Abatement costs of alternative tax systems to regulate agricultural nitrogen loss

Jan Christensen and Lars Hansen
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Jan Christensen: AKF-Institute of Local Government Studies

Environmental Economics and Policy Studies, 2005, vol. 7, issue 2, No 1, 53-74

Abstract: Abstract Nitrogen emissions from agriculture are considered an important environmental problem in Denmark, motivating consideration of different tax schemes as regulatory instruments. In this article, input/output behavior of Danish pig farms is estimated with farm-level panel data using the dual profit function approach, and emission functions for nitrogen loss are derived. With the estimated model, we are able to compare cost effectiveness of a comprehensive Pigouvian tax on nitrogen loss with simpler tax schemes that focus on nitrogen use. We find that both a fertilizer tax and a feed tax generate substantially higher abatement costs than Pigouvian incentives. A tax on nitrogen in all inputs will, on the other hand, only generate a marginal increase in abatement costs. These results are of interest because a tax on all nitrogen inputs is easier to implement than a comprehensive nitrogen loss tax. Our result implies that even a limited administrative cost advantage may make the input tax preferable to implementing Pigouvian incentives through a nitrogen loss tax.

Keywords: Non-point source emission; incentive regulation (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1007/BF03353945

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