Fertilizers taxation and regulation of nonpoint water pollution.

Transcription

Laboratoire d'économie et de sociologie rurales
Equipe R&A Grenoble..
Université Pierre Mendès-France
Grenoble 2 Sciences Sociales
FERTILIZERS TAXATION AND REGULATION OF NON POINT WATER POLLUTION :
A CRITICAL ANALYSIS AFTER EUROPEAN EXPERIENCES
François Bel ; Gérard d’Aubigny ; Anne Lacroix ; Amédée
Mollard
Document de travail 2002-01
Mars 2002
Fertlizers taxation in Europe, F.Bel, G. D’aubigny, A. Lacroix, A. Mollard. ISEE Sousse March 6th – 9th 2002
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ISEE Tunisia 2002
The 7th Biennal Conference of the International Society for Ecological Economics
Sousse (Tunisia) 6-9 March 2002
FERTILIZERS TAXATION AND REGULATION OF NONPOINT WATER POLLUTION.
A CRITICAL ANALYSIS AFTER EUROPEAN EXPERIENCES
François Bel 1, Gérard D'Aubigny 2, Anne Lacroix 1 et Amédée Mollard 1
Abstract
In Europe, the current forms of control of nonpoint nitrogen pollutions are considered weakly
effective. This assessment encourages to introduce more efficient modes of regulation. In that
direction, many economists recommend a simple tax, based on the reputed polluting factors,
for example a tax on the purchases of mineral fertilizers. In addition to its simplicity of
application and low information cost, one can argue that it was already implemented in
several European countries and could prefigure a possible more general decision at the
European Union level. However, the same economists diverge about the valuation of the
fertilizers' decreasing use that one could expect from it, the debate being very controversial
about the price - elasticity of the demand. The objective of this paper is to present a critical
assessment of researches undertaken up to now and of actual experiences of taxation and to
highlight the role played by determining factors in the long-term evolution of the consumption
of nitrogen fertilizers in European countries.
Keywords : fertilizers, nitrogenous pollution, economic instruments, taxation, Europe, priceelasticity
Résumé
Le faible impact des formes actuelles de contrôle de la pollution azotée diffuse en Europe
encourage la définition de modes de régulation plus efficaces. Dans ce but, un grand nombre
d'économistes préconisent une taxe reposant sur une assiette simple, la plus proche possible
des facteurs réputés polluants, comme par exemple la taxe sur les achats d'engrais minéraux.
Outre sa simplicité d'application et son faible coût informationnel, on peut faire valoir en sa
faveur qu'elle a déjà été appliquée dans plusieurs pays européens, ce qui pourrait préfigurer
une éventuelle décision plus générale au niveau de l'Union européenne. Cependant, les
mêmes économistes divergent sur l'appréciation de la diminution des utilisations d'engrais
que l'on pourrait en attendre, le débat étant très contradictoire sur l'élasticité - prix de leur
demande. L'objectif de ce papier est précisément de présenter un bilan critique des
recherches menées jusqu'ici sur l’élasticité-prix de la demande d’engrais, de dresser un bilan
des expériences de taxation réalisées en Europe et de mettre en évidence les facteurs
déterminants de l'évolution à long terme des consommations d'engrais azotés dans les pays
européens.
Mots clé : engrais, pollution azotée, instruments économiques, taxation, Europe, élasticitéprix
JEL classification codes : C22, H21, Q10, Q2
1
INRA/R & A, research team at the Université Pierre Mendès France, BP 47 X, 38040 Grenoble Cedex 09 (France) ; corresponding author
e-mail : [email protected].
2
LABSAD (Laboratoire de statistiques et d'analyse de données) University Pierre Mendès France, BP 47 X, 38040 Grenoble Cedex 09
(France).
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INTRODUCTION
The reduction of water pollution is one of the major aims of the EU environment policy.
Since 1973 no less than twenty directives have been adopted about water quality. Agricultural
nonpoint nitrogen pollutions are concerned in the first place and their regulation mainly rests
on public regulations : the “nitrate” directive (Council Directive 91/676/EEC) imposes
conditions about the quantities and ways of use of nitrogen by farms within “nitrate sensitive
areas”. Financial incentives are not much in use, except with the agri-environmental measures
(Council Regulation N°2078/92/EEC) where a financial compensation is proposed to farmers
who put into environment friendly techniques such as input reduction.
The limitations of this policy have often been stressed (EEA, 1999 ; EC, 1998, 2000). The
implementation of the nitrate directive turned out to be disappointing in a majority of member
states and countries which still do not comply with it are being sued. Agri-environmental
measures also were subjected to criticism : little funding, limitations in the analysis of the
ways and means to reach the stated objectives, expensive management and control of the
implementation. Altogether this policy had not noticeable impact on water quality : the nitrate
level in most European rivers has increased during the last 10 to 15 years ; model
computations of nitrate leaching from agricultural soils indicate that 87% of the agricultural
area in Europe have nitrate levels above the EU target value (25 mg NO3/l) and 22% above
the drinking water standard (50 mg NO3/l) (EEA, 2001).
This state of affairs encourages the design of tougher ways of regulation, especially through a
larger use of economic instruments (OECD, 1986 and 1989). In this direction many
economists recommend a tax based on the purchases of mineral fertilizers. Indeed such a tax
is based on a simple reference, close to the supposed pollutant factors. Beside its simple
application and its low information cost one can argue that it has already been experienced in
several European countries, which could make it easier to expand further to the scale of the
EU.
