Turning a Negative into a Positive: What to do about Negative Externalities from Nitrogen Used in Farming?
Malcolm, B., Rathnayake, C., Griffith, G., Sinnett, A., & Deane, P., “Turning a Negative into a Positive: What to do about Negative Externalities from Nitrogen Used in Farming?,” Australasian Agribusiness Perspectives. Link
Much of the nitrogen fertiliser that farmers use to grow crops and pasture is not used by these plants but is lost to the environment, causing negative externalities such as nitrous oxide contributing to stocks of global greenhouse gases, and nitrate and ammonium polluting water and air. These externalities have large external costs. Much of the discussion of how to minimise these costs has focused on government policy actions such as quantitative regulations about use, and the implementation of taxes and subsidies, or cap and trade models.
In this paper an alternative approach is outlined based on the theory of club goods and actions jointly with the private sector rather than solely by the public sector. A proposal for a public subsidy to fertiliser producers to cover the cost of precoating fertiliser products like urea, to reduce the cost of reduced-emission nitrogen fertiliser products, and to make treated nitrogen fertiliser products available to farmers at a similar cost to untreated nitrogen fertiliser products, is assessed against this approach.
