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Complementary instruments to EEC nitrogen policy in non-sensitive areas: A case study in Southern Spain
Agricultural Systems 46 (1994) 245 255 © 1994 Elsevier Science Limited Printed in Great Britain. All rights reserved 0308-521 X/94/$07.00 ELSEVIER
Complementary Instruments to E E C Nitrogen Policy in Non-sensitive Areas: A Case Study in Southern Spain* Slim Zekri Ecole Suprrieure d'Agriculture de Mograne, 1121 Zaghouan, Tunisia
& A. Casimiro Herruzo ETSIAM, University of Crrdoba, 14080 Crrdoba, Spain (Received 10 April 1993; revised versions received 10 June 1993, 2 August 1993; accepted 16 September 1993)
ABSTRACT Current EC nitrogen legislation stipulates for the non-sensitive areas a preventive approach via the development of 'best management practices' (BMPs) within a context of voluntary implementation. Under existing technologies, the adoption of BMPs leads to economic losses. A crop simulation model ( N T R M ) and a mathematical mixed multi-objective programming model (NISE) are used to assess the effects of nitrogen price increase and drainage water reduction in inducing adoption of BMPs. The model shows that increasing nitrogen price cannot be used to stimulate farmers to adopt BMPs. On the other hand, imposing a tax on drainage water could lead to a reduction of up to 37% on the quantity of nitrogen leached with a decrease of only 1.5% in gross margin. However, above this level drainage water is no longer a useful instrument to reduce and control nitrogen losses, and could lead to inefficient solutions in terms of gross margin and nitrates pollution.
INTRODUCTION
Nitrate pollution is considered to be one of the most serious environmental problems originating from agriculture. Currently, nitrate from fertilizers * This research was initiated while the first author was a post-doctoral associate at the University of Crrdoba, Spain. 245
246
Slim Zekri, A. Casimiro Herruzo
is the major cause of non-point pollution of EC waters, threatening both the physical environment and/or human health (Hanley, 1991). Current EC legislation related to nitrate water pollution stipulates two kinds of actions which will be undertaken in the future. Mandatory measures for environmentally sensitive areas concerning the quantity of fertilizer used, soil management and animal waste management are being considered. For the rest of the areas, a preventive approach via the development and diffusion of 'best management practices' (BMPs) is to take place within a context of voluntary implementation (EEC Regulation 91/676, Article 4a). The concept of BMPs refers to a recommended level of input use (or a set of management practices) taking both environmental and economic factors into account (Leathers, 1991). At the current state of technology, maximization of farmers' income and environmental quality are competing objectives. Hence, the level of nitrogen use that best achieves farmers' goals differs from the level of nitrogen use which best achieves environmental objectives. The fundamental weaknesses of the voluntary BMPs approach is that, in many cases, the earnings from the more efficient use of fertilizer do not offset additional costs and/or yield reductions. Under such circumstances, it is almost certain that farmers will not be motivated to adopt BMPs. Taking this into account, the EC legislation contemplates the development of specific programs to promote BMPs (EEC Regulation 91/676, Article 4b). However, even if such programs are designed, there still remain the problems of control and monitoring. It is obvious that a relationship exists between the quantity of nitrogen fertilizer used and the quantity of nitrogen leached. So the reduction of nitrogen applied could result in a decrease in the amount of nitrogen leached. This relationship is non-linear, varies from crop to crop, and depends on other factors such as soil condition, and the amount of irrigation water. In irrigated areas, it is thought that the second major cause of nitrogen losses is the level and timing of irrigation together with the efficiency of the irrigation system. Thus, a complementarity exists between the quantity of drainage water and that of nitrogen leached. Consequently, minimizing drainage water could lead to a minimization of nitrogen leached. Besides, drainage water is observed and quantified more easily than nitrogen losses. The area selected for this study has 2000 ha of irrigated land, situated in the province of C6rdoba, southern Spain. The irrigation water is elevated from the Guadalquivir river. The presence of a shallow impermeable layer makes the drainage return flow divert to the Guadalquivir river. Current nitrate concentration in the Guadalquivir river (flowing through the considered area) is around 18 mg/liter (AMA, 1990). Following the