Still, these economists do not agree about the anticipated reduction of fertilizers use which
would derive from the implementation of such a tax, there is a strong argument around the
price elasticity of demand. Finally this tax is recommended although little evidence is
available about its effectiveness, whether based on research results or on empirical
observation.
The aim of this paper is exactly to present a critical review of the researches carried out until
now and of actual experiences of tax implementation. In this view, we will try and answer
three questions : i) what lessons can be derived from simulations on fertilizers tax found in the
economic literature ? ii) What do we learn from tax implementation experienced in some
European countries ? iii) Can one give evidence of the role played by the prices in the long
term evolution of nitrogen fertilizers consumption in Europe ?
SURVEY OF ECONOMIC LITERATURE ABOUT FERTILIZERS TAXATION
Starting from the apparent link between the strong increase in mineral nitrogen fertilizers and
the raising level of nitrate in surface or underground waters, economists generally stick to a
simple assumption : pollution would increase proportionally with nitrogen fertilizers input
into agriculture. Hence a solution could be to design a tax on the base of nitrogen fertilizers
consumption in view to lower the level of pollution. This proposal is backed by the low cost
of administrative and control management of such a measure : a ten Euro per farm is
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anticipated (van Zeijts, 1999). It rests on the assumption of a significant price elasticity of
nitrogen demand and thus on the principle that an increase in price through a tax, would
decrease consumption, hence reduce the pollution.
The impact of a tax on fertilizers has been subjected to many economical assessments,
through simulation models. Unfortunately the results are not very consistent.
The results obtained
The survey of literature on fertilizers tax shows two main groups of results regarding the
recommendations about tax rates :
i)
the first group consists in studies about a specific objective of water quality
(Andreasson, 1990 ; Larson et al., 1996 ; Chowdhury and Lacewell, 1996), and
they advise a tax rate between 120% and 250% in order to reach the objective.
Other works, without reference to environmental objectives come up with similar
rates, because of the stiffness of fertilizers consumption (England, 1986 ; Rude and
Dubgaard, 1989).
ii)
The second group on the contrary advise much lower rates : 10% (Bonnieux and
Rainelli, 1989 ; Amand-Madelin, 1992 ; Vermersch and al., 1993) to 20% (Gohin
and al., 1999).
This heterogeneity of rates rests on different price elasticity estimations of the fertilizers
demand. Examining empirical work produced during the 70’ and the 80’ about Europe and the
US, A. Burell (1989) points out elasticities ranging from –0.08 for cereals in the UK
(England, 1986) to –2.15 for Dakota agriculture (Weaver, 1983). She stresses the relationship
between these figures and the different methods used to produce them.
She shows that linear programming systematically leads to lower figures than those produced
by econometric models. Linear programming operates with a constant level of output and thus
measures a Hicksian elasticity which underestimates the effect of price changes. In order to
assess the global impact of a price change on fertilizers consumption she advises to estimate
the Marshallian elasticity which takes into account both the substitution effect (technical
substitution along a specific isoquant) and the expansion effect (adjustment of the output
deriving from the fertilizers’ price change). Reckoned for the agricultural sector in the UK
over the period 1964-83, the Marshallian elasticity appears twice the Hicksian elasticity (-0.5
against –0.25)
Moreover, A. Burell’s article shows that various econometric models provide similar
estimates of the Marshallian elasticity over the period 1963-83 in the UK : between –0.4 and –
0.6. These models range from simple equation to equations system of the fertilizers demand
with profit optimisation or output adjustment.
Empirical work during the 90’ put an emphasis on the effects of alleviating the constraints of
fixed inputs. Indeed various assumptions are envisaged for the input substitution : substitution
between intermediate consumptions, between fertilizers and labour, between fertilizers and
land. Table 1 displays these results and their underlying assumptions.
Looking at the table it appears that the values of elasticity vary according to the greater or
lower flexibility assumed for the inputs. Therefore, relaxing the assumption of fixed land and
labour, Vermersch (1989) allows to reach a price elasticity three times greater than values
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usually estimated. Gohin and al., (1999) show, on the basis of a general equilibrium model
with special emphasis on the French agriculture, the sensitivity of the price elasticity to the
substitution elasticity between fertilizers and land : with a substitution elasticity of 0.8 or 1.4
the price elasticity of fertilizers demand rates accordingly –0.73 or –1.07.
Moreover this table displays the wide heterogeneity of price elasticity between farms.
Andreasson (1990) studying the Gotland Islands records differences rating from 1 to 7
between six groups of farms, a difference linked with large technical discrepancies, according
to the author. Vermersch et al., (1993) reach a ratio from 1 to 2 within a single group of stock
farms according to the efficiency of the management of the mineral and organic nitrogen.
Altogether, it appears that the underlying assumptions taken in influence more the results than
the methodologies followed. Therefore, in view to draw the lessons from this literature survey
it is necessary to clarify the assumptions. Such an approach seems the only way to delineate
the validity conditions of the various figures of elasticity that they produce.
