Agriculture and the environment in the Nordic countries

Agriculture and the environment in the Nordic countries
Agriculture and the environment
in the Nordic countries
TemaNord 2013:558
Ved Stranden 18
DK-1061 Copenhagen K
www.norden.org
Agriculture and the environment
in the Nordic countries
Policies for sustainability and green growth
In the future, demand for agricultural products will increase. The
agricultural sector must meet the increase in demand without
compromising the natural resources of which it depends on and
damage fragile ecosystems. Sustainable agricultural practices and
green growth is necessary for this to happen and agricultural policy
must facilitate such development. How agriculture contributes to
water pollution has been in focus in the Nordic countries for many
years. In many places, nutrient emissions have been successfully
reduces, but targets are still not met. The implementation of the
Water Framework Directive makes policies that facilitate reduction
of nutrient runoff even more relevant than before. This report looks
at experiences from the Nordic countries and makes suggestions for
future policies for sustainable agriculture and green growth.
The report has been commissioned by the Nordic Council of
Ministers. The study was carried out by the Norwegian Agricultural
Economics Research Institute (NILF).
TemaNord 2013:558
ISBN 978-92-893-2595-0
TN2013558 omslag.indd 1
29-08-2013 08:15:43
Agriculture and the environment
in the Nordic countries
Policies for sustainability and green growth
Anne Strøm Prestvik, Valborg Kvakkestad and Øystein Skutevik
TemaNord 2013:558
Agriculture and the environment in the Nordic countries
Policies for sustainability and green growth
Anne Strøm Prestvik, Valborg Kvakkestad and Øystein Skutevik
ISBN 978-92-893-2595-0
http://dx.doi.org/10.6027/TN2013-558
TemaNord 2013:558
© Nordic Council of Ministers 2013
Layout: Hanne Lebech
Cover photo: ©Stock.xchng.
This publication has been published with financial support by the Nordic Council of Ministers.
However, the contents of this publication do not necessarily reflect the views, policies or recommendations of the Nordic Council of Ministers.
www.norden.org/en/publications
Nordic co-operation
Nordic co-operation is one of the world’s most extensive forms of regional collaboration, involving Denmark, Finland, Iceland, Norway, Sweden, and the Faroe Islands, Greenland, and Åland.
Nordic co-operation has firm traditions in politics, the economy, and culture. It plays an important role in European and international collaboration, and aims at creating a strong Nordic
community in a strong Europe.
Nordic co-operation seeks to safeguard Nordic and regional interests and principles in the
global community. Common Nordic values help the region solidify its position as one of the
world’s most innovative and competitive.
Nordic Council of Ministers
Ved Stranden 18
DK-1061 Copenhagen K
Phone (+45) 3396 0200
www.norden.org
Content
Preface........................................................................................................................................................ 7
Summary ................................................................................................................................................... 9
1. Introduction................................................................................................................................... 11
2. Agriculture and the environment .......................................................................................... 15
2.1 Nutrient runoff to water .............................................................................................. 15
2.2 Greenhouse gas emissions from agriculture ........................................................ 20
2.3 Other environmental problems ................................................................................. 23
3. Multifunctional agriculture and farmer behaviour ......................................................... 25
3.1 Multifunctional agriculture ......................................................................................... 25
3.2 Farmer behaviour........................................................................................................... 26
3.3 Policy implications of multifunctionality and observed farm
behaviour........................................................................................................................... 28
4. Agri-environmental policy instruments in the Nordic countries ............................... 31
4.1 Agri-environmental policy in the Nordic EU-countries ................................... 31
4.2 Agri-environmental policy in Iceland...................................................................... 37
4.3 Agri-environmental policy in Norway .................................................................... 37
4.4 Summary of Nordic agri-environmental policy instruments ......................... 38
5. Nordic experiences in agri-environmental policies ........................................................ 41
5.1
The impact of agri-environmental policy in Finland on phosphorus and
nitrogen loadings in water............................................................................................. 42
5.2 Sweden: Economics of eutrophication management ........................................ 50
5.3 Water protection policies and management in Norway................................... 57
5.4 Green growth in Denmark ........................................................................................... 61
5.5 Soil conservation in Iceland ........................................................................................ 68
5.6 Taxes and other policies for reducing greenhouse gas emissions
from agriculture .............................................................................................................. 71
5.7 The potential of biofuels for mitigating climate change and water
quality ................................................................................................................................. 75
5.8 Summary of Nordic studies on policy measures for reduced
phosphorus and nitrogen loadings in water......................................................... 81
6. Policies for sustainable agriculture and green growth .................................................. 83
6.1 Holistic perspectives are needed .............................................................................. 83
6.2 Appropriate policy measures ..................................................................................... 84
6.3 Appropriate point of instrument application ....................................................... 85
6.4 Appropriate processes.................................................................................................. 86
6.5 Lessons that could be important for green growth............................................ 86
7. Conclusion ...................................................................................................................................... 89
8. References ...................................................................................................................................... 91
9. Sammendrag (norsk).................................................................................................................. 99
Preface
Agriculture delivers a combined set of private and public outputs like
food products, landscape values, biodiversity and pollution. This is so
because agricultural production is directly interlinked with the ecosystems it operates within and the space it utilizes. Inputs like land, water, air, fertilizers, pesticides, energy, etc., are combined in different processes. Out of this process come tradable private goods like grain and
public goods and bads like landscape values, food security, pollution etc.
A sustainable agriculture requires production processes that optimize
on and balance environmental, social and economic outputs.
This report focuses on how agricultural policy measures, in particular
payments and compensations to farmers, can be developed in order to
support an environmental sustainable agricultural production and green
growth. This is done by a literature review on Nordic studies. Important
considerations when formulating policies for sustainable agriculture
that are identified through this study includes precision, transaction
costs and farm behaviour. Holistic perspectives, appropriate policy
measures, appropriate point of instrument application and appropriate
processes are needed to ensure a sustainable agriculture.
Economic instruments like taxes, subsides or tradable emission permits could be used to reduce water pollution for nitrogen and phosphorus and to reduce GHG emissions from agriculture. The report analyses
how economic instruments could be applied to tradable input factors
like fertilizers and feeds, to particular production methods or to foodproducts. Economic instruments could be used in combination with information and norm-building instruments. Participatory processes could
be important for farmers response to these instruments.
The report discusses different possibilities to approach the green
growth concept in the case of agriculture. Green growth could be seen as
a development where the economic value of agriculture grows without
increasing food production. This could be achieved through increased
production of services and value added products that receive a price
premium due to specific production methods or locations.
Magnus Cederlöf
Chair
the Working Group on
Environment and Economy (MEG)
under the Nordic Council of Ministers
8
Agriculture and the environment in the Nordic countries
Summary
The purpose of this report has been to analyse how agricultural policy
measures can be developed in order to support a sustainable agricultural production and green growth. The focus has been on payments and
other economic incentives directed at farmers and on Nordic experience.
Nitrogen and phosphorus are important plant nutrients that can
cause great harm it they enter water systems. Chapter two explains the
processes where nutrients from agricultural soils enter water systems
through leaching and erosion. Greenhouse gas emissions from the agricultural sector, carbon storage in agricultural soils and biodiversity on
farms are also discussed.
Agricultural production and the surrounding terrestrial ecosystem
are mutually dependent and forms closely integrated systems. Inputs
like land, water, air, fertilizers, energy, etc., are combined in different
processes. The output is tradable private goods like grain and public
goods, and bads like landscape values, food security, pollution etc. Chapter three emphasises this combined output of private and public goods.
Agricultural policy-makers aiming for multifunctional agriculture often face a trade-off between transaction costs and precision. This is further complicated by farmer behaviour. Empirical studies show that
farmers are not only motivated by economic incentives, but that their
habits and norms also influence their behaviour and response to economic policy instruments.
In chapter four the agri-environmental policies in the Nordic countries are briefly described. The Nordic countries pursue many of the
same goals for their agri-environmental policy. The policy instruments
in Denmark, Sweden, Finland and Norway are similar in terms of a focus
on several issues like cultural landscape, cultural heritage, biodiversity,
greenhouse gas emissions, and nutrient (nitrogen and phosphorus)
leakage, while the main focus on Iceland has been soil conservation.
Chapter five presents a selection of studies from the Nordic countries
on agri-environmental policy instruments. Finland’s agri-environmental
program has a high participation rate but effects on water quality are
considered insufficient and may even have been counterproductive in
that it has given farmers incentives to cultivate more land. Analysis of
alternative policies does not give a clear answer to what is more efficient
for reducing nutrient losses to water. Decoupling support from production may, however, be more efficient.
In Sweden, agricultural measures to reduce nutrient loadings have
proven somewhat successful, but reduction targets have not been met.
Costs for reducing nutrient leakage further may be lowered if measures
are applied where they have the lowest costs. Tradable emission permits
may be a way to ensure this. Taxes on inputs like nitrogen in fertilisers,
and output taxes such on e.g. meat have the potential to reduce greenhouse gas emissions significantly, but raise strong political opposition.
Denmark has successfully reduced N loading in water since the
1990’s by restricting fertiliser application and focusing on fertiliser efficiency. Further reduction is necessary to implement the Water Framework Directive, which implies high costs for the Danish agricultural sector. Biogas production from animal manure and other by-products have
the potential to reduce nutrient losses to water and air, but will also
require large investments.
The studies from Norway and Iceland show how farmers’ knowledge
and attitudes, in combination with the right economic incentives and
management processes, can reduce erosion and land degradation.
Chapter six draws lessons from chapter five regarding how to formulate polices for a sustainable agriculture and green growth. It is emphasised that a holistic perspective that considers several policy goals and
environmental problems simultaneously is needed, as well as appropriate policy instruments, appropriate point of instrument application and
appropriate processes. It is important to acknowledge that farmers are
not only motivated by economic incentives, but that habits, social recognition, and intrinsic motivation is important for them when they respond to policy instruments. It is also important to acknowledge that
involving stakeholders in the process of developing and implementing
policy-instruments is important for how farmers response to policies.
For green growth it is important to stimulate research, development,
innovation, education, stakeholder communication and information to
farmers. Good agricultural practises can increase the effecttiveness of
nutrients and increase production without compromising the environment. The other side of the valuechain can contribute by reducing food
waste and meat consumption. This could be achieved through economic
instruments like food tax and/or trough changing habits and norms.
Finally the production of bioenergy should be stimulated in order to
achieve green growth in the society at large.
10
Agriculture and the environment in the Nordic countries
1. Introduction
In June 2012 the Nordic Council of Ministers for fisheries, agriculture, food
and forestry signed a declaration about the primary sectors’ and food
industry’s responsibility for green growth. This declaration verifies the
importance of the primary sector and food industry for green growth. The
primary sector provides food, fibres, animal fodder, materials for construction and energy production. These products are of vital importance
for the society. A growing global population requires increased food production. At the same time there is also increasing demand for energy and
other non-food agricultural products. The aim of green growth is to increase both sustainability and competitiveness of production.
The last century has seen a large increase in agricultural production.
Much of this increase is the result of increased use of inputs such as
chemical fertilisers. This has not taken place without negative impact on
the environment, in particular the aquatic environments that receive
nutrient runoff and leaching from agricultural soils. In the 1960’s and
70’s, the use of commercial fertilisers increased substantially in the Nordic countries. Later, the level has been reduced, but fertilisers are still
considered the main cause of nutrient losses to water and air, causing
eutrophication in freshwater and marine systems and incresing greenhouse gas emissions. In the future, the agricultural sector must both
tackle increased demand for its products as well as the environmental
challenges that are result from production. Climate change offers new
challenges that can both increase the negative consequences of production, and change the conditions for agricultural production. Green
growth is necessary, and depends on increased efficiency in all parts of
the value chain, waste management, research and innovation.
The purpose of this report is to analyse how agricultural policy
measures, in particular payments and compensations to farmers, can be
developed in order to support a sustainable agricultural production and
green growth. The report will focus on nutrient (nitrogen and phosphorus) losses from agricultural activities to water and air, but also touch
upon other environmental problems and the production of public goods
related to agriculture.
The report is mainly based on a literature review. The findings and
data used in this report are collected from other studies considered to be
relevant for agricultural and environmental policy in the Nordic countries. Researchers in the Nordic countries were asked to suggest literature they find relevant for the purpose. The response was good and
some also suggested their own publications. Studies from other countries, especially studies covering new and innovative policy measures,
are also covered when relevant.
The agricultural sector receives substantial subsidies, although the
level of support has decreased in recent years. Focus has changed from
supporting commodity production to also support the production of
public goods like cultural landscapes and biodiversity, together with
income. Policies that aim at reducing negative externalities, such as water pollution, are also developed. Multifunctional agriculture is a term
that is often used to explain that agricultural production has multiple
outputs. The multifunctionality of agriculture challenges policymaking
because all outputs needs to be taken into consideration. Policy instruments targeted at one kind of output may negativelse impact other, less
favorable outputs.
There are many potentially negative externalities from agricultural production. This report will focus on nutrient runoff to rivers, lakes and seas
that causes eutrophication, and agricultures’ contribution to greenhouse gas
emissions. However, agricultural production, public goods and externalities
are interlinked so that complete pollution removal is impossible.
That excess nutrients from agricultural production, in particular
phosphorus and nitrogen, reduce water quality has been a concern for
quite a while. These nutrients cause harm to the aquatic environment as
well as reducing the social value of the water. Algae blooms and “dead”
waters receive particular attention. According to an OECD report, agricultures negative impact on water quality is either stable or deteriorating (OECDb 2012). However, significant improvement has been observed, as will be presented in studies from the Nordic countries.
The agricultural sector’s contribution to greenhouse gas emissions is
increasingly recognised and the demand for this sector to take its share
of reducing emission increases. Worldwide, agriculture accounts for
60% of nitrous oxide and 50% of methane emissions (Smith et al. 2007).
However, agricultural production and soils can also store large amounts
of CO2.
The EU countries in particular are constrained by a number of directives, e.g. the Nitrates Directive, that demand regulations on agricultural
activities. All Nordic countries are implementing the Water Framework
Directive and need to find efficient policies that will improve water quality. This report will focus on economic policy instruments as these will
12
Agriculture and the environment in the Nordic countries
have to be developed within existing regulatory frameworks. Farmer
behaviour and intrinsic motivation will also be discussed.
The report is organised as follows: Chapter 2 elaborates on the negative externalities that are the focus of this report; nutrient runoff to water
and greenhouse gas emissions. It also briefly mentions other negative
effects from agriculture. Chapter 3 presents characteristics of agriculture
and farmers that are important when formulating policies for sustainable
agriculture. Chapter 4 presents main agri-environmental policies in the
Nordic countries. In chapter 5, relevant and interesting studies from Nordic countries are presented. Chapter 6 draws on the lessons from the studies presented in chapter 5 and, finally, chapter 7 concludes.
Agriculture and the environment in the Nordic countries
13
2. Agriculture and the
environment
Agriculture is based on natural resources and affects these in various
ways. Some are direct, i.e. changes in eco systems as a result of agricultural production. Other consequences are less direct and may emerge
away from the agricultural area, for example water pollution. Increased
food production for a growing global population is intensifying the negative environmental impacts of agriculture; one of the gravest is water
pollution that leads to eutrophication.
2.1 Nutrient runoff to water
The two most important nutrients for plant growth are phosphorus (P)
and nitrogen (N). Together with potassium (K), these nutrients are
called the primary macro nutrients because plants use large amounts of
these for growth. Plants absorb these nutrients from the soil and most
agricultural practises include adding nutrients to the soil to enhance
plant growth. Nutrients can be added using chemical and organic fertilizers. Chemical fertilizers are fully or partially synthetic material rich in
the three essential nutrients Nitrogen, kalium and phosphate (N-K-P).
Organic fertilizers are commonly manure or other substances from remains or by-products of organisms.
Both N and P can find ways from the soil to water. These are essential
nutrients for aquatic organisms and under normal conditions in scarce
supply. Excessive supply of nutrients to water can lead to algal and bacterial blooms which disturb the ecosystems. Some forms of N, nitrates,
are also harmful to humans and animals and can reach groundwater
systems. N applied to the soil can also leach to air in a form that makes it
a potent greenhouse gas.
There are many factors that affect the rate of which nutrients leach
into water and air. Especially nutrients that are water soluble, like nitrate, move with drainage water and end up in rivers, lakes and the sea.
This is enhanced when extra nutrients are applied with fertilizers.
2.1.1
Nitrogen
Nitrogen gas (N2) amounts to almost 80% of the air we breathe. Molecular nitrogen is extremely stable and difficult to convert into usable components for both organisms and industry. Certain bacteria can transform, or “fix”, N2 into usable compounds for plants such as ammonia
