Reducing Water Pollution from Nitrogen Fertilizer: Revisiting Insights from Production Economics

Yuan Chai, David Pannell and Philip Pardey

No 320519, Staff Papers from University of Minnesota, Department of Applied Economics

Abstract: Nitrogen sourced from agricultural fertilizers is a major contributor to water pollution. Despite policies targeting a range of farming practice changes, the goal of substantially reducing nitrogen losses from farms remains elusive. We highlight three empirical results from production economics that appear to provide untapped opportunities for policies to reduce nitrogen rates. First, many farmers apply more nitrogen than required to maximize expected profits or utility. Second, contrary to the perceptions of some farmers and farm advisers, nitrogen fertilizer is a risk- increasing input. Third, over wide ranges of nitrogen fertilizer rates, the relationship between rate and profit is remarkably flat, meaning that farmers can reduce fertilizer usage substantially at minimal private cost. We discuss a variety of policy options for efficiently exploiting these insights.

Keywords: Crop Production/Industries; Environmental Economics and Policy; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 50
Date: 2022-04
New Economics Papers: this item is included in nep-agr, nep-env and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:ags:umaesp:320519

DOI: 10.22004/ag.econ.320519

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