Lessons and critical discussion
With unchanging production techniques
With unchanging production techniques and for a specific crop, the fertilizers demand
remains stiff (England, 196 ; De Haen, 1990), since it is encouraged by the low cost of this
input as compared to its productive potential. In this case discrepancies can be explained by
the curve of potential productivity gains : with a low fertilizers consumption level the yields
can be highly increased and the price elasticity is low ; when the fertilizers consumption
reaches or goes beyond the technical optimum, the productivity increase becomes weak or
even nil and the price elasticity becomes larger. Finally the tax efficiency would highly
depend on the productivity level reached by the farmers subjected to the tax.
At farm level the wide variety of elasticity levels can be explained by the differences in size
and structure (crops, stock, machinery ...). Different values shown in mixed farming
(Andreasson, 1990 ; Vermersch and al., 1993) depend in particular on the larger or smaller
share of animal production in the total. Indeed the organic nitrogen content of animal waste
can substitute for mineral fertilizers. This substitution can be encouraged through increasing
price, especially since it is often poorly managed (Heming, 1998). This possible substitution
could explain a higher elasticity in farms with large nitrogen excess.
Still at farm level, differences of elasticity have been noticed according to the degree of
diversification of production. It appears that more diversified farms record a higher elasticity
than more specialised farms (England, 1986). In the short term they are more capable to
develop low nitrogen demanding crops (meadows, peas ...)since they already grow them and
master their production techniques.
With changing production techniques
The works which take into account a substitution between inputs come up with so called
“long term elasticities”, which reach higher values than those reached with unchanging
production techniques.
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Some works (Andreasson, 1990) relax the assumption of a fixed amount of family labour on
the farm on the basis of recorded substitution between labour and fertilizers, especially
between various kinds of farms or over time. If generalized this conclusion becomes
controversial. For example, our researches about the evolution of farm holders family labour
based on several surveys (Lacroix and al., 1988) show that labour hours are flexible to some
extent. But this flexibility touches a small share of the total and rather part time work of some
family members than the work input of the head of the holding. On the contrary, if one looks
at the structure of employment on the farms (number of active population, degree of
specialisation and skill) one must acknowledge a great stiffness for the agricultural labour
factor, even in the medium and long term. This quasi-fixed level of agricultural labour
assumption, taken in by Vermersch’s (1989) model, seems more acceptable than the
assumption of a simple substitution between fertilizers and labour.
Along the same line starting from a possible substitution between fertilizers and land, some
researchers utter the assumption of a possible extensification3 for the agricultural production
(Vermersch 1989 ; Bonnieux and al., 1990…). This flexibility requires access to land in the
medium term (land available at moderate prices). It also requires that the path followed when
substituting fertilizers to land can also be retraced substituting land to fertilizers. This assumes
that productive combinations less demanding for fertilizers be in existence and are still
profitable. Such a perspective does probably not hold true for all productions, nor for all
regions, and in the end it mainly is an assumption of induced innovation.
In all cases one touches the capabilities of production techniques evolution induced by a
fertilizers tax. At most one can admit that a tax would not work against such an evolution of
the techniques, evolution which would first depend on relative prices. In order to assess the
possibility of a technical change one must thus look at the evolution of agricultural outputs
prices. In this view De Haen (1984) showed that the fertilizers demand is more sensitive to
agricultural prices than to its own price. This result was confirmed by estimates from Mahé
and Rainelli (1987) on the basis of French national accounting for agriculture.
Finally, at the end of this literature survey the conclusions on the possible efficiency of a tax
on fertilizers are somewhat mixed : with unchanging production techniques the expected
effects are weak since farmers aim at a yield defined by the technology and since the
relationship between yield and fertilizers cost is tight in this framework. At most such a price
signal would be an incentive for farmers to better valorise their fertilizers and reduce
inefficiencies. But in the long term one could imagine going beyond the stiffness of the
present technical production systems, favouring less nitrogen demanding techniques. Along
this line agricultural products prices are the key element.
European experiences of fertilizers tax implementation examined below can be considered as
an empirical test of the previous conclusions.
EUROPEAN EXPERIENCES OF FERTILIZERS TAX IMPLEMENTATION
Four countries (Finland, Sweden, Norway, Austria) have implemented such a tax in order to
try and reduce the pollution level of their waters. Most of these experiences date back to the
middle of the 80’, sometimes even earlier. Except in Norway and Sweden they had to stop
3
One should not confuse between extensification and the mere reduction of the ratio fertilizers per hectare, resulting from a reduction of
technical inefficiencies.
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when the country entered the European Union, in order not to introduce competition
distortions. Since they are actual these experiences are interesting sources of information for
the assessment of the impact of a tax based on the consumption of fertilizers. In order to better
analyse the impact of these policies we shall first depict the main trends in fertilizers
consumption in Europe.
Statistical data availability gives the range and time scope for the analysis. The fertilizers
consumption is analysed from FAO data over the period 1961-98. Each country nitrogen
consumption is measured in kilograms of nitrogen content (N) per hectare of Utilized
Agricultural Area. This indicator displays the intensity in the use of nitrogen mineral
fertilizers. The price data of these fertilizers and of agricultural products come from
EUROSTAT (constant prices). They exclude Norway as not being a member of the EU. They
are only available since 1975, or even 1985 or 1988 for the recent new-comers into the EU.