(NH3). Ammonia is also industrially produced and can be used as a fertilizer directly or as a synthesis of nitrated fertilizers. Plants can only use
specific inorganic forms of nitrogen, mainly ammonium (NH 4+) and nitrate (NO3-). Ammonia and other chemically produced fertilizers like
ammonium nitrate and urea are easily transformed into ammonium and
nitrate, which plants can absorb and use. While ammonium is easily
bound to soil particles, nitrate is free to leach from the soil, either with
water or to air through denitrification. Ammonium is transformed to
nitrates by bacteria in the soil in a process called nitrification. This
transformation happens rapidly at higher temperatures. Denitrification
is also a bacterial process where nitrate is reduced to N 2 through several
stages, one of which is nitrous oxide (N2O).
Nitrate that is not absorbed by plants may be transported by excess
water below the root zone and end up in ground or surface water. The
capacity of the soil to contain water [holding capacity of the soil] strongly affects the rate of nitrate leaching, but nitrate may leach from any soil
as rainfall or irrigation water moves through the root zone. Another
source of nitrogen loss is volatilization in the form of ammonia. Nitrogen
can also be lost through soil erosion and runoff, which is more common
for phosphorus.
2.1.2
Phosphorus
Phosphorus is a mineral that in its elemental form is highly reactive and
mainly found as inorganic phosphate rocks. Weathering of phosphate
rich rocks and minerals releases a very small amount of P in a form that
can be used by plants. For use in chemical fertilizers, phosphate rock is
dissolved with nitric acid to produce phosphate and calcium nitrate.
In soils P appear as a negatively charged phosphate ion which easily
binds with other minerals. This makes phosphate tightly bound, adsorbed, to soil clay and organic matter. Plants can only take up P in the
form of orthophosphate which is dissolved in the soil solution. Only a
small fraction of total P content is in the dissolved form and available to
plants. As plants grow and absorb the soluble P, the soils’ small pool of
dissolved P is replenished by inorganic phosphate bound to soil particles
and decomposing organic materials. The soils’ ability to provide soluble
16
Agriculture and the environment in the Nordic countries
phosphate from adsorbed phosphate for plant growth is what makes it
fertile in terms of phosphorus.
Decay of dead organic matter also releases P for plants through bacterial processes. By harvesting crops, P in plants is removed from the system and may over time deplete P in the soil. As P can be a serious constraint for plant growth, it is commonly added through manure and other
organic and chemical fertilizers. The phosphate in fertilizers is generally
highly available for plants, but quickly becomes bound to soil particles and
other minerals. Over time the adsorbed phosphate forms compunds which
make it less available to plants. Continued application of more P than the
plants absorb will lead to P accumulation in the soil, much of which is
fixed and unavailable. These processes are dependent on several factors
like the texture and acidity of the soil. Fine-textured soils like clay can
generally accumulate more P than coarse-textured soils.
P loss from soils happens through soil erosion as particulate phosphate is washed away with water and leaching of dissolved phosphate.
Soil erosion has received most attention as most P is bound to soil particles. However, if P has accumulated in the soil, it will also have an increasing amount of soluble P which can leach to water. When soil particles reach water they may act as sources or sinks of soluble phosphate
depending on the conditions in the water. Leaching of P is particularly
relevant for soils with high water tables and which are saturated with P
(Mullins 2009). Even small amounts of dissolved P that becomes available to aquatic organisms can have detrimental effects on water quality.
2.1.3
Sources of nutrient pollution
There are large variations across countries and within countries on the
sources of nutrient pollution. However, agriculture is often the main
source of water pollution in many OECD countries (OECDb 2012).
Growth and intensification of agricultural production can enhance water
pollution from agriculture.
The sources of pollution of the aquatic environment are divided into
point sources and diffuse sources. The point sources are stationary locations and can be sewage treatment plants, industry, fish farms and agricultural sources like manure yards. Point sources are relatively easy to
identify, locate and regulate. The implementation EUs Urban
Wastewater Treatment Directive has successfully reduced phosphorus
pollution from wastewater in Europe the last 20 years (EEA 2012b).
Pollution from diffuse sources cannot be located from a particular,
but rather a large area and may come from several activities. Diffuse
Agriculture and the environment in the Nordic countries
17
sources of P and N are mainly runoff water and eroded sediment from
soils and atmospheric depositions. It includes background losses from
natural areas and rural populations without wastewater treatment, but
agriculture is the largest humanly generated diffuse nutrient source. In
the Baltic Sea, for example, diffuse inputs constitute the largest nitrogen
loading and agriculture contributed about 80% of the total diffuse loading to the sea (HELCOM 2009). For Finland and Sweden, agriculture is
also the greatest contributor to phosphorus in the Baltic Sea (ibid.).
The EEA estimates that diffuse pollution from agriculture, especially
in areas of intensive production, is the major threat to more than 40% of
Europe’s water bodies and rivers and coastal waters, and in one third of
water bodies in lakes (EEA 2012a).
2.1.4
Determinants of agricultural nutrient loadings
Nutrients can enter water courses through surface runoff, soil leaching
and atmospheric depositions. Runoff from rainfall, melting snow and
irrigation can transport nutrients on the soil surface, both as dissolved
and particular nutrients. Sub-surface drainage can also transport dissolved and adsorbed nutrients particles to water courses. Water can also
transport nutrients through sinkholes, pourus or fractured rock directly
into the groundwater. Leaching is the movement of dissolved nutrients
through the soil.
A study by Vagstad et al. (2001) discussed the possible explanations
for differences in nutrient losses in catchments in the Nordic and Baltic
countries. It was based on the monitoring of nutrient concentrations in
selected catchments in Nordic (except Iceland) and Baltic countries from
around 1990 to 2000. Much has changed since then and the determinants for N and P concentrations in streams may be different now. The
findings are cited here to illustrate the many factors that influence nutrient losses from agricultural soils. Main explanations for differences were
water runoff, fertiliser use, particularly the use of manure, soil type and
erosion risk. Hydrological processes, i.e. how the water moves (slow vs.
fast), may explain differences in nutrient losses in similar soil types
(ibid.). Agricultural practices such as crop rotations, nutrient inputs, and
soil conservation measures play a significant role in determining nutrient losses. However, understanding of the interaction between basic
characteristics of the catchments and agricultural practises is necessary
to efficiently manage diffuse losses of nutrients from agricultural soils.
Soil type, agricultural production practises including fertilization,
precipitation and water discharges were important determinants for
18
Agriculture and the environment in the Nordic countries
nitrogen losses in agricultural catchments in Norway (Vagstad et al.,
2001). Risk of erosion is higher with sloping lands, which is an important determinant for phosphorus losses.
In Denmark, the study by Vagstad et al. (2001) found that denitrification during groundwater transport can explain why N losses from sandy
soils were lower than losses from loamy soil. Catchments where animal
manure was the main fertiliser input experienced the highest N and P
concentrations in the streams. The main determinant for N and P concentrations in streams seemed to be type of agricultural production.
In Sweden, the highest N concentrations were measured in catchments with intensive cropping systems, high N surplus in the soil and
high water discharges. Phosphorus losses were related to high clay content in the soil which gives high risks of erosion, especially with high
water discharges. The findings were similar in Finland.
2.1.5
Nitrate in groundwater
The rate of nitrate leaching depends on the hydro-geological conditions
and there may be delay of nitrate transfer from the soil to the ground
water varying from 2–3 years in sandy soils and up to 40 years in chalk
limestone (EEA, 2005). If nitrates reach groundwater that is used as a
source of drinking water for humans and animals, it may pose a serious
threat to health. Among other health hazards nitrates in drinking water
is believed to cause cancer and in rare occasions infant methaemoglobinaemia (blue baby syndrome) (OECD 2012b). Denmark depends on
groundwater for drinking water supply and monitors the nitrate contents in the groundwater closely. Many shallow aquifers suffer from
pollution, especially from nitrates and pesticides and cannot be used as
source for drinking water (Danish Ministry of Environment).
2.1.6
Eutrophication in freshwater and the sea
N and P are naturally scarce in aquatic environment but vital for the
aquatic organisms. When extra nitrate and phosphate enter freshwater
and coastal water systems, the ecosystem may respond by sometimes
dramatic changes that deteriorate water quality. Phosphorus is usually a
limiting factor in freshwater systems and when extra is supplied, it enhances the growth of aquatic plants and algae. When algae and other
organic materials die they sink to the bottom and are decomposed by
bacteria, a process that uses oxygen and may result in the death of other
organisms that also use oxygen in the water. Algal blooms disturb the
Agriculture and the environment in the Nordic countries
19
natural ecosystem in a negative way and the water typically becomes
cloudy and colored and even toxic for humans and animals. When eutrophication leads to a reduction in oxygen, fish and other organisms
that becomes oxygen deprived die and the water becomes hypoxic. Hypoxia is the most severe symptom of eutrophication and severely affects
the ecosystem, including making the water system unfit for recreational
use (OECD 2012b).
In marine waters, nitrogen is commonly the limiting factor and increased levels can lead to eutrophication also in salt water. Hypoxia has
been found more and more frequently in the Baltic Sees over the past
five decades (Zillèn et al. 2008). This result in real economic losses for
the communities surrounding the Baltic Sea which provides ecosystem
services such as maintenance of fish stocks and human recreation.
2.1.7
Water pollution and climate change
Changes in climate and climate variability will affect locations of crop production, livestock production, technologies and management of agricultural production (OECD 2012b). Indirect consequences are the effects on
water pollution from these changes in agricultural production. There are
many factors that will determine how nutrient runoff and leaching will
change but some that point in the direction of an increase. Higher temperatures, more rainfall and extreme weather events will increase bioavailability of nutrients, erosion and leaching. Climate change will probably
make water quality targets harder to achieve in the future (ibid.).
2.2 Greenhouse gas emissions from agriculture
Agriculture is the producer of two powerful greenhouse gases (GHGs):
Nitrous dioxide – N2O and Methane – CH4. The efficiency of these two
gases compared to CO2 varies depending on which time horizon is used.
A much used conversion for a 100-year timeframe gives CH4 and N20 a
factor of 25 and 310 respectively in efficiency as a greenhouse gas compared to CO2.
According to the European commission the agriculture`s share of the
total greenhouse gas emissions in the EU, is about 9%. This share has
been reduced by 20% from 1995 to 2005, mainly due to changes in agricultural practises and reduced livestock (European Commission 2008).
How much agriculture contributes to total emissions varies between
countries. In Denmark the agricultural share is about 15%, and in Nor-
20
Agriculture and the environment in the Nordic countries
way it is about 9%, close to the average in EU. In EU, close to 60% of the
GHG emissions from agriculture is nitrous oxide, the rest is mainly methane. A small part of the N2O emissions are from manure storage, but
between 80–90% of the N2O emissions are produced by the conversion
of nitrogen in the soil.
2.2.1
Nitrous oxide (N2O) from agriculture
The main source of N20 emissions from agricultural soils is the use of
natural manure and nitrogen fertilizers (EEAa, 2012). The N 20 emissions
are the result of two microbial processes in the soil; nitrification and
denitrification. These processes are affected by soil moisture and temperature. Temperature determines the rate at which the soil microorganisms nitrify or denitrify; cooler temperature makes the process
slower. The oxygen concentration is also important for the microbial
processes that produce N2O. It is influenced by the moisture concentration in the soil; high moisture increases the formation of N20 during
nitrification and denitrification (IPNI, 2007). Under aerobic conditions
the N20 emissions are at the lowest, while water clogged fields, such as
rice fields, emit large amounts of N2O.
Soil texture is another factor that is affecting N2O emissions. The
physical properties of the soil determine the water filled pore space of
the top soil (WFPS). WFPS above about 60%, but below saturation, gives
the greatest potential for N2O emissions (Granli and Bockman, 1994).
That is the reason why soil compaction is a factor that stimulates N 20
emissions. A study by Mosquera et al. (2007) shows that on average, N2O
emissions were lowered by 20% when compaction was reduced, but
emissions were doubled after heavy compaction. In general, soil with
clay texture have the highest N20 emissions, and is the type of soil with
highest risk of compaction from tillage implements and agricultural machines such as tractors. In sandy soils, the emissions were also lowered
when compaction was reduced.
Increased nitrogen uptake in crops will also lower emissions of N 20.
All farming practices that increase the nutrient efficiency can decrease
the need for fertilizers and at the same time lower N 20 emissions.
2.2.2
Methane (CH4) emissions from agriculture
Some of the methane emitted from agriculture comes from anaerobic
decomposition processes in animal manure and waste products. The
main part, however, is digestive processes in ruminant animals (enteric
Agriculture and the environment in the Nordic countries
21
fermentation). In EU, enteric CH4 contributed to more than 70% of the
total CH4 emissions in 2005 (EC 2008). Hence the production of methane
is closely related to livestock production, especially ruminants such as
sheep and cattle.
Methane is produced in herbivores as a by-product of enteric formation, the digestive process where carbohydrates are broken down. The
ruminant livestock are the major sources of methane emissions. Nonruminant livestock, such as pigs, have significantly less methane production. The methane production is positively related to the age and weight of
the animal, the feed intake and the quality of the feed consumed.
The main driving force in the production of methane from enteric
fermentation is the number of cattle and sheep. In EU-15, from 1990 to
2010, there was a decline in emission of CH4 from enteric fermentation
by 11% from cattle, and 22% from sheep. The number of animals was
reduced by 17% and 25% respectively. The trend is a decreasing number of animals, which leads to lower total CH4 emission. However, this
effect is reduced by higher emissions per animal due to more intensive
production (EEAa, 2012).
The production of methane from storage and management of animal
manure comes from decomposition of the manure under anaerobic conditions. The highest emissions of methane occur when the manure is
treated in liquid systems. Temperature and time of storage also influences the production rate of methane (EEAa, 2012). From 1990 to 2005,
methane emissions from manure management were reduced by 9% in
the EU (EC 2008).
2.2.3
Carbon dioxide (C02)
Through photosynthesis, the plants consume large amounts of CO 2 from
the atmosphere. Some of this is converted back to CO 2 when plants are
consumed or decomposed, hence net uptake from the crop itself may be
zero. Due to the large amounts of carbon that are cycled, the crops capture and store a significant amount of CO 2. Some of it is converted to
organic forms of carbon (C) that are stored in the soil (IPNI 2007). This
way the soil can act as a CO2-sink, which can also release large amounts
of CO2 under certain conditions. This mechanism is often not included in
the overviews of agricultural greenhouse gas emissions although the
agriculture is considered to have large potential to reduce CO 2 content in
the atmosphere by increasing carbon content in the soils (IPNI 2007).
There are some emissions of CO2 from the energy-use on the farm,
but this is very small compared to the methane and nitrous oxide emis-
22
Agriculture and the environment in the Nordic countries
sions (EC 2008). There are also some emissions from transport of agricultural products and manufacture of input factors, e.g. fertilizer.
Total greenhouse gas emissions from agriculture are influenced by
management practices on the farm, but there are myriad interactions, so
it is necessary to look at the farm as a whole to decide whether a measure is raising or lowering the farm’s total GHG emissions (Bonesmo et
al., 2012). For example, organic agriculture may lower emissions per
hectare, but on a per-unit of output, the emissions may be higher (Stolze
et al., 2000). Generally, efforts to maximise profit, which involves improving efficiency and lowering costs by increasing yields relative to
input factors like fertilizers, pesticides, fuel etc., are expected to lower
the GHG emissions per kg yield (Bonesmo et al., 2012)
2.3 Other environmental problems
2.3.1
Soil degradation
Soils are composed of different shares of mineral particles, organic matter, water, air and living organisms (EEA, 2010). Soil suitable for agricultural production and soil quality are exposed to many threats. It is affected by wind and water erosion. Use of heavy agricultural machinery
can compact the soil. Salinization can make the soils unsuitable for plant
growth. Contaminations like heavy metals and mineral oil are also reducing the soil fertility. Agricultural land is converted to housing or industrial areas. The soil biodiversity is also affected by the processes
mentioned above. Landslides are also reducing the soil quantity available for agricultural production (EEA, 2010).
One important determinant for soil quality is the content of organic
carbon in the soil (SOC), which is a primary constituent in soil organic
matter (SOM). The soil acts as storage for carbon. In addition the SOM
influences on the soil structure and stability, water retention, biodiversity and as a source of plant nutrients (EEA, 2010). Surplus nitrogen in the
soil as a result of excessive use of manure, chemical fertilizer or low
plant uptake, can increase the mineralization of carbon in soils, which in
turn can release more carbon, and reduce the SOM content. Soils also
loose organic content through conversion of grassland to arable land,
deep ploughing, use of fertilizer and soil erosion. Much of these processes that leads to lower carbon content in soils are slow, and make changes difficult to assess.
Agriculture and the environment in the Nordic countries
23
Erosion happens when soil or rock material is moved away from the
agricultural land. The erosion can come from wind or water. Water erosion comes from rainfall, irrigation water or snowmelt, and is one of the
most widespread forms of soil degradation in Europe (EEA, 2010). Generally northern Europe is less vulnerable to erosion than e.g. the Mediterranean region, due to less erosive rainfalls and more grassland. But
arable land in northern Europe is also exposed to erosion, especially
loamy soils without vegetation cover.
Compaction of the soil is normally divided into topsoil and subsoil
compaction. Topsoil is the top 20–35 cm layer. Subsoil compaction is
below this layer. Wheel traffic from heavy farm equipment is the main
reason for soil compaction. If machines with axle loadings that exceed 10
tons are used, the risk of subsoil compaction is higher. This compaction
is more difficult to remove with common implements. Compaction reduces the pore volume in the soil, resulting in less space for air and water. Some of the consequences are less nutrient uptake and plant growth,
reduced water infiltration in the soil, and it increases the potential for
runoff of nutrients and erosion, as well as N2O emissions.
2.3.2
Agriculture, natural ecosystems and biodiversity
Agricultural production influence natural ecosystems in many ways,
from deforestation for making of new agricultural lands to pollution of
nutrients and pesticides that can change ecosystems far away. Changing
agricultural practises from extensive to intensive production alters the
habitats of many species and is seen as a threat of biodiversity. Intensive
production can reduce the biodiversity on farms when old and rare seed
varieties and animal breeds are exchanged for new, high yielding varieties that may also have less genetic variation. Wild biodiversity is also
reduced with more intense production. Landscapes become less diverse
and fewer species finds habitats.
Agriculture both consumes and produces ecosystem services. Agricultural production depends on nutrient recycling and other processes
in the soil and water. In addition to agricultural products, farms also
provide habitats for many species, especially in the borders between
agricultural fields and natural ecosystems. Many measures that reduce
nutrient losses from agricultural soils also enhance farm and wild biodiversity, such as wetlands and riparian buffer zones. Finally, agricultural
landscapes provide recreational value such as aesthetic scenery and
cultural preservation.
24
Agriculture and the environment in the Nordic countries
3. Multifunctional agriculture
and farmer behaviour
In this section we first describe the basic characteristics of agriculture,
namely the multifunctionality of agriculture. Next we describe characteristics of farmers in terms of their behaviour, and finally we elaborate on
the policy implications of multifunctionality and observed farm behaviour.
3.1 Multifunctional agriculture
Multifunctional agriculture implies that agriculture delivers a combined
