calculated by these authors is much higher
2 For the whole district the nitrogen standard abates leaching by 176 tons (-52) with a cost of 015 million euro (-37) in quasi-rent 3 The loss of quasi-rent for any uniform measure is below 2 percent compared with 016 losses under a first-best heterogeneous measure 4 For the whole district nitrogen fertilization is 1020 tons and the standard reduces fertilization by 212 tons These figures come from table 4 and corn acreage by soil 5 Thomas and Boisvert (1994) use a procedure different from the present study They consider nitrogen pollution as a fraction of the remaining nitrogen that is not taken by the plant or degraded by denitrification
14
than the cost obtained in table 5 for an emission tax which abates leaching by 50 percent
in the region increasing welfare and quasi-rent6
The results of the present study on nitrate pollution control under soil heterogeneity
indicate the possibility of differentiating application of control by soil type The preferred
second best instrument is a standard but the instrument will be applied only in vulnerable
soils Corn leaching in Chacilla soils is only 45 kgha which is below the leaching levels in
the other soil types applying any abatement measure An alternative for nitrogen leaching
control would be to implement control instruments only in Planteros and Corraletes soils
which have high pollution potential For the whole district implementing a nitrogen
standard in Planteros and Corraletes soils but not in Chacilla improves welfare by 1
percent over a homogeneous nitrogen standard in the district This small loss in welfare
from using a homogeneous instead of an heterogeneous standard confirms the finding by
Helfand and House (1995) that losses from uniform instruments are small and perfect
instruments are not necessary
Discrimination of control measures could depend also on the particular crop planted
so control could be linked to the land use decision by the farmer for each soil type
Information on nitrogen leaching in the district indicates that wheat barley sunflower and
alfalfa have all leaching levels below 45 kgha in absence of abatement measures (Martiacutenez
2002) so these crops would not be subject to abatement while other more polluting crop
production activities such as corn and rice would be subject to control in vulnerable soils
This discrimination by crop and soil could be implemented using a land use tax adapted to
crop and soil provided that the land tax has adequate cost efficiency and transaction costs
5 Conclusions
The evaluation of efficiency for alternative nitrogen abatement measures requires the
consideration of biophysical aspects such soil class and crop type The effects of selected
abatement measures have been examined through a dynamic model for corn production in
three different soils of the Flumen irrigation district in the Ebro basin This evaluation is
useful to rank different instruments by their efficiency as a contribution to the policy
decision process The results agree with previous literature and indicate that a fertilizer
standard is the more efficient second best measure to control nitrogen pollution
6 As indicated above the emission tax instrument is linked to a subsidy equal to optimal nitrogen damage cost Therefore quasi-rent under the emission tax is above quasi-rent under the base scenario
15
The observed farmer behavior differs from the optimal solution of the model under
the base scenario because there is an excess input utilization that aggravates the nitrogen
pollution problem in the district Alternative emissions reduction measures have been
simulated and compared to the base scenario
An increase in water prices reduces only slightly nitrogen discharges at very large costs
to farmers and society A tax on nitrogen utilization results in more significant pollution
reduction at much lower costs A standard on nitrogen application curbs emissions by
more than half with a very moderate impact on quasi-rent and gains in welfare The
introduction of subsidies linked to the standard could be a good second best alternative to
achieve nitrogen pollution control
The original contribution of this study is the following a quantitative assessment has
been performed that demonstrates that abatement measures may be taken only in
vulnerable soils with crops that have high pollution potential So the results show that
differentiating the application of control by soil type enhances welfare although this
welfare gain from a differentiated standard is small compared with an homogeneous
standard in the case of corn An important question for the choice of the correct pollution
control instrument is related with the implementation costs of the instrument The more
suitable measures are associated with implementation difficulties and policy makers should
evaluate the trade-off between cost-efficiency and implementation simplicity
Acknowledgements
Support for this research was provided by projects CICYT AGL2001-2333-C02 and
INIA RTA02-090 from the Spanish Ministry of Science and Technology The INIA
funded also research contacts with the Department of Agricultural Economics of the
University of Newcastle upon Tyne This study was made possible by the technical
assistance of Joseacute Cavero Jesuacutes Noguumles Dolores Quilez Juan Herrero and Auxi Casterad
from the Laboratorio Asociado de Agronomiacutea y Medio Ambiente (CSIC-CITA Aula Dei
Campus Zaragoza)
16
References Albiac J Uche J Valero A Serra L Meyer A Tapia J 2003 The Economic
Unsustainability of the Spanish National Hydrologic Plan International Journal of Water Resources Development 19 (3) 437-458
Casterad A Herrero J 2003 Irrivol database Unidad de Suelos y Riegos Servicio de Investigacioacuten Agroalimentaria Gobierno de Aragoacuten Zaragoza
Confederacioacuten Hidrograacutefica del Ebro 2003 Water quality data series CHE Ministerio de Medio Ambiente Zaragoza Available at wwwchebroes
Gobierno de Aragoacuten 1999 Base de datos 1T de superficie de cultivos por teacutermino municipal para Aragoacuten 1987-99 Servicio de Estudios y Planificacioacuten Secretariacutea General Teacutecnica Departamento de Agricultura Gobierno de Aragoacuten Zaragoza
Feijooacute M Calvo E Albiac J 2000 Economic and environmental policy analysis of the Flumen-Monegros irrigation system in Huesca Spain Geographical Analysis 32 (3) 187-204
Hanemann M 2003 Economics Findings and Recommendations Appendix C Economics In Horne A Dracup J Hanemann M Rodriguez-Iturbe I Means E Roth J (The US Technical Team) A Technical Review of the Spanish National Hydrological Plan (Ebro River Out-of-basin Diversion) Fundacioacuten Universidad Politeacutecnica de Cartagena University of Cartagena Cartagena
Helfand G House B 1995 Regulating Nonpoint Source Pollution Under Heterogeneous Conditions American Journal of Agricultural Economics 77 1024-1032
Howitt R 2003 A Review of Economic Hydrologic Planning Pertaining to the Ebro River Transfer Proposal In Biswas A (Ed) Spanish National Hydrologic Plan Reports of International Experts Gobierno de Aragoacuten Zaragoza
Johnson S Adams R Perry G 1991 The On-Farm Costs of Reducing Groundwater Pollution American Journal of Agricultural Economics 73 1063-1073
Khanna M Isik M Zilberman D 2000 Incentive-based Policies for Conservation Technology Adoption Implications for Pollution and Output Paper presented at the annual meeting of the American Agricultural of Economics Association Tampa Florida
Knickel K 1998 First Results of Model Calculations In Gazzola L Roest K (Eds) Economic Instruments for Nitrogen Control in European Agriculture Research Center on Animal Production Reggio Emilia
Mapp H Bernardo D Sabbagh S Geleta S Watkins K 1994 Economic and Environmental Impacts of Limiting Nitrogen Use to Protect Water Quality A Stochastic Regional Analysis American Journal of Agricultural Economics 76 889-903
Martiacutenez Y Uku S Albiac J 2001 El control de la contaminacioacuten por nitratos en el regadiacuteo Economiacutea Agraria y Recursos Naturales 2 (2) 115-131
Martiacutenez Y 2002 Anaacutelisis econoacutemico y ambiental de la contaminacioacuten por nitratos en el regadiacuteo Doctoral dissertation Department of Economic Analysis University of Zaragoza Zaragoza
Miettinen A 1993 The Effectiveness and Feasibility of Economic Incentives of Input Control in the Mitigation of Agricultural Water Pollution Agricultural Science in Finland 2 453-464
Ministerio de Agricultura Pesca y Alimentacioacuten 1999 Anuario de Estadiacutestica Agraria MAPA Madrid
Ministerio de Agricultura Pesca y Alimentacioacuten 2000 Hechos y Cifras del Sector Agroalimentario Espantildeol 2000 Secretariacutea General Teacutecnica MAPA Madrid
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
7
and corn field experimental data on yields and nitrogen leaching (Saad and Quiacutelez 1998
Saad 1999)
31 Dynamic model
The problem is stated as the maximization of welfare from corn production and
welfare is the sum of corn quasi-rent and the damage cost of nitrogen leaching In absence
of nitrogen pollution measures farmers maximize the private corn quasi-rent selecting the
amount of nitrogen fertilizer and irrigation throughout the time planning horizon (t = 1hellip
T) subject to the dynamics of nitrogen content in the soil Under discrete time the model
is the following
[ ] sum=
sdotλminus+minusminusminussdot+
T
1tttntxtyt
nx)le()sknpxpyp(
)r1(1
Maxtt
[1]
subject to
tttttt uvlengg minusminusminus+=+1 [2]
The objective function has two components the first term in parenthesis is quasi-rent
and the second term λ let is the damage cost from nitrogen leaching The sum is social
welfare through the planning horizon from corn production activities The constraint
captures the dynamics of soil nitrogen content and is defined as the balance of nitrogen
entering and leaving the soil Quasi-rent is equal to revenue minus variable and fixed costs
of corn per hectare1 and nitrogen damage is defined as a linear function of leaching
The constraint equation [2] is the motion equation for nitrogen in soil or soil nitrogen
balance Soil nitrogen in period t+1 is equal to nitrogen in period t plus fertilization minus
leaching volatilization and nitrogen uptake by corn The inclusion of the stock of nitrogen
in the soil is a key feature in order to represent the dynamic relationships among time
periods In absence of intertemporal relations the nitrogen stock in the soil yields and
nitrogen leaching would be static and constant for all periods This dynamic aspect is
crucial to adequately represent the biophysic processes leading to nitrogen pollution
Corn yield and leaching are assumed to be quadratic functions of water applied
nitrogen fertilization and the stock of nitrogen in soil The corn yield function is defined as
1 Costs include direct and indirect expenditures costs from hired labor and machinery and amortization Water and nitrogen costs are shown separately in the objective function
8
Table 3 Estimated yield and pollution functions by soil type
Under the second scenario the price of active nitrogen increases from 06 eurokg to 09
and 12 eurokg These higher nitrogen prices diminish the water and fertilizer application less
than the water price increase For Planteros and Corraletes soils the leaching reduction is
larger than under the higher water prices scenario but not for Chacilla soil A 12 eurokg
nitrogen price reduces nitrogen emissions 63 kgha for Corraletes-type soil 30 kgha for
Planteros and only 8 kgha for Chacillan For the whole district welfare losses are
between 023 and 045 million euros much lower than taxing water and with a much larger
leaching abatement Therefore a tax on nitrogen is more cost efficient than a tax on water
The third scenario introduces a limit or standard on applied nitrogen which is fixed at
250 kgha following the Extension Service recommendations (Oruacutes et al 2000) This
instrument is similar to the Code of Good Agricultural Practices established by the
European Nitrate Directive and the advantage of this measure is that costs to farmers in
terms of quasi-rent are reasonable and there are welfare gains for society in Planteros and
Corraletes soils Leaching abatement is above 40 percent in every soil and quasi-rent losses
are always below 5 percent This is a second best type of instrument and our results show
that the cost-efficiency is superior to taxes on inputs because the large abatement of
nitrogen emissions and the moderate reduction in quasi-rent Welfare increases under the
standard for the whole district (Table 5) although the standard reduces welfare in Chacilla
soils indicating that no standard is needed in this soil
The main obstacle to implement a quantitative limit is the difficulty to control
farmer compliance The introduction of a subsidy system for farmers who reduce fertilizer
application is a method to implement the standard provided that subsidies are coupled
with emissions verification These controls could be implemented and enforced by
irrigation user associations through measurement of nitrogen content in return water flow
canals Another method of implementing the standard is licensing fertilizer application to a
12
specialist a figure known as ldquoenvironmental doctorrdquo The measure of establishing a
standard has been recommended in the literature (Knickel 1998 Miettinen 1998 Weinberg
y Wilen 2000) and in studies analyzing the same irrigation district by Martiacutenez et al (2001)
and Martiacutenez (2002)
The last scenario considers the first best instrument of taxing nitrogen emissions
with a unit emission cost equal to 123 eurokg that has been chosen equal to the cost of
eliminating nitrogen from water The quasi-rent for this instrument is calculated assuming
that the social planner gives the farmer a subsidy equal to the optimal nitrogen damage
cost provided that pollution is at the social optimum The tax causes a strong leaching
reduction diminishing pollution levels by soil type between 10 and 60 percent Farmer
quasi-rent increases so farmers will embrace this solution provided that the
implementation was feasible
A ranking of policy measures can be defined by comparing the welfare effects of each
measure for the whole irrigation district by soil type (Table 5) The first best measure of
taxing emissions increases welfare in the district by 032 million euro Among the second
best measures a standard on nitrogen application also increases welfare by 007 million
euro while taxes on nitrogen fertilizer reduce welfare between 023 and 045 million euro
Higher water prices are very inefficient since welfare falls between 091 and 143 million
euro with an almost negligible leaching abatement below 4 percent This finding is
important because the recently approved Water Framework Directive of the European
Union relies heavily on higher water prices called full recovery cost in order to reach
ldquogood statusrdquo for all waters
An issue that could modify the effects presented here is that the introduction of
control measures may induce changes in the relative profitability of different crops and
farmers may respond expanding the more profitable crops This question was examined in
the study area by Martiacutenez el al (2001) for a standard limiting nitrogen application The
acreage substitution effect was moderate for all crops and in the case of corn the fall in
acreage was 03 percent
In accordance with the results presented here the studies by Pan and Hodge (1994)
and Johnson et al (1991) find that an emission tax equal to the cost of nitrogen removal is
the social optimum measure Jonhson el al (1991) evaluate the cost of the emission tax at 5
percent of quasi-rent with an emission reduction above 30 percent Other studies
examining nitrogen standards by Mapp et al (1994) in USA and Schmid (2001) in Austria
find that the abatement costs to reduce nitrogen leaching are somewhat higher than the
13
costs calculated here2 Mapp et al recommend a standard that reduces leaching by 67
percent at a cost of 22 percent of quasi-rent and Schmid states that a standard reduces
leaching between 40 and 90 percent at a cost to farmers between 5 and 14 percent of quasi-
rent Martiacutenez (2002) calculates a 2 percent loss of quasi-rent to curb leaching by 44
percent assuming homogeneous soil
Helfand and House (1995) examine the cost-efficiency of control measures under two
soil types in the case of lettuce production in order to abate nitrogen leaching by 20
percent Their findings are that quasi-rent losses derived from using uniform instruments
are small so perfect instruments are not necessary and may entail significant transaction
costs3 They indicate also that a nitrogen tax and a nitrogen standard are both very
inefficient measures which have very high welfare costs a finding contrary to the results
obtained here for corn Our results indicate that a nitrogen standard is the second best
preferred measure in accordance with economic theory and most of the empirical
literature Also our empirical evidence indicates that a tax on nitrogen is much more cost
efficient than a tax on water The finding on the nitrogen standard efficiency by Helfand