Three main periods in the evolution of nitrogen fertilizers consumption
In general terms from 1961 to 1998 three main periods of evolution can be drawn for the
European countries except for Ireland where the quantities of nitrogen fertilizers per hectare
increases steadily (graph 1) :
-
increasing quantities of nitrogen per ha are applied during the 60’ until mid-70’ or the
end ;
the 80’ show a slowing down growth, and even a steady level in some countries
(Sweden, Norway, Italy, Portugal). The quantity per hectare only continues to grow in
Spain ;
the 90’ exhibit an uneven profile : in most cases the consumption starts with a marked
decline, followed by a steady level or sometimes a decrease of the indicator (like in
Denmark, or even Norway, Greece and Austria).
Through the two first periods the increase of nitrogen consumption follows the intensification
tendency of national agricultures. From 1975 to 1990, in spite of disparities between countries
and marked fluctuations, the price of fertilizers decreases by about 40% to 60% in the EU
countries, whether with or without tax makes no difference. The output prices evolve in a
parallel way, with a 50% decrease over 15 years. This twofold situation might have
encouraged farmers to use more fertilizers. Indeed there were still potential productivity gains
and agriculture outputs benefited guarantee. The effect of the price guarantee policy can be
seen on the indicator for Ireland and the UK : when these countries came into the European
Community, in 1973, their fertilizers consumption increased markedly. On the contrary, in the
80’, when measures to restrict this guarantee policy were decided (milk quotas, price
guarantee quantity limitations) a significant slow down in fertilizers consumption has been
recorded over the second period.
In all countries, except Norway, the third period shows signs of the new direction taken by the
EU : Common Agricultural Policy reform in 1992, and further enlargement in 1995. A first
analysis of the decrease of the indicator at the start of the period could stress the effect of the
compulsory set aside scheme (15% in 1992). Yet the decrease often started before 1992 (in
the Netherlands, Belgium-Luxemburg, Germany…) and calculations made for France by the
Ministry of Agriculture state that land set aside impact was very partial on nitrogen fertilizers
consumption. Indeed uncertainty over the future evolution of output prices probably
influenced the farmers behaviour from the end of the 80’ : they would have anticipated a price
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decrease and adapted their production strategy to match this new context. Nevertheless, after
1992 the decrease of the output prices slowed down as compared with the previous period,
except for Austria, Finland and Portugal. Nitrogen fertilizers prices themselves also slowed
down their diminution as soon as the beginning of the 90’.
Still, beyond these general trends, there are sharp disparities between countries in the level of
nitrogen fertilizers use (a ratio from 1 to 5). The hierarchy between countries is not challenged
through the three periods and the ratio even had a tendency to inflate until the middle of the
80’, whereas it slightly reduced during the 90’ (graph 1).
Sharp heterogeneity between European countries
A closer look at the ranking of countries stresses the peculiar position of the Netherlands :
their level of nitrogen consumption remains higher than in any other country throughout time
(around 200 kg per ha in the 90’), this denotes a very intensive agriculture. Across the other
countries three main groups can be drawn :
-
-
-
the countries of the first group (Germany, Belgium-Luxemburg, Denmark and
Norway) rate a consumption larger than 100 kg per ha. Belgium and Denmark met a
reversal of tendency in the end of the 80’ and a marked decrease over the last period.
Norway took the same turning while the decrease acceleration already started during
the 80’. In Germany a dramatic fall of the indicator happened with the reunification,
and was followed by a stabilization.
The countries in the second group (Finland, France, Ireland, United Kingdom and
Sweden) range an average consumption between 50 and 100 kg nitrogen per ha.
Except Ireland, their consumption decreased by the end of the 80’, and kept steady
then, or with a low increase in recent years.
The countries in the third group (Austria, Spain, Greece and Portugal) reach an
average consumption below 50 kg per ha. The increase of their indicator is much
lower than in the other countries and keeps steady in the last period, with a weak effect
of CAP reform. Still one notices particular situations : in Austria where a great many
hill and mountain areas make it less favourable to intensify agriculture. The three
other countries qualify with a Mediterranean climate, and have a low intensive cereal
production whereas they develop outputs outside the scope of CAP.
Which trend changes before and during a tax implementation ?
Table 2 displays the schemes of operation of nitrogen taxation in the four European countries
where it has been implemented. The graph 2 makes it easy to spot the impact of such a policy
on the evolution of nitrogen consumption : in Austria the indicator records a sharp decrease in
the year when the taxation starts ; in Finland a decrease in the consumption appears the year
before a tax is set up and two years before its rate is increased ; in Norway a slight bending
down is observed since a tax was set up.
In order to assess the impact of a tax in a more structural way relating to medium term effects
we have tested the existence of a significant change in the trends before and after a tax was set
up. The slopes of the linear adjustments of the trends are compared (as summed up in table 3)
through a test of the difference of slopes with the zero value.
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•
In Finland, the comparison concerns the period when the tax has a low rate (19761990) with the period when the rate is very high (1991-1995). The quantity of nitrogen per
hectare grows over both periods. An increase in the rate of tax does not reduce this growth, on
the contrary the growth accelerates.
•
In Sweden, the implementation of a tax in 1985 went together with a slight reduction
in the nitrogen consumption. But after 1988 this consumption actually entered an hitherto
unknown period of fluctuations : marked decrease from 1988 to 1991, then a bumpy steady
level from 1991 to 1998. Van Zeijts (1999) assigns the responsibility of these fluctuations to
the changes in the taxation scheme : decrease of the fertilizers quantities with the rise of the
environmental tax in 1988 ; then an increase when the “regulation of prices for export tax”
was cut out. Still, this factor cannot give account of the whole evolution, marked changes in
the agricultural policy intervened meanwhile : set aside from 1988, and joining in the EU in
1995.