set of private and public outputs like food products, landscape values
and pollution. Agricultural production and the surrounding terrestrial
ecosystem are mutually dependent and form a closely integrated system.
Inputs like land, water, air, fertilizers, energy, etc., are combined in different processes. Outputs are tradable private goods like grain and public goods and bads like landscape values, food security, pollution etc.
According to OECD (2001, p. 11) “Multifunctionality refers to the fact
that an economic activity may have multiple outputs and, by virtue of
this, may contribute to several societal objectives at once. Multifunctionality is thus an activity oriented concept that refers to specific properties
of the production process and its multiple outputs” (OECD 2001). Multifunctionality may imply that private and public outputs are joint, complementary or competing (Kvakkestad and Vatn, 2004). If they are joint,
inputs cannot be specifically assigned to individual outputs. A joint public is a consequence of producing a certain private good. Food security
may have this characteristic. If they are complementary, the production
of one good facilitates, simplifies the production of or enhances the value
of a second good [contributes an element of production, which is joint
with the first good and required in the making of the second good.] Cultural landscape may be of this type. Finally, we may have a situation
where the private and public goods compete over some common factor
of production. Some types of biodiversity and water quality may have
these characteristics in the sense that they compete with agricultural
production or forestry.
3.2 Farmer behaviour
Recently, several studies have found that farm behaviour and farmers’
intrinsic motivations are complex and influenced by the institutional
context. Intrinsic motivations are important for determining how farmers respond to environmental policy instruments and could either complement or constrain the effect of policies (OECD, 2012a).
Several studies (e.g. Bergevoet et al. 2004; Gasson et al.1988; Gorton
et al., 2008; Greiner and Gregg, 2011; Lien et al., 2006; Salamon, 1985;
Willock et al., 1999) report that farmers have several goals and see farming as more than a way to make money. Lien et al. (2006) found that
Norwegian farmers emphasise that the production of high quality food
and sustainable and environmentally sound farming are more important
than profit maximization. Gorton et al. (2008) found that non-pecuniary
benefits of farming like quality of life, independence and lifestyle feature
prominently in Europe. Gasson (1973) found that farmers have a predominantly intrinsic orientation to work, valuing the way of life, independence and performance of work tasks. Salamon (1985) found that
farming strategies are selected within a context of ethnically derived
family and farming goals, more complex than short-run profit optimization. Bergevoet et al. (2004) found that Dutch dairy farmers considered
the joy of their work, producing a good and safe product and working
with animals to be more important than maximizing profits. Greiner and
Gregg (2011) fund that Australian farmers emphasise that passing on
the land in good condition, looking after the environment and improving
land conditions are more important than economic goals.
After the turn to multifunctional agriculture by the policy makers in
the late 1990’s, a particular issue related to intrinsic motivation, namely
farmers’ emphasis on the production of food versus the production of
public goods, has been examined by several authors. Rye and Storstad
(2002) showed that Norwegian farmers found "providing consumers
with safe food" and "maintaining competence with respect to food production" along with "to provide consumers with Norwegian food" important. Environmental objectives had a much lower score, except for
"maintaining production area". Variables linked to viable rural communities and rural settlement all had relatively high scores. Burton and
Wilson (2006) and Wilson (2001) emphasise that studies throughout
Europe demonstrate that farmers’ self-concepts are still heavily related
to food-production. Burton and Wilson’s (2006) study from Bedfordshire (UK) found that conservation is a relatively important part of the
farmer self-concept although playing a subsidiary role to production-
26
Agriculture and the environment in the Nordic countries
oriented identities. Davies and Hodge (2007) explored the diversity of
UK farmers attitudes to environmental stewardship and found that no
groups emerge with a purely productivist outlook, rather, it seemed that
it was the interpretation of the ‘conservation ethic’–how it is translated
into practice, but not its fundamental legitimacy – that accounts for most
diversity among farmers. Gorton et al. (2008) found that farmers (in five
EU countries) find the production of food and fibres important, but so
was also the production of landscapes and environmental goods.
Several authors have examined the influence of intrinsic motivation
on the outcome of policy incentives. Breen et al. (2005) found that farmers’ intentions to adjust to the agricultural policy instruments contrasted
markedly with the predictions from a Linear Programming optimisation
(LP-) model that assumed economically rational farmers. Battershill and
Gilg (1997) found that the attitudinal dispositions of farmers were more
important than their 'structural' constraints in influencing farmers’ response to agricultural policy and Davies and Hodge (2006) found that
attitudinal factors significantly determine the acceptability of cross
compliance, and that structural and socio-demographic factors were
considerably less important. Defrancesco et al. (2008) report that besides income factors, farmers’ opinions on environmentally friendly
practices have significant effects on adoption of agri-environmental
measures. Greiner and Gregg (2011) found that motivational profiles
explained differences in farmers’ perceptions of and stated propensity to
interact with policy instruments for conservation practices. Ryan et al.
(2003) found that farmers who adopt conservation practices are intrinsically motivated rather than by receiving economic compensation.
Siebert et al. (2006) reviewed publications on farmers’ willingness to
cooperate with biodiversity policies and found that financial compensation are an important, but not the only determining factor for farmers’
decision-making. Vanslembrouck et al. (2002) found that environmental
attitudes are significant determinants of the acceptance rate of agrienvironmental policies in Belgium. Economic factors were considered
the primary reason for not taking part in country side stewardship
measures by only 20%–30% of farmers. Most of these studies do, however, focus on attitudes towards agri-environmental instruments and
not agricultural policy instruments in general. An important exception is,
however, Gorton et al. (2008) who examined farmers’ attitudes to different forms of payments in five EU countries. They find that farmers in
these countries are about equally positive to payments for environmental good production, payments for commodity production and direct
income payments and that farmers’ attitudes to these different forms of
Agriculture and the environment in the Nordic countries
27
payments depend on the nationality of the farm education, off-farm office work and whether located in a Less Favoured Area or not.
3.3 Policy implications of multifunctionality and
observed farm behaviour
Given the economic perspective, optimal policies or precise policies demand equality between marginal costs and gains. Concerning costs, only
marginal production costs are normally considered. Transaction costs
on the other hand, are the costs for acquiring information, making contracts and controlling the deal. They are the costs of ‘being precise’. By
taking transaction costs into consideration, some of the standard conclusions obtained in the literature are altered and we often get a situation
where there are trade-offs between transaction costs and precision
(Vatn, 2002).
Vatn et al., (2002) developed principles concerning what should
characterize an optimal policy for multifunctional agriculture when
transaction costs are included in the analysis. If the private and the public goods are produced jointly, paying for the public good directly or via
an increased price for the private good are equally precise – i.e., the resource allocation in the production of the goods will be the same. Transaction costs will, however, be much lower in the latter case since existing
information from the market for the private good can be utilized. Contracting and controlling is also much easier.
Pure jointness – as above – may not be the typical case. In practice
jointness between a private and public good may be what is called impure.
These are situations where the public good is a function both of the production of the private good and some other inputs. Then, paying only via
the private good will incur some loss of precision. Still, it may be more
efficient to pay via the private good, maybe in combination with subsidizing this other input if it is traded. The conclusion depends on the case
specific trade-off between transaction costs and the loss of precision.
If there is complementarity, the reasoning is parallel to the two prior
cases. Complementarity implies that an input used in producing the public good is joint in production with the private one. As an example, agricultural fields are joint outputs with food production and an input into
the creation of a landscape. If the production of the public good is based
on inputs that are all joint with the private good, the policy conclusion is
the same as for the situation with pure jointness. Paying via the private
28
Agriculture and the environment in the Nordic countries
good is as precise as paying directly for the public good, while transaction costs are lower.
If other inputs are required for the production of the public good, we
encounter the same trade off problem as in the case with impure public
goods. To develop precise policy instruments, a case-by-case evaluation is
necessary. The effect of the private good on the joint input may not be
positive. It may create a public bad. Reduced water quality may be a joint
output from food production. One example is nitrate pollution. Water may
next be an input into the production of some landscape values, biodiversity etc. which become of lower quality. In this case corrections may be undertaken by reducing the price of the private good – e.g. by a tax on the
food product. The conclusion is parallel to the reasoning above. If substitutes exist for the input that causes the damage – for example mineral
fertilizers can be substituted by better utilization of ammonia in manure –
increasing the price of the polluting input may be more precise and thus
preferable. Given that the input involved is traded, transaction costs
should be low and of equal magnitude to that of the private good which is
the alternative low cost point of instrument application. When the public
and private good is competing over the use of the same resources, paying
directly for the public good is the only relevant option.
A reasonable policy for multifunctional agriculture needs, however,
also to consider actual farm behaviour. Above it is assumed that farmers
will respond economically rational to economic incentives. Section 3.2
shows that farm behaviour is influenced by financial incentives as well
as social norms and habits. OECD (2012) emphasise that the environmental outcome of policy instruments is usually much lower than their
potential due to institutional, educational and social factors and that
environmental improvements require a combination of economic policy
instruments and other mechanisms, such as impacting habits, cognition
and norms which can influence farmer behaviour. The attitudes and
beliefs of farmers, as well as influence from local behavioural characteristics, must be taken into account when designing appropriate incentives. Economic policy instruments and incentives to farmers should
therefore often be complemented with education, consultancy and
communication while taking into account farmers’ attitudes and beliefs.
The point is not that economic incentives do not work, but that they
often need to be combined with other instruments.
Agriculture and the environment in the Nordic countries
29
4. Agri-environmental policy
instruments in the Nordic
countries
Policy instruments are normally divided into command-and-control
instruments, economic instruments and information or norm building
instruments. This chapter will mainly deal with economic policy instruments, but will also touch upon the other instruments. This chapter also gives an overview of policies related to environmental goals in
the Nordic countries.
4.1 Agri-environmental policy in the Nordic
EU-countries
4.1.1
Current EU policies and cap reform
In 2003, the Common Agricultural Policy (CAP) was subject to a fundamental reform, based on "decoupling" subsidies from particular crops.
Member States do, however, have the choice to maintain a limited link
between subsidy and production to avoid abandonment of particular
production. The 2003 reform introduced the Single Farm Payment
(SFP). This new scheme was intended to change the way the EU supported its farms by removing the link between subsidies and production
of specific crops. The payments to farmers reflect historic patterns of
production for different crops. The Single Payment Scheme (SPS) pays
farmers for the land that they manage or own. Farmers can submit a
claim for each year based on their land and their entitlements. Entitlements are the farmer’s “right” to claim. In order to gain these rights,
farmers had to make a successful claim during the first year of SPS or
purchase them from another farmer. In order for farmers to qualify for
payments under the scheme, they have to follow certain conditions and
rules; their holdings must be at least 0.3 hectare and used for an agricultural activity; their land must be at their disposal for a period of ten
months; they may have to set-aside a proportion of their land depending
on their holding size and crops grown; and they must meet Cross Compliance standards that cover environment, food safety and animal health
and welfare law (and good practices).
In addition to the direct subsidies, amounts are earmarked for rural
development programs. The rural development program is divided into
four areas, termed axes. Axis two covers management of natural resources. These amounts for rural areas and for special environmental
considerations are paid on the premise that the individual countries
themselves contribute a similar amount.
In 2011 a proposal for the new common agricultural policy 2014–
2022 were presented. The proposal implied a greening of direct payments and new rural development policy for 2014–2020. The proposal
contains the following instruments: (1) A basic payment scheme (flat
rate per eligible hectare) where agricultural activity is required (keep
animals, cultivate crops and/or maintain land in a condition suitable to
be farmed without any preparation beyond traditional methods). (2)
Green payments which imply that 30% of direct payments could be dedicated to practices which enable optimal use of natural resources like
crop diversification, permanent grasslands and ecological focus areas.
(3) Young farmer scheme. (4) Coupled support which implies support
linked directly to the crops produced or livestock reared. These would
only be permitted where the sector in question is undergoing difficulties
and is particularly important for economic, social or environmental reasons. (5) Natural constraint support which imply an additional top-up
payment per hectare for farmers whose land lies wholly or partly in
“areas of natural constraint”
4.1.2
The Danish rural development program
One of the four objectives of the Danish Rural development program is
rich nature and clean environment. Several of the impact indicators are
related to water and greenhouse gas emissions:
 Improvement in water quality – reduction in nitrogen surplus
 Contribution to combating climate change – renewable energy
 Reduction in phosphorus emissions
32
Agriculture and the environment in the Nordic countries
National requirements for farming practice and cross-compliance forms
the basis for agri-environmental payments for measures implemented
under the rural development program. The measures under the rural
development program go beyond the nationally set baseline requirements. The basic requirements and the measures taken to implement
the Nitrates Directive already restrict the farmers in terms of manure
handling and spreading, livestock intensity, buffer zones, chemical fertilizer application and cover crops.
Measures under the rural development program are:
 Extensive farming
 Establishing and management of set-aside border strips
 Establishment and management of wetlands
 Conservation by grazing or cutting on pasture and natural areas
There are also specific support measures and agricultural practices related to water under the Article 68 program with special requirements.
These measures are funded by unused funds under the EU’s direct agricultural, a pillar 1 support. Article 68 allows EU states to retain by sector
up to 10% of their national ceilings for direct payments. In Denmark this
was DKK 178 million in 2012. One of the purposes these funds can be
used for is protecting the environment. In Denmark these measures are:
 Extensive farming
 Establishment of perennial energy crops
 Management of permanent grassland
 Production of energy crops
 Establishment of organic fruit and berry production
As other agri-environmental measures fall under Pillar 2, article 68 can
be seen as a way of greening the CAP and merging the two pillars (Hart
and Baldock 2011).
Agriculture and the environment in the Nordic countries
33
4.1.3
The Swedish rural development program
The overall objective of Sweden’s rural development policy is to support
the economically, ecologically and socially sustainable development of
rural areas. One means of achieving this objective is the Rural Development Programme (The Ministry of Agriculture, 2010). Axis two in this
program (management of natural resources), aims to achieve a sustainable development in agriculture, forestry and reindeer husbandry. The
total budget for the program period of 2007–2013 is € 3,9 billion
(http://europa.eu/rapid/press-release_MEMO-07-210_en.htm), in which
almost 50% is from the EU and the rest is Swedish public funds. Axis two
include compensatory allowance in less favourable areas, payments for
environmentally friendly farming and payment for increasing biodiversity
in forestry. Compensatory allowance are provided in areas where natural
conditions for agriculture are less favorable, such as mountainous or forested areas, farmers may receive compensatory allowance to manage
pastureland or for the cultivation of forage, grain or potatoes. This will
serve to strengthen the regional economy and to promote an open and
varied agricultural landscape (The Ministry of Agriculture, 2010).
The largest amount is used for environmentally friendly farming.
Payments for environmentally friendly farming aims to contribute to
agriculture that is better adapted to the environment and hence to the
achievement of the Swedish environmental quality objectives (The Ministry of Agriculture, 2010). Payments are intended to maintain an open,
varied agricultural landscape by cultivating forage, by managing seminatural grasslands and mown meadows or by preserving cultural heritage features in the agricultural landscape and reindeer husbandry area.
Payments are also available for reducing plant nutrient leakage, reducing the risks of using chemical pesticides, and conducting organic forms
of production. To preserve genetic variation, payments are also paid for
keeping species of Swedish livestock that are threatened with extinction
or cultivating traditional types of brown beans. A few specific types of
environmental payments are only available in specifically designated
areas of the country.
34
Agriculture and the environment in the Nordic countries
4.1.4
The Finnish Rural Development Program
The total amount of funding for the Finnish rural development program
was € 6.6 billion for the six-year period, of which one third came from
the EU. The largest share (81%) of the RDP is allocated to axis 2 of which
Measure 214, agri-environmental payments, gets 44% (Berninger et al.,
2011). The total funding for axis 2 totals about € 2.3 billion (Niemi and
Ahlsted, 2012). Axis 2 includes the agri-environment and natural handicap payments, non-productive investments and promoting the welfare
of farm animals (Niemi and Ahlstedt, 2012).
Agri-environmental support was first introduced in 1995 and the current programme is the third agri-environmental programme. In 2007, the
first year of the current program, the environmental support was € 315
million. Payments have increased every year and were estimated to be €
372 millions in 2011. In addition to agri-environmental payments, Finnish
agriculture receive CAP support for arable crops and livestock, less favoured area (LFA) payments, national support to northern and southern
Finland, national LFA and certain other national support.
The agri-environmental payments are meant to compensate for losses in income from reduced production output or extra production costs
as the farmer commit to undertake certain measures. The main objective
of the programme is to reduce nutrient loadings from agricultural lands
to water. Most of the payments are directed to water protection
measures while a small% age of the payments are used for measures to
enhance biodiversity (Niemi and Ahlsted, 2012). However, many of the
water protection measures also enhance biodiversity, e.g. wetlands and
riparian buffer zones.
The programme consists of basic, additional and special measures and
payments vary according to region and measures undertaken (Aakkula et
al., 2011) (box 1). Participation is extensive, in 2010 almost 90% of all
farms in Finland, covering 92% of total cultivated arable land, were committed to the basic measures. The basic measures are obligatory for participants in the program and concerns monitoring and planning of farm
practices, fertilization of arable land, and headlands and filter strips
(Berninger et al., 2011). Farms in southern parts of Finland (area A and B)
must undertake between one and four additional measures while farms in
northern parts (area C) can choose maximum two additional measures on
a voluntary basis (Niemi and Ahlsted, 2012). The most popular additional
measures are more accurate nitrogen fertilization, plant cover on arable
lands during winter and calculation of nutrient balances (ibid.).
Agriculture and the environment in the Nordic countries
35
Box 1
Water protection measures in the Finnish agri-environmental program
Basic measures:

Environmental planning and monitoring.

Fertilizer application to arable and horticultural crops according to soil fertility crop requirements.

Reservation of wider headlands and broader set-aside margins along water
channels.
Additional measures:

Reduced fertilizer use.

More accurate nitrogen fertilizer application on arable crops.

Plant cover in winter.

Reduced tilling.

Extensive grassland production.

Spreading of manure in growing season.

Calculation of nutrient balances.

Cultivation of catch crop.
Special measures:

Establishment and management of riparian buffer zone.

Management of multifunctional wetlands.

Arable faming in groundwater areas.

More efficient reduction of nutrient loadings.

Runoff water treatment methods.

Incorporation of liquid manure in the soil.
Source: Berninger et al., 2011.
To be compensated for basic and additional measures through payments, the farmer must comply with certain cross- and minimum requirements. The minimum requirements already include some maximum amount of nitrogen and phosphorus fertilizer use (Aakkula et.al,
2011). Special measures require additional contracts and are linked to
special geographical areas. The payments for the special measures are
36
Agriculture and the environment in the Nordic countries
linked to a particular area or number of animals while payments for
basic and additional measures are paid for the farms’ entire area. In
2009 the total agri-environmental payments to farmers were € 340 million, € 220 million in compensation for basic measures, € 72 million for
additional measures and € 48 million for special measures (Aakkula
et.al, 2011).
4.2 Agri-environmental policy in Iceland
Iceland’s natural conditions make the agricultural sector noncompetitive with other European countries (Jóhannesson 2010). Agriculture mainly consists of livestock production, dairy and sheep account
for half of the production (OECD 2011a). Support to Icelandic farmers
has been reduced by almost 30% from 1986–88 to 2008–10. The support consists of mainly price support which is sustained with border
measures and quotas. Payments based on outputs are provided to dairy
producers. In 1996, support to sheep meat producers changed from
price support to direct payments based on historic entitlements. A regional scheme for sheep farmers implemented in 2008, also provide
more decoupled payments. Agri-environmental policies focus on soil
conservation and forestry through payments that aim to enhance sustainable land use and restoration of degraded land.
4.3 Agri-environmental policy in Norway
Sustainable agriculture is one of the policy goals for agriculture in Norway. More specifically they want to achieve protection of land resources,
production of environmental goods, biodiversity, reduced climate emissions and water pollution (Ministry of agriculture and food, 2011). The
most important agri-environmental subsidies include acreage and cultural landscape payments, payments for grazing livestock, support for
preserving rare livestock breeds, support for organic farming, regional
agri-environmental programs, payments for environmentally friendly
spreading of manure, special environmental measures in agriculture and
payments for selected cultural landscapes. From 1999, a differentiated
environmental levy on pesticides has been in place. The fee is area-based
and differentiated by the health and environmental risk of the pesticide.
Pesticides are divided in seven tax classes depending on the health and
environmental risks.
Agriculture and the environment in the Nordic countries
37
4.4 Summary of Nordic agri-environmental policy
instruments
Table 1 show that the Nordic countries hold many of the same goals for
their agri-environmental policy. Denmark, Sweden and Norway are similar in terms that they focus on several issues like cultural landscapes
heritage, biodiversity, greenhouse gas emissions, and nutrient (nitrogen
and phosphorus) leakage, while Finland mainly focus on nutrient leakage and Iceland mainly focus on soil conservation.
Table 1 The main agri-environmental policy instruments in Norden
Country
Environmental concerns
Denmark. Rural Rich nature and clean
development
environment
programme 20072013. Axis 2
Main type of agri-environmental subsidies
Extensive farming
Biogas
Set-aside buffer zones
Energy crops
Maintaining wetlands
Rare livestock breeds
Municipal wet area projects
Environment Conditional grants
Environmentally friendly technologies
Nature and environment projects
Natura 2000 projects
Conversion to organic farming
Management of EB-grassland
Management of pasture and natural areas
Organic fruit trees and berry production
Island support
Sweden. Rural
Sustainable development Environmental Compensation for:
development
in agriculture
Pastures and hayfields
programme 2007Forage cultivation
2013. Axis 2
Certified organic or recycling-oriented production
Natural and cultural environments in the agricultural landscape
Reduced nitrate leaching
Brown beans on Öland
Endangered livestock breeds
Buffer zones
Environmental precautions
Natural promotion efforts on farmland
Compensation within designated environments (Pastures and hay
meadows, arable land, water, cultural heritage)
Finland. Rural
Reduce nutrient loadings
development
from agricultural lands to
programme 2007- water.
2013. Axis 2
38
Basic measures: monitoring and planning of farm practices, fertilization of arable land, and headlands and filter strips
Additional measures: reduced fertilizer use, more accurate nitrogen fertilization, plant cover in winter, reduced tillage, extensive
grassland production, spreading of manure in growing season,
calculation of nutrient balances, cultivation of catch crops.
Special measures: Establishment and management of riparian
buffer zone, management of multifunctional wetlands, arable
faming in groundwater areas, more efficient reduction of nutrient
loadings, runoff water treatment methods, and incorporation of
liquid manure in the soil
Agriculture and the environment in the Nordic countries
Norway
Sustainable agriculture
Acerage and cultural landscape payments
Payments for animals on pasture
Support for preserving rare livestock breeds
Support for organic farming
Regional environmental programs (cultural landscapes, cultural
heritage, biodiversity, recreational values, runoff to water, reduced
use of pesticides.)
Payments for environmentally friendly spreading of manure
Special environmental measures in agriculture (cultural landscape,
pollution and facilitation)
Selected cultural landscapes
Iceland
Soil conservation
Payments that aim to enhance sustainable land use and restoration of degraded land
Source: Ministeriet for Fødevarer, Landbrug og Fiskeri (2013), Jordbruksverket (2013), Niemi and
Ahlsted (2012), Kvakkestad et al. (2012).
Agriculture and the environment in the Nordic countries
39
5. Nordic experiences in agrienvironmental policies
This chapter presents and discuss case- evaluations, alternative policy
models and scenarios from the Nordic countries. Finland’sagrienvironmental program has achieved widespread participation. The
program consists of payments to farmers who adopt measures that will
reduce nutrient runoff to water and has been evaluated by many. Alternative policy instruments and further developments have also been suggested and will be presented in part 5.1.
Sweden has, along with other countries around the Baltic Sea,
pledged to reduce its nutrient runoff to the sea. How Sweden and other
countries plan to reach their reduction targets of nutrient runoff from
agriculture in a cost-efficient manner is presented in part 5.2. Markedbased instrument like tradable quotas may be part of the solution and
are also presented in this section.
In 2011, the part of Norway’s regional agri-environmental program
that relates to nutrient runoff, was evaluated. The most common measure in this program is reduced tillage in the autumn and the farmer was
compensated. The estimated impact of this evaluation on runoff, the
farmers’ economy and the role of management and counselling is presented in part 5.3.
In Denmark, agriculture’s pollution of soils, water and air is mainly
due to intensive livestock production and the use of chemical fertilizers
(OECD 2008). Nutrient efficiency is increasing, but agriculture still accounts for the greater part of nitrogen runoff. Denmark has a great focus
on green growth in agriculture by enhancing the growth of energy crops
and biogas from animal manure. How the policy instruments work and
the impact on nutrient runoff to waterbodies and greenhouse gas emission is presented in part 5.4.
Iceland’s natural resources are sensitive to human activities and especially livestock production has led to massive degradation of vegetation and soil erosion (Arnalds et al., 2001). How policy instruments and,
more importantly, knowledge and awareness of soil erosion can turn the
negative trends on Iceland is presented in part 5.5.
Agricultural activities contribute to greenhouse gas emissions but
can also contribute to reductions by storing carbon and producing input
for biogas production. Policies for reducing greenhouse gas emissions
are not as developed and researched as for water quality measures. Section 5.6 presents an evaluation of the impact of Swedish nitrogen tax on
nitrous oxide emissions and how a tax on animal food can reduce GHG
emissions from agriculture in Europe. Section 5.7 will present some policies for biogas production in Denmark and Sweden and evaluate potential for cultivating energy crops for biofuels in Europe.
5.1 The impact of agri-environmental policy in Finland
on phosphorus and nitrogen loadings in water
The participation rate in the agri-environmental program may be seen as
a measure of the program’s effectiveness. However, participation is rather
a measure of promised changes in agricultural practices and an indication
that payments make participation relatively attractive compared to the
costs (Laukkanen and Nauges, 2012). This section looks closer at the impact of the agri-environmental program on the environment and how it
should be evaluated to understand its real costs and benefits.
5.1.1
Impacts and evaluations of the Finnish agrienvironmental program
The legislation behind the agri-environmental programme requires
evaluation and follow-up studies (Aakkula et al., 2011). One such followup study focuses on the impacts of the agri-environmental measures in
the 2007–2013 programme (MYTVAS 3) and aims to evaluate how the
measures have influenced the agricultural environment, preconditions
for farm activities and suggest further development and improvement of
the agri-environmental programme. The follow-up study finds that the
measures with the greatest potential for reducing nutrient loadings are
(reduced) fertilization of arable crops, set-aside margins/nature management fields and plant cover during winter (ibid.).
Changes in agricultural practices and structural changes in Finnish
agriculture also have consequences for nutrient loadings and water pollution. The use of commercial fertilizers has decreased considerably in
Finland since 1990 (Aakkula et al., 2011). The MYTVAS 3 and previous
studies find that both nitrogen and phosphorus balances in the soil have
decreased, mainly as a result of the reduction in fertilizer use. In recent
42
Agriculture and the environment in the Nordic countries
years yield uptake of nutrients has increased in southern Finland, another important factor for reducing nutrient loadings to water. There
has also been a change in land use from animal to cereal production and
a tendency for intensification of animal husbandry in south-western and
western parts of Finland.
Agricultural nutrient loadings in water were found to be decreasing for
phosphorus and increasing for nitrogen between 1985 and 2006 (Aakkula
et, al., 2011). Although the agri-environmental programme started in 1995
when Finland entered the EU, impacts may be small and hard to measure
because of nutrient reserves in the soil, changes in agricultural production
and even climate change (Ekholm et.al. 2007). Increase in nitrogen loadings
may be a result of intensification in animal husbandry in certain areas as
well as increase in field area (Aakkula et al., 2011).
Other studies of the agri-environmental programme in Finland have
similar conclusions; although reductions in nutrient loadings have taken
place, the effect of the agri-environmental program is not large. Laukkanen and Nauges (2012) emphasize that although farming practices
have changed so that nutrient loadings are reduced, a multitude of factors influence farming practices and agri-environmental payments are
only one of them. The effect of an agri-environmental program must
therefore be evaluated in a larger context, preferably with other, alternative policy measures in mind.
Laukkanen and Nauges (2012) are particularly interested in the use
of fertilizer and allocation of land to grain production and set-aside,
which is considered key determinants of surface water pollution from
agriculture. In order to include the other factors that influence farmer
behaviour, they analyse an unbalanced panel from 1996 to 2005 of
farms that have at least some of their land allocated to grain production
in the three southernmost support regions in Finland. The data is based
on a selection of individual Finnish farms for the period 1995 to 2005
(data collected for the European Commission’s Farm Accountancy Data
Network that contain physical and financial variables for agricultural
production). Based on historical input and output prices, total land and
agri-environmental payments and other subsidies, they model farmer
decisions about fertilizer nutrient use and land allocation to grain production and set-aside land. The model is used to predict farmers’ input
use and land allocation to grain production, other production and setaside land, with and without the agri-environmental programme.
Farms that adopt special measures receive payments that cover investment and management costs up to a certain ceiling set by the EU.
Over the study period, an increasing proportion of farms adopted such
Agriculture and the environment in the Nordic countries
43
measures, rising from 12% in 1996 to 29% in 2005. Praticipation in the
program is not random. Farmers’ age has a statistically significant negative effect on participation, as younger farmers’ may have a longer planning horizon, are better educated and willing to participate in the program. The price of labour, number of animals on the farm and farm size
had a positive effect on participation. By taking land out of production
for set-aside, riparian buffer zones or wetlands, labour requirements on
the farm are reduced. Proximity to the West coast of Finland also has a
positive effect on participation as farmers in this part are possibly more
aware of the nutrient-related water quality problems in the Baltic Sea.
Although participation in the agri-environmental is almost universal
among Finnish farms, participation in the sub-program related to reduction of nutrient run-off is neither common nor evenly distributed.
Data on predicted land allocation, conservation measures like filter
strips along water ways, and fertilizer use, was used in a nutrient pollution simulator to measure the environmental outcome of the agrienvironmental program. This was compared to a counterfactual scenario
without an environmental policy, keeping the rest of CAP and prices
constant. By comparing the counterfactual with the prevailing policy, it
is possible to isolate the impact of the agri-environmental payments on
farmer decisions and thereby nutrient loadings. They find that the payments result in minor reductions in fertilizer use, an increase in grain
production area and a reduction in set-aside land. The latter is considered counter-productive as set-aside land has the potential to reduce
nutrient runoff to water. Similar analysis from Germany and the United
States suggest that participants in agri-environmental programs increase area under cultivation.
Although the program reduces fertilizer use, this effect is small, less
than 2% reduction in fertilizer use. The reduction in fertilizer has resulted in a decrease in nutrient loadings from grain production by 8%. Land
changes that are part of the program, such as construction of riparian
buffer strips, adds another % in reduction.
The estimated effect of the agri-environmental program was a reduction in nitrogen loading by 11% and phosphorus loading by 13% relative
to what the counterfactual scenario with no agri-environmental payments. When this is combined with monetary measures for damage from
nutrient runoff, the program reduced damage by 11–12% compared to
the counterfactual case. When comparing these benefits from reduced
damage with the costs of the payments, the cost-benefit ratio ranged
from 0.68 to 1.05 depending on the calculation method.
44
Agriculture and the environment in the Nordic countries
In conclusion, Laukkanen and Nauges state that the Finnish agrienvironmental program has reduced nutrient loading from agriculture,
mainly by reducing fertiliser use. The reduction is not, however, large
enough to meet Finland’s water protection targets. More targeted policy
instruments like fertilizer tax is suggested. The incentive created by the
agri-environmental program to increase the grain area should also be
changed. However, other benefits of the agri-environmental program, such
as increases in biodiversity, reduced risk from use of pesticides and improved water quality in certain lakes in Finland, is not included in this analysis. Additional benefits such as increased biodiversity because of wetlands
and reduced use of pesticides would increase the total benefits of the program. Locally, the FAEP may have had better results in certain lakes and
waterways. Such benefits increase the total value of the program.
5.1.2
Counterfactual scenarios and fertilizer constraints
Lankoski and Ollikainen (2011) constructed a similar model of the impact
of the Finnish agri- environmental programme and compared it to two
counterfactual policy scenarios, (1) land use and allocation as in 1994 and
(2) the CAP without agri-environmental payments. They developed a theoretical framework which was used for empirical analysis of farmer decisions on fertilizer intensity, land use and crops in the years 1995, 2001
and 2007. Based on these variables they estimate nutrient runoff using a
model based on another study by Lankoski et al. (2006) which is based on
Finnish data. In this model, phosphorus runoff is based on both easily
soluble P in the soil and the rate of soil erosion and P content in eroded
soil. Both nitrogen and phosphorus runoff for different crops and fallow
land are estimated for the years 1995, 2001 and 2007.
In their analysis, Lankoski and Ollikainen separate the effects on nutrient runoff from several factors. These are:
 Total land under cultivation ,
 Allocation of land between crops, and
 The fertilizer constraint, which is part of the agri-environmental
program.
Table 2 summarizes the effects.
Since Finland joined the EU in 1995 and the first agri-environmental
payments were introduced the same year, land use and allocation between different crops has changed. From 1994 to 1995 there was a decrease in total agricultural land as a result of the changes in agricultural
Agriculture and the environment in the Nordic countries
45
policy. Later, total cultivated area increased until it was almost on the
1995 level again in 2007. Before the first agri-environmental program,
farmers were required to allocate a certain portion of their land to fallow (set-aside). Land allocated to fallow was reduced by half from 1994
to 1995 and was reduced further until 2007. In general, there was a shift
to more fertilizer intensive crops and silage production from 1995 to
2001 and from 2001 to 2007.
Table 2. Nitrogen and phosphorus losses in actual and counterfactual scenarios
1995
Actual (current
policy regime)
(tons)
2001
N
P
31,851
2,056
N
35,180
2007
1995–2007 change
P
N
P
2,024
43,613
2,003
Actual change in nutrient losses from 1995 to 2007
N
11,762
P
-53
36.9 %
-2.6 %
Relative change in
nutrient losses with
land allocation as in
1995
0.0 %
0.0 %
-7.9 %
-4.2 %
-16.3 %
-8.5 %
14.7 %
-10.8 %
Relative change in
nutrient losses with
land allocation as in
1994
-8.8 %
-3.6 %
-16.1 %
-7.9 %
-24.5 %
-11.9 %
13.3 %
-11.0 %
Relative change in
nutrient losses with
no fertilizer constraint and no land
allocation constraint
10.4 %
-5.3 %
5.8 %
-6.4 %
6.1 %
-4.5 %
31.6 %
-1.8 %
According to model estimates, nitrogen loading increased by 36.9%. If
land allocation was fixed as it was in 1995 or 1994, nitrogen loading
would have increased by 14.7 and 13.3% respectively. Reductions in
phosphorus runoff would have been larger, 10.8% with land allocation
as in 1995 and 11.1% with land allocation fixed to 1994. In these two
scenarios the agri-environmental program was included so that it is
possible to isolate the effects of changes in land allocation. Changes in
land allocation have led to a larger increase in nitrogen runoff and a
smaller decrease in phosphorus runoff.
The agri-environmental programme set a limit to how much fertilizer
the farmers can apply. Lankoski and Ollikainen (2011) estimated the
optimal amount of fertilizer that would maximize farmers’ profit based
on market prices of inputs and outputs without the fertilizer constraint.
For most crops the optimal amount of fertilizer was higher than the constraint. Between 2001 and 2007 the fertilizer application constraint in
the agri-environmental programme was relaxed, i.e. participants were
46
Agriculture and the environment in the Nordic countries
allowed to apply a larger amount of fertilizer. According to the model,
nutrient runoff under the fertilizer constraint was larger in 2007 than in
2001 and 1995, a result of the relaxation of the fertilizer constraint. The
application of phosphorus, on the other hand, has not resulted in increases in runoff and leaching. Both particulate and dissolved phosphorus runoff decreased during the same period because of the diminishing
phosphorus content in the soil.
Without the fertilizer constraint, nitrogen losses would have been
10.4% higher in 1995. Later, the fertilizer constraint was relaxed and the
preventive effect of the program was reduced. In 2001 and 2007 the
program prevented 5.8 and 6.1% of the actual nitrogen runoff. Total
increase in nitrogen runoff from 1995 to 2007 was smaller in%age
without the agri-environmental program, but higher in tons.
For phosphorus, however, the program has actually resulted in
smaller reduction in nutrient loadings by on average 5.7% from 1995 to
2007 when compared to the counterfactual. This can be explained by the
increased area under cultivation during the program, which has outweighed the relaxation of the fertilizer constraint. Lankoski and Ollikainen (2011) conclude that the relaxed fertilizer application constraint and changes in land use contributed almost equally to the actual
increase in nitrogen loading between 1995 and 2007.
This study has highlighted some interesting aspects of policy effects.
The counterfactual scenario without the agri-environmental program
suggests that nitrogen loadings would have been larger without the fertilizer constraint. However, another effect of the program is that the
total area of cultivated land increased, possibly because the payments
made it profitable for farmers to cultivate marginal land. This increase in
total cultivated area has made phosphorus runoff reductions smaller
than what was estimated under the counterfactual scenario with no agrienvironmental program.
Land allocation between crops has been as important for changes in
nutrient runoff as the agri-environmental programme. The estimated
nutrient loadings under the land allocation that existed in 1994 and
1995 were lower than the actual loadings. Since 1994–95 there has been
shift to more fertilizer intensive crops and less fallow land. If land allocation had been kept as in 1995, the increase in nitrogen loading would
have been 22% less and decrease in phosphorus loading four times
more. In conclusion, the analysis by Lankoski and Ollikainen (2011)
suggests that the agri-environmental programme has had positive impacts in that it has reduced nitrogen runoff compared to the alternative
with no agri-environmental program. However, the program may also
Agriculture and the environment in the Nordic countries
47
have impacts that counteract its own objectives, as well as the impacts of
other policies and price changes.
Lankoski and Ollikainen (2011) conclude three effects:
1. Crop area and single farm payments give incentives to increase area
under cultivation.
2. The combined effects of the crop area payments, single farm
payments and relative prices leads to more land under cultivation
and more fertilizer intense agriculture which both leads to increased
use of fertilizer.
3. The agri-environmental payments may motivate farmers to utilize
marginal land, a development that may increase nutrient runoff.
Potential counterproductive effects of agri-environmental payments
need to be taken into consideration when agri-environmental programs
are developed.
5.1.3
Alternative policy scenarios for reduction in nutrient
pollution
Counterproductive effects of agri-environmental programs indicate that
such payments and other policies that give farmers incentives to increase area under cultivation, should not be used to reach environmental goals. Removal of perverse support is argued to be an important policy change to decrease water pollution from agriculture (OECD 2012b).
Analysis of alternative policy scenarios do not, however, give clear evidence that liberalisation will increase water quality. Lehtonen et al.
(2005) found that full scale trade liberalisation would lead to a significant decrease in Finnish agricultural production. This reduction in production would not, however, lead to any additional environmental benefits in terms of reduced nutrient balances. The reason for this was that
relatively competitive regions for dairy production in Finland would
import feed grains which would result in increased nutrient balances in
these regions.
Another study from Lehtonen et al. (2007b) also analysed alternative
policy regimes and their implications on nutrient leaching on two
catchments with varied environmental conditions and production. In the
region with high yielding soil suitable for grains, nutrient leaching was
quite stable across policy scenarios. Grain production in this region
would be contained almost irrespective of agricultural policy. The other
region, which was specialized in beef and dairy production, decoupling
48
Agriculture and the environment in the Nordic countries
and decrease in beef and milk prices may result in extensive grass production and relatively large reduction in nutrient leaching. Under certain
