Reducing nitrogen use and pollution, but with which policy?
Synthetic nitrogen (N) fertilisers worldwide increase crop yields three-fold and more than half of the world is fed by crops that utilise N fertilisers. The use of N fertilisers have increased by a factor of ten since 1961 and with that comes an environmental consequence. Due to plants not being able to utilise all the N provided, the residual N can become volatile which causes pollution on land, water and the atmosphere.
Governments around the world are trying to find a policy solution to the challenge of limiting and optimising N fertiliser use, whilst utilising emerging technology to reduce the environmental damage to waterways, atmosphere, human health, soil degradation, climate change, among others. The cost to clean up the pollution from N fertilisers costs billions of dollars and if we are not turning off the tap then the pollution continues to occur.
The general tools at the disposal of governments are taxes, subsidies and incentives. Tax N fertilisers or subsidise alternative options. They can also legislate use. To find out which is the best approach to reducing N pollution, we first need to look at what, where, when and why.
In the systematic review by Prof Bill Malcolm and his team, they reviewed over 56 studies on how policies may be implemented to provide some guidance to this challenge of maintaining food security but reducing N pollution. Studies that did not evaluate the effectiveness of the policies were removed leaving 19 final research papers to compare. These were categorised into tax and subsidy policies. Countries or regions that were included in the 19 studies were: England, the European Union, the United Kingdom, Canada, China, Germany, the United States, Columbia, Italy and Spain.
Changes to Tax:
Tax is only effective if it is a disincentive to use N fertilisers by increasing the cost past the peak yield -financial- return. If a tax is not reducing the N fertiliser use, then it is purely revenue raising. The raised revenue from a tax, can go back into cleaning up environmental damage or into creating novel technologies where pollution is reduced. The effectiveness of a tax can be measured by the change in N fertiliser used. The probability of a tax being effective is in the price elasticity, that is, does the benefit outweigh the cost? How high does the tax need to be to have the desired result? Another consideration is if the pollution is taxed, or the N fertiliser product is taxed. It is thought that crops with lower fertiliser requirements or a crop with a higher market value may become more popular if a tax starts to take effect causing a lowering in crop biodiversity.
Changes to Subsidies:
Subsidises are paid for by a government or a private company and there must be checks and balances to ensure that the subsidised practice(s) has indeed been implemented. Putting in place practices that reduce pollution from N also depend on the region, farm, crop grown, water irrigation, equipment available etc. For example, looking at ways to reduce N leeching into waterways by creating buffers near water sources or reducing irrigation, could afford a subsidy. Otherwise, monitoring of N2O gas emissions and creating a system where producers are credited for being under and charged for being over a threshold. Implementation of measuring pollution by these methods is the challenging part and may cost more than it is worth to the farmer or industry.
Unanswered Questions:
Whether a tax, a subsidy or an incentive, society should look at the overall effectiveness of reducing N pollution/use and consider the flow on affects (Crop prices, crop type, loss or increase to biodiversity). What are the social net benefits and the cost of implementation? Who really pays? Will the cost be passed on to the consumer? Should the farmer pay? Or should it be a whole chain approach where everyone is responsible? Everyone will benefit from reduced N pollution.
After the review of the 19 relevant papers, the most straight forward policy is likely taxing N fertiliser as a product. It is easier and more cost effective to implement and regulate. Unfortunately, the review found that a reduction of only 20% N use would occur with a 100% increase in price. Meaning that as a reduction mechanism, taxing N fertiliser as a sole measure was a poor choice. Having up to date data on N use, demand, and the effectiveness of a tax (elasticity) are all required to make an informed decision on viability of this policy choice.
Education and technological innovations around N use and management as well as specific farming techniques addressing individual requirements based on farm type and variables, could have a bigger impact than just hiking prices. These innovations could be subsidised or even free to access for producers. There could be whole community approaches such as environmentally conscious waterway reparation and stewardship or demanding new technologies be readily available.
If governments are able to find that fine balance between taxes, subsidies and incentives, we need to be able to verify the impact. Data driven evidence before and after any intervention is crucial to find the correct path forwards.