•
In Norway, the decrease of nitrogen consumption started in 1978 and speeded up
slightly after 1988, that is when the tax was set up.
•
In Austria, the effect is clearer and supports the idea of a tax impact on nitrogen
consumption. Indeed, its implementation with a rising rate intervened together with a trend
reversal : the slow increase in the nitrogen consumption was followed by a decrease after the
tax went into action. After the tax was cut out the consumption resumed with a slow increase.
Still one can have doubts about the price effect in this context. Actually, in spite of a rising
tax rate the nitrogen fertilizers price really went down in Austria where the fertilizers
companies and suppliers have absorbed the tax burden (Van Zeijts, 1999). After the tax was
cut out Austrian farmers still benefited from the lowest price for mineral nitrogen of all EU
countries.
Altogether, the result of this analysis remains mixed. With the exception of sporadic
fluctuations in the year of implementation or in the preceding years, longer term adjustment
are hardly to be seen. Austria is the only country where a clear reduction of the nitrogen
consumption occurred during a period when taxation was being implemented ; in Sweden and
in Norway the impact of the tax has been very poor ; and in Finland a marked increase of the
consumption happened paradoxically enough with a high level of tax.
Difference of trend between countries with and without tax ?
A supplementary direction of research is concerned with the comparison of evolution in the
fertilizers consumption between countries where a tax has been implemented and the others
where no tax ever was (Table 4). This comparison was conducted within each of the three
groups of countries previously settled, each of them including at least one country with a tax.
The comparison is made between the slopes of the trends in consumption over the recent
period (called 90’ in the period design) since this is the time when taxation policies were
mainly implemented.
First of all let us notice that the slow down in the fertilizers consumption per hectare is the
highest by large in Denmark (-5% per year) and in the Netherlands (-4%), whereas during this
period no taxation was ever implemented in these countries.
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•
In the first group, Norway shows a decreasing tendency in the quantity of nitrogen per
hectare (-1.2% per year) of the same order of magnitude as Germany, a little smaller than
Belgium-Luxemburg and markedly smaller than Denmark. Now, the two last ones did not
implement any nitrogen limitation policy during this period.
•
In the second group, Sweden shows a steady nitrogen consumption, which is not very
different from the case of Italy. Among the other countries Finland slows down the pace more
so than France does and especially more than Ireland.
•
In the third group the evolution of nitrogen consumption in Austria (-0.6 per year) is
markedly different from what it is in Spain and Portugal, but the decrease is not as strong as
in Greece (-1.6 per year).
At last, the evolution of the quantity of nitrogen fertilizers per hectare in the countries where a
tax was implemented is not so different from what it was in the countries where no tax was
put into operation, provided their consumption structure is comparable. It is thus necessary to
further analyse the situation in order to better delineate the influencing factors of nitrogen
demand.
MODELLING THE EXPLANATORY FACTORS OF NITROGEN FERTILIZERS DEMAND
The purpose is not to encompass all the factors which influence the evolution of nitrogen
fertilizers consumption. Such endeavour would require to include the whole set of explicative
terms of the agricultural production evolution, and thus require models based on partial or
general equilibrium. We wish to estimate the parameters of an equation of nitrogen fertilizers
demand on the basis of available time series for the countries of the EU. Let us recall that the
price data are only available over a short period of time, hence we had to retain a simple
model. Altogether the equation could be estimated for the period 1978-98 and only for the EU
countries.
The model :
The design of the retained model derives from two assumptions.
i)
first assumption : The nitrogen consumption Y is a constant elasticity function of
the nitrogen price Xp and of other variables Xa (crop expansion, technical progress
and so on…)
β
(1)
Y = K . X p p . X aβ a
where β p is the price elasticity, β a the sensibility to the relative variation of the other
variables.
A transformation through Neperian logarithms of the above equation allows a linear
form in terms of the parameters to be estimated :
y = k + β p x p + β a xa + u
(2)
where u gives account of the difference between the model and the data.
ii) second assumption : since we use panel data, the distinctive features of each
country (latitude, type of soils, climate, ownership of land, size of holdings…) can
have an influence that one wants to get rid of, in order to estimate the linear
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dependence. One considers that these peculiarities are specific to each country and that
they last over the whole period.
A specific effect for each country was thus introduced while using the fixed effect design
(Mathyas, Sevestre, 1996). It leads to take into account for each country instead of the values
of the variable level (both endogenous and exogenous), the values of the differences between
the level and the average level of the variable over the period. This expression makes it
possible to only retain the changes which are not specific to the national context, and thus
allows to make the data more homogeneous.
More specifically, denoting with i the countries and with t the years, one can express the
deviations from the average as ~
y it = y it − y i and ~
xit = xit − xi and write (2) as follows :
~
~
~
yit = k + β p x pit + β a xait + ν it
(3)
In order to empirically test the model we used the data provided by Eurostat. When
transformed as defined above, their names are :
-
CN : mineral nitrogen fertilizers consumption per hectare of utilised agricultural area ;
PN : price of mineral nitrogen fertilizers ;
Pp : price of agricultural products ;
R : wheat yield. This variable can be considered as giving account of the
technological change. Wheat is the most relevant crop since it grows across the whole
area of EU, except in the northern part of Finland and Sweden.