assumptions the model also shows that extensive cattle and grass production may lead to an increase in the soluble phosphorus leaching,
which contradicts the notion that lower prices and decoupling always
leads to a decrease in pollution.
Lehtonen et al (2007a) provides an economic sector level analysis of
alternative national policies to reduce nutrient runoff from Finnish agriculture. With the EU CAP as it was in 2006 as the starting point, they
investigated three different national policy strategies; a baseline scenario with small changes in output prices and the 2006 agri-environmental
support scheme, a scenario with full decoupling from production of national support, partial decoupling of national support, a scheme of agrienvironmental payments for reducing both N and P surplus by 50%
from the 1995 level, and finally a tax on N fertilizer which gives on average 20% tax rate. In the two last scenarios, all other support and prices
are kept as in the baseline scenario.
None of the policy scenarios were superior in terms of reducing nutrient surplus. In the baseline scenario, set-aside area increased so that
nutrient surplus decreased with approximately 10%. Grain production
decreased and livestock production decreased a little. On actively
farmed land, phosphorus surplus would increase a little. Full decoupling
of national support would also decrease nitrogen but especially phosphorus surplus and increase set-aside land more than in the baseline
scenario. At the same time farm income would increase and like in the
baseline scenario, phosphorus surplus would increase a little on actively
farmed land. The scenario with payments for nutrient reduction is relatively effective for reducing nitrogen surplus, but also results in a negative income shock, a large increase in set-aside land, and reduction in
pork and grain production. In this scenario, production is moved to the
most productive regions and less productive regions have strong incentives to stop production. The tax on nitrogen, keeping national support
coupled to production, results in 30–32% reduction in N and P surplus
while keeping production volumes but has a negative impact on farm
income. By taking into account the governmental expenses, the tax is
nearly as effective as decoupling of national support in reaching reduction in nutrient surpluses.
In terms of reductions in nutrient surplus and farm income, full decoupling of national support is the most effective scenario in Lehtonen et
al (2007a) analysis. However, by including the analysis done by Lehtonen et al. (2005), decoupling combined with trade liberalization, de-
Agriculture and the environment in the Nordic countries
49
creases in support and/or decreases in grain prices, may lead to increases in nutrient balances, especially if meat prices remain high. Policy and
price changes that give incentives for intensive livestock production will
increase nutrient surpluses. Neither will decoupling alone ensure decrease in nutrient surplus in all regions since livestock intensity may
increase in competitive regions. It should be mentioned that the results
in this analysis depend on the cross-compliance requirement of keeping
the land in good agricultural condition in order to receive support.
5.2 Sweden: Economics of eutrophication
management
This chapter briefly presents Swedish efforts to reduce nutrient leaching
to the Baltic Sea. The chapter draws heavily on a report by Katarina
Elofsson (2010) to the Expert Group on Environmental studies. The objective of the report was to evaluate how nutrient-input permits trading
can lower the costs of meeting the targets of Baltic Sea Action Plan. The
notion of a nutrient trading scheme is in itself interesting, and the report
concludes that the benefits of such a system may be substantial. The
report also has a relevant focus on cost effectiveness and how differences in targets can change costs for achieving them. The focus of the
report is not the agricultural sector alone. But when dealing with policies that reduce nutrient leaching from agriculture it will also be necessary to look to other sectors to improve cost efficiency.
Many of the Nordic countries are catchment areas to the Baltic Sea, a
sea which has been reported to contain the largest anthropogenic “dead
zone” in world. The countries surrounding the Baltic Sea have established the Convention on the protection of the Marine Environment of
the Baltic Sea, working to reduce nutrient emissions to the sea to sustainable levels. The Convention includes quantified and targeted nutrient reductions for each Baltic Sea country (HELCOM Baltic Sea action
plan 2007). In the Baltic Sea Action Plan (BSAP), Sweden has agreed to
reduce phosphorus emissions into the Baltic Sea by 290 tons (1.9% of
total reduction target) and nitrogen emissions by 20,780 tons (15.6% of
total reduction target). Agriculture was the largest single contributor to
both phosphorus and nitrogen loadings in 2006 (Ministry of Environment, Sweden 2010).
Nutrient runoff from agriculture is an important contributor to the
eutrophication in the Baltic Sea. HELCOM countries have already
achieved a 40% reduction in nitrogen and phosphorus discharges. But in
50
Agriculture and the environment in the Nordic countries
order to reach the target of “clear water”, phosphorus and nitrogen loadings must be further reduced 42 and 18% respectively (HELCOM Baltic
Sea action plan 2007). The Swedish Agency for Marine and Water Management has published a report that presents a number of studies that
have modelled the costs of reducing the nutrients loadings in the Baltic
Sea for all countries involved (Elofsson 2008). Agriculture as a sector is
included in all of these studies as the potential to reduce nutrient runoff
from this sector is great. The largest public, fiscal cost for reaching Sweden’s targets is compensations through the Rural development program
(Ministry of Environment, Sweden 2010). Low-cost measures for reducing nitrogen runoff from agriculture include wetland restoration, reduced fertilizer use and improved manure management. For phosphorus, only restoration of wetlands is related to the agricultural sector.
Trading in nutrient loading permits are a promising way of reducing
the costs. According to Elofsson (2010), a basin-wide emission permit
trading scheme can reduce total annual costs of reaching reduction targets by € 724 million for the HELCOM countries. Bilateral cooperation,
similar to the Clean development mechanism under the Kyoto protocol,
can further reduce costs of cleaning the Baltic sea by including the countries that are not included in HELCOM (Belarus and Ukraine). Such
schemes would insure that abatement is implemented where the costs
are lowest.
Parts of Sweden’s reduction targets have already been reached as
both nitrogen and phosphorus discharges from agriculture to water
have been reduced from 1995 to 2006 (Ministry of Environment, Sweden 2010). Changes in use of agricultural land and more efficient use of
nutrients have resulted in an annual reduction in runoff from arable land
with 12% nitrogen and 7% phosphorus. Other measures like establishment of wetlands, reduced soil cultivation and changes in crop cultivation have further reduced runoff by 870 tons nitrogen and 20 tons phosphorus (ibid.).
Through measures related to agriculture, Sweden plan to reduce nutrient loadings with 3,500–6,250 tons nitrogen and 40 tons phosphorus
in the years between 2010 and 2016 (Ministry of Environment, Sweden
2010). However, the Baltic Sea can be divided into several drainage basins or catchments, which each have their own emission reduction targets. The basin-wide reduction targets increase the costs of reaching
these targets because abatement must take place in specific watersheds
where abatement may be more costly (Elofsson 2010).
Participation in the the agri-environmental support scheme in the
Rural Development Program is voluntary. The Swedish Board of Agricul-
Agriculture and the environment in the Nordic countries
51
ture works to educate farmers about nutrient losses in a program called
“Focus on nutrients” (Elofsson 2010) and together with Swedish Farmers Association farmers are encouraged to adopt agricultural practices
that reduce nutrient loss. An evaluation of the implemented measures to
reduce leaching of nutrients from agricultural activities concludes that
there are strong indications for achievement of their intended effect
(Fölster et al. 2012). There has been a significant downwards trend in
the concentration of both nitrogen and phosphorus in watercourses that
are mainly agricultural. However, for phosphorus, the trend in reduction
is only in the long term. In the short term, i.e. the last 10 years, there is
no general trend.
There seems to be a positive relationship between the reductions in
nutrient concentrations and the extent of measures implemented. In the
Skagerrak and Kattegat Water districts in the south-western part of Sweden this relationship is particularly evident. The crop distribution has
been changed in this area with an increase in grasslands and a decrease in
spring crops. A database containing information on the distribution of
crops, livestock density and implementation of environmental measures
supports the notion that the measures have had an effect on reducing
nutrient concentration in water. Catch crops in combination with spring
cultivation could best explain the reduction of the concentration of inorganic nitrogen in water. A reduction in the area of spring crops could best
explain reductions in the total concentration of phosphorus.
The education and advisory program “Focus on nutrients” gives
farmers advice on how to reduce greenhouse gas emissions, nutrient
surplus and safe use of pesticides (Fölster et al. 2012). The program
covered 10% of the agricultural land in Sweden in 2010. Participation
was highest in Skåne, southern Sweden, where 50% of the area was included in the program.
A report by Swedish Environmental Protection Agency (Naturvårdsverket 2008) concludes that many of the targets related to the national environmental objective “zero eutrophication” can be met. But no
clear change in the state of eutrophication is visible since the last evaluation and the state of many lakes and streams are serious. The state of the
Baltic Sea is considered the most severe with large algal blooms. The timescale for recovery is long, and there is hope that recent trends of falling
nutrient concentrations, international initiatives like HELCOM and the EU
Water Framework Directive will improve the environmental situation.
The Swedish Environmental Protection Agency suggests reduced tillage, a larger area and more permanent catch crops, a larger area of
spring crops, set-aside land in especially sensitive areas, riparian buffer
52
Agriculture and the environment in the Nordic countries
zones in along streams and lakes and other erosion prone areas, establishment of wetlands, build damns to trap phosphorus, lime filter drains,
improved drainage and a decrease in phosphorus in livestock feed
(Naturvårdsverket 2008). The most innovative measure is large scale
mussel farming. Reduced tillage has the greatest potential in reducing
nitrogen leaching, followed by wetlands, catch crops and spring crops.
For phosphorus reduction, mussel farming has the greatest total reduction, followed by dams and buffer zones. In total, the suggested
measures have the potential to reduce nitrogen leaching by 5,100 to
7,200 tons per year and phosphorus leaching by 236 tons per year at a
cost between 4.1 and 4.6 billion per year. These numbers do, however,
include significant uncertainties regarding the actual results.
5.2.1
Cost effectiveness of nutrient reductions
Elofsson (2010) developed a cost effectiveness model that includes
abatement measures in the countries surrounding the Baltic Sea in order
to analyse costs and effects of nutrient policies.
According to Elofsson (2010) there was disagreement between the
Swedish EPA and the Swedish Board of Agriculture about the appropriate strategy as well as the costs of reducing nutrient leaching. However,
the costs of reaching the target depend on not only measures, but on
how the target is formulated. In the Baltic Sea Action Plan, targets are
connected to catchments and reducing nutrient leaching from agriculture receives more weight. At the time of writing of Elofsson’s report,
Sweden had not yet adopted Baltic Sea Action Plan (BSAP) targets. Instead, targets agreed upon in the 1980’s were the current nutrient targets. The total cost of agricultural measures under the BSAP is twice the
total costs under the current targets. The reason for this difference is
partly that the BSAP targets are higher. It is also because of the formulation of the BSAP targets which are spatially restricted to specific basins.
This requires implementation of additional measures at higher abatement costs, thereby increasing the total costs.
In the BSAP, Sweden’s targets are in three sea basins; the Baltic Proper, Danish Straits and Kattegat. All N reduction targets are larger under
the BSAP than the current targets. Phosphorus reduction is restricted
only to the Baltic Proper basin under the BSAP, but reduction targets
exists in all basins under the current targets. This also makes the BSAP
target more expensive as more measures are required in the Baltic
Proper region. Less expensive phosphorus reduction measures would
have been implemented in other regions. There is evidence that phos-
Agriculture and the environment in the Nordic countries
53
phorus loadings to other basins also affects the Baltic Proper basin
through nutrient exchange (see e.g. Savchuk, 2003). Hence, costs of
phosphorus reduction could be lowered by a more general phosphorus
policy where reductions are made where costs are lowest. Current nutrient reduction targets are higher in the Danish Straits than under the
BSAP. This difference reflects the large potential to reduce nitrogen
loadings at a low cost in this catchment.
Measures that reduce both nitrogen and phosphorus leaching should
be more attractive in implementation, especially if they are also cost
effective. Cost-effectiveness also varies across regions. Riparian buffer
strips are for example only cost effective in the catchment to the Bothnian Sea region according to Elofsson’s model. Buffer strips are an expensive measure and would need additional benefits, e.g. biodiversity, to
be economically defendable in other catchments. Reduction in livestock
density is a cost effective measure in the Kattegat region while conversion to grassland is cost effective in northern catchments and the Baltic
Proper. These measures simultaneously reduce N and P which gives
them a cost advantage. The model also finds reduction in chemical fertilizer application to be a cost effective measure. In the model this measure account for 4% of nitrogen and 61% of phosphorus reduction. Marginal costs for phosphorus loading reduction in the catchments varied
between EUR 3 and EUR 44 per kg P. Nitrogen loading reductions did
not have a large variation in marginal abatement costs between catchments, approx. EUR 2 per kg N, a very low cost when abatement is only
carried out where costs are lowest.
If the Swedish nutrient reduction policy had used the most cost efficient
measures as estimated in the model, all BSAP targets could have been fulfilled by 65% using the same budget since 1995. By reducing a small proportion of nitrogen abatement in the Baltic Proper region, a much higher
amount of nitrogen abatement is possible in the Kattegat region with the
same resources. If reduction targets under the BSAP are prioritized equally,
i.e. phosphorus loading is reduced only in the Baltic Proper, marginal
abatement cost would be EUR 48 per kg P in this basin. Marginal abatement
costs for nitrogen would also vary, from EUR 30 per kg N in the Baltic Proper to EUR 8 per kg in N the Danish Straits. This means prioritizing the targets equally is economically optimal only if the benefit of reducing phosphorus loadings to the Baltic Proper by 1 kg is 6 times higher than reducing the
nitrogen loading to the Danish Straits by 1 kg.
Prioritizing measures that reduces one nutrient may also be economically viable as indicated by Boesch et al. (2006), who recommend focus
in measures to reduce phosphorus loadings to the Baltic Sea. Measures
54
Agriculture and the environment in the Nordic countries
to reduce nitrogen loadings are relatively expensive and focus on this
nutrient only would not achievements much relative to reduction targets. By focusing in phosphorus only, this target can be met 100%. Nitrogen reduction targets would be met by 55% because many of the
measures that reduce phosphorus leaching also reduce nitrogen loadings. This would increase marginal abatement costs of phosphorus to
EUR 1,390 per kg P, while marginal abatement costs of nitrogen would
be EUR 8 per kg nitrogen in the Danish Straits. For this prioritization to
economically optimal, the benefits of removing 1 kg of P to the Baltic
Proper would be 170 times higher than removing 1 kg of nitrogen to the
Danish Straits.
There is however, some disagreement on how prioritizing one nutrient will effect eutrophication. Boesch et al. (2006) argued that reducing
phosphorus leaching should be the main concern for the open Baltic Sea,
while reductions in nitrogen loadings would still be necessary, particularly sensitive areas of the Swedish east coast and the west coast. The
Swedish EPA meant that the reduction targets for nitrogen were still
important (EPA 2006).
5.2.2
Market-based instruments – tradable emission
permits
In general, market-based policy instruments like environmental taxes
and tradable emission permits will reach reduction targets more efficiently than command-and-control instruments like regulations
(Elofsson 2010). Market-based instruments will ensure that abatement
happens where it has least costs. Although command-and-control instrument may be more accurate in terms of achievements, market-based
instruments are more flexible for the polluter. Moreover, a tax that
makes it more costly to pollute, gives incentives for development of lowcost technologies to reduce emissions. A tax is seldom welcomed by polluters because of the increase in cost, while regulations and tradable
emission permits might meet less resistance.
A tradable nutrient loading scheme for the HELCOM countries has
been suggested by NEFCO (2008). A permit trading scheme can be established both between countries and within economies, as suggested by the
Swedish EPA (2010). Countries or producers can be given permits according to historical emissions and can choose whether to meet targets by
carrying out abatement or to buy or sell permits. Where abatement costs
are low, reductions can be made further than the target and permits can
Agriculture and the environment in the Nordic countries
55
be sold. Where abatement costs are higher than the market price of permit, expensive reduction can be avoided by buying extra permits.
Regional differences may need regionally differentiated policies for
cost effectiveness. In general, measures undertaken closer to the sea has
larger impact on the water quality in the sea. In Sweden, the RDP differentiates between regions and supports only farmers in the South for
catch crops and spring crops. Stringent, uniform regulations may be
cost-effective when abatement costs are low and impacts on water quality high. On the other hand, high cost measures with low impact should
only be used if targets are very stringent and no other abatement options are available.
Ecological systems frequently offer uncertainty of the impacts of
abatement as well as future abatement costs and benefits. When it is
believed that marginal benefits of abatement decrease rapidly, while
marginal abatement costs decrease slowly, a permit trading system may
give the lowest efficiency losses. When marginal abatement costs increase rapidly while marginal benefits of abatement decrease slowly, a
tax may be better. When there is no institution ready to collect a tax and
ensure compliance, a permit trading system may have advantages.
Flexibility of the system must be weighed against transaction costs.
Environmental taxes are commonly associated with lower costs than
regulations. Permit trading schemes can also result in relatively high
transaction costs, especially if this is not taken into consideration when
the policy is designed. Analysis by the Swedish EPA (2010) show that
transaction costs can be kept low in the short term for a permit fee system. The EPA would set up a permit fee system for large sewage treatment plants and forest industry enterprises. In the long term, it would be
necessary to include additional sectors, among them agriculture. Finding
the right cap for agriculture will require considerable research and development to fully understand the consequences of such a system.
There are few experiences from tradable permit schemes that involve
the agricultural sector in Europe. In the United States water quality trading initiatives have increased in number since year 2000. A comprehensive survey from 2004 found more than 70 initiatives (Breetz et al.
2004). Despite efforts to develop trading programs, very little trading is
taking place (King 2005). The conclusion may be that involving agriculture in point-nonpoint trading is hard to get started.
With the trading infrastructure in place, King (2005) suggests that it
is the absence of willing buyers and sellers that prevent trading. Demand
bare exists and does not provide positive prices. Tighter limits or caps in
discharges need to be implemented and enforced for trade to take place.
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Agriculture and the environment in the Nordic countries
In some cases, because there is pressure to do something about water
quality soon, taxes and subsidies are implemented and effectively eliminate all demand for water quality credits. The water quality trading programs also suffer from weak emission discharge restrictions, small and
easily avoided penalties for non-compliance. King suggests that in order
to create demand, non-compliance must cost more than buying permits.
In the US initiatives, agricultural non-point sources are believed to
supply credits/permits. Farmers willingness to supply such credits may
depend on several things; agricultural subsidies, green payments and
expectations of future regulations. Farmers need to comply with baseline regulations in order to sell credits. This means that in order to sell
credits, farmers must implement certain measures that go beyond what
they are required to do. They also have to validate that the additional
measures actually reduce nutrient leaching. Farmers may also be unwilling to reveal abatement costs on their property by selling credits to a
certain price.
5.3 Water protection policies and management in
Norway
5.3.1
Reduced tillage and other measures to reduce
phosphorus losses
Norway’s agri-environmental program consists of many subsidies paid
to farmers who undertake certain practices or implement measures that
reduce nutrient runoff to water. One part of the program is called “Runoff to water” and it was this part in particular that was evaluated in 2012
(Øygarden et al. 2012). The participation, impact and cost effectiveness
was compared in 2006 and 2011 in 9 out of 19 counties in Norway. Since
2005, the agri-environmental program have been regional in nature,
which means that county authorities can adjust measures to suit regional conditions like agricultural production, erosion risk and pollution
level. Counties have the freedom to choose level of payments, adjust
measures and implement new measures.
In 2010, 56.3% of the area used for grain cultivation associated with
minimum tillage. The measure “minimum tillage” comprises several
tilling practises where the reference practise is ploughing in the fall after
harvest. Minimum tillage then refers four practises; harrowing in fall,
direct drilling of winter crops, no tillage in fall but ploughing or harrowing in spring and direct drilling in spring. The general measure was im-
Agriculture and the environment in the Nordic countries
57
plemented on a larger area in 2010 than in 2006 in all but two counties.
Implementation of other measures, riparian buffer zones, grass strips
along streams and areas converted to permanent grassland, also increased from 2006 to 2010.
In Norway, cultivated area is classified according to erosion risk
where category 4 has the highest risk. Measures like minimum tillage
and conversion to grassland have the highest potential to reduce phosphorus losses when implemented on soils with the highest risks of erosion. In one county, minimum tillage in fall or conversion to grassland is
implemented on all areas with erosion category 3 and 4. In the other
counties, the area in erosion category 3–4 that are ploughed in fall varies
from 20 to 57%. From 2006 to 2010, the area of minimum tillage in fall
increased most in erosion category 1 and 2. Payments to farmers are
differentiated according to erosion risk, but level of payment varies between counties. The evaluation found no evidence that differentiated
payments caused increased implementation on areas with higher risk of
erosion. Size of payment is only one of many factors that effects farmers’
decision to implement measures.
A survey of farmers’ attitudes and knowledge revealed that farmers
demand counselling because of local variations when they decide what
measures to implement (Refsgaard et al. 2010). Farmers’ attitudes and
knowledge may be an important factor in adopting minimum tillage
practices as data show that it can be profitable for farmers to reduce
phosphorus application. In catchments where focus has been on minimum tillage practices for several years, farmers’ adoption rate of these
practices is higher. This suggests that farmers’ awareness of this practice
affects the rate of adoption. Increased need of pesticides has been related to minimum tillage practices. That and other believed or real negative
effects may also stop farmers from adopting such practices.
Some water catchments have additional requirements where 60% of
total cultivated area should have no-tillage in fall, direct drilling of winter
crops or permanent grassland. These requirements were fulfilled in 2010
which makes rate of implementation much higher in catchments with
these requirements compared to other catchments in the same county.
These catchments have also implemented more measures like buffer
zones, grass covered strips along streams and flood prone areas.
Estimated effect on erosion from the reduced tillage measures is
290,000 tons, which means a 9% increase in the total volume of reduced
erosion (Øygarden et al. 2011). Net increases have been achieved in two
counties because total area with no tillage in fall has increased. In another county net effect has increased despite reduction in total area with