and House is questionable because the dynamic aspect of nitrogen content in the soil is
not considered When the level of nitrogen input changes the nitrogen content in the soil
adjust over several periods They force a 20 percent leaching abatement within the
production period reducing nitrogen fertilization by 90 percent so costs of a nitrogen
standard or a tax are prohibitive In contrast our results indicate that the standard reduces
nitrogen fertilization in the district by 20 percent abating leaching by more than half4 As
indicated above a tax of water is a very inefficient measure in our case with leaching
abatement below 4 percent and very high costs in terms of quasi-rent and welfare
Thomas and Boisvert (1994) simulate the introduction of a market for nitrogen
pollution permits and estimate that a permit price reducing 10 percent nitrogen emissions
reduces gross income by 15 percent5 This pollution permit instrument can be compared
with the emission tax examined here The cost calculated by these authors is much higher
2 For the whole district the nitrogen standard abates leaching by 176 tons (-52) with a cost of 015 million euro (-37) in quasi-rent 3 The loss of quasi-rent for any uniform measure is below 2 percent compared with 016 losses under a first-best heterogeneous measure 4 For the whole district nitrogen fertilization is 1020 tons and the standard reduces fertilization by 212 tons These figures come from table 4 and corn acreage by soil 5 Thomas and Boisvert (1994) use a procedure different from the present study They consider nitrogen pollution as a fraction of the remaining nitrogen that is not taken by the plant or degraded by denitrification
14
than the cost obtained in table 5 for an emission tax which abates leaching by 50 percent
in the region increasing welfare and quasi-rent6
The results of the present study on nitrate pollution control under soil heterogeneity
indicate the possibility of differentiating application of control by soil type The preferred
second best instrument is a standard but the instrument will be applied only in vulnerable
soils Corn leaching in Chacilla soils is only 45 kgha which is below the leaching levels in
the other soil types applying any abatement measure An alternative for nitrogen leaching
control would be to implement control instruments only in Planteros and Corraletes soils
which have high pollution potential For the whole district implementing a nitrogen
standard in Planteros and Corraletes soils but not in Chacilla improves welfare by 1
percent over a homogeneous nitrogen standard in the district This small loss in welfare
from using a homogeneous instead of an heterogeneous standard confirms the finding by
Helfand and House (1995) that losses from uniform instruments are small and perfect
instruments are not necessary
Discrimination of control measures could depend also on the particular crop planted
so control could be linked to the land use decision by the farmer for each soil type
Information on nitrogen leaching in the district indicates that wheat barley sunflower and
alfalfa have all leaching levels below 45 kgha in absence of abatement measures (Martiacutenez
2002) so these crops would not be subject to abatement while other more polluting crop
production activities such as corn and rice would be subject to control in vulnerable soils
This discrimination by crop and soil could be implemented using a land use tax adapted to
crop and soil provided that the land tax has adequate cost efficiency and transaction costs
5 Conclusions
The evaluation of efficiency for alternative nitrogen abatement measures requires the
consideration of biophysical aspects such soil class and crop type The effects of selected
abatement measures have been examined through a dynamic model for corn production in
three different soils of the Flumen irrigation district in the Ebro basin This evaluation is
useful to rank different instruments by their efficiency as a contribution to the policy
decision process The results agree with previous literature and indicate that a fertilizer
standard is the more efficient second best measure to control nitrogen pollution
6 As indicated above the emission tax instrument is linked to a subsidy equal to optimal nitrogen damage cost Therefore quasi-rent under the emission tax is above quasi-rent under the base scenario
15
The observed farmer behavior differs from the optimal solution of the model under
the base scenario because there is an excess input utilization that aggravates the nitrogen
pollution problem in the district Alternative emissions reduction measures have been
simulated and compared to the base scenario
An increase in water prices reduces only slightly nitrogen discharges at very large costs
to farmers and society A tax on nitrogen utilization results in more significant pollution
reduction at much lower costs A standard on nitrogen application curbs emissions by
more than half with a very moderate impact on quasi-rent and gains in welfare The
introduction of subsidies linked to the standard could be a good second best alternative to
achieve nitrogen pollution control
The original contribution of this study is the following a quantitative assessment has
been performed that demonstrates that abatement measures may be taken only in
vulnerable soils with crops that have high pollution potential So the results show that
differentiating the application of control by soil type enhances welfare although this
welfare gain from a differentiated standard is small compared with an homogeneous
standard in the case of corn An important question for the choice of the correct pollution
control instrument is related with the implementation costs of the instrument The more
suitable measures are associated with implementation difficulties and policy makers should
evaluate the trade-off between cost-efficiency and implementation simplicity
Acknowledgements
Support for this research was provided by projects CICYT AGL2001-2333-C02 and
INIA RTA02-090 from the Spanish Ministry of Science and Technology The INIA
funded also research contacts with the Department of Agricultural Economics of the
University of Newcastle upon Tyne This study was made possible by the technical
assistance of Joseacute Cavero Jesuacutes Noguumles Dolores Quilez Juan Herrero and Auxi Casterad
from the Laboratorio Asociado de Agronomiacutea y Medio Ambiente (CSIC-CITA Aula Dei
Campus Zaragoza)
16
References Albiac J Uche J Valero A Serra L Meyer A Tapia J 2003 The Economic
Unsustainability of the Spanish National Hydrologic Plan International Journal of Water Resources Development 19 (3) 437-458
Casterad A Herrero J 2003 Irrivol database Unidad de Suelos y Riegos Servicio de Investigacioacuten Agroalimentaria Gobierno de Aragoacuten Zaragoza
Confederacioacuten Hidrograacutefica del Ebro 2003 Water quality data series CHE Ministerio de Medio Ambiente Zaragoza Available at wwwchebroes
Gobierno de Aragoacuten 1999 Base de datos 1T de superficie de cultivos por teacutermino municipal para Aragoacuten 1987-99 Servicio de Estudios y Planificacioacuten Secretariacutea General Teacutecnica Departamento de Agricultura Gobierno de Aragoacuten Zaragoza
Feijooacute M Calvo E Albiac J 2000 Economic and environmental policy analysis of the Flumen-Monegros irrigation system in Huesca Spain Geographical Analysis 32 (3) 187-204
Hanemann M 2003 Economics Findings and Recommendations Appendix C Economics In Horne A Dracup J Hanemann M Rodriguez-Iturbe I Means E Roth J (The US Technical Team) A Technical Review of the Spanish National Hydrological Plan (Ebro River Out-of-basin Diversion) Fundacioacuten Universidad Politeacutecnica de Cartagena University of Cartagena Cartagena
Helfand G House B 1995 Regulating Nonpoint Source Pollution Under Heterogeneous Conditions American Journal of Agricultural Economics 77 1024-1032
Howitt R 2003 A Review of Economic Hydrologic Planning Pertaining to the Ebro River Transfer Proposal In Biswas A (Ed) Spanish National Hydrologic Plan Reports of International Experts Gobierno de Aragoacuten Zaragoza
Johnson S Adams R Perry G 1991 The On-Farm Costs of Reducing Groundwater Pollution American Journal of Agricultural Economics 73 1063-1073
Khanna M Isik M Zilberman D 2000 Incentive-based Policies for Conservation Technology Adoption Implications for Pollution and Output Paper presented at the annual meeting of the American Agricultural of Economics Association Tampa Florida
Knickel K 1998 First Results of Model Calculations In Gazzola L Roest K (Eds) Economic Instruments for Nitrogen Control in European Agriculture Research Center on Animal Production Reggio Emilia
Mapp H Bernardo D Sabbagh S Geleta S Watkins K 1994 Economic and Environmental Impacts of Limiting Nitrogen Use to Protect Water Quality A Stochastic Regional Analysis American Journal of Agricultural Economics 76 889-903
Martiacutenez Y Uku S Albiac J 2001 El control de la contaminacioacuten por nitratos en el regadiacuteo Economiacutea Agraria y Recursos Naturales 2 (2) 115-131
Martiacutenez Y 2002 Anaacutelisis econoacutemico y ambiental de la contaminacioacuten por nitratos en el regadiacuteo Doctoral dissertation Department of Economic Analysis University of Zaragoza Zaragoza
Miettinen A 1993 The Effectiveness and Feasibility of Economic Incentives of Input Control in the Mitigation of Agricultural Water Pollution Agricultural Science in Finland 2 453-464
Ministerio de Agricultura Pesca y Alimentacioacuten 1999 Anuario de Estadiacutestica Agraria MAPA Madrid
Ministerio de Agricultura Pesca y Alimentacioacuten 2000 Hechos y Cifras del Sector Agroalimentario Espantildeol 2000 Secretariacutea General Teacutecnica MAPA Madrid
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
8
Table 3 Estimated yield and pollution functions by soil type
Under the second scenario the price of active nitrogen increases from 06 eurokg to 09
and 12 eurokg These higher nitrogen prices diminish the water and fertilizer application less
than the water price increase For Planteros and Corraletes soils the leaching reduction is
larger than under the higher water prices scenario but not for Chacilla soil A 12 eurokg
nitrogen price reduces nitrogen emissions 63 kgha for Corraletes-type soil 30 kgha for
Planteros and only 8 kgha for Chacillan For the whole district welfare losses are
between 023 and 045 million euros much lower than taxing water and with a much larger
leaching abatement Therefore a tax on nitrogen is more cost efficient than a tax on water
The third scenario introduces a limit or standard on applied nitrogen which is fixed at
250 kgha following the Extension Service recommendations (Oruacutes et al 2000) This
instrument is similar to the Code of Good Agricultural Practices established by the
European Nitrate Directive and the advantage of this measure is that costs to farmers in
terms of quasi-rent are reasonable and there are welfare gains for society in Planteros and
Corraletes soils Leaching abatement is above 40 percent in every soil and quasi-rent losses
are always below 5 percent This is a second best type of instrument and our results show
that the cost-efficiency is superior to taxes on inputs because the large abatement of
nitrogen emissions and the moderate reduction in quasi-rent Welfare increases under the
standard for the whole district (Table 5) although the standard reduces welfare in Chacilla
soils indicating that no standard is needed in this soil
The main obstacle to implement a quantitative limit is the difficulty to control
farmer compliance The introduction of a subsidy system for farmers who reduce fertilizer
application is a method to implement the standard provided that subsidies are coupled
with emissions verification These controls could be implemented and enforced by
irrigation user associations through measurement of nitrogen content in return water flow
canals Another method of implementing the standard is licensing fertilizer application to a
12
specialist a figure known as ldquoenvironmental doctorrdquo The measure of establishing a
standard has been recommended in the literature (Knickel 1998 Miettinen 1998 Weinberg
y Wilen 2000) and in studies analyzing the same irrigation district by Martiacutenez et al (2001)
and Martiacutenez (2002)
The last scenario considers the first best instrument of taxing nitrogen emissions
with a unit emission cost equal to 123 eurokg that has been chosen equal to the cost of
eliminating nitrogen from water The quasi-rent for this instrument is calculated assuming
that the social planner gives the farmer a subsidy equal to the optimal nitrogen damage
cost provided that pollution is at the social optimum The tax causes a strong leaching
reduction diminishing pollution levels by soil type between 10 and 60 percent Farmer
quasi-rent increases so farmers will embrace this solution provided that the
implementation was feasible
A ranking of policy measures can be defined by comparing the welfare effects of each
measure for the whole irrigation district by soil type (Table 5) The first best measure of
taxing emissions increases welfare in the district by 032 million euro Among the second
best measures a standard on nitrogen application also increases welfare by 007 million
euro while taxes on nitrogen fertilizer reduce welfare between 023 and 045 million euro
Higher water prices are very inefficient since welfare falls between 091 and 143 million
euro with an almost negligible leaching abatement below 4 percent This finding is
important because the recently approved Water Framework Directive of the European
Union relies heavily on higher water prices called full recovery cost in order to reach
ldquogood statusrdquo for all waters
An issue that could modify the effects presented here is that the introduction of
control measures may induce changes in the relative profitability of different crops and
farmers may respond expanding the more profitable crops This question was examined in
the study area by Martiacutenez el al (2001) for a standard limiting nitrogen application The
acreage substitution effect was moderate for all crops and in the case of corn the fall in
acreage was 03 percent
In accordance with the results presented here the studies by Pan and Hodge (1994)
and Johnson et al (1991) find that an emission tax equal to the cost of nitrogen removal is
the social optimum measure Jonhson el al (1991) evaluate the cost of the emission tax at 5
percent of quasi-rent with an emission reduction above 30 percent Other studies
examining nitrogen standards by Mapp et al (1994) in USA and Schmid (2001) in Austria
find that the abatement costs to reduce nitrogen leaching are somewhat higher than the
13
costs calculated here2 Mapp et al recommend a standard that reduces leaching by 67
percent at a cost of 22 percent of quasi-rent and Schmid states that a standard reduces
leaching between 40 and 90 percent at a cost to farmers between 5 and 14 percent of quasi-
rent Martiacutenez (2002) calculates a 2 percent loss of quasi-rent to curb leaching by 44
percent assuming homogeneous soil
Helfand and House (1995) examine the cost-efficiency of control measures under two
soil types in the case of lettuce production in order to abate nitrogen leaching by 20
percent Their findings are that quasi-rent losses derived from using uniform instruments
are small so perfect instruments are not necessary and may entail significant transaction
costs3 They indicate also that a nitrogen tax and a nitrogen standard are both very
inefficient measures which have very high welfare costs a finding contrary to the results
obtained here for corn Our results indicate that a nitrogen standard is the second best
preferred measure in accordance with economic theory and most of the empirical
literature Also our empirical evidence indicates that a tax on nitrogen is much more cost
efficient than a tax on water The finding on the nitrogen standard efficiency by Helfand
and House is questionable because the dynamic aspect of nitrogen content in the soil is
not considered When the level of nitrogen input changes the nitrogen content in the soil
adjust over several periods They force a 20 percent leaching abatement within the
production period reducing nitrogen fertilization by 90 percent so costs of a nitrogen
standard or a tax are prohibitive In contrast our results indicate that the standard reduces
nitrogen fertilization in the district by 20 percent abating leaching by more than half4 As
indicated above a tax of water is a very inefficient measure in our case with leaching
abatement below 4 percent and very high costs in terms of quasi-rent and welfare
Thomas and Boisvert (1994) simulate the introduction of a market for nitrogen
pollution permits and estimate that a permit price reducing 10 percent nitrogen emissions
reduces gross income by 15 percent5 This pollution permit instrument can be compared
with the emission tax examined here The cost calculated by these authors is much higher