S : stands for the proportion of arable land (except set aside) in the utilised
agricultural area. This variable makes it possible to assess the expansion effect of the
crops ;
U : stands for the livestock unit per hectare, in order to assess the substitution
potential between mineral and organic manure ;
T : is a dummy variable which spots the implementation of a tax.
The assumption is that mineral fertilizers use responds systematically to these variables : it
will react negatively to an increase in its own price, positively to an increase in the
agricultural output prices, positively to an increase in the share of arable land, positively to an
increase in the wheat yield, negatively to an increase in the livestock sewage ratio and
negatively to a tax implementation. These relationships are assumed to be steady over time
and hence can be quantified through an econometric data processing.
In fact, the time neutrality should be made more accurate. Since the statistical analysis
previously performed made it plain that two periods should be clear cut. So we have created a
dummy variable Per giving account of the two periods with a zero value over the 80’ and a 1
value over the 90’.
These dummies were then combined with the previous variables according to the Casetti
(1972, 1997) development method. They get combined, for example, in the shape of ~
x a * Per ,
as an interaction term. The coming in of such terms into the equation makes it possible to
assess the influence of a change in the period between the first years with a β1 slope and the
following years qualified with a (β1+ βd1) slope (provided the usual caution is used to assess
the risk of colinearity between parameters).
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Along the same line, we have created a dummy variable Trb (for troubled years) which gives
account of years with bumpy variations in the fertilizers consumption (in relation with CAP
reform, Germany reunification, entering the EU for some countries). This variable is zero
except for the relevant years and countries.
The estimation of the full equation showed that many parameters did not significantly deviate
from zero value. It is the case with all coefficients of the variables referring to the period,
except the coefficient of U in group 1 in 90’. In spite of what previously seemed to be noticed,
it appears that the period has not significant influence in the model as it is defined. Moreover,
the wheat yield and the stocking density per hectare happen to be inefficient exogenous
variables.
These variables have been omitted in the short version of the model, which improved
enormously the equation’s size without any noticeable loss in the AIC criterion :
CN =k + β1PN + β 2 Pp + β3S + β 4T + β5Trb+ν
(4)
Results and discussion
The application of the Chow test (Baltagi, 1996) across the groups of countries confirmed the
relevance of the sorting between the three groups and the Netherlands (critical probability is
10-5 ). Thus not only do the levels of nitrogen fertilizers use differ according to the groups, but
in each of them their consumption reacts in a specific manner to changes of the exogenous
variables
The estimation results are summarized in table 5 and deserve several comments :
-
First of all, one must stress the very low level of the elasticity of nitrogen fertilizers
demand to its own price : between –0.10 for the group 1 and –0.20 for the groups 2
and 3. The lower value in group 1 can be explained by a demand which has been
strongly pulled in these countries by the expansion of crops, at least during the 80’.
-
As a general rule, the fertilizers demand was more sensitive to agricultural output
prices than to its own price, except in group 2. This feature could be related with
Finland’s presence in the group, and its very peculiar behaviour when the rate of tax
happened to increase (sharp increase in fertilizers consumption during the 90’ together
with a 70% increase of its price and a reduction of output price around 40%). In the
other countries the comparison ends up with the ability of the marginal productivity of
nitrogen fertilizers to compensate for the marginal loss of income produced by the
decrease in the output prices.
-
The variable related with the crop’s expansion play a significant role within groups 1
and 2, but not within group 3. Altogether, the estimated model does not fit as well in
group 3 (Log likelihood = 82) as in the two other groups (log likelihood = 107 and
143). This backs the idea that groups 1 and 2 follow an agricultural development
pattern characterized by the production intensification. On the contrary, the group 3
countries turn out to be far from this pattern, with prominent Mediterranean crops or
pasture for feeding livestock.
- 12 -
-
In the countries where the model is really relevant (groups 1 and 2), the nitrogen
fertilizers demand is more sensitive to crop expansion than to changes in the nitrogen
price. The prominent influence of crops derives from the intensification process under
way, especially with animal production : an increase in the areas growing forage
maize and temporary grassland against permanent pasture areas. This process of
change could develop thanks to the price support policy towards agricultural outputs.
-
The “troubled year” effect is clear for groups 1 and 2. During these years of policy
uncertainty (CAP reform in 1992, Germany reunification, new entrances in the EU…),
the nitrogen consumption slightly skips from the general trend.
-
The tax effect is not significant in group 3 and plays in the wrong sense in group 2.
This confirms previous results : the tax does not produce a marked change in the
nitrogen fertilizers consumption.
-
The substitution effect between organic manure and mineral fertilizers is only
noticeable during the 90’ in group 1. In Denmark, Germany, Belgium-Luxemburg
(and also in the Netherlands, outside this group), nitrogen excess are beyond 100 kg
per hectare (Brower, 1996). And the reduction in nitrogen fertilizers consumption over
the 90’ can be understood as a reduction of the technical inefficiencies, inter alia
through a better use of organic nitrogen included in animal waste. But as long as a
very high level of nitrogen excess is not met, the substitution effect does not appear.
CONCLUSION
Coming to the end of this analysis, one can doubt of a nitrogen fertilizers tax effectiveness in
view to reduce nonpoint pollution. Indeed we have shown that in Europe, over the 20 last
years, the price of nitrogen fertilizers has weakly influenced the evolution of its consumption.