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minimum tillage because such practices are implemented on a larger
share of acreage with high risk of erosion. Reductions in erosion per unit
of payment also varied across counties. When grass is established on
land with high risk of erosion, the effect of the payment on reduced erosion is increasing. When measures are implemented on land with less
risk of erosion, the effect of the payment can be negative because costs
do not exceed the benefits of reduced erosion.
Cost related to changes in tillage practices was estimated as the
change in farmers’ gross margin as a result of the change. An analysis of
farmers’ gross margins with different tillage practices in two counties in
Norway, found that changing from wither crops to spring crops with
reduced tillage does reduce farmers’ income (Refsgaard et al. 2010).
However, there are significant variations in these costs. In some areas,
the payment covers the costs, but not in all areas. The costs of reducing 1
kg of phosphorus ranged from NOK 2 000–3 000 on land with low erosion risk, to NOK 200–300 on land with great risk of erosion. Payments
for reduced tillage in areas with low risk of erosion are not considered
cost-efficient, i.e. loss in income for farmers exceeds the environmental
benefit of reduced erosion.
According to the evaluation, there is still potential for reduced phosphorus leaching by reducing tillage on land with high risk of erosion. In
particularly sensitive areas, additional measures may be necessary and
the development of “packages” of measures that are suited for local conditions may be a natural extension of the agri-environmental payments.
The implementation of the Water Framework Directive will increase the
need for local effective measures. Areas with high risk of erosion and/or
that are particularly sensitive to eutrophication may need locally adjusted
packages that contain several measures that are supported with payments
to compensate farmers for extra costs or loss of income. At present, there is
little coordination between measures under different programs that can
potentially reduce nutrient losses, e.g. reduced tilling and fertilizer planning.
In some areas, reductions in applied phosphorus and improved utilization
of animal manure may be effective measures to reduce phosphorus surpluses. Reduction in applied fertilizer can also have other positive environmental effects like reduction in nitrous oxide emissions.
With climate change the need for measures to reduce nutrient leaching
may be increasing, especially with increases in rainfall and higher temperatures that increases risk of erosion. The agricultural sector must adapt to
climate changes and at the same time reduce GHG emissions and nutrient
leaching. Agri-environmental program should include all environmental
issues so that conflicting effects of measures does not arise.
Agriculture and the environment in the Nordic countries
59
5.3.2
Water governance
When significant change in water quality is required, the governance of
the catchment may be as important as measures and agri-environmental
payments. The Lake Morsa in south-eastern Norway is an example of
how local authorities can team up with stakeholders and return a lake to
good ecological status, as is the aim of the WDF (Gunnarsdottir and
Refsgaard 2012). The watershed included 9 municipalities in two counties and served as source of drinking water and recreational area for
around 65,000 people. However, heavy loadings of phosphorus lead to
eutrophication and toxic algae blooms. In 1999 the Morsa river basin
organization was established and a process of creating trust and collaboration between the stakeholders were started.
The Morsa river basin based water management on knowledge,
which led to public understanding and consensus. Objectives were based
on analysis carried out by neutral institutes. Every municipality developed a plan for waste water treatment by 2002 and a partly regional and
partly municipal environmental program for the agricultural sector
came the same year and adopted by municipalities in 2003.
The western part of the lake required special measures to reduce
phosphorus loadings. All stakeholders, including farmers were invited to
participate in creating an action plan. The solution was to apply environmental contracts between farmers and the county governor where
payments were given to farmers who reduced phosphorus application
on their fields and implemented other measures. 73% of farmers signed
the contract and total use of phosphorus fertilizer was reduced by 75%.
No-tillage practices were adopted in the autumn, buffer zones were constructed along all streams and 16 wetland sediment traps were constructed. The process changed the farmers’ attitudes and engagement in
improving water quality.
The result was that the lake again became suitable for swimming in
2008. The result did not come without a cost. In total EUR 90 million
were spent on measures, 20 million in the agricultural sector. The area
of minimum autumn tillage was increased from 30 to 80% of the area,
phosphorus fertilization was reduced by 50% and around 70 wetlands
were constructed. However, good governance of the watershed that
created trust, public understanding and collective action were critical
factors for implementing the measures that resulted in significantly improved water quality in the lake and rivers.
60
Agriculture and the environment in the Nordic countries
5.4 Green growth in Denmark
Danish agricultural policy is a combination of several types of policy
instruments. The CAP provides direct subsidies through the single farm
payment system and cross-compliance standards. The implementation
of the Nitrates Directive provides further regulations regarding storage
and spreading of slurry, application of nitrogen to the fields and catch
crops. The Rural Development program and the Article 68 program provide agri-environmental payments for establishment and management
of measures of particular environmental value. The implementation of
the third Action Plan for the Aquatic Environment introduced a tax on
phosphorus in animal feed. The following will present Denmark’s experience with these policy instruments and the evaluation of alternative
policy measures.
5.4.1
Action Plans for the Aquatic Environment
All of Denmark’s agricultural land is classified as nitrate sensitive according EU’s Nitrate Directive. The first Action Plan for the Aquatic Environment (APAE) from 1987 was one of the first initiatives to reduce
nitrogen leakage. The second Action plan, implementing the Nitrates
Directives in 1998, implemented further measures, including establishments of wetlands, limits on nitrogen fertilization, catch crops and afforestation. When it was evaluated in 2003, the already implemented as
well as the measures that were about to be implemented were estimated
to reduce nitrogen discharges by around 48% since 1985 (EPA 2006).
From 1990 to 2003, the consumption of nitrogen in mineral fertilizer
fell from 395 thousand tons to 196 thousand tons (Andersen et al.,
2006). The application of nitrogen through manure was reduced from
244 thousand tons 237 thousand tons in the same period. These reductions in N application contributed to a decrease in total nitrogen surplus
in field balance from 1990 to 2003 by 48% (Jensen et al. 2012.). Part of
this reduction is also a result of changes in land use, i.e. some arable land
is no longer cultivated. A study that observed N concentrations in 86
streams which catchments were mainly arable land, found that for most
streams the average annual N-concentrations was below the target in
the Nitrates Directive in the period 1989–2004 (Kronvang et al., 2008).
Modelled nitrogen leaching within the same 86 catchments was on average reduced by 33%.
The study by Kronvang et al. (2008) concludes that the APAE and
other initiatives have shown that it is possible to reduce N-leaching by a
Agriculture and the environment in the Nordic countries
61
considerable amount while at the same time maintaining crop levels and
increase livestock production. The reason for this has been the strong
focus on nitrogen efficiency, combined with regulatory measures, intense research and an innovative farming community. Measures that
increase nitrogen efficiency include improved utilization of animal manure, fertilizer and crop rotation plans, improved utilization of feed stuff
and limitations on N application.
5.4.2
Analysis of different policy instruments
In preparation of the Action Plan for the Aquatic Environment (APAE)
III, one of the three established working groups analysed a number of
policy measures to reduce nutrient leakage (Arbejdsgruppen for generelle virkemidler, 2003). The analysis included economic instruments
like taxes, quotas and subsidies as well as regulations. It also included
the prospects of nutrient and “green” accounting, guidance and information to farmers and new technological developments. In the previous
action plans, administrative instruments like regulations, in addition to
agri-environmental payments were used. There was concern that this
system was too complex and had large administrative costs as well as
inefficient for the individual farmer. Attention was therefore directed to
the development of economic instruments that allow farmers to optimize production accordingly, for example a tax on phosphorus in feed.
Nine different models of taxing nitrogen were analysed. Nitrogen can
be taxed both when it is applied to the field and as calculated surplus, the
tax can be directed at the individual farmer and at the agricultural sector
as a whole. It is important to tax all sources of nitrogen, or there will be
substitution between nitrogen sources and the surplus will not decrease.
The analysis shows that a tax on the nitrogen surplus on the sector level is
the most cost-efficient model, included administration costs. There is
however, some uncertainty connected to the level of the tax. A theoretical
model may be used to estimate the optimal tax level, but farmers may not
react as predicted by the model and may apply more nitrogen than economically optimal. Changes in other prices may also influence farmer behaviour. To ensure the targeted environmental effect, the tax may be
somewhat higher than the rate suggested by the model.
A tax on phosphorus was also analysed. Surplus phosphorus in the
soil is a problem particularly on land with high livestock density. A separate working group considered many different measures for reducing
phosphorus surplus in the soil, including different tax schemes. A tax on
phosphorus in feeds was considered easy to administrate, followed by a
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Agriculture and the environment in the Nordic countries
tax on phosphorus in mineral fertilizer. A tax on the surplus phosphorus
in the agricultural sector would be more related to the environmental
effect and contribute to better distribution of animal manure. However,
such a scheme is relatively hard to administrate. A tax on phosphorus in
animal feeds was implemented in 2005.
A trading quota scheme is economically attractive because it (theoretically) insures a cost-effective reduction in nutrient leakage. Each
farmer will get a quota of nutrients that can be applied to the land. A
market for trading quotas will then be established and farmers can either buy or sell excess quotas. The scheme will insure that reductions
are done where this has least costs and additional nutrients will be applied only where this is profitable. A quota scheme is preferable to a tax
when the environmental effects of the amount of surplus nutrients are
known, but not the individual costs. When distributing the quotas, it is
possible to take into account the geographical differences and other
factors that influence the leakage of nutrients. Especially vulnerable
areas can receive a smaller quota and get limited trading possibilities.
This will, however, increase the administrative costs of the scheme.
Trading the quotas will also imply higher transaction costs for the farmers than a tax scheme.
The working group evaluated the existing regulations on nitrogen
application and found the regulations on point-source emissions to be
both necessary and efficient. The nitrogen standard that limits how
much nitrogen a farmer can apply to the land can motivate the farmer
for optimal distribution of nitrogen, especially manure. The standards
are formed such that all farmers must reduce their use of nitrogen by the
same%age below the economically optimal. However, as the standard is
based on averages, some farmers will be more restricted by the standard
than others and have a larger economic loss. Neither does the standard
take into account the socioeconomic costs of nitrogen leakage, which are
greater in some areas than others.
Finally, the working group analysed the socioeconomic costs of using
three policy instruments to reduce nitrogen leakage 5–50% more than
the APAE II target. A tax on nitrogen in fertilizer was the most costefficient instrument, especially at a 5 and 10% reduction target. The
analysis showed that there is great cost-efficiency in replacing existing
regulations on nitrogen applications by a tax on nitrogen. In this analysis, all side effects of the instruments were not included. Other instruments may have greater positive effects on ammonia and greenhouse
gas emissions and on the natural environment.
Agriculture and the environment in the Nordic countries
63
5.4.3
The APAE III and its mid-term evaluation
The third action plan for 2004–2015 has a stronger focus on phosphorus
emissions and included further measures to reduce nitrogen discharge.
The aim in the Action plan was to reduce the phosphorus surplus by
25% by 2009. The mid-term evaluation found that phosphorus surplus
was reduced by around 23% in 2007/2008. The fulfillment of the 2009
target was considered within reach. This was mainly due to an increase
in the price of phosphorus in feeds. In order to fulfill the 50% reduction
target by 2015, there have to be a reduction of 1,000 tons of surplus
phosphorus every year. This will depend on livestock production and
the price of mineral fertilizer in the coming years, which is hard to predict (Waagepetersen et al. 2008a).
Table 3: Measures and targets in APAE III
Measure
Target
Evaluation
Tax on mineral phosphorus in animal feed, DKK 4 per 25% reduction by 2009
kg
Midterm target probably
achieved
New knowledge about phosphorus balance
?
3.000 tons reduced
Almost 30.000 hectares of new, crop-free buffer
Expected to reduce N by
zones around streams and lakes established by 2009 approx. 960 tons
Not achieved, low participation in voluntary program
Further establishment of 20.000 hectares of buffer
zones before 2015
Structural development, set-aside land, improved
Expected to reduce N with
feed utilization and EU reform, land change for roads, 11.200 tons by 2015
etc.
Did not happen
Afforestation 20.000 – 25.000 hectares
Afforestation achieved, but N
reduction failed
Expected to reduce N by
approx. 900 tons
Tightening regulations on catch crops, 6–10% of land Expected to reduce N by
2005-2009, 10-14% of land 2010-2015.
approx. 4.600 tons
Tightening in requirement for utilization of nitrogen
in livestock manure
Reduction lower than expected
Expected to reduce N by
Achieved, but counteracted
approx. 2.900 tons (by 2011) by changes in ammonia use
Establishment of further 4.000 hectares of wetlands Expected to reduce N by
approx. 1.100 tons
Achieved
General agro-environmental measures
Expected to reduce N by
approx. 400 tons
Probably not achieved, low
participation
Tightening in requirement for utilization of nitrogen
in mink manure
Expected to reduce N by
approx. 100 tons
Achieved
300 m buffer zones around particularly vulnerable
areas, approx. 180.000 hectares
Adapted from VMP3 and Børgesen et al. (2009)
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Agriculture and the environment in the Nordic countries
The purpose of the tax on mineral phosphorus in feed stuff was to motivate livestock farmers to use feed with a lower concentration of mineral
phosphorus and added phytase. An evaluation of this tax found that the
increasing international price of mineral phosphorus had probably reduced the consumption of P independently of the tax which amount to a
very small part of the market price (Miljøministeriet 2008). Consumption of mineral phosphorus decreased from 13.000 tons to 10.000 tons
between 2003 and 2008, while a reduction of 5.000 tons was expected
(Jacobsen et al. 2009). The evaluation report suggests that the tax can be
increased and that more research and information about the use of
phytase in animal feed is needed.
Another measure to reduce P-leakage was riparian buffer zones
along streams and lakes. From 2005–2009, almost 30.000 ha of buffer
zones were supposed to be established according to the APAE III. This
land use change is voluntary and supported by a payment as compensation. However, only 700 ha of new buffer zones were established and a
mapping of the area around streams and lakes found a decrease in riparian buffer zones by 4.000 ha (Bro 2008). Land kept fallow along streams
and lakes were counted as buffer zones. But as the EU set-aside scheme
was repealed in 2008, much of this land was cultivated which further
reduce the total area of buffer zones (Waagepetersen et al. 2008a). More
set-aside land will probably be cultivated again, further reducing the
area of uncultivated buffer zones.
The mid-term evaluation of the APAE also included an analysis of the
costs and effectiveness of measures implemented the planning period
from 2005 to 2009 (Jacobsen et al. 2009). The analysis was based on the
environmental effects found in the main mid-term evaluation (Waagepetersen et al. 2008a). The analysis showed that some of the measures did
not have the expected effect on reduction of N-leakage. Only the change
in the regulation in use of manure from mink farms led to a larger reduction than expected.
The creation of wetlands was more cost effective under the second
APAE when only a one-time investment support was paid and the requirements for N-leakage reduction were higher. The effect from this
measure was also smaller because a smaller area of wetlands than expected was established. Catch crops is a very cost efficient measure, but
the APAE allows farmers, under certain circumstances, to replace it with
winter-green fields. Winter crops are, however, not as effective in reducing N-leakage as catch crops. Area with afforestation is larger than expected, but did not have the expected effect on total N-leakage. This is
Agriculture and the environment in the Nordic countries
65
because implemented measures such as afforestation allows for increased nitrogen application on other areas.
Total cost of the APAE III measures was as expected but the reduction of phosphorus surplus had higher cost than expected. Total costs of
measures to reduce N-leakage was lower than expected as some
measures had a lower cost than budgeted and other measures had not
been implemented (Jacobsen et al. 2009). The cost per kg nitrogen reduction was twice of the expected, i.e. the cost efficiency was much lower than expected. One reason for this is that afforestation had much lower environmental effect while the cost per ha was slightly higher than
expected.
5.4.4
EU’s set-aside land scheme
One of the measures following the CAP “Health check” was the abolition
of the set-aside land scheme. Previously, farmers were obliged to keep
10% of their land uncultivated. In 2007, this amounted to 148.000 ha in
Denmark (Waagepetersen et al. 2008b). In 2008, the set-aside area was
reduced by around 83.000 ha and the long-term expected increase in
cultivated area was from 80.000–120.000 ha (ibid.). This increase in
cultivated area would lead to a long-term increase in N-leakage by 300–
500 tons per year, increase in ammonia emissions by 1.300–1.900 tons
per year and an increase in CO2 emissions by 110.00–170.000 tons per
year. Short-term consequences, i.e. the two first years, were much higher
than long-term effects since the fixed nitrogen quota later lead to a decreased amount of nitrogen per ha applied. Transforming the set-aside
land into cultivated land will also increase the use of pesticides.
To counteract the environmental consequences of the cultivation of
set-aside land, the Danish government made an action plan early in 2008
(Miljøministeriet 2008). According to APAE III the requirements for
catch crops were supposed to increase with 4% from 6 or 10% (according livestock density) in 2009. This was implemented in 2008. Farmers
who volunteer to keep buffer zones uncultivated and establish new buffer zones were allowed to increase their N-quota on the other land. An
information campaign was also launch to inform farmers about the environmental value of set-aside land, support measures and regulations.
Despite these efforts, around 80% or 115.000 ha of the set-aside land
were cultivated in 2009 (Normander et al. 2009).
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5.4.5
The Green Growth Agreement
The Danish government launched the Green Growth Agreement (GGA) in
2009, a comprehensive plan for Danish agriculture and environment.
The agreement includes the APAE objectives, Denmark’ obligations
through the Water Framework and Natura 2000 Directives, a follow-up
on the Pesticide Plan, and implements the Rural Development Program
for 2010–2013. It also includes a broad strategy on how to meet environmental objectives and at the same time allow the agricultural sector
to grow.
By green growth the government means a development in the agricultural sector that is not a burden on the environment (Regeringen
2009b). Such a development requires changes and cause transition
costs. The government estimated that the cost for the agricultural sector
as a consequence of new regulations was on average DKK 621 million
every year from 2010 to 2015. The government planned to spend DKK
513 million each year on compensations and payments for voluntary
measures. Compensations are only paid for areas taken out of production and which leads to lower production and thereby lower income
possibilities for farmers. The government will also increase spending on
the agricultural sector, in particular on green technologies and organic
production.
The GGA was revised and a second agreement, version 2.0, was made
in 2010. In this version, the agricultural sectors economic sustainability
and its significance for rural economies was emphasized even more than
in the first version (Regeringen 2010). The new agreement has the same
targets for nitrogen reduction, but states that more analysis is needed to
map the consequences of the Danish River Basin Management Plans
(RBMP), the implementation of the Water Framework Directive, for the
agricultural sector. The new version also included additional measures,
among them a property tax relief for agricultural land. Farmers, however, were not content.
The development of the 23 RBMPs started in 2007 and they were
sent for public hearing from October 2010. There was early concern
about how the implementation of the RBMPs would affect the agricultural sector – unless the measures were cost-effective and with positive
side-effects (Ministeriet for Fødevarer, Landbrug og Fiskeri og Miljøministeriet 2008). An analysis of the costs of the implementation of suggested measures, shows that the agricultural sector must bear two thirds of
the total costs at the suggest method of funding (Iversen et al. 2009). For
example, it was suggested that the farmers take the full cost of reducing
Agriculture and the environment in the Nordic countries
67
the nitrogen-norm, increase area with catch crops and stop tilling in the
fall (ibid.).
In the autumn 2012, the Danish Agriculture and Food Council took
the Ministry of Environment to court because they believe implementation of the plans did not happen correctly. In December 2012, the RBMPs
were withdrawn for a new hearing. The new government, which is not
bound by the GGA, established an independent “commission for the environment and agriculture” which objective is to suggest solutions that
will solve the economic and environmental challenges faced by Danish
agriculture (www.naturoglandbrug.dk). The commission published a
comprehensive status report in autumn 2012 that will form the basis for
suggested developments for the sector.
5.5 Soil conservation in Iceland
This section presents the soil conservation policies in Iceland which
have successfully led to the restoration of degraded areas. Unlike many
European countries, Iceland has large areas of desert-like, barren areas
where wind and rain move the soils. Overgrazing by sheep has contributed to this in a way that resembles the “tragedy of the commons”. This
section draws heavily on a journal article by Arnalds and Barkarson
from 2003 and a contribution by Arnalds to a conference in 2006.
Sheep meat production is largely based on the resources in the
common high lands where the sheep graze in the summer (Jóhannesson 2010). The right to use these lands for grazing is based on old
traditions. Farmers also have grazing areas on their own lands and
usually house their sheep from November to May. Use of pesticides
and fertilizers are very limited in Iceland and nitrogen and phosphorus pollution in rivers and lakes is an unknown problem as measured
run-off from fields is within natural range. Soil erosion and desertification are severe environmental problems with adjoining policies
which will be discussed here.
Since human settlement 1100 years ago, a large share of Iceland’s
terrestrial ecosystems has been devastated (Arnalds and Barkarson
2003). The ecosystems developed without large grazing animals and
reconstructing suggests that most of the island was fully vegetated when
man came with livestock and started wood harvesting. Sheep grazing
altered the ecosystems and made them more vulnerable and less productive. Cold spells, ash-fall from volcanic activity, sand encroachments
from glacier margins also contribute to soil degradation.
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Agriculture and the environment in the Nordic countries
In 1991, a national survey was initiated to map Icelandic soil erosion.
The most common soil type, Andosols, consist of volcanic materials that
are very sensitive to water and wind erosion when not protected by
vegetation. The surveys mapped the erosion problems in the Icelandic
highlands and revealed that serious soil erosion was present on about
40% of Iceland (Arnalds 2006). This spurred the process of reviewing
existing agricultural policy and develops new solutions for combatting
the soil degradation (Arnalds and Barkarson 2003) and put an end to the
wide disagreement between land users and conservation interests on
the extent and seriousness of soil erosion (Arnalds 2006).
The interior of Iceland consist of highlands which are mostly common grazing areas for sheep. The first centuries of settlement reflected a