2 For the whole district the nitrogen standard abates leaching by 176 tons (-52) with a cost of 015 million euro (-37) in quasi-rent 3 The loss of quasi-rent for any uniform measure is below 2 percent compared with 016 losses under a first-best heterogeneous measure 4 For the whole district nitrogen fertilization is 1020 tons and the standard reduces fertilization by 212 tons These figures come from table 4 and corn acreage by soil 5 Thomas and Boisvert (1994) use a procedure different from the present study They consider nitrogen pollution as a fraction of the remaining nitrogen that is not taken by the plant or degraded by denitrification
14
than the cost obtained in table 5 for an emission tax which abates leaching by 50 percent
in the region increasing welfare and quasi-rent6
The results of the present study on nitrate pollution control under soil heterogeneity
indicate the possibility of differentiating application of control by soil type The preferred
second best instrument is a standard but the instrument will be applied only in vulnerable
soils Corn leaching in Chacilla soils is only 45 kgha which is below the leaching levels in
the other soil types applying any abatement measure An alternative for nitrogen leaching
control would be to implement control instruments only in Planteros and Corraletes soils
which have high pollution potential For the whole district implementing a nitrogen
standard in Planteros and Corraletes soils but not in Chacilla improves welfare by 1
percent over a homogeneous nitrogen standard in the district This small loss in welfare
from using a homogeneous instead of an heterogeneous standard confirms the finding by
Helfand and House (1995) that losses from uniform instruments are small and perfect
instruments are not necessary
Discrimination of control measures could depend also on the particular crop planted
so control could be linked to the land use decision by the farmer for each soil type
Information on nitrogen leaching in the district indicates that wheat barley sunflower and
alfalfa have all leaching levels below 45 kgha in absence of abatement measures (Martiacutenez
2002) so these crops would not be subject to abatement while other more polluting crop
production activities such as corn and rice would be subject to control in vulnerable soils
This discrimination by crop and soil could be implemented using a land use tax adapted to
crop and soil provided that the land tax has adequate cost efficiency and transaction costs
5 Conclusions
The evaluation of efficiency for alternative nitrogen abatement measures requires the
consideration of biophysical aspects such soil class and crop type The effects of selected
abatement measures have been examined through a dynamic model for corn production in
three different soils of the Flumen irrigation district in the Ebro basin This evaluation is
useful to rank different instruments by their efficiency as a contribution to the policy
decision process The results agree with previous literature and indicate that a fertilizer
standard is the more efficient second best measure to control nitrogen pollution
6 As indicated above the emission tax instrument is linked to a subsidy equal to optimal nitrogen damage cost Therefore quasi-rent under the emission tax is above quasi-rent under the base scenario
15
The observed farmer behavior differs from the optimal solution of the model under
the base scenario because there is an excess input utilization that aggravates the nitrogen
pollution problem in the district Alternative emissions reduction measures have been
simulated and compared to the base scenario
An increase in water prices reduces only slightly nitrogen discharges at very large costs
to farmers and society A tax on nitrogen utilization results in more significant pollution
reduction at much lower costs A standard on nitrogen application curbs emissions by
more than half with a very moderate impact on quasi-rent and gains in welfare The
introduction of subsidies linked to the standard could be a good second best alternative to
achieve nitrogen pollution control
The original contribution of this study is the following a quantitative assessment has
been performed that demonstrates that abatement measures may be taken only in
vulnerable soils with crops that have high pollution potential So the results show that
differentiating the application of control by soil type enhances welfare although this
welfare gain from a differentiated standard is small compared with an homogeneous
standard in the case of corn An important question for the choice of the correct pollution
control instrument is related with the implementation costs of the instrument The more
suitable measures are associated with implementation difficulties and policy makers should
evaluate the trade-off between cost-efficiency and implementation simplicity
Acknowledgements
Support for this research was provided by projects CICYT AGL2001-2333-C02 and
INIA RTA02-090 from the Spanish Ministry of Science and Technology The INIA
funded also research contacts with the Department of Agricultural Economics of the
University of Newcastle upon Tyne This study was made possible by the technical
assistance of Joseacute Cavero Jesuacutes Noguumles Dolores Quilez Juan Herrero and Auxi Casterad
from the Laboratorio Asociado de Agronomiacutea y Medio Ambiente (CSIC-CITA Aula Dei
Campus Zaragoza)
16
References Albiac J Uche J Valero A Serra L Meyer A Tapia J 2003 The Economic
Unsustainability of the Spanish National Hydrologic Plan International Journal of Water Resources Development 19 (3) 437-458
Casterad A Herrero J 2003 Irrivol database Unidad de Suelos y Riegos Servicio de Investigacioacuten Agroalimentaria Gobierno de Aragoacuten Zaragoza
Confederacioacuten Hidrograacutefica del Ebro 2003 Water quality data series CHE Ministerio de Medio Ambiente Zaragoza Available at wwwchebroes
Gobierno de Aragoacuten 1999 Base de datos 1T de superficie de cultivos por teacutermino municipal para Aragoacuten 1987-99 Servicio de Estudios y Planificacioacuten Secretariacutea General Teacutecnica Departamento de Agricultura Gobierno de Aragoacuten Zaragoza
Feijooacute M Calvo E Albiac J 2000 Economic and environmental policy analysis of the Flumen-Monegros irrigation system in Huesca Spain Geographical Analysis 32 (3) 187-204
Hanemann M 2003 Economics Findings and Recommendations Appendix C Economics In Horne A Dracup J Hanemann M Rodriguez-Iturbe I Means E Roth J (The US Technical Team) A Technical Review of the Spanish National Hydrological Plan (Ebro River Out-of-basin Diversion) Fundacioacuten Universidad Politeacutecnica de Cartagena University of Cartagena Cartagena
Helfand G House B 1995 Regulating Nonpoint Source Pollution Under Heterogeneous Conditions American Journal of Agricultural Economics 77 1024-1032
Howitt R 2003 A Review of Economic Hydrologic Planning Pertaining to the Ebro River Transfer Proposal In Biswas A (Ed) Spanish National Hydrologic Plan Reports of International Experts Gobierno de Aragoacuten Zaragoza
Johnson S Adams R Perry G 1991 The On-Farm Costs of Reducing Groundwater Pollution American Journal of Agricultural Economics 73 1063-1073
Khanna M Isik M Zilberman D 2000 Incentive-based Policies for Conservation Technology Adoption Implications for Pollution and Output Paper presented at the annual meeting of the American Agricultural of Economics Association Tampa Florida
Knickel K 1998 First Results of Model Calculations In Gazzola L Roest K (Eds) Economic Instruments for Nitrogen Control in European Agriculture Research Center on Animal Production Reggio Emilia
Mapp H Bernardo D Sabbagh S Geleta S Watkins K 1994 Economic and Environmental Impacts of Limiting Nitrogen Use to Protect Water Quality A Stochastic Regional Analysis American Journal of Agricultural Economics 76 889-903
Martiacutenez Y Uku S Albiac J 2001 El control de la contaminacioacuten por nitratos en el regadiacuteo Economiacutea Agraria y Recursos Naturales 2 (2) 115-131
Martiacutenez Y 2002 Anaacutelisis econoacutemico y ambiental de la contaminacioacuten por nitratos en el regadiacuteo Doctoral dissertation Department of Economic Analysis University of Zaragoza Zaragoza
Miettinen A 1993 The Effectiveness and Feasibility of Economic Incentives of Input Control in the Mitigation of Agricultural Water Pollution Agricultural Science in Finland 2 453-464
Ministerio de Agricultura Pesca y Alimentacioacuten 1999 Anuario de Estadiacutestica Agraria MAPA Madrid
Ministerio de Agricultura Pesca y Alimentacioacuten 2000 Hechos y Cifras del Sector Agroalimentario Espantildeol 2000 Secretariacutea General Teacutecnica MAPA Madrid
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
9
Table 4 Results of alternative policy measures by soil type
Under the second scenario the price of active nitrogen increases from 06 eurokg to 09
and 12 eurokg These higher nitrogen prices diminish the water and fertilizer application less
than the water price increase For Planteros and Corraletes soils the leaching reduction is
larger than under the higher water prices scenario but not for Chacilla soil A 12 eurokg
nitrogen price reduces nitrogen emissions 63 kgha for Corraletes-type soil 30 kgha for
Planteros and only 8 kgha for Chacillan For the whole district welfare losses are
between 023 and 045 million euros much lower than taxing water and with a much larger
leaching abatement Therefore a tax on nitrogen is more cost efficient than a tax on water
The third scenario introduces a limit or standard on applied nitrogen which is fixed at
250 kgha following the Extension Service recommendations (Oruacutes et al 2000) This
instrument is similar to the Code of Good Agricultural Practices established by the
European Nitrate Directive and the advantage of this measure is that costs to farmers in
terms of quasi-rent are reasonable and there are welfare gains for society in Planteros and
Corraletes soils Leaching abatement is above 40 percent in every soil and quasi-rent losses
are always below 5 percent This is a second best type of instrument and our results show
that the cost-efficiency is superior to taxes on inputs because the large abatement of
nitrogen emissions and the moderate reduction in quasi-rent Welfare increases under the
standard for the whole district (Table 5) although the standard reduces welfare in Chacilla
soils indicating that no standard is needed in this soil
The main obstacle to implement a quantitative limit is the difficulty to control
farmer compliance The introduction of a subsidy system for farmers who reduce fertilizer
application is a method to implement the standard provided that subsidies are coupled
with emissions verification These controls could be implemented and enforced by
irrigation user associations through measurement of nitrogen content in return water flow
canals Another method of implementing the standard is licensing fertilizer application to a
12
specialist a figure known as ldquoenvironmental doctorrdquo The measure of establishing a
standard has been recommended in the literature (Knickel 1998 Miettinen 1998 Weinberg
y Wilen 2000) and in studies analyzing the same irrigation district by Martiacutenez et al (2001)
and Martiacutenez (2002)
The last scenario considers the first best instrument of taxing nitrogen emissions
with a unit emission cost equal to 123 eurokg that has been chosen equal to the cost of
eliminating nitrogen from water The quasi-rent for this instrument is calculated assuming
that the social planner gives the farmer a subsidy equal to the optimal nitrogen damage
cost provided that pollution is at the social optimum The tax causes a strong leaching
reduction diminishing pollution levels by soil type between 10 and 60 percent Farmer
quasi-rent increases so farmers will embrace this solution provided that the
implementation was feasible
A ranking of policy measures can be defined by comparing the welfare effects of each
measure for the whole irrigation district by soil type (Table 5) The first best measure of
taxing emissions increases welfare in the district by 032 million euro Among the second
best measures a standard on nitrogen application also increases welfare by 007 million
euro while taxes on nitrogen fertilizer reduce welfare between 023 and 045 million euro
Higher water prices are very inefficient since welfare falls between 091 and 143 million
euro with an almost negligible leaching abatement below 4 percent This finding is
important because the recently approved Water Framework Directive of the European
Union relies heavily on higher water prices called full recovery cost in order to reach
ldquogood statusrdquo for all waters
An issue that could modify the effects presented here is that the introduction of
control measures may induce changes in the relative profitability of different crops and
farmers may respond expanding the more profitable crops This question was examined in
the study area by Martiacutenez el al (2001) for a standard limiting nitrogen application The
acreage substitution effect was moderate for all crops and in the case of corn the fall in
acreage was 03 percent
In accordance with the results presented here the studies by Pan and Hodge (1994)
and Johnson et al (1991) find that an emission tax equal to the cost of nitrogen removal is
the social optimum measure Jonhson el al (1991) evaluate the cost of the emission tax at 5
percent of quasi-rent with an emission reduction above 30 percent Other studies
examining nitrogen standards by Mapp et al (1994) in USA and Schmid (2001) in Austria
find that the abatement costs to reduce nitrogen leaching are somewhat higher than the
13
costs calculated here2 Mapp et al recommend a standard that reduces leaching by 67
percent at a cost of 22 percent of quasi-rent and Schmid states that a standard reduces
leaching between 40 and 90 percent at a cost to farmers between 5 and 14 percent of quasi-
rent Martiacutenez (2002) calculates a 2 percent loss of quasi-rent to curb leaching by 44
percent assuming homogeneous soil
Helfand and House (1995) examine the cost-efficiency of control measures under two
soil types in the case of lettuce production in order to abate nitrogen leaching by 20
percent Their findings are that quasi-rent losses derived from using uniform instruments
are small so perfect instruments are not necessary and may entail significant transaction
costs3 They indicate also that a nitrogen tax and a nitrogen standard are both very
inefficient measures which have very high welfare costs a finding contrary to the results
obtained here for corn Our results indicate that a nitrogen standard is the second best
preferred measure in accordance with economic theory and most of the empirical
literature Also our empirical evidence indicates that a tax on nitrogen is much more cost
efficient than a tax on water The finding on the nitrogen standard efficiency by Helfand
and House is questionable because the dynamic aspect of nitrogen content in the soil is
not considered When the level of nitrogen input changes the nitrogen content in the soil
adjust over several periods They force a 20 percent leaching abatement within the
production period reducing nitrogen fertilization by 90 percent so costs of a nitrogen
standard or a tax are prohibitive In contrast our results indicate that the standard reduces
nitrogen fertilization in the district by 20 percent abating leaching by more than half4 As
indicated above a tax of water is a very inefficient measure in our case with leaching
abatement below 4 percent and very high costs in terms of quasi-rent and welfare
Thomas and Boisvert (1994) simulate the introduction of a market for nitrogen
pollution permits and estimate that a permit price reducing 10 percent nitrogen emissions
reduces gross income by 15 percent5 This pollution permit instrument can be compared
with the emission tax examined here The cost calculated by these authors is much higher
2 For the whole district the nitrogen standard abates leaching by 176 tons (-52) with a cost of 015 million euro (-37) in quasi-rent 3 The loss of quasi-rent for any uniform measure is below 2 percent compared with 016 losses under a first-best heterogeneous measure 4 For the whole district nitrogen fertilization is 1020 tons and the standard reduces fertilization by 212 tons These figures come from table 4 and corn acreage by soil 5 Thomas and Boisvert (1994) use a procedure different from the present study They consider nitrogen pollution as a fraction of the remaining nitrogen that is not taken by the plant or degraded by denitrification
14
than the cost obtained in table 5 for an emission tax which abates leaching by 50 percent
in the region increasing welfare and quasi-rent6
The results of the present study on nitrate pollution control under soil heterogeneity
indicate the possibility of differentiating application of control by soil type The preferred
second best instrument is a standard but the instrument will be applied only in vulnerable
soils Corn leaching in Chacilla soils is only 45 kgha which is below the leaching levels in
the other soil types applying any abatement measure An alternative for nitrogen leaching
control would be to implement control instruments only in Planteros and Corraletes soils
which have high pollution potential For the whole district implementing a nitrogen