In the countries with a tax, cross section data analysis showed sporadic fluctuations of the
consumption, but no major reversal in the trends, except perhaps in Austria. The time series
analysis between countries with and without a tax was not able to reveal a specific behaviour
in the first ones. The econometric analysis made clear the impact of the intensification process
in the agricultural production within the northern Europe countries. The nitrogen fertilizers
demand was pulled by this process and the altogether small changes in the nitrogen price
produced by taxation were not able to reverse this heavy trend.
Yet the present results are only exploratory. They are established over a short period of time.
They are concerned with rather small changes in the nitrogen price level (an average of 14%
for the variation coefficient) and only in the case of a decreasing prices trend. Now one knows
that a price elasticity is rather smaller when prices decrease than when they increase.
Moreover the data refer to a period when the production structure underwent great changes
under the influence of the agricultural prices policy. This policy allowed for a production
increase through technical progress action on the productive factors.
These results do not take away the relevance of a tax as a price signal towards farmers. But
they incline us to account for the specific conditions of the country’s agriculture when
anticipating the effects of such a price signal. A lower impact in a highly intensified
agriculture, and a higher impact in a less intensified agriculture. Hence, in order to trigger a
- 13 -
“desintensification4” change in agriculture the tax rate should be high, and supported by
agriculture policy measures in agreement and by consistent technical innovations.
Finally, these conclusions drive us not to restrict an environment policy in the field nonpoint
nitrogen pollutions only to put pressure on the purchase of nitrogen fertilizers. The more since
some works have showed that a decrease in nitrogen fertilizers use only has a limited impact
on water quality (Vatn et al. 1997 ; Bel and al., 1999). A more appropriate base should be
worked out. In this view, it seems that a tax based on excess nitrogen is more promising, such
as in the case of those lately adopted in the Netherlands and in Denmark. However some other
agricultural policy measures may interfere, which may require stronger and adequate
incentives in order to meet the quality objectives. It is the case for example with the CAP’s
compensatory allowances which should be tuned according to environmental criteria (crosscompliance conditions).
Acknowledgements
The research presented in this paper was developed within the framework of a programme
devoted to the analysis of economic instruments for the management of agricultural nonpoint
nitrogen pollutions, with the support of the Agence de l’Eau Rhône - Méditerrannée – Corse
(Water agency). A final report on this matter provides more details (Bel and al., 1999)
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4
We use the word on purpose and do not use extensification which would include the labour factor but not only the land as it is meant here.
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- 16 -
Table1 : Summary of price-elasticities results in various research works
Auteurs
Abler, Shortle
(1992)
Scenario
Réduction de 10% des
engrais chimiques
Méthode
Modèle d'équilibre
partiel
Hypothèses
Substitution entre les inputs
limitée (terre et capital rigides)
Régions/pays
Pays de l'UE
Productions
Blé, maïs, autres
céréales
Andréasson
(1990)
Réduction de 60% des
engrais azotés pour
atteindre 30 mg NO3/l
Modèle économétrique
Substitution entre engrais
minéraux et travail
Ile de Gotland
(Suède)
Elevage,
maraîchage
Taxation des engrais
azotés pour atteindre
10 mg NO3/l
Modèle agronomique
(EPIC) + modèle
optimisation profit
Aquifère de
Seymour
(Texas, USA)
Coton, blé
Taxer les engrais azotés
pour couvrir coût de
traitement de pollution
résiduelle
Taxe de 20% sur les
engrais minéraux
partiel (MAGALI)
Substitution entre productions
France
Ensemble de la
branche
agriculture
général (MEGAAF)
Substitution entre inputs et
ouputs
France
Ensemble de la
branche
agriculture
Paramètres estimés
pour l'année 1994
Salinas Valley
(Californie,
USA)
France
Laitue
pour conditions de
production en 1990
Données de panel
(RICA)
Chowdhury,
Lacewell (1996)
Direction de la
Prévision (1998)
Gohin et alii
(1999)
Larson et alii
(1996)
Vermersch
(1989)
Vermersch et alii
(1993)
azotés pour réduire de
20% fuites de nitrates
-
azotés pour réduire
inefficacités techniques
1)
neutralité au risque
2)
aversion au risque
Modèle agronomique
Substitution entre inputs
(EPIC) + modèle
optimisation du profit
Modèle économétrique Assouplissement contraintes
fixité de facteurs
1) travail et terre fixes
2) travail semi-fixe
3) travail et terre optimisés
Modèle économétrique
Substitution entre azote
minéral et azote organique
Terre et travail optimisés
Bretagne
(France)
Céréales
Elevage intensif
(>1,5 UGB/ha)
- 17 -
Données
Elasticité-prix
-0,22 pour le blé
pour la période 1980- -0,20 pour le maïs et les
84
autres céréales
Données de panel
-0,15 à -1,09 selon
Série 1948-84 pour la
SAU des exploit.