good understanding of the limits of the grazing lands, with strong property rights that required owners to keep the livestock on own land (Arnalds 2006). However, this did not last as increased grazing and demand
for wood and agricultural land, in combination with volcanic eruptions
and climatic fluctuations started a process of dramatic degeneration
with soil erosion and desertification. Originally, at least 25% was covered with woodland. In the 2000s, only 1% of Iceland’s area is covered
by woods.
Efforts to mitigate soil erosion and desertification started early in 1907
with the establishment of the Soil Conservation Service (SCS). Measures
were undertaken to stop rapidly advancing soil erosion and were locally
successful. However, on a national scale the degradation continued as the
roots of the problems were not addressed (Arnalds 2006).
The local communities have grazing rights in the commons. Grazing
management, including length of grazing period and animal density is
decided by the district councils. Practices vary between districts, but
incentives to protect sensitive areas from grazing are commonly not
present. The number of sheep in Iceland has varied greatly, with at peak
around 1977 with 896.000 sheep. In the 2000s, the number of sheep
was almost halved to 460.000 sheep. The large number of sheep was
supported by export subsidies, which is now provided as a direct payment per sheep head. The government has spent considerable resources
to reduce the number of sheep and there are now fewer sheep farms
although they have a larger number of animals.
Agriculture and the environment in the Nordic countries
69
A new subsidy scheme was implemented in 2000 where farmers
have a production quota entitled to subsidy. Additional contracts were
made between the government and farmers on a voluntary basis, where
farmers had to meet certain criteria of “quality management” to receive
additional support. Sustainable land use was part of the criteria which,
according to Arnalds and Barkarson (2003) will include the withdrawal
of some commons for grazing as they are unsuitable for this. A Farm
Land database which mapped all farmland in Iceland was developed in
the early 2000s. This database is used to define the sustainable land use
criteria, which will set a limit for how much half-vegetated and denuded
land a farm can have and restrain the use of commons where soil erosion is active or characterized by deserts (ibid.). Farmers not meeting
these criteria must undertake measures to improve their land, such as
re-vegetation, improve grazing management or even restrict grazing and
land use change (Arnalds 2006).
The important development in this policy is that subsidies for sheep
farming are linked with sustainable land use. This development was
partly led by farmers who needed to improve the image and quality of
their products. The link also gives incentives to concentrate future sheep
farming in areas with appropriate resources. Arnalds and Barkarson
(2003) believe that financial incentives is not enough to stop unsustainable grazing in commons and suggest that land not suitable for grazing
needs protection by law.
The Soil Conservation Service (SCS) of Iceland has played an important role in re-vegetating much of Iceland’s area. SCS has administered two successful land management programs, “Farmers heal the
land” and a Land improvement incentives program. In the first program,
a cooperative of farmers receive 85% of the costs of fertilizer and seeds
necessary for re-vegetating devastated lands. Farmers use their own
machines and labour, which creates a sense of ownership and enhances
local knowledge. The program is based on trust rather than bureaucracy
(Arnalds 2006). The second program is directed to larger projects where
the recipients are land care groups and district authorities.
One of the government’s five principal objectives related to climate
change is directly linked to soil degradation:
The government will attempt to increase carbon sequestration from
the atmosphere through afforestation, revegetation, wetland reclamation, and changed land use (Ministry for the Environment 2007).
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GHG emissions from Icelandic agriculture have been declining slightly from 1990 to 2004 and were 13.4% of total emissions in 2004. Further reductions from conventional agriculture are considered difficult
without also reducing production. However, significant potential in carbon sequestration in soil and vegetation is present (Ministry for the Environment 2007).
5.6 Taxes and other policies for reducing greenhouse
gas emissions from agriculture
5.6.1
The Swedish nitrogen tax
This chapter draws heavily on an article by Kristina Mohlin (2012)
which evaluates the impact of Swedish fertilizer tax on nitrous oxide
(N2O) from agriculture. Another article by Wirsenius, Hedenus and
Mohlin (2010) which proposes a tax on animal feed to reduce greenhouse gas emissions from European countries is also presented. Other
studies of the impact of taxes on nutrient leakage and greenhouse gas
emissions from the Nordic countries are also presented.
Sweden introduced a tax on synthetic fertilizer in the 1984 in order
to reduce nitrogen and phosphorus leakage to water. From 1994 the
charge was approximately SEK 1.80 per kg N. In 2010, the Swedish government passed a bill that abolished the tax on fertilizer and at the same
time reduced the deductions on the CO2 tax on diesel for farmers. The
stated intention of abolishing the tax was to enhance the competitiveness of Swedish farmers. However, it can also be seen as a compensation
for raising the CO2 tax on diesel. If the tax on nitrogen was reducing N2O
emissions, the result may be an increase in greenhouse gas emission
because N2O is a very much more potent GHG than CO2.
Mohlin’s (2012) estimate the price elasticities of N by using panel data from the counties of Sweden and compare these with an estimate of
the price elasticity of aggregate N sales in Sweden. Earlier studies from
Sweden have found the own-price elasticity of nitrogen to be between 0.1 and -0.5, which means that 1% increase in the price of fertilizer will
lead to between 0.1 and 0.5% decrease in the quantity purchased. Demand for fertilizer also depends on agri-ecological conditions and in
other countries price elasticity have been found to be as high as -0.8
(Greece).
Agriculture and the environment in the Nordic countries
71
In a UN IPCC report, N2O emissions from agricultural soils are estimated as a linear function of applied nitrogen (IPCC 2006). However,
this relationship may not be linear, as suggested by a study by Van Groeningen et al. (2010). They wanted to find out how N2O emissions from
agricultural soils can be minimized and still provide acceptable yields. In
general, N2O emissions are expressed as a function of N application such
that smaller N application always leads to smaller N2O emissions. A meta-analysis of yield-scaled N2O emissions by non-leguminous annual
crops revealed that the best strategy to reduce N2O emissions is to use
median rates of N inputs, not minimizing it.
Mohlin (2012) uses the emission function estimated by Van Groeningen et al. (2010) where nitrogen surplus is an exponential function of
nitrogen applied. The own-price elasticity of the average N application
rate was estimated to be -0.4 for cereals, -0.5 for ley (grass) and -0.3 for
other crops. The estimated price elasticities seemed to relate well to the
advice farmers get from the Swedish Board of Agriculture on economically optimal application rates. These results were used to simulate N2O
emissions from agricultural soils from the cultivation years from
1989/99 to 2008/9. The results suggest that over the decade the annual
average direct level of N2O emissions from Swedish agricultural soils
would have been 240 tons higher without the tax. In CO2 equivalents,
this translates into 74.000 tons of CO2. In comparison, a crude estimation shows that the increase in the CO2 tax on diesel results in a reduction in CO2 emissions by 40.000 tons in 2007 (as an example year). This
calculation suggests that the impact of the policy change is an increase in
GHG emissions from agriculture.
Mohlin’s study raises another interesting aspect of GHG emission calculations. If the exponential function of N2O emissions is a better representation of the true relationship between nitrogen application and soil
N2O emissions, this will have implications for the calculation of the national GHG inventory. If removal of the nitrogen tax leads to a significant
increase in N2O emissions, the emission will be underestimated in the
official GHG figures because of the linear function used in calculation of
the national GHG inventory. More research is needed to clarify the relationship between nitrogen application and N2O emissions from agricultural soils in order to improve GHG accounting and develop efficient
policy instruments to reduce such emissions.
Bonesmo et al. (2012) take a holistic view of the farm to analyse the
relationship between GHG intensities and profits. A better understanding of this relationship can help policy makers reach emission reduction
targets. They analysed 95 crop production farms and estimated the farm
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scale GHG emissions and gross margins. Estimations of N2O emissions
were based on the linear function developed by IPCC (2006) and detailed data on soil and weather. The model used farm level agronomic
and economic data for the year 2008. The results showed that N2O constituted the largest part of total GHG emissions, accounting for 45–49%.
The second largest contributor was off farm manufacturing of inputs,
except for oilseed where it was change in soil carbon. Large variations in
estimated GHG emission intensity, both per ha and per DM (output) can
be explained by differences in soil carbon change, but there were also
variations in N2O emissions. On the whole, there was also a decrease in
GHG emissions per ha and DM with increasing gross margins. High fertilizer efficiency can explain this. In other words, farmers may have economic incentives to reduce emission intensities and optimization of fertilizer use may be an effective measure to reduce emissions. Another
suggested measure, reduced tillage, did not have significant impact on
GHG emissions.
5.6.2
Tax on animal food products
The study by Wirsenius et al. (2010) assesses the potential of GHG
weighted consumption taxes on animal food products in the EU27 countries. The impact of such taxation on land change and food production
and additional mitigation potential from freeing land for growing crops
for bioenergy is also estimated. The latter notion makes this an interesting study for green growth in agriculture. One disadvantage of such a tax
scheme, like other consumption taxes, is the impact it has on the distribution of the household disposable income. There are solutions to this
problem, e.g. changes in income tax, which is not discussed further by
Wirsenius et al.
The inclusion of non-CO2 greenhouse gases in climate policy instruments would affect agricultural sector as this sector is responsible for
about 60% of these emissions (IPCC 2007). There seems to be different
opinions of the costs of reducing GHG emission in agriculture, but more
agreement on the barriers to implementation of climate policy for this
sector because of high transaction and monitoring costs. Wirsenius et al.
(2010) argue that these circumstances may favour output taxes, i.e. a
consumption tax, rather than a tax on emissions of methane and nitrous
oxide. Animal food products such as meat have high emission intensities,
high substitutability in consumption and large divergences in emissions
per food unit. A tax on meat that is differentiated by GHG emissions per
Agriculture and the environment in the Nordic countries
73
food unit could be a cost-effective policy for reducing agricultural GHG
emissions in EU.
A tax on output rather than a tax on emission is preferable if (1) monitoring costs are high, (2) it is hard to reduce emission without reducing
output level, and (3) the output is easily substitutable (Schmutzler and
Goulder 1997). Earlier studies show that GHG emissions from agriculture have decreased over time and will continue to do so due to increases in productivity and technological and agronomic mitigation measures.
In developed countries, the scope for reducing GHG emissions and the
cost-effectiveness of mitigation measures are relatively low. There are
some technological and agronomic measures like altered animal feed,
improved manure management and fertilizer efficiency, which have the
potential to reduce GHG emissions by 10–20% in the EU (Wirsenius and
Hedenus 2010). There is, however, substantial potential in reducing GHG
emission by substituting some animal foods with others. If cattle beef is
substituted by pork and poultry meet, GHG emissions are reduced by
80%. The potential mitigation is even higher if protein requirement in
human diet is fulfilled with beans instead of beef. An emission differentiated tax should be levied at the consumption level in order to avoid
emission leakage and creating a cost disadvantage for EU farmers.
Wirsenius et al. (2010) use a model of the EU27 food and agriculture
system to estimate land use change and GHG emissions related to a
change in food consumption. Where land would be converted from permanent pasture to cropland because of production changes, CO2 emissions were taken into consideration. The tax would need to be weighted
according to average emission intensity of the actual food category.
Emission intensity included CO2 from fuels used on farms. Food consumption changes were seen in the long term.
The estimations revealed that if the tax rate was set to EUR 60 per
ton CO2 equivalent, net reductions would be 32 million tons CO2 equivalents or 7% of current GHG emissions from agriculture in EU. The main
reductions in emissions come from reduced consumption of ruminant
meat. The tax per kg meat would EUR 1.4 per kg if ruminant meat, an
approximate price increase of 16%. Consumption of pig and poultry
increased due to substitution effects, and the increase in emission from
this production result in a net reduction that is around 10% smaller than
if this increase had not happened. Around 11 million ha of permanent
pastures and 4 million of cropland were taken out of production, which
constitutes 16 and 3% of current agricultural land, respectively.
If the land taken out of production is used for bioenergy that replaces
fossil fuels, additional mitigation can be achieved. There are several
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ways in which this can happen, different crops that can be used for biofuels, which affect the GHG emissions. For example, growing wheat and
rapeseed for bioethanol and -diesel, result in a relatively small net GHG
emission reduction. Net mitigation is much larger if former pasture land
is used to grow lignocellulosic crops. In the most effective scenario,
when lignocellulosic crops replace coal in power generation, net GHG
emission reductions exceed that of changes in food consumption.
The analysis has several shortcomings and factors that are not included are e.g. impacts on imports of animal food. It does, however,
clearly show that ruminant livestock production account for the greatest
part of GHG emissions in EU and replacing this with other meats and
foodstuffs will reduce emissions. A tax on ruminant products only would
still lead to 80% of mitigation from the tax on all animal foods and reduce administration costs. When freed agricultural land is used for bioenergy, potential mitigation is even larger.
In Wilsenius et al.’s discussion, they point out that a GHG weighted
tax on animal food should not be the only instrument to mitigate emissions from agriculture. An output tax does not provide the incentives to
exploit and develop technical and agronomic reduction potentials. Regulations and standards can complement the output tax to ensure that best
practices are used. Other aspects of the impact of the tax are also worth
discussing. Permanent pastures can be of significant value to biodiversity and landscape conservation. Such pastures may be preserved through
direct subsidies. The loss of soil carbon and carbon sinks that exists in
permanent pastures may be more severe. By replacing the permanent
pastures with bioenergy crops would still result in net GHG mitigation
most places.
5.7 The potential of biofuels for mitigating climate
change and water quality
This chapter first briefly explains the processes of biogas production.
Then it presents a few, selected evaluations and analysis of the prospects of using agricultural products and wastes for the production of
biogas, especially in Sweden and Denmark. The focus is on aspects of
policies that affects agricultural production and in particular, nutrient
run-off and GHG emissions from agriculture.
Agriculture and the environment in the Nordic countries
75
5.7.1
Biogas systems
Biogas can be produced from a wide range of raw materials, from dedicated energy crops to organic wastes. The actual production is a natural
process where microorganisms degrade organic materials under conditions without oxygen, called anaerobic digestion (International Energy
Agency 2005). The product called biogas consists of 50–80% methane
(CH4), 20–50% carbon dioxide (CO2) and some traces of other gases, e.g.
0–0.4% hydrogen sulphide (H2S) (Lantz et al. 2007). Biogas can be used
for different energy services, e.g. heat and power, and with upgrading it
can be used as fuel for vehicles. Common feedstock for biogas production is sewage sludge, animal manure and other agricultural wastes,
energy crops like corn, industrial wastes and municipal solid wastes.
Biogas is a CO2-neutral source of energy and leads to reduced GHG
emissions when it replaces fossil fuels.
In addition to the biogas, the anaerobic digestion transforms the
feedstock into digestate that can be used as fertilizer. The digestion process increases the plant availability of nitrogen, thus increases the fertilizer efficiency of the feedstock (Börjesson and Berglund 2007). The
production plants come in many sizes, from the large-scale centralized
plant with digester volumes of 4.650–6.000 m3 common in Denmark, to
farm-scale with simple technology more common in China (International
Energy Agency 2005). The target for the EU is that renewable sources
comprise 20% of energy by 2020, in which biogas will be an important
contributor.
5.7.2
Environmental benefits of biogas
This section draws on an article by Börjesson and Berglund published in
journal of Biomass and Bioenergy (2007) which is based on Swedish
conditions and use a life-cycle perspective when analysing the environmental impact of biogas systems. Biogas systems are different and environmental impacts differ according to feedstock, digestion technology
and field application of digestates. Total environmental impact also depends on what energy system the biogas replaces, concerning waste
handling and farming practices. Börjesson and Berglund (2007) analysed six different end-use technologies. Six raw materials are analysed,
of which 4 are agricultural; ley crops, straw, tops and leaves of sugar
beets and manure from pigs. Only the environmental impact of using
feedstock from agriculture is presented here. The biogas systems are
compared to reference energy systems that are realistic Swedish alternatives to energy from biogas.
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Agriculture and the environment in the Nordic countries
Danish calculations show that by replacing conventional storage systems for manure with anaerobic digestion, emissions of methane can be
reduced by on average 1.6 kg per ton of pig slurry (this may be overestimated). By reducing on-farm storage time, reduction potential is larger.
Reductions in ammonia and nitrous oxide depends on how the storage
system on the farm. Spreading of digestate on the field may increase
ammonia emissions slightly due to the higher content of ammonium
which can potentially be converted to ammonia. Nitrous oxide emissions
are reduced as the digestate contains less energy for the oxide-forming
bacteria. Estimated reduction of nitrous oxide emission is between 25
and 40 g of N2O per ton of manure. By harvesting the tops and leaves of
sugar beets, nitrogen loss can be reduced by 30 kg N per ha per year
where one third is potential ammonia emission. Field tests in southern
Sweden showed that the recovery of tops and leaves of sugar beets reduce nitrogen leaching by 25–30%.
The introduction of a biogas system may lead to land use change
which may affect nutrient leaching. When ley crops replace fallow land,
nitrogen leaching is increased by 5 kg N per ha per year. If ley crops replace willow, leaching is reduced the same amount. By applying digestate instead of conventional liquid manure, N leaching is reduced with
7.5 kg per ha per year. Field trials in southern Sweden found that leaching can be reduced by 20% by replacing undigested manure with digestate. In Denmark, field trials are ambiguous and Hamlin et al. question
the effect on reduced eutrophication potential from using digestate on
the fields because it is small and uncertain.
Normally, the nitrogen available to plants corresponds to 70% of total nitrogen content while digestate contain about 85% available nitrogen. Differences in the plant available nutrients would have to be balanced by production of commercial fertilizers with extra energy use.
Table 4. Environmental impacts from replacing fossil fuel with biogas systems for the production
of heat
Environmental impact when biogas replace fossil for
heating
Extent
System with largest impact
Reduction in GHG emissions
75–90 % per MJ heat Manure
Reduction in acidity potential (SO2 emissions) and eutrophication potential (PO4 leaching)
Up to 95 % per MJ
heat
Manure and tops and leaves of
sugar beets
Decrease in particle emissions
30–70 %
Manure
When biogas is used to generate heat and power and replace fossil fuels
in transportation vehicles, the impacts are similar but smaller in extent.
The environmental impacts of using ley crops for biogas is sometimes
Agriculture and the environment in the Nordic countries
77
negative when compared to cultivation of willow for methanol production. This is because the ley production has a lower energy output per ha
and more gas is needed to obtain the same amount of energy which
leads to increased GHG emissions.
The analysis has several potential uncertainties. The biogas, mainly
methane, is in itself a potent GHG. If leakage from the production plant is
not controlled, the emissions of methane can increase contribution to
climate change. In Börjesson and Berglund’s (2007) analysis losses of
methane is estimated to be 1% when the biogas is used for heating and
2% when used as transportation fuel. Losses of methane during upgrading and pressurizing have in some cases been reported to be as much as
13% of gas treated at the upgrading plant. Losses of methane must be
from 10–32% depending on the technology before the biogas system
exceeds the equivalent GHG emissions from the reference system.
Assumptions about eutrophication potential, mainly the leaching of
nitrate to water and ammonia to air due to changed cropping practices
and handling of wastes, may also be too general. Leaching may vary
greatly and estimations cannot take local variations into account partly
because lack of long-term field trials and limited data, which makes the
estimated results somewhat uncertain.
Börjesson and Berglund (2007) conclude that biogas systems have
the potential to mitigate several environmental problems. Direct effects
are reduction in GHG emissions other air pollutants when biogas replace
fossil fuels. Indirect effects due to changes in agricultural practices may
be even more important, as leaching of nitrate to water and ammonia to
air is significantly reduced when manure, crop residues and organic
wastes are used for biogas production. However, the environmental
impacts may vary greatly according to the feedstock used and energy
service provided. Also, biogas systems are not always a positive replacement to for example willow cultivation for methanol production,
where the biogas system may increase GHG emissions. To maximize the
positive effects, the biogas systems must be designed and located wisely.
A life cycle analysis supported by the Danish Environmental Protection Agency found that environmental benefit of biogas production from
animal slurry highly depends on the technology used in the process
(Hamelin et al. 2010). A low efficiency separation technology may offset
a significant part of environmental benefits. The combustion of biogas
also produces NOx and N2O, which counteract some of the benefits of
biogas production.
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5.7.3
Danish biogas production
Denmark has for many years been aware of the potential contribution
from centralized biogas plants to mitigating problems in the energy sector, agriculture and environment and the development of biogas technology has been encouraged by the government. In 2008 total biogas
production was 3.93 PJ where biogas from slurry constitutes 1.06 PJ.
The greatest unused potential is clearly from animal manure, potential
energy was 29 PJ. A much greater part of the potential from industrial
wastes and waste water is already exploited. Estimated energy potential
from biogas is 60 PJ or 10% of Denmark’s gross (future) energy consumption. This estimate assumes that half of the energy can come from
energy crops which will be cultivated on around 6% of agricultural area
(Energistyrelsen 2010).
The Green Growth agreement aims to use 50% of all animal manure
for biogas production by 2020 (Regeringen 2009). This requires continued investments in new biogas plants that need to be economically sustainable and reduction in the dependence on organic industrial wastes
(Energistyrelsen 2010). The use of half of all animal manure requires
investments in biogas plants that produce 12 PJ per year. By supplementing the slurry with energy crops that contribute to half of the energy, 24 PJ of energy per year will be produced.
In relation to the implementation of the Green Growth agreement,
additional and updated analysis environmental impact of the utilization
of more manure for biogas was carried out (DFJ and DMU 2011). By
utilizing 50% of animal manure for biogas, a net effect on GHG emissions
is a reduction of 349.000 tons CO2 equivalents per year. The impact on
nitrogen leaching will not change unless the regulations on utilization
are changed. If application is adapted to the increased amount of ammonium, the burned manure can replace commercial fertilizer and reduce
leaching in the long-term by 2.1 to 4.1 kg N per ha. No effect on phosphorus leaching is expected from this measure.