standard in Planteros and Corraletes soils but not in Chacilla improves welfare by 1
percent over a homogeneous nitrogen standard in the district This small loss in welfare
from using a homogeneous instead of an heterogeneous standard confirms the finding by
Helfand and House (1995) that losses from uniform instruments are small and perfect
instruments are not necessary
Discrimination of control measures could depend also on the particular crop planted
so control could be linked to the land use decision by the farmer for each soil type
Information on nitrogen leaching in the district indicates that wheat barley sunflower and
alfalfa have all leaching levels below 45 kgha in absence of abatement measures (Martiacutenez
2002) so these crops would not be subject to abatement while other more polluting crop
production activities such as corn and rice would be subject to control in vulnerable soils
This discrimination by crop and soil could be implemented using a land use tax adapted to
crop and soil provided that the land tax has adequate cost efficiency and transaction costs
5 Conclusions
The evaluation of efficiency for alternative nitrogen abatement measures requires the
consideration of biophysical aspects such soil class and crop type The effects of selected
abatement measures have been examined through a dynamic model for corn production in
three different soils of the Flumen irrigation district in the Ebro basin This evaluation is
useful to rank different instruments by their efficiency as a contribution to the policy
decision process The results agree with previous literature and indicate that a fertilizer
standard is the more efficient second best measure to control nitrogen pollution
6 As indicated above the emission tax instrument is linked to a subsidy equal to optimal nitrogen damage cost Therefore quasi-rent under the emission tax is above quasi-rent under the base scenario
15
The observed farmer behavior differs from the optimal solution of the model under
the base scenario because there is an excess input utilization that aggravates the nitrogen
pollution problem in the district Alternative emissions reduction measures have been
simulated and compared to the base scenario
An increase in water prices reduces only slightly nitrogen discharges at very large costs
to farmers and society A tax on nitrogen utilization results in more significant pollution
reduction at much lower costs A standard on nitrogen application curbs emissions by
more than half with a very moderate impact on quasi-rent and gains in welfare The
introduction of subsidies linked to the standard could be a good second best alternative to
achieve nitrogen pollution control
The original contribution of this study is the following a quantitative assessment has
been performed that demonstrates that abatement measures may be taken only in
vulnerable soils with crops that have high pollution potential So the results show that
differentiating the application of control by soil type enhances welfare although this
welfare gain from a differentiated standard is small compared with an homogeneous
standard in the case of corn An important question for the choice of the correct pollution
control instrument is related with the implementation costs of the instrument The more
suitable measures are associated with implementation difficulties and policy makers should
evaluate the trade-off between cost-efficiency and implementation simplicity
Acknowledgements
Support for this research was provided by projects CICYT AGL2001-2333-C02 and
INIA RTA02-090 from the Spanish Ministry of Science and Technology The INIA
funded also research contacts with the Department of Agricultural Economics of the
University of Newcastle upon Tyne This study was made possible by the technical
assistance of Joseacute Cavero Jesuacutes Noguumles Dolores Quilez Juan Herrero and Auxi Casterad
from the Laboratorio Asociado de Agronomiacutea y Medio Ambiente (CSIC-CITA Aula Dei
Campus Zaragoza)
16
References Albiac J Uche J Valero A Serra L Meyer A Tapia J 2003 The Economic
Unsustainability of the Spanish National Hydrologic Plan International Journal of Water Resources Development 19 (3) 437-458
Casterad A Herrero J 2003 Irrivol database Unidad de Suelos y Riegos Servicio de Investigacioacuten Agroalimentaria Gobierno de Aragoacuten Zaragoza
Confederacioacuten Hidrograacutefica del Ebro 2003 Water quality data series CHE Ministerio de Medio Ambiente Zaragoza Available at wwwchebroes
Gobierno de Aragoacuten 1999 Base de datos 1T de superficie de cultivos por teacutermino municipal para Aragoacuten 1987-99 Servicio de Estudios y Planificacioacuten Secretariacutea General Teacutecnica Departamento de Agricultura Gobierno de Aragoacuten Zaragoza
Feijooacute M Calvo E Albiac J 2000 Economic and environmental policy analysis of the Flumen-Monegros irrigation system in Huesca Spain Geographical Analysis 32 (3) 187-204
Hanemann M 2003 Economics Findings and Recommendations Appendix C Economics In Horne A Dracup J Hanemann M Rodriguez-Iturbe I Means E Roth J (The US Technical Team) A Technical Review of the Spanish National Hydrological Plan (Ebro River Out-of-basin Diversion) Fundacioacuten Universidad Politeacutecnica de Cartagena University of Cartagena Cartagena
Helfand G House B 1995 Regulating Nonpoint Source Pollution Under Heterogeneous Conditions American Journal of Agricultural Economics 77 1024-1032
Howitt R 2003 A Review of Economic Hydrologic Planning Pertaining to the Ebro River Transfer Proposal In Biswas A (Ed) Spanish National Hydrologic Plan Reports of International Experts Gobierno de Aragoacuten Zaragoza
Johnson S Adams R Perry G 1991 The On-Farm Costs of Reducing Groundwater Pollution American Journal of Agricultural Economics 73 1063-1073
Khanna M Isik M Zilberman D 2000 Incentive-based Policies for Conservation Technology Adoption Implications for Pollution and Output Paper presented at the annual meeting of the American Agricultural of Economics Association Tampa Florida
Knickel K 1998 First Results of Model Calculations In Gazzola L Roest K (Eds) Economic Instruments for Nitrogen Control in European Agriculture Research Center on Animal Production Reggio Emilia
Mapp H Bernardo D Sabbagh S Geleta S Watkins K 1994 Economic and Environmental Impacts of Limiting Nitrogen Use to Protect Water Quality A Stochastic Regional Analysis American Journal of Agricultural Economics 76 889-903
Martiacutenez Y Uku S Albiac J 2001 El control de la contaminacioacuten por nitratos en el regadiacuteo Economiacutea Agraria y Recursos Naturales 2 (2) 115-131
Martiacutenez Y 2002 Anaacutelisis econoacutemico y ambiental de la contaminacioacuten por nitratos en el regadiacuteo Doctoral dissertation Department of Economic Analysis University of Zaragoza Zaragoza
Miettinen A 1993 The Effectiveness and Feasibility of Economic Incentives of Input Control in the Mitigation of Agricultural Water Pollution Agricultural Science in Finland 2 453-464
Ministerio de Agricultura Pesca y Alimentacioacuten 1999 Anuario de Estadiacutestica Agraria MAPA Madrid
Ministerio de Agricultura Pesca y Alimentacioacuten 2000 Hechos y Cifras del Sector Agroalimentario Espantildeol 2000 Secretariacutea General Teacutecnica MAPA Madrid
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
10
fertilization and pollution emissions taxes The model is run under these alternative
scenarios generating the time paths for variables yield input use nitrogen stock in soil and
leaching
First the steady-state solution for each soil type is generated under the base scenario of
present corn production conditions in the area and then the steady-state solution for the
different alternative control measures are generated Ranking of the pollution control
measures is based on these steady-state solutions comparing welfare quasi-rent and
nitrogen leaching for each soil and for the whole irrigation district
Table 4 shows the steady-state solution under the base scenario for welfare quasi-rent
corn yield input consumption soil nitrogen content and nitrogen leaching This optimal
solution differs from actual behavior of farmers which are using excessive quantities of
nitrogen and water as noted by Oruacutes et al (2000) The reason for this excessive application
is that farmers cover the risk of underapplying inputs in parts of the field (Helfand and
House 1995) Corn producers maximize quasi-rent and are aware of the effects of
production decisions on the nitrogen stock in the soil
The base scenario approximates the actual conditions in the area related to the initial
nitrogen stock in soil corn and input prices and costs and subsidies per hectare Nitrogen
pollution levels are higher for low (Planteros) and intermediate (Corraletes) productive
soils because fertilizer consumption is higher in these soils than in the more productive
soil (Chacilla) Nitrogen leaching reaches 336 tons for the whole Flumen irrigation district
which is the sum of 54 tons from Chacilla-type soil 68 tons from Planteros and 214 tons
from Corraletes (Table 5)
The first scenario simulates an increase in water prices from 001 to 006 and 009
eurom3 This price increase reduces water and fertilizer application per hectare in the three
soil categories but nitrate emissions show a slight decrease in Chacilla and Planteros soils
and none in Corraletes soil (Table 4) The emission reduction in Chacilla and Planteros
soils is only 8 kgha when water price reaches 009 eurom3 and there is no reduction in
Corraletes because of the high level of soil nitrogen content Cost to farmers from the first
scenario is very high because quasi-rent losses are between 280 and 300 euroha for the 006
eurom3 price and between 430 and 460 euroha for the 009 eurom3 price For the whole district a
rise in water price to 006 eurom3 abates emission by only 11 tons but reduces social welfare
by 091 million euro and a 009 eurom3 water price reduces leaching by 13 tons and reduces
social welfare by 143 million euro Taxing water prices is a very inefficient instrument to curb
nitrogen emissions
11
Table 5 Yearly welfare and leaching by abatement measure and soil type in the district
Under the second scenario the price of active nitrogen increases from 06 eurokg to 09
and 12 eurokg These higher nitrogen prices diminish the water and fertilizer application less
than the water price increase For Planteros and Corraletes soils the leaching reduction is
larger than under the higher water prices scenario but not for Chacilla soil A 12 eurokg
nitrogen price reduces nitrogen emissions 63 kgha for Corraletes-type soil 30 kgha for
Planteros and only 8 kgha for Chacillan For the whole district welfare losses are
between 023 and 045 million euros much lower than taxing water and with a much larger
leaching abatement Therefore a tax on nitrogen is more cost efficient than a tax on water
The third scenario introduces a limit or standard on applied nitrogen which is fixed at
250 kgha following the Extension Service recommendations (Oruacutes et al 2000) This
instrument is similar to the Code of Good Agricultural Practices established by the
European Nitrate Directive and the advantage of this measure is that costs to farmers in
terms of quasi-rent are reasonable and there are welfare gains for society in Planteros and
Corraletes soils Leaching abatement is above 40 percent in every soil and quasi-rent losses
are always below 5 percent This is a second best type of instrument and our results show
that the cost-efficiency is superior to taxes on inputs because the large abatement of
nitrogen emissions and the moderate reduction in quasi-rent Welfare increases under the
standard for the whole district (Table 5) although the standard reduces welfare in Chacilla
soils indicating that no standard is needed in this soil
The main obstacle to implement a quantitative limit is the difficulty to control
farmer compliance The introduction of a subsidy system for farmers who reduce fertilizer
application is a method to implement the standard provided that subsidies are coupled
with emissions verification These controls could be implemented and enforced by
irrigation user associations through measurement of nitrogen content in return water flow
canals Another method of implementing the standard is licensing fertilizer application to a
12
specialist a figure known as ldquoenvironmental doctorrdquo The measure of establishing a
standard has been recommended in the literature (Knickel 1998 Miettinen 1998 Weinberg
y Wilen 2000) and in studies analyzing the same irrigation district by Martiacutenez et al (2001)
and Martiacutenez (2002)
The last scenario considers the first best instrument of taxing nitrogen emissions
with a unit emission cost equal to 123 eurokg that has been chosen equal to the cost of
eliminating nitrogen from water The quasi-rent for this instrument is calculated assuming
that the social planner gives the farmer a subsidy equal to the optimal nitrogen damage
cost provided that pollution is at the social optimum The tax causes a strong leaching
reduction diminishing pollution levels by soil type between 10 and 60 percent Farmer
quasi-rent increases so farmers will embrace this solution provided that the
implementation was feasible
A ranking of policy measures can be defined by comparing the welfare effects of each
measure for the whole irrigation district by soil type (Table 5) The first best measure of
taxing emissions increases welfare in the district by 032 million euro Among the second
best measures a standard on nitrogen application also increases welfare by 007 million
euro while taxes on nitrogen fertilizer reduce welfare between 023 and 045 million euro
Higher water prices are very inefficient since welfare falls between 091 and 143 million
euro with an almost negligible leaching abatement below 4 percent This finding is
important because the recently approved Water Framework Directive of the European
Union relies heavily on higher water prices called full recovery cost in order to reach
ldquogood statusrdquo for all waters
An issue that could modify the effects presented here is that the introduction of
control measures may induce changes in the relative profitability of different crops and
farmers may respond expanding the more profitable crops This question was examined in
the study area by Martiacutenez el al (2001) for a standard limiting nitrogen application The
acreage substitution effect was moderate for all crops and in the case of corn the fall in
acreage was 03 percent
In accordance with the results presented here the studies by Pan and Hodge (1994)
and Johnson et al (1991) find that an emission tax equal to the cost of nitrogen removal is
the social optimum measure Jonhson el al (1991) evaluate the cost of the emission tax at 5
percent of quasi-rent with an emission reduction above 30 percent Other studies
examining nitrogen standards by Mapp et al (1994) in USA and Schmid (2001) in Austria
find that the abatement costs to reduce nitrogen leaching are somewhat higher than the
13
costs calculated here2 Mapp et al recommend a standard that reduces leaching by 67
percent at a cost of 22 percent of quasi-rent and Schmid states that a standard reduces
leaching between 40 and 90 percent at a cost to farmers between 5 and 14 percent of quasi-
rent Martiacutenez (2002) calculates a 2 percent loss of quasi-rent to curb leaching by 44
percent assuming homogeneous soil
Helfand and House (1995) examine the cost-efficiency of control measures under two
soil types in the case of lettuce production in order to abate nitrogen leaching by 20
percent Their findings are that quasi-rent losses derived from using uniform instruments
are small so perfect instruments are not necessary and may entail significant transaction
costs3 They indicate also that a nitrogen tax and a nitrogen standard are both very
inefficient measures which have very high welfare costs a finding contrary to the results
obtained here for corn Our results indicate that a nitrogen standard is the second best
preferred measure in accordance with economic theory and most of the empirical
literature Also our empirical evidence indicates that a tax on nitrogen is much more cost
efficient than a tax on water The finding on the nitrogen standard efficiency by Helfand
and House is questionable because the dynamic aspect of nitrogen content in the soil is
not considered When the level of nitrogen input changes the nitrogen content in the soil
adjust over several periods They force a 20 percent leaching abatement within the
production period reducing nitrogen fertilization by 90 percent so costs of a nitrogen
standard or a tax are prohibitive In contrast our results indicate that the standard reduces
nitrogen fertilization in the district by 20 percent abating leaching by more than half4 As
indicated above a tax of water is a very inefficient measure in our case with leaching
abatement below 4 percent and very high costs in terms of quasi-rent and welfare
Thomas and Boisvert (1994) simulate the introduction of a market for nitrogen
pollution permits and estimate that a permit price reducing 10 percent nitrogen emissions
reduces gross income by 15 percent5 This pollution permit instrument can be compared
