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Agri-Environmental Program Compliance in a Heterogeneous Landscape

Author

Listed:
  • Lankoski, Jussi E.
  • Lichtenberg, Erik
  • Ollikainen, Markku
Abstract
Heterogeneity of agricultural landscapes may necessitate the use of spatially targeted instrument combinations to implement the social optimum. But compliance with these policies may require costly enforcement. This paper examines the design of agri-environmental policies featuring two of the most commonly used instruments, reductions in fertilizer application rates and installation of riparian buffers. While compliance with buffer strip requirements is verifiable at negligible cost, fertilizer application is only verifiable through costly monitoring. We derive optimal subsidies for fertilizer reduction and buffer strip set-asides and enforcement strategies for the cases of low and excessive monitoring costs. An empirical simulation model suggests that enforceable policies can come close to replicating socially optimal crop production, nitrogen runoff, and overall welfare without requiring increases in overall subsidy expenditures, at least under conditions characteristic of Scandinavia. Sensitivity analysis suggests that these conclusions may carry over to areas with higher overall land quality as well.

Suggested Citation

  • Lankoski, Jussi E. & Lichtenberg, Erik & Ollikainen, Markku, 2008. "Agri-Environmental Program Compliance in a Heterogeneous Landscape," Working Papers 37797, University of Maryland, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:umdrwp:37797
    DOI: 10.22004/ag.econ.37797
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    References listed on IDEAS

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    Cited by:

    1. Renan-Ulrich Goetz & Yolanda Martínez, 2013. "Nonpoint source pollution and two-part instruments," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 15(3), pages 237-258, July.
    2. Lankoski, Jussi E. & Lichtenberg, Erik & Ollikainen, Markku, 2008. "Agri-environmental program compliance under heterogeneous conditions," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44381, European Association of Agricultural Economists.
    3. Ozana Nadoveza Jelić & Jurica Šimurina, 2020. "Evaluating sectoral effects of agricultural nitrogen pollution reduction policy in Croatia within a CGE framework," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 8(1), pages 1-35, December.
    4. Lankoski, Jussi, 2015. "Cost-effectiveness of Alternative Payment and Auction Designs for Biodiversity Conservation in Agriculture," 2015 Conference, August 9-14, 2015, Milan, Italy 212031, International Association of Agricultural Economists.
    5. Hongxing Liu & Wendong Zhang & Elena Irwin & Jeffrey Kast & Noel Aloysius & Jay Martin & Margaret Kalcic, 2020. "Best Management Practices and Nutrient Reduction: An Integrated Economic-Hydrologic Model of the Western Lake Erie Basin," Land Economics, University of Wisconsin Press, vol. 96(4), pages 510-530.
    6. Hervé Guyomard & Jussi Lankoski & Markku Ollikainen, 2005. "Impacts of agri-environmental policies on land allocation and prices," Post-Print hal-01593991, HAL.
    7. Lötjönen, Sanna & Ollikainen, Markku & Kotamäki, Niina & Huttunen, Markus & Huttunen, Inese, 2021. "Nutrient load compensation as a means of maintaining the good ecological status of surface waters," Ecological Economics, Elsevier, vol. 188(C).
    8. Barbara Langlois & Vincent Martinet, 2023. "Defining cost-effective ways to improve ecosystem services provision in agroecosystems," Review of Agricultural, Food and Environmental Studies, Springer, vol. 104(2), pages 123-165, June.
    9. Kim, Youngho & Lichtenberg, Erik & Newburn, David, 2022. "Payments and Penalties in Ecosystem Services Programs," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322103, Agricultural and Applied Economics Association.
    10. Vincent Martinet, 2012. "Effect of soil heterogeneity on the welfare economics of biofuel policies," Working Papers 2012/01, INRA, Economie Publique.
    11. Juvancic, Luka & Travnikar, Tanja & Glavan, Matjaz & Cvejic, Rozalija & Pintar, Marina, 2012. "Targeting And Spatial Impacts Of Agri-Environmental Support – Spatial Econometric Analysis Of Agri–Environmental Measures In Slovenia," 132nd Seminar, October 25-27, 2012, Skopje, Republic of Macedonia 139491, European Association of Agricultural Economists.
    12. Kim, Youngho & Lichtenberg, Erik & Newburn, David A., 2024. "Payments and penalties in ecosystem services programs," Journal of Environmental Economics and Management, Elsevier, vol. 126(C).
    13. Danso, G.K. & Jeffrey, S.R. & Dridi, C. & Veeman, T., 2021. "Modeling irrigation technology adoption and crop choices: Gains from water trading with farmer heterogeneity in Southern Alberta, Canada," Agricultural Water Management, Elsevier, vol. 253(C).
    14. Cho, Wonjoo & Blandford, David, 2015. "Bilateral information asymmetry and irreversible practice adoption through agri-environmental policy: an application to peat land retirement in Norway," 89th Annual Conference, April 13-15, 2015, Warwick University, Coventry, UK 204212, Agricultural Economics Society.
    15. James Shortle & Richard D. Horan, 2017. "Nutrient Pollution: A Wicked Challenge for Economic Instruments," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(02), pages 1-39, April.

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    More about this item

    Keywords

    Agricultural and Food Policy; Environmental Economics and Policy;

    JEL classification:

    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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