Energy crops will play an important role extending the biogas production from manure (Energistyrelsen 2010). In the Green Growth
agreement, several measures are related to the cultivation of perennial
energy crops.
 A grant scheme for planting perennial energy crops where it leads to
reduction in leaching of nitrogen
 Expenses for planting energy crops are tax deductible
Agriculture and the environment in the Nordic countries
79
 Energy crops can under certain conditions replace mandatory catch
crops (this measures is not meant to have an effect on total leaching,
but gives the farmers flexibility in the choice of measures (DFJ and
DMU 2011))
When an energy crop like Miscanthus (Danish: Elefantgræs) replaces an
annual crop like spring wheat, annual emission of nitrous oxide is reduced by 0.43 CO2 equivalents per ha. Perennial grasses can also increase the carbon content in the soil equivalent to 1.57 tons CO2 per ha
per year. Catch crops also absorb carbon so that replacing spring wheat
and catch crops with an energy crop will result in an increase in carbon
sequestration by 0.82 tons CO2 equivalents per ha per year. Some studies report higher numbers for carbon absorption by energy crops.
Perennial energy crops can also reduce the phosphorus surplus in the
soil as long as applied amount of P is less than the amount that the crop
absorbs. By applying less P than the plants take up, loss of P to water can
be reduced by 0.003–0.1 kg P per ha in several years. Overload of phosphorus may lead to increased leaching and as there are no P-norms for
energy crops, there are some uncertainties connected to how perennial
crops will affect P surplus and leaching. Perennial energy crops also lead
to reduced use of pesticides and may have local positive impacts on biodiversity (Börjesson and Tufvesson 2011).
5.7.4
Danish energy crops for combustion plants
In 2010, support under the GGa was given to the establishment of 1409
ha of energy crops, mainly willow (DFJ and DMU 2011). Willow is not
suitable for biogas plants but is used in combustion plants. Area with
energy crops increased from around 1300 ha in 2005 to 4719. Future
establishment depends on many factors, among them farmers’ expectations of grain prices, energy crop prices and agricultural policy. If rate of
establishment continue as before, 8.000 ha will be planted from 2010 to
2015. A great part of this establishment will probably be done as a replacement for catch crops and some will replace perennial grassland.
The target in the Green Growth strategy was to establish 30.000 ha of
energy crops.
The first 1–2 years after planting a perennial energy crop include
some risk of N leaching at the same level as other crops (Schou et al.
2007), depending on the crop it replaces. In the long-term, N leaching is
reduced by 30–45 kg N per year, on sandy soils 10 kg more. Total reduction in N leaching from the root zone depends on how much replaces
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Agriculture and the environment in the Nordic countries
catch crops and grassland, and whether it is established on sandy or
clayey soils, but ranges from 563 tons and 1440 tons N per year.
5.8 Summary of Nordic studies on policy measures
for reduced phosphorus and nitrogen loadings in
water
Table 5 summarizes the main findings from the studies presented in
this chapter.
Table 5. Main findings from Nordic studies on agri-environmental policy measures
Study and country
Policy instrument (or Lessons learned
change)
Laukkanen and Nauges
(2012), Finland
Agri-environmental
program
The Finnish agri-environmental program (FAEP) had high
participation rates which implies that Finnish farmers can
change behaviour when compensated. Participation is not
random, but influenced by several factors such as age, labour
constraints and awareness. The FAEP resulted in a 11 % and 13
% reduction in N and P loading, mainly because of reductions in
fertilizer use. Increase in area under cultivation was another
effect which reduced the total effect on water quality.
Lankoski and Ollikainen
(2011), Finland
Agri-environmental
program Fertilizer
constraint
N loading in Finland has increased because of changes in land
use and a shift to more fertilizer intense production from 1995
to 2007. Without the FAEP N loadings would have been larger,
but P loadings would have been smaller.
Lehtonen et al. (2005),
Finland
Liberalisation of
agricultural policy
Significant reduction in Finnish production
No reduction in nutrients loading because of intensity of
remaining production
Lehtonen et al. (2007b),
Finland
Lehtonen et al (2007a),
Finland
Decoupling of support Decrease in nutrient loadings
Full decoupling of
national support,
partial decoupling,
agri-environmental
payments, tax on N
fertiliser
Full decoupling most efficient in reducing nutrient loadings, but
no policy scenario stand out in terms of impact.
Fölster et al. 2012,
Sweden
Agri-environmental
payments
Information
Some reduction in nutrient loadings in water
Elofsson (2010), Sweden Emission permit
and Baltic Sea
trading
Øygarden et al. 2012,
Norway
How targets are formulated influences the costs of achieving
them. Targets for specific catchments are more costly than for
the Baltic Sea as a whole. If possible, reductions should happen
where costs are lowest. This can be met by trading emission
permits.
Agri-environmental
Large regional differences in implementation could not be
payments for reduced- explained by the size of the payment.
and no-tillage practises
Agriculture and the environment in the Nordic countries
81
Study and country
Policy instrument (or Lessons learned
change)
Refsgaard et al. 2010,
Norway
Farmers’ attitudes and Farmers’ attitudes may be imperative for adoption of no-tillage
knowledge
practises, not profit.
Gunnarsdottir and
Refsgaard 2012,
Watershed governance Local involvement, agreement on targets and bottom-up
governance important for the achievement of water quality
goals.
Kronvang et al. (2008),
Denmark
Regulatory measures Nitrogen loadings were successfully reduced in Denmark from
on fertiliser use, focus 1990 to 2003.
on fertiliser efficiency
Arbejdsgruppen for
generelle virkemidler
2003, Denmark
Tax on nitrogen,
phosphorus, quota
trading scheme,
nitrogen application
regulations
A tax on nitrogen was most cost-effective, but is hard to
impose on farmers although it gives them more freedom than
regulations.
Waagepetersen et al.
2008b, Denmark (EI)
EUs end of set-aside
land scheme
The end of EUs set-aside land scheme resulted in a large
decrease in set-aside land in Denmark and a long-term increase
in N losses
Danish Government
(2009)
Green Growth agreement
Failed, and new efforts are undertaken to create policies that
can help Denmark implement the Water Framework Directive.
Arnalds and Barkarson
2003 and Arnalds 2006
Knowledge and
economic incentives
Iceland has successfully stopped land degradation cause by
excessive grazing
Kristina Mohlin (2012),
Sweden
Tax on nitrogen
The tax on fertilizer reduced N2O emissions from Swedish soils
significantly
Bonesmo et al. (2012),
Norway
Knowledge about
agronomy
Farmers can increase profit by increasing fertilizer efficiency
Wirsenius et al. (2010),
EU
Consumer tax on meat, A consumer tax will change consumption and thereby producweighted by GHG
tion of meat such that current (2010) GHG emissions from
emissions in produc- agriculture in EU was reduced by 7 %
tion
Net mitigation increases if agricultural area is used for growing
energy crops
Denmark and Sweden
Biogas production
82
By using animal manure and energy crops for biogas production, nutrient losses to water and air can be significantly
reduced.
Agriculture and the environment in the Nordic countries
6. Policies for sustainable
agriculture and green growth
The studies presented in chapter five contain several lessons that are
important to consider when developing policy instruments for a sustainable agricultural production and green growth. This chapter identifies and elaborates on these lessons.
6.1 Holistic perspectives are needed
The findings in chapter five shows that it is important to consider side
effects of policy instruments and that a holistic approach to policymaking is necessary. Policy-makers and the society at large often hold
goals for policies for green growth in agriculture, for example rural viability, self-sufficiency, reduced GHG emissions, and reduced nutrient
leaching, cultural landscapes and biodiversity, that can be conflicting.
Trade-offs between different environmental goals and between socio
economic goals and environmental goals have to be identified and policy-makers have to acknowledge that such trade-offs imply value judgments. Examples of such trade-offs are pesticide use and nutrient runoffs versus increases in grain production, as well as rural viability and
biodiversity versus reduced GHG emissions from ruminants. Lehtonen et
al. (2007) emphasize that important trade-offs exists between avoiding
large reductions in the supply of domestic agricultural products (with
large economic and social consequences) and yet still promote green
set-aside and decreases in nutrient surpluses. Goals and policy measures
for agriculture are, however, also characterized by synergy effects. Such
synergy effects are important to exploit, like in Denmark where nutrient
runoff policies are combined with planting of energy crops. Finally it is
important to evaluate whether the costs of policy measures outweigh
the benefits or not. Lankoski and Ollikainen (2011) found that the social
net benefit is negative for the nutrient runoff reduction in Finland. Their
conclusion is based on a willingness to pay study, and could, however, be
different if other methods like multi-criteria analysis and citizen juries
were used.
6.2 Appropriate policy measures
When formulating policies for sustainable agriculture the studies in
chapter five show firstly that it is important to choose appropriate policy
measures. The policy measures described in chapter five include regulatory, economic and informational policy instruments as well as norm
building policy instruments. These policy instruments could change incentives, information and preferences (Vatn, 2005). While informational
and norm building instruments change information and preferences,
legal and economic instruments could change incentives and preferences (Vatn, 2005). An important advantage with command-and-control
instruments is that the uncertainty concerning achievement of goals are
reduced. Economic instruments will, in most cases, allow farmers to
reach reduction targets more efficiently than command-and-control
instruments. In addition, economic instruments give incentives for development of low-cost technologies to reduce emissions. It is further
important to be aware of the fact that a tax is seldom welcomed by polluters because of the increase in costs, while regulations and tradable
emission permits might meet less resistance. Transaction costs are,
however, generally higher with tradable emission permits than a tax.
Finally, it is important to be aware that the costs of reaching the targets
depend on not only measures, but on how the target is formulated (i.e.
which the actual target is) (following Elofsson, 2010). Increased
knowledge about how nutrients travel from agricultural soils to water
and possible measures to stop this, can leave room for flexibility to
choose between measures.
Informational and norm-building instruments might be important
additional measures to command and control measures and they could
also be used as independent policy instruments. The studies from Iceland (Arnalds and Barkarson from 2003) and Norway (Refsgaard et al.
2010) show that it is important to achieve trust in available knowledge
and the study from Sweden show that it is important to educate farmers
about nutrient losses. A recent OECD (2012a) report emphasize that
there is a consensus in the literature cited that a financial incentive is
not enough when considering behavioural drivers for farmers, although
there is acknowledgement that the overall picture is not entirely clear.
Policy incentives, education and information and consistency and compatibility with traditional local practices, all play a determining role in
84
Agriculture and the environment in the Nordic countries
the actual outcome of economic policy instruments (OECD, 2012a)1. The
report emphasize that the assumption of purely profit maximizing behaviour is increasingly difficult to sustain and the attitudes and beliefs of
farmers must be taken into account when designing appropriate incentives. Pure informational instruments will be important in the case of
bounded rationality. The study from Norway showed that lack of information might explain why farmers not reduce phosphorus application as
data show that it can be profitable to reduce phosphorus application.
Norm-building and habit changing instruments could be important for at
least for two reasons. Firstly, if farmers hold norms and habits that constrain the effects of policies it could be preferable for the society to introduce instruments that aim at change these norms and habits. Examples are when farmers have preferences for field free of weeds and this
might prevent the adoption of more environmentally sound weed management. Secondly, if farmers hold intrinsic motivation concerning the
production of environmental goods this might complement the effects of
command-and control instruments and economic instruments.
6.3 Appropriate point of instrument application
The studies in chapter five show that it is important to choose the appropriate point of instrument application. Policy instruments could be
attached to traded inputs like feed, fertilizers and fuel, to specific production methods like certain tillage practices, to the private goods produced like food and green tourism or to public bads (e.g. water pollution,
GHG emissions) or goods (e.g. biodiversity and cultural landscape).
When choosing the appropriate point of instrument application it is important to consider the characteristics of the environmental problem
(the relationship between the environmental bads and goods and traded
outputs and inputs as well as the production method), the information
setting (degree and type of asymmetry) and transaction costs. When
there is a high degree of jointness between the environmental outcomes
and traded inputs or outputs it is often preferable to attach the policy
instrument to traded inputs or outputs to reduce transaction costs.
However, when jointness is weaker, the policy maker often faces a tradeoff between precision and transaction costs. The Danish tax on phospho-
──────────────────────────
1 This conclusion is mainly based on survey results.
Agriculture and the environment in the Nordic countries
85
rus in feed is an example of a point of instrument application that reduces transaction costs compared to taxing phosphorus runoffs.
6.4 Appropriate processes
The studies in chapter five show that it is important to establish process
that fosters trust and mutual learning and where the different stakeholders take part. The same policy measures can give quite different
results depending on the process related to establishing and implementing these policy measures. The results from Iceland show that the national survey that mapped soil erosion was essential for putting an end
to the wide disagreement between land users and conservation interests
on the extent and seriousness of soil erosion. And the land management
program, “Farmers heal the land” in Iceland has created a sense of ownership to the project and enhances local knowledge. The results from
Norway show that participatory processes where trust and collaboration is fostered are important for farmers’ adoption of measures
(Refsgaard et al. 2010).
6.5 Lessons that could be important for green growth
Green growth has become a popular term that contains different meanings. In the Nidaros declaration by the Nordic Ministers for Fisheries and
Aquaculture, Agriculture, Food and Forestry (2012) green growth were
defined as increased sustainable and competitive production. OECD
(2011b) emphasis that a green-growth strategy aims to ensure that
enough food is provided, efficiently and sustainably, for a growing population. This means increasing output while managing scarce natural resources; reducing the carbon intensity and adverse environmental impacts throughout the food chain; enhancing the provision of environmental services such as carbon sequestration, flood and drought control;
and conserving biodiversity. OECD (2011b) further emphasize that the
over-arching policy challenge is to create the right incentives that would
optimise resource use from an economic, environmental and social perspective. In the perspective of institutional economics (e.g. Vatn, 2005),
it will also be important to build norms and motivations that take considerations for the environment, as well as the social and the economic
aspects of agriculture. Caution is needed in making broad generalizations: not all government transfers (support) are harmful to growth and
86
Agriculture and the environment in the Nordic countries
the environment; not all environmentally motivated subsidies are beneficial for the environment; and the absence of government support is no
guarantee that the desired level of environmental performance will be
achieved (OECD, 2011b).
One of the great challenges with agricultural policies for green
growth is how to maintain or increase current food production, while at
the same time to decrease the negative ecological footprints from agriculture. Possible solutions are innovation and better management practices through research, development, innovation, education, stakeholder
communication and information. This could increase resource use efficiency throughout the supply chain and thereby ensure more production
relative to inputs used, but also conserve scarce natural resources and
deal with waste. An important measure to realize agricultural green
growth could be reduced food waste. Decreased meat consumption
could also be an important measure that would reduce the ecological
food prints from food. Wirsenius et al. (2010) suggested introducing a
tax on meat consumption to achieve this. Other measures could be increased use of precision agriculture, better utilization of manure and
increase public funding of plant breeding. Finally, agriculture and forestry provide important opportunities for making green growth in the society more at large possible. Bioenergy from agriculture could be important in replacing fossil energy sources and second generation biofuel
from forest could be crucial for replacing fossil fuel (Nordic Energy
Technology Perspective, 2013).
Green growth in agriculture could also be seen as a development
where income or the economic value of agriculture is increased without
increasing food production, or even reducing food production. This
could be achieved through increased production of services and value
added products that receive a price premium due to specific production
methods like organic or production locations (i.e. local food) without
increasing inputs that causes ecological footprints. Examples of such
green growth sectors in agriculture are tourism based on historical
landscapes, environmental values such as bird watching and hunting.
Agriculture and the environment in the Nordic countries
87
7. Conclusion
This report has looked at how agricultural policy measures, in particular
payments and compensations to farmers, can be developed in order to
support a sustainable agricultural production and green growth in the
Nordic countries. Concerning effective policy instruments to reduce the
ecological footprints from agriculture it is often emphasised that the
most efficient policy instruments are to reduce agricultural production
oriented subsidies, and then pay separately for the production of public
goods. This could, however, hamper the achievement of other policy
goals for agriculture and increase the transaction costs of policies.
Examples from the Nordic countries show that economic instruments
like payments for certain measures, taxes, subsides or tradable emission
permits can be used to effectively reduce water pollution from nitrogen
and phosphorus and to reduce GHG emissions from agriculture. Whether
these instruments should be applied to tradable input factors like fertilizers and feeds, to particular production methods, to food-products or
to emissions depend on transaction costs and the interlinkages between
emissions and point of instrument application. Economic instruments
should, however, be complimented by information and norm-building
instruments and participatory processes could be important for farmers
response to these instruments. The experience from Iceland, Denmark
and Norway show that agreement on the extent and seriousness of the
pollution problem and how measures actually affect pollution.
Finally, correct agricultural practises can lead to increased nutrient efficiency which will lead to increased production without compromising
natural resources. In order to meet future demands for agricultural products, best practices must include measures that reduce emissions of nutrients from agricultural soils. This requires research and innovation, and
willingness among both policy-makers and farmers to change practices.
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Agriculture and the environment in the Nordic countries
9. Sammendrag (norsk)
Denne rapporten ser på hvordan virkemidler i jordbruket kan utformes for å fremme et bærekraftig jordbruk og grønn vekst. Erfaringer
fra nordiske land med subsidier og andre økonomiske virkemidler har
fått særlig fokus.
Avrenning av næringsstoffer fra jordbruket til elver, innsjøer og havområder kan skape store problemer med blant annet algeoppblomstring
og eutrofiering. Kapittel 2 beskriver hvordan jordbruket bidrar til vannforurensing, klimagassutslipp og andre miljøutfordringer. Jordbruket
både påvirker og er helt avhengig av økosystemet rundt seg. Vann, jord,
gjødsel og andre innsatsmidler kombineres for å produsere private goder som korn og offentlige goder som kulturlandskap, matsikkerhet og
forunrensing. Kapittel tre beskriver hvordan jordbruket produserer en
kombinasjon av goder og hvordan dette påvirker utformingen av virkemidler. Det er utfordrende å lage virkemidler med formål å fremme et
multifunsjonelt jordbruk, særlig med tanke på transaksjonskostnader vs.
effekt. Bønder er motivert av flere ting enn økonomiske virkemidler, for
eksempel vaner, kunnskap og normer.
Kapittel 4 presenterer virkemidler for å redusere miljøproblemer i
jordbruket i Norden. De nordiske landene har mange av de samme målene jordbruket og legger vekt på kulturlandskap, biodiversitet, og vannforurensing. På Island har fokuset vært på bevaring og forbedring av
sårbart jordsmonn.
Kapittel 5 presenterer et utvalg studier og evalueringer av virkemidler rettet mot jordbruk og miljø i nordiske land. I Finland er en meget
stor andel av bøndene med i miljøprogrammet som blant annet skal
redusere avrenning fra jordbruket. Likevel har ikke programmet hatt de
ønskede effektene på vannforurensing og har bidratt til at mer jord har
blitt dyrket og dermet økt avrenning av næringsstoffer til vann. Vurdering av alternative virkemidler og jordbrukspolitikk gir ingen klare svar
på hva som mest effektivt kan redusere vannforurensing. Å gå bort fra
produksjonsrettet støtte kan bidra til å redusere vannforurensing, men
redusjon i totalt støttenivå gir ikke automatisk mindre forurensing.
I Sverige har virkemidlene bidratt til å redusere avrenning, men målene er ikke nådd. Tiltak som reduserer avrenning må iverksettes der det
koster minst. Handel med kvoter for avrenning kan sørge for dette. Skatt
på nitrogen i handelsgjødsel og skatt på kjøtt (forbrukerskatt) kan også
bidra til å redusere både avrenning av næringstoffer og klimagassutslipp
fra jordbruket, men er upopulære virkemidler.
Siden 1990 har Danmark redusert vannforurensing fra jordbruket
ved å redusere bruk av gjødsel og øke gjødseleffektivitet. Gjennom implementeringen av Vanndirektivet må avrenning reduseres mer, noe
som vil bli kostbart for jordbruket. Produksjon av biogass fra husdyrgjødsel og avfall fra produksjon har stort potensiale for å redusere utslipp av næringsstoffer, men har høye investeringskostnader.
Erfaringer fra Norge og Island viser hvordan bøndenes kunnskap og
holdninger til miljøprobleme i jordbruket, i kombinasjon med de riktige
tiltak og prosessene, kan redusere erosjon og annen forringelse av jorda.
I kapittel 6 blir erfaringene fra kapittel 5 brukt til å anbefale utforming av virkemidler som kan bidra til et mer miljøvennling jordbruk. En
helhetling tilnærming er nødvendig for utforming av virkemidler som
både skal forsterke jordbruksproduksjon og redusere forurensing. Riktige tiltak må rettes mot de rette mottakerne gjennom prosesser der alle
aktører blir involvert. Bønders holdninger og kunnskap er med på å
avgjøre virkningen av tiltak, ikke bare økonomiske insentiver.
Grønn vekst er avhengig av forskning, innovasjon, utdanning og prosesser der alle akøtrer er involvert. God agronomi bidrar til effektiv utnyttelse av næringsstoffene og økt produksjon uten å øke forurensingen.
Økonomiske insentiv som avgifter og holdningskampanjer rettet mot forbrukere kan bidra til å redusere matavfall og kjøttkomsum, som kan bidra
til å redusere klimagassutslipp fra jordbruket. Produksjon av biogass er
også et lovende tiltak som kan bidra til grønn vekst for hele samfunnet.
100
Agriculture and the environment in the Nordic countries
Agriculture and the environment
in the Nordic countries
TemaNord 2013:558
Ved Stranden 18
DK-1061 Copenhagen K
www.norden.org
Agriculture and the environment
in the Nordic countries
Policies for sustainability and green growth
In the future, demand for agricultural products will increase. The
agricultural sector must meet the increase in demand without
compromising the natural resources of which it depends on and
damage fragile ecosystems. Sustainable agricultural practices and
green growth is necessary for this to happen and agricultural policy
must facilitate such development. How agriculture contributes to
water pollution has been in focus in the Nordic countries for many
years. In many places, nutrient emissions have been successfully
reduces, but targets are still not met. The implementation of the
Water Framework Directive makes policies that facilitate reduction
of nutrient runoff even more relevant than before. This report looks
at experiences from the Nordic countries and makes suggestions for
future policies for sustainable agriculture and green growth.
The report has been commissioned by the Nordic Council of
Ministers. The study was carried out by the Norwegian Agricultural
Economics Research Institute (NILF).
TemaNord 2013:558
ISBN 978-92-893-2595-0
TN2013558 omslag.indd 1
29-08-2013 08:15:43
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