Why voluntary programs struggle and marketbased instruments are likely to work best Brent Sohngen OSU Current Subsidy Policy Subsidize the implementation of practices aimed at trapping nutrients on the land ID: 1033475
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1. Reducing phosphorus emissions: Why voluntary programs struggle and market-based instruments are likely to work bestBrent Sohngen (OSU)
2. Current Subsidy PolicySubsidize the implementation of practices aimed at trapping nutrients on the land63% of all cropped acres in US have some form of conservation tillageConservation Reserve Program (CRP enrolled over 14 million ha in US and over 140,000 ha in Ohio.Manure storage structures trap nutrients in hardened structuresCover crops trap some nutrients in plant materialCreate legacy effects.
3. Farm Bill PaymentsData from R. Claasen, USDA-ERSAverage payment in Ohio = $14/acre
4. Why do emissions keep getting worse even as subsidies and regulations have increased?
5. ProblemsDifficult for agencies to target pollution reductionFunds need to spread out to achieve political goals. Example: Do cover crops have the same effects on all soils? Should they be targeted to soils with the greatest soil P?When targeting does occur, it focuses on practices, not pollution reductionCREP, cover crops, conservation tillageProblem with practice-based targeting is that the array of practices will not be effective, is focused on the last issue, and misses important trends (CREP program ignored sub-surface flows).
6. ProblemsLittle incentive to innovateWhen faced with market incentives for crops or inputs, farmers adopt new varieties and techniques quickly. Conservation tillage widely adopted when technologies combined with higher off-farm labor rates in the 1990s and 2000s. With conservation programs, payments are for pre-defined activities. Farmers have no incentive to innovate. They stand to gain little if they make a really large contribution to reducing pollution.All the activities allowed, and the specifications for implementing those activities, are defined in the Field Office Technical Guide.
7. ProblemsFunds are skewed towards capital expenditures rather than management.EQIP funds have historically been shifted towards funding livestock activities, and heavily towards implementing the federal CAFO rules.These expenditures were not geared towards reducing nutrient loads.When management is addressed, it’s problematicE.g., Nutrient management plans have a limited impact because they need to be implemented on a continual basis.
8. ProblemsTrapped nutrients do not appear to be all that stable.It looks like we have done exactly what we set out to do 40 years ago when we decided to focus on using conservation tillage to reduce soil erosion and maintain P in fields. We did not count on it coming out.
9. ProblemsTrapping is expensiveCover crops (CP 327)$40-$120/acConservation crop rotation (CP 328)$80-$200/acNutrient Management Plans (CP590)50-$80/acCritical Area Planting (CP 342)$250/ac + 90# P2O5/acreAvg CRP rental rates $125/acre with CREP lots higher.
10. How to address?Change the incentive farmers faceTax PP prices do not account for the damages P release causes (they are too low), so we should tax P fertilizer to raise the price farmers pay.This will cause farmers to adopt the 4Rs more widely and robustly.Would this work?Evidence is that past price increases have reduced emissions.
11. Effect of recent high P prices?High Phosphorus prices in 2006-2011 period reduced soluble P emissions by 28% in Maumee and 21% in Sandusky.Prices increased by around 92% relative to earlier averages
12. Pros and Cons of P taxPlus SideRaise the costs to farmers, so they change behavior.Institutions available: Sales tax already collected.Reduces future legacy P.Provides strong incentive to use 4R practices.Less costly than the current subsidy programs that are ineffective and cost $14 per acre.Negative SideCostly to farmers – a 135% tax would be needed to achieve a 40% reduction, costing $6 per acre.Could lead to yield losses that increase those lossesDoes not include manure nutrients (that only makes things worse if farmers add animals to increase fertilizer).
13. How to address?Change the incentive farmers faceLimit P inputs on each acreCurrent average in agricultural areas is somewhere around 16 lbs P per acre (37 lbs P2O5).30 lbs P on corn (>90% acres), 24 lbs P on soy and wheat (20% and >90% acres repsectively).Start to reduce average application per farmer.Farmers choose crops, rates, timing, etc.
14. How much P needs to be reduced?To achieve the P task force suggested 40% reduction, need to reduce 1300 tons at Maumee and Sandusky mouth, or 12,000 tons on farms. Each 9 lb reduction in P inputs by farmers will reduce 1 lb of P in the lake. To attain a 40% reduction in emissions need to reduce 5.4 lbs P, or 12.4 lbs P2O5 per acre.
15. Example for 1000 acre farm500 acres soybean, 350 acres corn and 150 acres wheat, applications average 16 lbs P per acre, or 16000 lbs. 1440 lbs make their way into Lake Erie.To achieve a 40% reduction, you need to reduce your inputs so as to achieve a reduction of 576 lbs of your P delivery at the lake.This is a reduction of 5299 lbs from your farm, or roughly 5.3 lbs per acre.One myth out there is that you just need to reduce your emissions by a half a pound per acre (576 lbs/1000 acres)That is false. A half a pound per acre reduction on your farm will deliver a reduction of only 50 lbs downstream, which is nowhere near the needed reduction of 40%.
16. How to implement a P limit?Start with a 15 lb per acre of farmed land limit on P (34.4 lbs P2O5).Reduce over time to 11 lbTo further reduce costs and provide incentives for farmers to adapt to the policy, can allow trading.
17. Pros and Cons of P limitsPlus SideRaise the costs to farmers.Easier to include manure nutrients.Institutions available with new regulations on fertilizer applicators.Reduces future legacy PProvides strong incentive to use 4R practices.Less costly to society than current programs.Negative SideShould cost farmers about the same as the P tax, but could achieve further cost savings with trading market.Could lead to yield losses that increase those losses.More cumbersome and costly to measure, monitor and verify.
18. How to address?Change the incentive farmers faceAdjust Tri-state recommendations to include externalities and enforce the recommendations on farms in specific watersheds (e.g., watersheds in distress)
19. Soil testFertilizerRateCritical levelMaintenancelimitTri-State P Recommendations without externalities
20. Soil testFertilizerRateCritical levelMaintenancelimitTri-State P Recommendations with externalities
21. Can the 4Rs be successful?If purely voluntary, they will face difficulties achieving a 40% reduction in P delivered to Lake Erie.If linked with other policies, such as P taxes, P limits, or externality adjusted tri-state recommendations, then they will be very successful.
22. Other IssuesWeatherLegacy PCrop yields
23. Changing weather patterns increased emissionsIf we apply the weather from 1980-1995 to the period 1996-2011, SRP emissions fall by 28% in Maumee and 46% in the Sandusky.
24. What do changing weather patterns mean for policy?Changing weather patterns suggest that policy has to be more strict, not less strict.
25. Other issues: Legacy PP is a stock pollutant that builds up in soils and leaks out over time, particularly with the use of conservation tillage to hold soils on the landscape.The presence of legacy P implies that policies have to be more stringent than otherwise.We cannot reduce our past applications.
26. Higher crop yields appear to lead to more emissions. Summertime concentrations should be lower if higher yields take up more nutrient, but concentrations actually are higher in years with higher yieldsGood crop years also appear to be good years to release trapped nutrients.
27. ConclusionsResponding to P emissions will require a different approach for the conservation community, an approach that recognizes the limits to policies that trap nutrients and focus on specific activities, like conservation tillage or cover crops.Policy needs to increase the incentive landowners have to reduce pollutants in order to gain efficiencies and reduce overall costs. There are a number of good policy approaches for doing this.