région
-0,5 pour l'ensemble
des agriculteurs
Exploitation type
1) -1,12 pour le blé et
-0,51 pour le coton
2) -0,87 pour le blé et
-0,39 pour le coton
-0,7 à court terme
-1,7 à long terme
Données de panel
(RICA)
-0,9
(-1,05 pour les grandes
cultures, -0,74 pour les
fourrages)
-0,75
1)
2)
3)
-0,23
-0,39
-0,63
-0,36 pour exploit. sans
excès d'azote
-0,68 pour exploit. avec
excès d'azote
Table 2 : Summary of european experiences of nitrogen taxation
Pays
Finlande
Suède
Dates
Assiette et taux de taxe (en % du prix de
l'engrais)
De 1976 à 1995
Taxe sur les engrais (moins de 3 %)
De 1992 à 1995
Taxe spécifique sur les engrais azotés (70%)
Depuis 1987
Taxe sur les engrais perçue auprès des
producteurs et des importateurs d’engrais
Frais de contrôle et de surveillance
découlant de la réglementation
De 1985 à 1993
Taxe régulatrice des prix prélevée sur les
engrais NPK (environ 20 %)
Affecté au financement des exportations
Depuis 1985
Taxe environnementale sur les engrais NP
(taux croissant)
Subventions, dépenses de protection de
l'environnement Versé au budget général
depuis 1995.
Au total pour N : entre 20 et 30 % de son prix
Autriche
De 1986 à 1993
Taxe sur les engrais NPK (taux croissant)
Pour N : 39 %, puis 59 % de son prix
Norvège
Produit de la taxe
Depuis 1988
Taxe sur les engrais NP
Subventions aux exportations
Primes aux exportations
Subventions, dépenses de protection de
l'environnement
Versé au budget général.
Pour N : environ 20 % de son prix
Sources : OCDE, 1994 ; van Zeijts, 1999 ; informations UNIFA 1999 ; commission "Eau-Agriculture", MATE-MAP, 98/99.
Table 3. Evolution of nitrogen fertilizers consumption per hectare in countries with tax
(slope of the linear trends)
Autriche
Finlande
Norvège
Suède
Période avant taxe
1979-84
+0,4
1975-90
+1,9
1978-86
-0,8
1975-83
0
Période de taxation
1985-93
-1,1
1991-95
+3,5
1987-98
-1,2
1984-98
–0,9
Probabilité critique de la
différence de pente entre périodes
22x10-6
0,006
0,020
3,6x10-9
Source des données : FAO
- 18 -
Table 4. Evolution of nitrogen fertilizers consumption per hectare over the 90’s in
countries with and without tax
Pays
Pays-Bas
Groupe 1
Allemagne
Belgique-Lux.
Danemark
Norvège
Groupe 2
Finlande
France
Irlande
Italie
Royaume Uni
Suède
Groupe 3
Autriche
Espagne
Grèce
Portugal
Pente de la tendance
-4,08
Probabilité critique de
la pente
0,001
-1.08
-1,72
-5,03
-1,18
0,039
0,001
0,000
0,003
1,23
2.26
3,16
0,61
1,14*
-0,02
0,097
0,001
0,003
0,059
0,273
0,977
-0,56
1,30
-1,62
0,56
0.004
0,039
0,001
0,049
Source des données : FAO
Note : les pays avec taxe sont en italiques ; les résultats indiqués d'un* ne sont pas significatifs à 10 %
- 19 -
Table 5. Nitrogen fertilizers demand per hectare for 15 European Union countries over 1978-98
Estimated parameters
(critical probability)
Prix engrais
Prix produits agricoles
Part des terres arables
Taxation
Période troublée
Nb observations
AIC
Ensemble des 15 pays
-0.122
(0.7x10-3)
0.207
(8x10-6)
0.739
(10-9)
-0.003
(0.91)
-0.116
(10-9)
250
-663
Groupe 1
-0.095
(83x10-3)
0.253
(0.5x10-3)
0.695
(3x10-3)
-0.114
(0.1x10-3)
63
-204
Groupe 2
-0.205
(10-3)
0.145
(47x10-3)
0.719
(80x10-9)
0.744
(24x10-3)
-0.125
(0.1x10-6)
106
-273
Groupe 3
-0.209
(27x10-3)
0.427
(3x10-3)
0.192
(0.62)
0.005
(0.92)
-0.093
(36x10-3)
60
-152
L’examen de la multicolinéarité des variables PN , Pp, R, S et U a été satisfaisant puisque les rapports des valeurs propres n’ont jamais dépassé 7.
Un modèle de résidus auto-régressifs d’ordre 1 (AR1) a été appliqué pour les trois groupes pris séparément et pour l’ensemble des pays. En effet,
le diagnostic des séries chronologiques du point de vue de l’autocorrélation des résidus pour chaque pays a fait apparaître une structure d’ordre 1
très largement partagée et la très rare présence d’auto-corrélation d’ordre supérieur .
- 20 -
Figure 1 : Evolution of nitrogen fertilizers consumption per hectare (UAA) in 16 european countries 1961 - 1998
250
200
150
100
50
0
1960
1965
Autriche
Italie
1970
Bel-Lux
Pays Bas
1975
Danemark
Norvège
1980
Finlande
Portugal
1985
France
Espagne
Grèce
Suède
1990
Irlande
Roy-Uni
1995
Allemagne
- 21 -
Figure 2 . Compared evolutions of nitrogen fertilizers consumption per hectare (UAA) between countries with and without tax
140
120
100
80
60
40
20
0
1960
1965
Autriche
Data Source : FAO
1970
Finlande
Norvège
1975
Suède
1980
1985
Groupe 1 sans taxe
tax implementation
1990
Groupe 2 sans taxe
1995
Groupe 3 sans taxe
tax abolition
- 22 -

Fertilizers taxation and regulation of nonpoint water pollution.

Transcription

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