with the emission tax examined here The cost calculated by these authors is much higher
2 For the whole district the nitrogen standard abates leaching by 176 tons (-52) with a cost of 015 million euro (-37) in quasi-rent 3 The loss of quasi-rent for any uniform measure is below 2 percent compared with 016 losses under a first-best heterogeneous measure 4 For the whole district nitrogen fertilization is 1020 tons and the standard reduces fertilization by 212 tons These figures come from table 4 and corn acreage by soil 5 Thomas and Boisvert (1994) use a procedure different from the present study They consider nitrogen pollution as a fraction of the remaining nitrogen that is not taken by the plant or degraded by denitrification
14
than the cost obtained in table 5 for an emission tax which abates leaching by 50 percent
in the region increasing welfare and quasi-rent6
The results of the present study on nitrate pollution control under soil heterogeneity
indicate the possibility of differentiating application of control by soil type The preferred
second best instrument is a standard but the instrument will be applied only in vulnerable
soils Corn leaching in Chacilla soils is only 45 kgha which is below the leaching levels in
the other soil types applying any abatement measure An alternative for nitrogen leaching
control would be to implement control instruments only in Planteros and Corraletes soils
which have high pollution potential For the whole district implementing a nitrogen
standard in Planteros and Corraletes soils but not in Chacilla improves welfare by 1
percent over a homogeneous nitrogen standard in the district This small loss in welfare
from using a homogeneous instead of an heterogeneous standard confirms the finding by
Helfand and House (1995) that losses from uniform instruments are small and perfect
instruments are not necessary
Discrimination of control measures could depend also on the particular crop planted
so control could be linked to the land use decision by the farmer for each soil type
Information on nitrogen leaching in the district indicates that wheat barley sunflower and
alfalfa have all leaching levels below 45 kgha in absence of abatement measures (Martiacutenez
2002) so these crops would not be subject to abatement while other more polluting crop
production activities such as corn and rice would be subject to control in vulnerable soils
This discrimination by crop and soil could be implemented using a land use tax adapted to
crop and soil provided that the land tax has adequate cost efficiency and transaction costs
5 Conclusions
The evaluation of efficiency for alternative nitrogen abatement measures requires the
consideration of biophysical aspects such soil class and crop type The effects of selected
abatement measures have been examined through a dynamic model for corn production in
three different soils of the Flumen irrigation district in the Ebro basin This evaluation is
useful to rank different instruments by their efficiency as a contribution to the policy
decision process The results agree with previous literature and indicate that a fertilizer
standard is the more efficient second best measure to control nitrogen pollution
6 As indicated above the emission tax instrument is linked to a subsidy equal to optimal nitrogen damage cost Therefore quasi-rent under the emission tax is above quasi-rent under the base scenario
15
The observed farmer behavior differs from the optimal solution of the model under
the base scenario because there is an excess input utilization that aggravates the nitrogen
pollution problem in the district Alternative emissions reduction measures have been
simulated and compared to the base scenario
An increase in water prices reduces only slightly nitrogen discharges at very large costs
to farmers and society A tax on nitrogen utilization results in more significant pollution
reduction at much lower costs A standard on nitrogen application curbs emissions by
more than half with a very moderate impact on quasi-rent and gains in welfare The
introduction of subsidies linked to the standard could be a good second best alternative to
achieve nitrogen pollution control
The original contribution of this study is the following a quantitative assessment has
been performed that demonstrates that abatement measures may be taken only in
vulnerable soils with crops that have high pollution potential So the results show that
differentiating the application of control by soil type enhances welfare although this
welfare gain from a differentiated standard is small compared with an homogeneous
standard in the case of corn An important question for the choice of the correct pollution
control instrument is related with the implementation costs of the instrument The more
suitable measures are associated with implementation difficulties and policy makers should
evaluate the trade-off between cost-efficiency and implementation simplicity
Acknowledgements
Support for this research was provided by projects CICYT AGL2001-2333-C02 and
INIA RTA02-090 from the Spanish Ministry of Science and Technology The INIA
funded also research contacts with the Department of Agricultural Economics of the
University of Newcastle upon Tyne This study was made possible by the technical
assistance of Joseacute Cavero Jesuacutes Noguumles Dolores Quilez Juan Herrero and Auxi Casterad
from the Laboratorio Asociado de Agronomiacutea y Medio Ambiente (CSIC-CITA Aula Dei
Campus Zaragoza)
16
References Albiac J Uche J Valero A Serra L Meyer A Tapia J 2003 The Economic
Unsustainability of the Spanish National Hydrologic Plan International Journal of Water Resources Development 19 (3) 437-458
Casterad A Herrero J 2003 Irrivol database Unidad de Suelos y Riegos Servicio de Investigacioacuten Agroalimentaria Gobierno de Aragoacuten Zaragoza
Confederacioacuten Hidrograacutefica del Ebro 2003 Water quality data series CHE Ministerio de Medio Ambiente Zaragoza Available at wwwchebroes
Gobierno de Aragoacuten 1999 Base de datos 1T de superficie de cultivos por teacutermino municipal para Aragoacuten 1987-99 Servicio de Estudios y Planificacioacuten Secretariacutea General Teacutecnica Departamento de Agricultura Gobierno de Aragoacuten Zaragoza
Feijooacute M Calvo E Albiac J 2000 Economic and environmental policy analysis of the Flumen-Monegros irrigation system in Huesca Spain Geographical Analysis 32 (3) 187-204
Hanemann M 2003 Economics Findings and Recommendations Appendix C Economics In Horne A Dracup J Hanemann M Rodriguez-Iturbe I Means E Roth J (The US Technical Team) A Technical Review of the Spanish National Hydrological Plan (Ebro River Out-of-basin Diversion) Fundacioacuten Universidad Politeacutecnica de Cartagena University of Cartagena Cartagena
Helfand G House B 1995 Regulating Nonpoint Source Pollution Under Heterogeneous Conditions American Journal of Agricultural Economics 77 1024-1032
Howitt R 2003 A Review of Economic Hydrologic Planning Pertaining to the Ebro River Transfer Proposal In Biswas A (Ed) Spanish National Hydrologic Plan Reports of International Experts Gobierno de Aragoacuten Zaragoza
Johnson S Adams R Perry G 1991 The On-Farm Costs of Reducing Groundwater Pollution American Journal of Agricultural Economics 73 1063-1073
Khanna M Isik M Zilberman D 2000 Incentive-based Policies for Conservation Technology Adoption Implications for Pollution and Output Paper presented at the annual meeting of the American Agricultural of Economics Association Tampa Florida
Knickel K 1998 First Results of Model Calculations In Gazzola L Roest K (Eds) Economic Instruments for Nitrogen Control in European Agriculture Research Center on Animal Production Reggio Emilia
Mapp H Bernardo D Sabbagh S Geleta S Watkins K 1994 Economic and Environmental Impacts of Limiting Nitrogen Use to Protect Water Quality A Stochastic Regional Analysis American Journal of Agricultural Economics 76 889-903
Martiacutenez Y Uku S Albiac J 2001 El control de la contaminacioacuten por nitratos en el regadiacuteo Economiacutea Agraria y Recursos Naturales 2 (2) 115-131
Martiacutenez Y 2002 Anaacutelisis econoacutemico y ambiental de la contaminacioacuten por nitratos en el regadiacuteo Doctoral dissertation Department of Economic Analysis University of Zaragoza Zaragoza
Miettinen A 1993 The Effectiveness and Feasibility of Economic Incentives of Input Control in the Mitigation of Agricultural Water Pollution Agricultural Science in Finland 2 453-464
Ministerio de Agricultura Pesca y Alimentacioacuten 1999 Anuario de Estadiacutestica Agraria MAPA Madrid
Ministerio de Agricultura Pesca y Alimentacioacuten 2000 Hechos y Cifras del Sector Agroalimentario Espantildeol 2000 Secretariacutea General Teacutecnica MAPA Madrid
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
11
Table 5 Yearly welfare and leaching by abatement measure and soil type in the district
Under the second scenario the price of active nitrogen increases from 06 eurokg to 09
and 12 eurokg These higher nitrogen prices diminish the water and fertilizer application less
than the water price increase For Planteros and Corraletes soils the leaching reduction is
larger than under the higher water prices scenario but not for Chacilla soil A 12 eurokg
nitrogen price reduces nitrogen emissions 63 kgha for Corraletes-type soil 30 kgha for
Planteros and only 8 kgha for Chacillan For the whole district welfare losses are
between 023 and 045 million euros much lower than taxing water and with a much larger
leaching abatement Therefore a tax on nitrogen is more cost efficient than a tax on water
The third scenario introduces a limit or standard on applied nitrogen which is fixed at
250 kgha following the Extension Service recommendations (Oruacutes et al 2000) This
instrument is similar to the Code of Good Agricultural Practices established by the
European Nitrate Directive and the advantage of this measure is that costs to farmers in
terms of quasi-rent are reasonable and there are welfare gains for society in Planteros and
Corraletes soils Leaching abatement is above 40 percent in every soil and quasi-rent losses
are always below 5 percent This is a second best type of instrument and our results show
that the cost-efficiency is superior to taxes on inputs because the large abatement of
nitrogen emissions and the moderate reduction in quasi-rent Welfare increases under the
standard for the whole district (Table 5) although the standard reduces welfare in Chacilla
soils indicating that no standard is needed in this soil
The main obstacle to implement a quantitative limit is the difficulty to control
farmer compliance The introduction of a subsidy system for farmers who reduce fertilizer
application is a method to implement the standard provided that subsidies are coupled
with emissions verification These controls could be implemented and enforced by
irrigation user associations through measurement of nitrogen content in return water flow
canals Another method of implementing the standard is licensing fertilizer application to a
12
specialist a figure known as ldquoenvironmental doctorrdquo The measure of establishing a
standard has been recommended in the literature (Knickel 1998 Miettinen 1998 Weinberg
y Wilen 2000) and in studies analyzing the same irrigation district by Martiacutenez et al (2001)
and Martiacutenez (2002)
The last scenario considers the first best instrument of taxing nitrogen emissions
with a unit emission cost equal to 123 eurokg that has been chosen equal to the cost of
eliminating nitrogen from water The quasi-rent for this instrument is calculated assuming
that the social planner gives the farmer a subsidy equal to the optimal nitrogen damage
cost provided that pollution is at the social optimum The tax causes a strong leaching
reduction diminishing pollution levels by soil type between 10 and 60 percent Farmer
quasi-rent increases so farmers will embrace this solution provided that the
implementation was feasible
A ranking of policy measures can be defined by comparing the welfare effects of each
measure for the whole irrigation district by soil type (Table 5) The first best measure of
taxing emissions increases welfare in the district by 032 million euro Among the second
best measures a standard on nitrogen application also increases welfare by 007 million
euro while taxes on nitrogen fertilizer reduce welfare between 023 and 045 million euro
Higher water prices are very inefficient since welfare falls between 091 and 143 million
euro with an almost negligible leaching abatement below 4 percent This finding is
important because the recently approved Water Framework Directive of the European
Union relies heavily on higher water prices called full recovery cost in order to reach
ldquogood statusrdquo for all waters
An issue that could modify the effects presented here is that the introduction of
control measures may induce changes in the relative profitability of different crops and
farmers may respond expanding the more profitable crops This question was examined in
the study area by Martiacutenez el al (2001) for a standard limiting nitrogen application The
acreage substitution effect was moderate for all crops and in the case of corn the fall in
acreage was 03 percent
In accordance with the results presented here the studies by Pan and Hodge (1994)
and Johnson et al (1991) find that an emission tax equal to the cost of nitrogen removal is
the social optimum measure Jonhson el al (1991) evaluate the cost of the emission tax at 5
percent of quasi-rent with an emission reduction above 30 percent Other studies
examining nitrogen standards by Mapp et al (1994) in USA and Schmid (2001) in Austria
find that the abatement costs to reduce nitrogen leaching are somewhat higher than the
13
costs calculated here2 Mapp et al recommend a standard that reduces leaching by 67
percent at a cost of 22 percent of quasi-rent and Schmid states that a standard reduces
leaching between 40 and 90 percent at a cost to farmers between 5 and 14 percent of quasi-
rent Martiacutenez (2002) calculates a 2 percent loss of quasi-rent to curb leaching by 44
percent assuming homogeneous soil
Helfand and House (1995) examine the cost-efficiency of control measures under two
soil types in the case of lettuce production in order to abate nitrogen leaching by 20
percent Their findings are that quasi-rent losses derived from using uniform instruments
are small so perfect instruments are not necessary and may entail significant transaction
costs3 They indicate also that a nitrogen tax and a nitrogen standard are both very
inefficient measures which have very high welfare costs a finding contrary to the results
obtained here for corn Our results indicate that a nitrogen standard is the second best
preferred measure in accordance with economic theory and most of the empirical
literature Also our empirical evidence indicates that a tax on nitrogen is much more cost
efficient than a tax on water The finding on the nitrogen standard efficiency by Helfand
and House is questionable because the dynamic aspect of nitrogen content in the soil is
not considered When the level of nitrogen input changes the nitrogen content in the soil
adjust over several periods They force a 20 percent leaching abatement within the
production period reducing nitrogen fertilization by 90 percent so costs of a nitrogen
standard or a tax are prohibitive In contrast our results indicate that the standard reduces
nitrogen fertilization in the district by 20 percent abating leaching by more than half4 As
indicated above a tax of water is a very inefficient measure in our case with leaching
abatement below 4 percent and very high costs in terms of quasi-rent and welfare
Thomas and Boisvert (1994) simulate the introduction of a market for nitrogen
pollution permits and estimate that a permit price reducing 10 percent nitrogen emissions
reduces gross income by 15 percent5 This pollution permit instrument can be compared
with the emission tax examined here The cost calculated by these authors is much higher
2 For the whole district the nitrogen standard abates leaching by 176 tons (-52) with a cost of 015 million euro (-37) in quasi-rent 3 The loss of quasi-rent for any uniform measure is below 2 percent compared with 016 losses under a first-best heterogeneous measure 4 For the whole district nitrogen fertilization is 1020 tons and the standard reduces fertilization by 212 tons These figures come from table 4 and corn acreage by soil 5 Thomas and Boisvert (1994) use a procedure different from the present study They consider nitrogen pollution as a fraction of the remaining nitrogen that is not taken by the plant or degraded by denitrification
14
than the cost obtained in table 5 for an emission tax which abates leaching by 50 percent
in the region increasing welfare and quasi-rent6
The results of the present study on nitrate pollution control under soil heterogeneity
indicate the possibility of differentiating application of control by soil type The preferred
second best instrument is a standard but the instrument will be applied only in vulnerable
