Farmers' costs of environmental regulation: Reducing the consumption of nitrogen in citrus farming

Environmental externalities in agriculture, and the choice of suitable instruments to integrate environmental concerns into agricultural policies, are a matter of interest for the Common Agricultural Policy. In this paper, we use Data Envelopment Analysis techniques to assess the impact on farms...

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Bibliographic Details
Published in:Economic modelling 2007-03, Vol.24 (2), p.312-328
Main Authors: Picazo-Tadeo, Andrés J., Reig-Martínez, Ernest
Format: Article
Language:English
Subjects:
Citrus
Citrus farming
Citrus fruits
Common Agricultural Policy
Data envelopment analysis
Economic impact
Environmental policies
Environmental regulations
Farming
Nitrogen
Nitrogen fertilization
Private regulation costs
Regulation
Studies
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Summary:Environmental externalities in agriculture, and the choice of suitable instruments to integrate environmental concerns into agricultural policies, are a matter of interest for the Common Agricultural Policy. In this paper, we use Data Envelopment Analysis techniques to assess the impact on farms' performance of two environmentally-friendly regulations aimed at abating consumption of inorganic nitrogen in Spanish citrus farming: levies on purchased nitrogen and nitrogen use permits for farms. By comparing farms' short-run maximum profits under both unregulated and regulated scenarios a regulation cost index is computed. Our results show that nitrogen overuse is mostly a matter of management inefficiency and that pollution could be reduced by promoting best farming techniques. Instead, if environmental regulations are implemented, regulating authorities should be aware that quantitative limits exercise a lower impact on farms' profits than taxes.
ISSN:0264-9993
1873-6122
DOI:10.1016/j.econmod.2006.08.002