soils Corn leaching in Chacilla soils is only 45 kgha which is below the leaching levels in
the other soil types applying any abatement measure An alternative for nitrogen leaching
control would be to implement control instruments only in Planteros and Corraletes soils
which have high pollution potential For the whole district implementing a nitrogen
standard in Planteros and Corraletes soils but not in Chacilla improves welfare by 1
percent over a homogeneous nitrogen standard in the district This small loss in welfare
from using a homogeneous instead of an heterogeneous standard confirms the finding by
Helfand and House (1995) that losses from uniform instruments are small and perfect
instruments are not necessary
Discrimination of control measures could depend also on the particular crop planted
so control could be linked to the land use decision by the farmer for each soil type
Information on nitrogen leaching in the district indicates that wheat barley sunflower and
alfalfa have all leaching levels below 45 kgha in absence of abatement measures (Martiacutenez
2002) so these crops would not be subject to abatement while other more polluting crop
production activities such as corn and rice would be subject to control in vulnerable soils
This discrimination by crop and soil could be implemented using a land use tax adapted to
crop and soil provided that the land tax has adequate cost efficiency and transaction costs
5 Conclusions
The evaluation of efficiency for alternative nitrogen abatement measures requires the
consideration of biophysical aspects such soil class and crop type The effects of selected
abatement measures have been examined through a dynamic model for corn production in
three different soils of the Flumen irrigation district in the Ebro basin This evaluation is
useful to rank different instruments by their efficiency as a contribution to the policy
decision process The results agree with previous literature and indicate that a fertilizer
standard is the more efficient second best measure to control nitrogen pollution
6 As indicated above the emission tax instrument is linked to a subsidy equal to optimal nitrogen damage cost Therefore quasi-rent under the emission tax is above quasi-rent under the base scenario
15
The observed farmer behavior differs from the optimal solution of the model under
the base scenario because there is an excess input utilization that aggravates the nitrogen
pollution problem in the district Alternative emissions reduction measures have been
simulated and compared to the base scenario
An increase in water prices reduces only slightly nitrogen discharges at very large costs
to farmers and society A tax on nitrogen utilization results in more significant pollution
reduction at much lower costs A standard on nitrogen application curbs emissions by
more than half with a very moderate impact on quasi-rent and gains in welfare The
introduction of subsidies linked to the standard could be a good second best alternative to
achieve nitrogen pollution control
The original contribution of this study is the following a quantitative assessment has
been performed that demonstrates that abatement measures may be taken only in
vulnerable soils with crops that have high pollution potential So the results show that
differentiating the application of control by soil type enhances welfare although this
welfare gain from a differentiated standard is small compared with an homogeneous
standard in the case of corn An important question for the choice of the correct pollution
control instrument is related with the implementation costs of the instrument The more
suitable measures are associated with implementation difficulties and policy makers should
evaluate the trade-off between cost-efficiency and implementation simplicity
Acknowledgements
Support for this research was provided by projects CICYT AGL2001-2333-C02 and
INIA RTA02-090 from the Spanish Ministry of Science and Technology The INIA
funded also research contacts with the Department of Agricultural Economics of the
University of Newcastle upon Tyne This study was made possible by the technical
assistance of Joseacute Cavero Jesuacutes Noguumles Dolores Quilez Juan Herrero and Auxi Casterad
from the Laboratorio Asociado de Agronomiacutea y Medio Ambiente (CSIC-CITA Aula Dei
Campus Zaragoza)
16
References Albiac J Uche J Valero A Serra L Meyer A Tapia J 2003 The Economic
Unsustainability of the Spanish National Hydrologic Plan International Journal of Water Resources Development 19 (3) 437-458
Casterad A Herrero J 2003 Irrivol database Unidad de Suelos y Riegos Servicio de Investigacioacuten Agroalimentaria Gobierno de Aragoacuten Zaragoza
Confederacioacuten Hidrograacutefica del Ebro 2003 Water quality data series CHE Ministerio de Medio Ambiente Zaragoza Available at wwwchebroes
Gobierno de Aragoacuten 1999 Base de datos 1T de superficie de cultivos por teacutermino municipal para Aragoacuten 1987-99 Servicio de Estudios y Planificacioacuten Secretariacutea General Teacutecnica Departamento de Agricultura Gobierno de Aragoacuten Zaragoza
Feijooacute M Calvo E Albiac J 2000 Economic and environmental policy analysis of the Flumen-Monegros irrigation system in Huesca Spain Geographical Analysis 32 (3) 187-204
Hanemann M 2003 Economics Findings and Recommendations Appendix C Economics In Horne A Dracup J Hanemann M Rodriguez-Iturbe I Means E Roth J (The US Technical Team) A Technical Review of the Spanish National Hydrological Plan (Ebro River Out-of-basin Diversion) Fundacioacuten Universidad Politeacutecnica de Cartagena University of Cartagena Cartagena
Helfand G House B 1995 Regulating Nonpoint Source Pollution Under Heterogeneous Conditions American Journal of Agricultural Economics 77 1024-1032
Howitt R 2003 A Review of Economic Hydrologic Planning Pertaining to the Ebro River Transfer Proposal In Biswas A (Ed) Spanish National Hydrologic Plan Reports of International Experts Gobierno de Aragoacuten Zaragoza
Johnson S Adams R Perry G 1991 The On-Farm Costs of Reducing Groundwater Pollution American Journal of Agricultural Economics 73 1063-1073
Khanna M Isik M Zilberman D 2000 Incentive-based Policies for Conservation Technology Adoption Implications for Pollution and Output Paper presented at the annual meeting of the American Agricultural of Economics Association Tampa Florida
Knickel K 1998 First Results of Model Calculations In Gazzola L Roest K (Eds) Economic Instruments for Nitrogen Control in European Agriculture Research Center on Animal Production Reggio Emilia
Mapp H Bernardo D Sabbagh S Geleta S Watkins K 1994 Economic and Environmental Impacts of Limiting Nitrogen Use to Protect Water Quality A Stochastic Regional Analysis American Journal of Agricultural Economics 76 889-903
Martiacutenez Y Uku S Albiac J 2001 El control de la contaminacioacuten por nitratos en el regadiacuteo Economiacutea Agraria y Recursos Naturales 2 (2) 115-131
Martiacutenez Y 2002 Anaacutelisis econoacutemico y ambiental de la contaminacioacuten por nitratos en el regadiacuteo Doctoral dissertation Department of Economic Analysis University of Zaragoza Zaragoza
Miettinen A 1993 The Effectiveness and Feasibility of Economic Incentives of Input Control in the Mitigation of Agricultural Water Pollution Agricultural Science in Finland 2 453-464
Ministerio de Agricultura Pesca y Alimentacioacuten 1999 Anuario de Estadiacutestica Agraria MAPA Madrid
Ministerio de Agricultura Pesca y Alimentacioacuten 2000 Hechos y Cifras del Sector Agroalimentario Espantildeol 2000 Secretariacutea General Teacutecnica MAPA Madrid
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
12
specialist a figure known as ldquoenvironmental doctorrdquo The measure of establishing a
standard has been recommended in the literature (Knickel 1998 Miettinen 1998 Weinberg
y Wilen 2000) and in studies analyzing the same irrigation district by Martiacutenez et al (2001)
and Martiacutenez (2002)
The last scenario considers the first best instrument of taxing nitrogen emissions
with a unit emission cost equal to 123 eurokg that has been chosen equal to the cost of
eliminating nitrogen from water The quasi-rent for this instrument is calculated assuming
that the social planner gives the farmer a subsidy equal to the optimal nitrogen damage
cost provided that pollution is at the social optimum The tax causes a strong leaching
reduction diminishing pollution levels by soil type between 10 and 60 percent Farmer
quasi-rent increases so farmers will embrace this solution provided that the
implementation was feasible
A ranking of policy measures can be defined by comparing the welfare effects of each
measure for the whole irrigation district by soil type (Table 5) The first best measure of
taxing emissions increases welfare in the district by 032 million euro Among the second
best measures a standard on nitrogen application also increases welfare by 007 million
euro while taxes on nitrogen fertilizer reduce welfare between 023 and 045 million euro
Higher water prices are very inefficient since welfare falls between 091 and 143 million
euro with an almost negligible leaching abatement below 4 percent This finding is
important because the recently approved Water Framework Directive of the European
Union relies heavily on higher water prices called full recovery cost in order to reach
ldquogood statusrdquo for all waters
An issue that could modify the effects presented here is that the introduction of
control measures may induce changes in the relative profitability of different crops and
farmers may respond expanding the more profitable crops This question was examined in
the study area by Martiacutenez el al (2001) for a standard limiting nitrogen application The
acreage substitution effect was moderate for all crops and in the case of corn the fall in
acreage was 03 percent
In accordance with the results presented here the studies by Pan and Hodge (1994)
and Johnson et al (1991) find that an emission tax equal to the cost of nitrogen removal is
the social optimum measure Jonhson el al (1991) evaluate the cost of the emission tax at 5
percent of quasi-rent with an emission reduction above 30 percent Other studies
examining nitrogen standards by Mapp et al (1994) in USA and Schmid (2001) in Austria
find that the abatement costs to reduce nitrogen leaching are somewhat higher than the
13
costs calculated here2 Mapp et al recommend a standard that reduces leaching by 67
percent at a cost of 22 percent of quasi-rent and Schmid states that a standard reduces
leaching between 40 and 90 percent at a cost to farmers between 5 and 14 percent of quasi-
rent Martiacutenez (2002) calculates a 2 percent loss of quasi-rent to curb leaching by 44
percent assuming homogeneous soil
Helfand and House (1995) examine the cost-efficiency of control measures under two
soil types in the case of lettuce production in order to abate nitrogen leaching by 20
percent Their findings are that quasi-rent losses derived from using uniform instruments
are small so perfect instruments are not necessary and may entail significant transaction
costs3 They indicate also that a nitrogen tax and a nitrogen standard are both very
inefficient measures which have very high welfare costs a finding contrary to the results
obtained here for corn Our results indicate that a nitrogen standard is the second best
preferred measure in accordance with economic theory and most of the empirical
literature Also our empirical evidence indicates that a tax on nitrogen is much more cost
efficient than a tax on water The finding on the nitrogen standard efficiency by Helfand
and House is questionable because the dynamic aspect of nitrogen content in the soil is
not considered When the level of nitrogen input changes the nitrogen content in the soil
adjust over several periods They force a 20 percent leaching abatement within the
production period reducing nitrogen fertilization by 90 percent so costs of a nitrogen
standard or a tax are prohibitive In contrast our results indicate that the standard reduces
nitrogen fertilization in the district by 20 percent abating leaching by more than half4 As
indicated above a tax of water is a very inefficient measure in our case with leaching
abatement below 4 percent and very high costs in terms of quasi-rent and welfare
Thomas and Boisvert (1994) simulate the introduction of a market for nitrogen
pollution permits and estimate that a permit price reducing 10 percent nitrogen emissions
reduces gross income by 15 percent5 This pollution permit instrument can be compared
with the emission tax examined here The cost calculated by these authors is much higher
2 For the whole district the nitrogen standard abates leaching by 176 tons (-52) with a cost of 015 million euro (-37) in quasi-rent 3 The loss of quasi-rent for any uniform measure is below 2 percent compared with 016 losses under a first-best heterogeneous measure 4 For the whole district nitrogen fertilization is 1020 tons and the standard reduces fertilization by 212 tons These figures come from table 4 and corn acreage by soil 5 Thomas and Boisvert (1994) use a procedure different from the present study They consider nitrogen pollution as a fraction of the remaining nitrogen that is not taken by the plant or degraded by denitrification
14
than the cost obtained in table 5 for an emission tax which abates leaching by 50 percent
in the region increasing welfare and quasi-rent6
The results of the present study on nitrate pollution control under soil heterogeneity
indicate the possibility of differentiating application of control by soil type The preferred
second best instrument is a standard but the instrument will be applied only in vulnerable
soils Corn leaching in Chacilla soils is only 45 kgha which is below the leaching levels in
the other soil types applying any abatement measure An alternative for nitrogen leaching
control would be to implement control instruments only in Planteros and Corraletes soils
which have high pollution potential For the whole district implementing a nitrogen
standard in Planteros and Corraletes soils but not in Chacilla improves welfare by 1
percent over a homogeneous nitrogen standard in the district This small loss in welfare
from using a homogeneous instead of an heterogeneous standard confirms the finding by
Helfand and House (1995) that losses from uniform instruments are small and perfect
instruments are not necessary
Discrimination of control measures could depend also on the particular crop planted
so control could be linked to the land use decision by the farmer for each soil type
Information on nitrogen leaching in the district indicates that wheat barley sunflower and
alfalfa have all leaching levels below 45 kgha in absence of abatement measures (Martiacutenez
2002) so these crops would not be subject to abatement while other more polluting crop
production activities such as corn and rice would be subject to control in vulnerable soils
This discrimination by crop and soil could be implemented using a land use tax adapted to
crop and soil provided that the land tax has adequate cost efficiency and transaction costs
5 Conclusions
The evaluation of efficiency for alternative nitrogen abatement measures requires the
consideration of biophysical aspects such soil class and crop type The effects of selected
abatement measures have been examined through a dynamic model for corn production in
three different soils of the Flumen irrigation district in the Ebro basin This evaluation is
useful to rank different instruments by their efficiency as a contribution to the policy
decision process The results agree with previous literature and indicate that a fertilizer
standard is the more efficient second best measure to control nitrogen pollution
6 As indicated above the emission tax instrument is linked to a subsidy equal to optimal nitrogen damage cost Therefore quasi-rent under the emission tax is above quasi-rent under the base scenario
15
The observed farmer behavior differs from the optimal solution of the model under
the base scenario because there is an excess input utilization that aggravates the nitrogen
pollution problem in the district Alternative emissions reduction measures have been
simulated and compared to the base scenario
An increase in water prices reduces only slightly nitrogen discharges at very large costs
to farmers and society A tax on nitrogen utilization results in more significant pollution
reduction at much lower costs A standard on nitrogen application curbs emissions by
more than half with a very moderate impact on quasi-rent and gains in welfare The
introduction of subsidies linked to the standard could be a good second best alternative to
achieve nitrogen pollution control
The original contribution of this study is the following a quantitative assessment has
been performed that demonstrates that abatement measures may be taken only in
vulnerable soils with crops that have high pollution potential So the results show that
differentiating the application of control by soil type enhances welfare although this
welfare gain from a differentiated standard is small compared with an homogeneous
standard in the case of corn An important question for the choice of the correct pollution
control instrument is related with the implementation costs of the instrument The more
suitable measures are associated with implementation difficulties and policy makers should
evaluate the trade-off between cost-efficiency and implementation simplicity
Acknowledgements
Support for this research was provided by projects CICYT AGL2001-2333-C02 and
INIA RTA02-090 from the Spanish Ministry of Science and Technology The INIA
funded also research contacts with the Department of Agricultural Economics of the
University of Newcastle upon Tyne This study was made possible by the technical
assistance of Joseacute Cavero Jesuacutes Noguumles Dolores Quilez Juan Herrero and Auxi Casterad
from the Laboratorio Asociado de Agronomiacutea y Medio Ambiente (CSIC-CITA Aula Dei
Campus Zaragoza)
16
References Albiac J Uche J Valero A Serra L Meyer A Tapia J 2003 The Economic
Unsustainability of the Spanish National Hydrologic Plan International Journal of Water Resources Development 19 (3) 437-458
Casterad A Herrero J 2003 Irrivol database Unidad de Suelos y Riegos Servicio de Investigacioacuten Agroalimentaria Gobierno de Aragoacuten Zaragoza
Confederacioacuten Hidrograacutefica del Ebro 2003 Water quality data series CHE Ministerio de Medio Ambiente Zaragoza Available at wwwchebroes
Gobierno de Aragoacuten 1999 Base de datos 1T de superficie de cultivos por teacutermino municipal para Aragoacuten 1987-99 Servicio de Estudios y Planificacioacuten Secretariacutea General Teacutecnica Departamento de Agricultura Gobierno de Aragoacuten Zaragoza
Feijooacute M Calvo E Albiac J 2000 Economic and environmental policy analysis of the Flumen-Monegros irrigation system in Huesca Spain Geographical Analysis 32 (3) 187-204
Hanemann M 2003 Economics Findings and Recommendations Appendix C Economics In Horne A Dracup J Hanemann M Rodriguez-Iturbe I Means E Roth J (The US Technical Team) A Technical Review of the Spanish National Hydrological Plan (Ebro River Out-of-basin Diversion) Fundacioacuten Universidad Politeacutecnica de Cartagena University of Cartagena Cartagena
Helfand G House B 1995 Regulating Nonpoint Source Pollution Under Heterogeneous Conditions American Journal of Agricultural Economics 77 1024-1032
Howitt R 2003 A Review of Economic Hydrologic Planning Pertaining to the Ebro River Transfer Proposal In Biswas A (Ed) Spanish National Hydrologic Plan Reports of International Experts Gobierno de Aragoacuten Zaragoza
Johnson S Adams R Perry G 1991 The On-Farm Costs of Reducing Groundwater Pollution American Journal of Agricultural Economics 73 1063-1073
Khanna M Isik M Zilberman D 2000 Incentive-based Policies for Conservation Technology Adoption Implications for Pollution and Output Paper presented at the annual meeting of the American Agricultural of Economics Association Tampa Florida
Knickel K 1998 First Results of Model Calculations In Gazzola L Roest K (Eds) Economic Instruments for Nitrogen Control in European Agriculture Research Center on Animal Production Reggio Emilia
Mapp H Bernardo D Sabbagh S Geleta S Watkins K 1994 Economic and Environmental Impacts of Limiting Nitrogen Use to Protect Water Quality A Stochastic Regional Analysis American Journal of Agricultural Economics 76 889-903
Martiacutenez Y Uku S Albiac J 2001 El control de la contaminacioacuten por nitratos en el regadiacuteo Economiacutea Agraria y Recursos Naturales 2 (2) 115-131
Martiacutenez Y 2002 Anaacutelisis econoacutemico y ambiental de la contaminacioacuten por nitratos en el regadiacuteo Doctoral dissertation Department of Economic Analysis University of Zaragoza Zaragoza
Miettinen A 1993 The Effectiveness and Feasibility of Economic Incentives of Input Control in the Mitigation of Agricultural Water Pollution Agricultural Science in Finland 2 453-464
Ministerio de Agricultura Pesca y Alimentacioacuten 1999 Anuario de Estadiacutestica Agraria MAPA Madrid
Ministerio de Agricultura Pesca y Alimentacioacuten 2000 Hechos y Cifras del Sector Agroalimentario Espantildeol 2000 Secretariacutea General Teacutecnica MAPA Madrid
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
13
costs calculated here2 Mapp et al recommend a standard that reduces leaching by 67
percent at a cost of 22 percent of quasi-rent and Schmid states that a standard reduces
leaching between 40 and 90 percent at a cost to farmers between 5 and 14 percent of quasi-
rent Martiacutenez (2002) calculates a 2 percent loss of quasi-rent to curb leaching by 44
percent assuming homogeneous soil
Helfand and House (1995) examine the cost-efficiency of control measures under two
soil types in the case of lettuce production in order to abate nitrogen leaching by 20
percent Their findings are that quasi-rent losses derived from using uniform instruments
are small so perfect instruments are not necessary and may entail significant transaction
costs3 They indicate also that a nitrogen tax and a nitrogen standard are both very
inefficient measures which have very high welfare costs a finding contrary to the results
obtained here for corn Our results indicate that a nitrogen standard is the second best
preferred measure in accordance with economic theory and most of the empirical
literature Also our empirical evidence indicates that a tax on nitrogen is much more cost
efficient than a tax on water The finding on the nitrogen standard efficiency by Helfand
and House is questionable because the dynamic aspect of nitrogen content in the soil is
not considered When the level of nitrogen input changes the nitrogen content in the soil
adjust over several periods They force a 20 percent leaching abatement within the
production period reducing nitrogen fertilization by 90 percent so costs of a nitrogen
standard or a tax are prohibitive In contrast our results indicate that the standard reduces
nitrogen fertilization in the district by 20 percent abating leaching by more than half4 As
indicated above a tax of water is a very inefficient measure in our case with leaching
abatement below 4 percent and very high costs in terms of quasi-rent and welfare
Thomas and Boisvert (1994) simulate the introduction of a market for nitrogen
pollution permits and estimate that a permit price reducing 10 percent nitrogen emissions
reduces gross income by 15 percent5 This pollution permit instrument can be compared
with the emission tax examined here The cost calculated by these authors is much higher
2 For the whole district the nitrogen standard abates leaching by 176 tons (-52) with a cost of 015 million euro (-37) in quasi-rent 3 The loss of quasi-rent for any uniform measure is below 2 percent compared with 016 losses under a first-best heterogeneous measure 4 For the whole district nitrogen fertilization is 1020 tons and the standard reduces fertilization by 212 tons These figures come from table 4 and corn acreage by soil 5 Thomas and Boisvert (1994) use a procedure different from the present study They consider nitrogen pollution as a fraction of the remaining nitrogen that is not taken by the plant or degraded by denitrification
14
than the cost obtained in table 5 for an emission tax which abates leaching by 50 percent
in the region increasing welfare and quasi-rent6
The results of the present study on nitrate pollution control under soil heterogeneity
indicate the possibility of differentiating application of control by soil type The preferred
second best instrument is a standard but the instrument will be applied only in vulnerable
soils Corn leaching in Chacilla soils is only 45 kgha which is below the leaching levels in
the other soil types applying any abatement measure An alternative for nitrogen leaching
control would be to implement control instruments only in Planteros and Corraletes soils
which have high pollution potential For the whole district implementing a nitrogen
standard in Planteros and Corraletes soils but not in Chacilla improves welfare by 1
percent over a homogeneous nitrogen standard in the district This small loss in welfare
from using a homogeneous instead of an heterogeneous standard confirms the finding by
Helfand and House (1995) that losses from uniform instruments are small and perfect
instruments are not necessary
Discrimination of control measures could depend also on the particular crop planted
so control could be linked to the land use decision by the farmer for each soil type
Information on nitrogen leaching in the district indicates that wheat barley sunflower and
alfalfa have all leaching levels below 45 kgha in absence of abatement measures (Martiacutenez
2002) so these crops would not be subject to abatement while other more polluting crop
production activities such as corn and rice would be subject to control in vulnerable soils
This discrimination by crop and soil could be implemented using a land use tax adapted to
crop and soil provided that the land tax has adequate cost efficiency and transaction costs
5 Conclusions
The evaluation of efficiency for alternative nitrogen abatement measures requires the
consideration of biophysical aspects such soil class and crop type The effects of selected
abatement measures have been examined through a dynamic model for corn production in
three different soils of the Flumen irrigation district in the Ebro basin This evaluation is
useful to rank different instruments by their efficiency as a contribution to the policy
decision process The results agree with previous literature and indicate that a fertilizer
standard is the more efficient second best measure to control nitrogen pollution
6 As indicated above the emission tax instrument is linked to a subsidy equal to optimal nitrogen damage cost Therefore quasi-rent under the emission tax is above quasi-rent under the base scenario
15
The observed farmer behavior differs from the optimal solution of the model under
the base scenario because there is an excess input utilization that aggravates the nitrogen
pollution problem in the district Alternative emissions reduction measures have been
simulated and compared to the base scenario
An increase in water prices reduces only slightly nitrogen discharges at very large costs
to farmers and society A tax on nitrogen utilization results in more significant pollution
reduction at much lower costs A standard on nitrogen application curbs emissions by
more than half with a very moderate impact on quasi-rent and gains in welfare The
introduction of subsidies linked to the standard could be a good second best alternative to
achieve nitrogen pollution control
The original contribution of this study is the following a quantitative assessment has
been performed that demonstrates that abatement measures may be taken only in
vulnerable soils with crops that have high pollution potential So the results show that
differentiating the application of control by soil type enhances welfare although this
welfare gain from a differentiated standard is small compared with an homogeneous
standard in the case of corn An important question for the choice of the correct pollution
control instrument is related with the implementation costs of the instrument The more
suitable measures are associated with implementation difficulties and policy makers should
evaluate the trade-off between cost-efficiency and implementation simplicity
Acknowledgements
Support for this research was provided by projects CICYT AGL2001-2333-C02 and
INIA RTA02-090 from the Spanish Ministry of Science and Technology The INIA
funded also research contacts with the Department of Agricultural Economics of the
University of Newcastle upon Tyne This study was made possible by the technical
assistance of Joseacute Cavero Jesuacutes Noguumles Dolores Quilez Juan Herrero and Auxi Casterad
from the Laboratorio Asociado de Agronomiacutea y Medio Ambiente (CSIC-CITA Aula Dei
Campus Zaragoza)
16
References Albiac J Uche J Valero A Serra L Meyer A Tapia J 2003 The Economic
Unsustainability of the Spanish National Hydrologic Plan International Journal of Water Resources Development 19 (3) 437-458
Casterad A Herrero J 2003 Irrivol database Unidad de Suelos y Riegos Servicio de Investigacioacuten Agroalimentaria Gobierno de Aragoacuten Zaragoza
Confederacioacuten Hidrograacutefica del Ebro 2003 Water quality data series CHE Ministerio de Medio Ambiente Zaragoza Available at wwwchebroes
Gobierno de Aragoacuten 1999 Base de datos 1T de superficie de cultivos por teacutermino municipal para Aragoacuten 1987-99 Servicio de Estudios y Planificacioacuten Secretariacutea General Teacutecnica Departamento de Agricultura Gobierno de Aragoacuten Zaragoza
Feijooacute M Calvo E Albiac J 2000 Economic and environmental policy analysis of the Flumen-Monegros irrigation system in Huesca Spain Geographical Analysis 32 (3) 187-204
Hanemann M 2003 Economics Findings and Recommendations Appendix C Economics In Horne A Dracup J Hanemann M Rodriguez-Iturbe I Means E Roth J (The US Technical Team) A Technical Review of the Spanish National Hydrological Plan (Ebro River Out-of-basin Diversion) Fundacioacuten Universidad Politeacutecnica de Cartagena University of Cartagena Cartagena
Helfand G House B 1995 Regulating Nonpoint Source Pollution Under Heterogeneous Conditions American Journal of Agricultural Economics 77 1024-1032
Howitt R 2003 A Review of Economic Hydrologic Planning Pertaining to the Ebro River Transfer Proposal In Biswas A (Ed) Spanish National Hydrologic Plan Reports of International Experts Gobierno de Aragoacuten Zaragoza
Johnson S Adams R Perry G 1991 The On-Farm Costs of Reducing Groundwater Pollution American Journal of Agricultural Economics 73 1063-1073
Khanna M Isik M Zilberman D 2000 Incentive-based Policies for Conservation Technology Adoption Implications for Pollution and Output Paper presented at the annual meeting of the American Agricultural of Economics Association Tampa Florida
Knickel K 1998 First Results of Model Calculations In Gazzola L Roest K (Eds) Economic Instruments for Nitrogen Control in European Agriculture Research Center on Animal Production Reggio Emilia
Mapp H Bernardo D Sabbagh S Geleta S Watkins K 1994 Economic and Environmental Impacts of Limiting Nitrogen Use to Protect Water Quality A Stochastic Regional Analysis American Journal of Agricultural Economics 76 889-903
Martiacutenez Y Uku S Albiac J 2001 El control de la contaminacioacuten por nitratos en el regadiacuteo Economiacutea Agraria y Recursos Naturales 2 (2) 115-131
Martiacutenez Y 2002 Anaacutelisis econoacutemico y ambiental de la contaminacioacuten por nitratos en el regadiacuteo Doctoral dissertation Department of Economic Analysis University of Zaragoza Zaragoza
Miettinen A 1993 The Effectiveness and Feasibility of Economic Incentives of Input Control in the Mitigation of Agricultural Water Pollution Agricultural Science in Finland 2 453-464
Ministerio de Agricultura Pesca y Alimentacioacuten 1999 Anuario de Estadiacutestica Agraria MAPA Madrid
Ministerio de Agricultura Pesca y Alimentacioacuten 2000 Hechos y Cifras del Sector Agroalimentario Espantildeol 2000 Secretariacutea General Teacutecnica MAPA Madrid
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
14
than the cost obtained in table 5 for an emission tax which abates leaching by 50 percent
in the region increasing welfare and quasi-rent6
The results of the present study on nitrate pollution control under soil heterogeneity
indicate the possibility of differentiating application of control by soil type The preferred
second best instrument is a standard but the instrument will be applied only in vulnerable
soils Corn leaching in Chacilla soils is only 45 kgha which is below the leaching levels in
the other soil types applying any abatement measure An alternative for nitrogen leaching
control would be to implement control instruments only in Planteros and Corraletes soils
which have high pollution potential For the whole district implementing a nitrogen
standard in Planteros and Corraletes soils but not in Chacilla improves welfare by 1
percent over a homogeneous nitrogen standard in the district This small loss in welfare
from using a homogeneous instead of an heterogeneous standard confirms the finding by
Helfand and House (1995) that losses from uniform instruments are small and perfect
instruments are not necessary
Discrimination of control measures could depend also on the particular crop planted
so control could be linked to the land use decision by the farmer for each soil type
Information on nitrogen leaching in the district indicates that wheat barley sunflower and
alfalfa have all leaching levels below 45 kgha in absence of abatement measures (Martiacutenez
2002) so these crops would not be subject to abatement while other more polluting crop
production activities such as corn and rice would be subject to control in vulnerable soils
This discrimination by crop and soil could be implemented using a land use tax adapted to
crop and soil provided that the land tax has adequate cost efficiency and transaction costs
5 Conclusions
The evaluation of efficiency for alternative nitrogen abatement measures requires the
consideration of biophysical aspects such soil class and crop type The effects of selected
abatement measures have been examined through a dynamic model for corn production in
three different soils of the Flumen irrigation district in the Ebro basin This evaluation is
useful to rank different instruments by their efficiency as a contribution to the policy
decision process The results agree with previous literature and indicate that a fertilizer
standard is the more efficient second best measure to control nitrogen pollution
6 As indicated above the emission tax instrument is linked to a subsidy equal to optimal nitrogen damage cost Therefore quasi-rent under the emission tax is above quasi-rent under the base scenario
15
The observed farmer behavior differs from the optimal solution of the model under
the base scenario because there is an excess input utilization that aggravates the nitrogen
pollution problem in the district Alternative emissions reduction measures have been
simulated and compared to the base scenario
An increase in water prices reduces only slightly nitrogen discharges at very large costs
to farmers and society A tax on nitrogen utilization results in more significant pollution
reduction at much lower costs A standard on nitrogen application curbs emissions by
more than half with a very moderate impact on quasi-rent and gains in welfare The
introduction of subsidies linked to the standard could be a good second best alternative to
achieve nitrogen pollution control
The original contribution of this study is the following a quantitative assessment has
been performed that demonstrates that abatement measures may be taken only in
vulnerable soils with crops that have high pollution potential So the results show that
differentiating the application of control by soil type enhances welfare although this
welfare gain from a differentiated standard is small compared with an homogeneous
standard in the case of corn An important question for the choice of the correct pollution
control instrument is related with the implementation costs of the instrument The more
suitable measures are associated with implementation difficulties and policy makers should
evaluate the trade-off between cost-efficiency and implementation simplicity
Acknowledgements
Support for this research was provided by projects CICYT AGL2001-2333-C02 and
INIA RTA02-090 from the Spanish Ministry of Science and Technology The INIA
funded also research contacts with the Department of Agricultural Economics of the
University of Newcastle upon Tyne This study was made possible by the technical
assistance of Joseacute Cavero Jesuacutes Noguumles Dolores Quilez Juan Herrero and Auxi Casterad
from the Laboratorio Asociado de Agronomiacutea y Medio Ambiente (CSIC-CITA Aula Dei
Campus Zaragoza)
16
References Albiac J Uche J Valero A Serra L Meyer A Tapia J 2003 The Economic
Unsustainability of the Spanish National Hydrologic Plan International Journal of Water Resources Development 19 (3) 437-458
Casterad A Herrero J 2003 Irrivol database Unidad de Suelos y Riegos Servicio de Investigacioacuten Agroalimentaria Gobierno de Aragoacuten Zaragoza
Confederacioacuten Hidrograacutefica del Ebro 2003 Water quality data series CHE Ministerio de Medio Ambiente Zaragoza Available at wwwchebroes
Gobierno de Aragoacuten 1999 Base de datos 1T de superficie de cultivos por teacutermino municipal para Aragoacuten 1987-99 Servicio de Estudios y Planificacioacuten Secretariacutea General Teacutecnica Departamento de Agricultura Gobierno de Aragoacuten Zaragoza
Feijooacute M Calvo E Albiac J 2000 Economic and environmental policy analysis of the Flumen-Monegros irrigation system in Huesca Spain Geographical Analysis 32 (3) 187-204
Hanemann M 2003 Economics Findings and Recommendations Appendix C Economics In Horne A Dracup J Hanemann M Rodriguez-Iturbe I Means E Roth J (The US Technical Team) A Technical Review of the Spanish National Hydrological Plan (Ebro River Out-of-basin Diversion) Fundacioacuten Universidad Politeacutecnica de Cartagena University of Cartagena Cartagena
Helfand G House B 1995 Regulating Nonpoint Source Pollution Under Heterogeneous Conditions American Journal of Agricultural Economics 77 1024-1032
Howitt R 2003 A Review of Economic Hydrologic Planning Pertaining to the Ebro River Transfer Proposal In Biswas A (Ed) Spanish National Hydrologic Plan Reports of International Experts Gobierno de Aragoacuten Zaragoza
Johnson S Adams R Perry G 1991 The On-Farm Costs of Reducing Groundwater Pollution American Journal of Agricultural Economics 73 1063-1073
Khanna M Isik M Zilberman D 2000 Incentive-based Policies for Conservation Technology Adoption Implications for Pollution and Output Paper presented at the annual meeting of the American Agricultural of Economics Association Tampa Florida
Knickel K 1998 First Results of Model Calculations In Gazzola L Roest K (Eds) Economic Instruments for Nitrogen Control in European Agriculture Research Center on Animal Production Reggio Emilia
Mapp H Bernardo D Sabbagh S Geleta S Watkins K 1994 Economic and Environmental Impacts of Limiting Nitrogen Use to Protect Water Quality A Stochastic Regional Analysis American Journal of Agricultural Economics 76 889-903
Martiacutenez Y Uku S Albiac J 2001 El control de la contaminacioacuten por nitratos en el regadiacuteo Economiacutea Agraria y Recursos Naturales 2 (2) 115-131
Martiacutenez Y 2002 Anaacutelisis econoacutemico y ambiental de la contaminacioacuten por nitratos en el regadiacuteo Doctoral dissertation Department of Economic Analysis University of Zaragoza Zaragoza
Miettinen A 1993 The Effectiveness and Feasibility of Economic Incentives of Input Control in the Mitigation of Agricultural Water Pollution Agricultural Science in Finland 2 453-464
Ministerio de Agricultura Pesca y Alimentacioacuten 1999 Anuario de Estadiacutestica Agraria MAPA Madrid
Ministerio de Agricultura Pesca y Alimentacioacuten 2000 Hechos y Cifras del Sector Agroalimentario Espantildeol 2000 Secretariacutea General Teacutecnica MAPA Madrid
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
15
The observed farmer behavior differs from the optimal solution of the model under
the base scenario because there is an excess input utilization that aggravates the nitrogen
pollution problem in the district Alternative emissions reduction measures have been
simulated and compared to the base scenario
An increase in water prices reduces only slightly nitrogen discharges at very large costs
to farmers and society A tax on nitrogen utilization results in more significant pollution
reduction at much lower costs A standard on nitrogen application curbs emissions by
more than half with a very moderate impact on quasi-rent and gains in welfare The
introduction of subsidies linked to the standard could be a good second best alternative to
achieve nitrogen pollution control
The original contribution of this study is the following a quantitative assessment has
been performed that demonstrates that abatement measures may be taken only in
vulnerable soils with crops that have high pollution potential So the results show that
differentiating the application of control by soil type enhances welfare although this
welfare gain from a differentiated standard is small compared with an homogeneous
standard in the case of corn An important question for the choice of the correct pollution
control instrument is related with the implementation costs of the instrument The more
suitable measures are associated with implementation difficulties and policy makers should
evaluate the trade-off between cost-efficiency and implementation simplicity
Acknowledgements
Support for this research was provided by projects CICYT AGL2001-2333-C02 and
INIA RTA02-090 from the Spanish Ministry of Science and Technology The INIA
funded also research contacts with the Department of Agricultural Economics of the
University of Newcastle upon Tyne This study was made possible by the technical
assistance of Joseacute Cavero Jesuacutes Noguumles Dolores Quilez Juan Herrero and Auxi Casterad
from the Laboratorio Asociado de Agronomiacutea y Medio Ambiente (CSIC-CITA Aula Dei
Campus Zaragoza)
16
References Albiac J Uche J Valero A Serra L Meyer A Tapia J 2003 The Economic
Unsustainability of the Spanish National Hydrologic Plan International Journal of Water Resources Development 19 (3) 437-458
Casterad A Herrero J 2003 Irrivol database Unidad de Suelos y Riegos Servicio de Investigacioacuten Agroalimentaria Gobierno de Aragoacuten Zaragoza
Confederacioacuten Hidrograacutefica del Ebro 2003 Water quality data series CHE Ministerio de Medio Ambiente Zaragoza Available at wwwchebroes
Gobierno de Aragoacuten 1999 Base de datos 1T de superficie de cultivos por teacutermino municipal para Aragoacuten 1987-99 Servicio de Estudios y Planificacioacuten Secretariacutea General Teacutecnica Departamento de Agricultura Gobierno de Aragoacuten Zaragoza
Feijooacute M Calvo E Albiac J 2000 Economic and environmental policy analysis of the Flumen-Monegros irrigation system in Huesca Spain Geographical Analysis 32 (3) 187-204
Hanemann M 2003 Economics Findings and Recommendations Appendix C Economics In Horne A Dracup J Hanemann M Rodriguez-Iturbe I Means E Roth J (The US Technical Team) A Technical Review of the Spanish National Hydrological Plan (Ebro River Out-of-basin Diversion) Fundacioacuten Universidad Politeacutecnica de Cartagena University of Cartagena Cartagena
Helfand G House B 1995 Regulating Nonpoint Source Pollution Under Heterogeneous Conditions American Journal of Agricultural Economics 77 1024-1032
Howitt R 2003 A Review of Economic Hydrologic Planning Pertaining to the Ebro River Transfer Proposal In Biswas A (Ed) Spanish National Hydrologic Plan Reports of International Experts Gobierno de Aragoacuten Zaragoza
Johnson S Adams R Perry G 1991 The On-Farm Costs of Reducing Groundwater Pollution American Journal of Agricultural Economics 73 1063-1073
Khanna M Isik M Zilberman D 2000 Incentive-based Policies for Conservation Technology Adoption Implications for Pollution and Output Paper presented at the annual meeting of the American Agricultural of Economics Association Tampa Florida
Knickel K 1998 First Results of Model Calculations In Gazzola L Roest K (Eds) Economic Instruments for Nitrogen Control in European Agriculture Research Center on Animal Production Reggio Emilia
Mapp H Bernardo D Sabbagh S Geleta S Watkins K 1994 Economic and Environmental Impacts of Limiting Nitrogen Use to Protect Water Quality A Stochastic Regional Analysis American Journal of Agricultural Economics 76 889-903
Martiacutenez Y Uku S Albiac J 2001 El control de la contaminacioacuten por nitratos en el regadiacuteo Economiacutea Agraria y Recursos Naturales 2 (2) 115-131
Martiacutenez Y 2002 Anaacutelisis econoacutemico y ambiental de la contaminacioacuten por nitratos en el regadiacuteo Doctoral dissertation Department of Economic Analysis University of Zaragoza Zaragoza
Miettinen A 1993 The Effectiveness and Feasibility of Economic Incentives of Input Control in the Mitigation of Agricultural Water Pollution Agricultural Science in Finland 2 453-464
Ministerio de Agricultura Pesca y Alimentacioacuten 1999 Anuario de Estadiacutestica Agraria MAPA Madrid
Ministerio de Agricultura Pesca y Alimentacioacuten 2000 Hechos y Cifras del Sector Agroalimentario Espantildeol 2000 Secretariacutea General Teacutecnica MAPA Madrid
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
16
References Albiac J Uche J Valero A Serra L Meyer A Tapia J 2003 The Economic
Unsustainability of the Spanish National Hydrologic Plan International Journal of Water Resources Development 19 (3) 437-458
Casterad A Herrero J 2003 Irrivol database Unidad de Suelos y Riegos Servicio de Investigacioacuten Agroalimentaria Gobierno de Aragoacuten Zaragoza
Confederacioacuten Hidrograacutefica del Ebro 2003 Water quality data series CHE Ministerio de Medio Ambiente Zaragoza Available at wwwchebroes
Gobierno de Aragoacuten 1999 Base de datos 1T de superficie de cultivos por teacutermino municipal para Aragoacuten 1987-99 Servicio de Estudios y Planificacioacuten Secretariacutea General Teacutecnica Departamento de Agricultura Gobierno de Aragoacuten Zaragoza
Feijooacute M Calvo E Albiac J 2000 Economic and environmental policy analysis of the Flumen-Monegros irrigation system in Huesca Spain Geographical Analysis 32 (3) 187-204
Hanemann M 2003 Economics Findings and Recommendations Appendix C Economics In Horne A Dracup J Hanemann M Rodriguez-Iturbe I Means E Roth J (The US Technical Team) A Technical Review of the Spanish National Hydrological Plan (Ebro River Out-of-basin Diversion) Fundacioacuten Universidad Politeacutecnica de Cartagena University of Cartagena Cartagena
Helfand G House B 1995 Regulating Nonpoint Source Pollution Under Heterogeneous Conditions American Journal of Agricultural Economics 77 1024-1032
Howitt R 2003 A Review of Economic Hydrologic Planning Pertaining to the Ebro River Transfer Proposal In Biswas A (Ed) Spanish National Hydrologic Plan Reports of International Experts Gobierno de Aragoacuten Zaragoza
Johnson S Adams R Perry G 1991 The On-Farm Costs of Reducing Groundwater Pollution American Journal of Agricultural Economics 73 1063-1073
Khanna M Isik M Zilberman D 2000 Incentive-based Policies for Conservation Technology Adoption Implications for Pollution and Output Paper presented at the annual meeting of the American Agricultural of Economics Association Tampa Florida
Knickel K 1998 First Results of Model Calculations In Gazzola L Roest K (Eds) Economic Instruments for Nitrogen Control in European Agriculture Research Center on Animal Production Reggio Emilia
Mapp H Bernardo D Sabbagh S Geleta S Watkins K 1994 Economic and Environmental Impacts of Limiting Nitrogen Use to Protect Water Quality A Stochastic Regional Analysis American Journal of Agricultural Economics 76 889-903
Martiacutenez Y Uku S Albiac J 2001 El control de la contaminacioacuten por nitratos en el regadiacuteo Economiacutea Agraria y Recursos Naturales 2 (2) 115-131
Martiacutenez Y 2002 Anaacutelisis econoacutemico y ambiental de la contaminacioacuten por nitratos en el regadiacuteo Doctoral dissertation Department of Economic Analysis University of Zaragoza Zaragoza
Miettinen A 1993 The Effectiveness and Feasibility of Economic Incentives of Input Control in the Mitigation of Agricultural Water Pollution Agricultural Science in Finland 2 453-464
Ministerio de Agricultura Pesca y Alimentacioacuten 1999 Anuario de Estadiacutestica Agraria MAPA Madrid
Ministerio de Agricultura Pesca y Alimentacioacuten 2000 Hechos y Cifras del Sector Agroalimentario Espantildeol 2000 Secretariacutea General Teacutecnica MAPA Madrid
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
17
Mitchell G Griggs R Benson V Williams J 1996 The EPIC Model Environmental Policy Integrated Climate Userrsquos Guide Texas Agricultural Experiment Station Temple
Nogueacutes J Herrero J Rodriacuteguez R Boixadera J 1999 Land evaluation in a salt-affected irrigated district using an index of productive potential Environmental Management 25 143-152
Nogueacutes J 2000 Mapa de Suelos (E 125000) de Barbueacutes y Torres de Barbueacutes (Huesca) Aplicaciones para Modernizacioacuten de Regadiacuteos Consejo de Proteccioacuten de la Naturaleza de Aragoacuten Serie Investigacioacuten Zaragoza
Oruacutes F Quiacutelez D Betraacuten J 2000 El Coacutedigo de Buenas Praacutecticas Agrarias (I) Fertilizacioacuten Nitrogenada y Contaminacioacuten por Nitratos Direccioacuten General de Tecnologiacutea Agraria (DGA) Informaciones Teacutecnicas Nordm 93 Zaragoza
Pan J Hodge I 1994 Land use permits as an alternative to fertiliser and leaching taxes for the control of nitrate pollution Journal of Agricultural Economics 45(1) 102-112
Saad J Quiacutelez D 1998 Efecto de la dosis de abonado y el riego sobre el lavado de nitrato en cultivo de maiacutez Paper presented at the XVI Congreso Nacional de Riegos Palma de Mallorca
Saad J 1999 The effects of fertilization and irrigation on nitrate leaching in maize PhD dissertation Escuela Teacutecnica Superior de Ingenieros Agroacutenomos Universidad de Leacuterida Leacuterida
Schmid E 2001 Efficient Policy Design to Control Effluents from Agriculture Doctoral dissertation Department of Economics Politics and Law University of Agricultural Sciences Vienna
Thomas A Boisvert R 1994 Bioeconomics of Regulating Nitrates in Groundwater Taxes Quantity Restrictions and Pollution Permits Department of Agricultural Resource and Managerial Economics Cornell University Working paper 94-07
Vickner S Hoag D Frasier W Ascough J 1998 A Dynamic Analysis of Nitrate Leaching in Corn Production under Nonuniform Irrigation Conditions American Journal of Agricultural Economics 80 397-408
Weinberg M Wilen J 2000 Efficiency Benefits versus Transaction Costs in Non-point Source Pollution Control Working document Department of Environmental Science and Policy University of California Davis
Yadav S 1997 Dynamic Optimization of Nitrogen Use When Groundwater Contamination Is Internalized at the Standard in the Long Run American Journal of Agricultural Economics 79 931-945