Complementary instruments to EEC nitrogen policy
247
EC classification, this area has a nitrate level in its waters below 50 mg/liter and is thus not considered as an environmentally sensitive area. The EC preventive approach involves first the identification of the BMPs the farmers should adopt and second the promotion of its use by farmers. In a previous paper we identified the BMPs farmers should adopt. It appeared that the adoption of BMPs could lead to losses varying from 6% to 21% of farmers' gross margin (FernS.ndez-Santos et al., 1993). Thus, there is a need to develop specific programs in order to induce the farmers to adopt the BMPs. The aim of this paper is to show how nitrogen price increase and drainage water taxation perform in encouraging farmers to adopt BMPs. The paper stresses the opportunity of nitrogen pollution control through drainage water in a context of limited information. METHODOLOGY This study is based on a simulation model and a mixed multi-objective programming model. The simulation model considered is the N T R M (Schaffer & Pierce, 1987). The simulations were based on 1990 weather conditions considering three crops: corn, cotton and sunflower. The key variables used for the simulations are the quantity and timing of nitrogen fertilizer applied as well as the quantity of irrigation water. This resulted in a variety of management practices for each crop. It is assumed that high nitrogen fertilizer rates together with inefficient irrigation systems are the principal factors responsible for water quality degradation by high nitrate concentration. The reduction of nitrogen quantity and the increase in the number of split applications will certainly lead to a considerable reduction of nitrate leached. Although the timing of irrigation is a key variable in reducing nitrogen pollution, it is not considered in this study, since under the current irrigation system farmers can irrigate their lands only every 10 days. Nevertheless, the level of irrigation is considered as a variable in the N T R M model. In this context 234 management practices are simulated for cotton, 71 for sunflower and 64 for corn. Each management practice is characterized by the quantity and timing of nitrogen fertilizer, the quantity of irrigation water, crop yield, drainage water and quantity of nitrate leachate. This information is used as technical coefficients in the mathematical multi-objective model. The mathematical mixed multi-objective model is designed for a representative farm of 40 ha. Four objectives are considered in this paper: (1) maximization of gross margin measured in pesetas (pts)/ha (2) minimization of nitrogen leachate measured in kg/ha
Slim Zekri, A. Casimiro Herruzo
248
(3) minimization of nitrogen fertilizer applied measured in kg/ha (4) minimization of drainage water measured in m3/ha year. Mathematically the model is expressed as follow: Maximise:
234
71
64
Z GM~COT,.+
Z GMjSj+
]~ GM k C O R k
i=1
j=l
234
k=l
71
64
~, N I T i COT t + ~, NITj Sj + ~, N I T k COR k
Minimise:
i=1
j=l
234
k=l
71
64
~. NFQi COT~ + ~. NFQj Sj + ~. NFQk COR k
Minimise:
i=1
j=l
234
71
Z DWjCOT~+
Minimise:
k=l 64
~, D W j S j +
i=1
Z DWkCORk
j=l
k=l
subject to 234
71
64
Z Wim C O T i + Z Wjm Sj q- Z Wkm COR k < A V W m
i=1 234
Z i=1
6
j=l
71
Z W~mcor~ + Z m=l
j=l
6
64
6
Z wj,. sj + Z m=l
Y~ w~m COR~ <_r o r w
k=l
234
71
64
j=l 71
(2)
m=l
~, COT i + ~. Sj + Z COR k < 4 0 i=1
(1)
k=l
(3)
k=l 64
Z s~ < 2 COR~ j=l
(4)
k=l
x~- COT~ < O
(5)
COT~ - 26 X~ < 0
(6)
234
Zx~<_l
(7)
i=1
Yj- sj_
(8) (9)
Complementary instruments to EEC nitrogen policy
249
71
Z Yj < 1
(10)
j=l
Z k - COR k < 0
(11)
COR k - 24 Zk < 0
(12)
64
Zk -< 1
(13)
k=l
where G M i = gross margin for the i-th management practice (pts/ha); COT" = area of i-th management practice for cotton; Sj = area ofj-th management practice for sunflower; CORk = area of k-th management practice for corn; NIT~ = nitrogen leachate of i-th management practice (kg/ha); NFQi = nitrogen fertilizer quantity of i-th management practice (kg/ha); D W~ = drainage water of i-th management practice (m3/ha); W,m ----water requirement for i-th management practice during m-th m o n t h (m3/ha), m = 1-6; 1 = March-6 = August; A VWm = water available during the m-th m o n t h (m3/ha); T O T W = total available water during the irrigation season (m3/ha); X, = a zero/one variable = 1, if and only if COT,. > 0; Yj = a zero/one variable = 1, if and only if Sj > 0; Z k = a zero/one variable = 1, if and only if CORj, > O. The first two constraints refer to monthly and irrigation season water limitations, respectively. Constraint (3) represents the total allowed area to be grown. Constraint (4) is an agronomic restraint that expresses the fact that sunflower can be grown only after corn. Constraints (5), (6) express the fact that if cotton is to be chosen in the crop mix the m i n i m u m area must be 1 ha and the upper b o u n d must be 26 ha (Schrage, 1986). The upper b o u n d is a restraint on individual crops for reasons related to diseases and weed control (Rae, 1977). Constraint (7) expresses the fact that only one m a n a g e m e n t practice for cotton can be chosen at a time. Constraints (8)-(10) and (11)-(13) express the same as constraints (5)-(7) for cotton, sunflower and corn. The decision-makers here are interested in two objectives: maximizing farmers' income and minimizing nitrogen pollution. Maximizing farmers' income is undertaken by maximizing the gross margin. The minimization of nitrogen pollution could either be achieved through the adoption of BMPs, the reduction of nitrogen fertilizer quantity, or the reduction of drainage water. Thus, three bicriterion models follow. Model 1 analyses the conflict between the maximization of gross margin and minimization of the quantity of nitrogen leached corresponding to each possible management practice in order to determine the BMPs and their opportunity costs in terms of gross margin. Model 2 consists of the maximization of gross margin versus mini-
250
Slim Zekri, A. Casimiro Herruzo
mization of nitrogen fertilizer quantity. Model 3 tackles the bicriterion problem: maximization of gross margin versus minimization of drainage water. In real life it is very difficult to measure the nitrate quantity produced by each farmer. The simulation model used in this study allows the quantification of nitrate leached. Model 1 was developed in Fern/mdez-Santos et al. (1993), and helped estimate the economic losses farmers would incur if they adopt the BMPs identified. Model 1 provides then an efficient frontier to which the solutions of Model 2 and Model 3 will be compared. Model 2 and Model 3 are used in order to test how well reducing the quantity of nitrogen fertilizer (through price enhancing) and decreasing the quantity of drainage water (through taxation) perform in reducing nitrate pollution and hence on BMPs' adoption. The non-Inferior Set Estimation Method (NISE) developed by Cohon et al. (1979) which allows the generation of extreme efficient solutions for problems with two or three objectives is used in this paper to resolve the three bicriterion models mentioned above. The NISE method also allows the estimation of trade-offs between any two objectives.
RESULTS Tables 1-3 show the extreme efficient solutions of Models 1 3, respectively. As mentioned above, Model 1 determines the BMPs as well as their opportunity cost. Model 2 determines the necessary increase in nitrogen price for any given level of nitrogen fertilizer application to induce farmers to reduce the quantity of nitrogen applied. Finally, Model 3 gives the amount of tax to be imposed on drainage water in order to stimulate farmers to reduce the quantity of drainage water diverting to the Guadalquivir river. The comparison of Model 1 with Model 2 shows how a program involving punishment for nitrogen use via price enhancing performs in encouraging farmers to adopt BMPs. The solutions H (Table 1) and S (Table 2) correspond to the ideal of gross margin, 10 792 million pts, and the anti-ideals of nitrogen leached and nitrogen applied, respectively, 2205 kg and 11 512 kg. The move from points H to G via the adoption of BMPs allows a 24% reduction of nitrogen leachate. Between these two points the opportunity cost of reducing 1 kg of nitrogen leached is 220 pts. Point P (Table 2) has a gross margin almost equal to that of point G (Table 1). The move from point S to point P reduces the applied nitrogen quantity by 1175 kg (10%), implying an opportunity cost of 102 pts/kg, that is the reduction of 1 kg of nitrogen applied implies a loss of 102 pts. The quantity of nitrogen leached corresponding to solution P is also similar to the quantity corresponding to
Complementary instruments to EEC nitrogen policy
251
TABLE 1 Extreme Efficient Solutions for the Bicriterion Problem Gross Margin versus Nitrogen Leachate (Model 1)
efficient solutions
Maximize: Gross margin (million pts )
Minimize: Nitrogen leachate (kg/year )
A B C D E F G H
8-507 9.905 10-124 10.294 10.445 10.560 10.676 10.792
762 973 028 070 153 259 675 205
Extreme
1 1 1 1 1 2
Trade-off (pts/kgs N leached)
6 3 4 1 1
620 980 050 820 080 280 220
Total Nitrogen applied ( kg/year ) 8 8 9 9 9 10 10 11
250 900 075 425 775 125 562 512
solution G. Therefore, the reduction of nitrogen leachate obtained by the BMPs (Model 1) could also be achieved by an increase in nitrogen price. Currently nitrogen price is about 75 pts/kg. Thus, if farmers are to use the quantity of nitrogen corresponding to point P, nitrogen price must be increased by 102 pts/kg. This amounts to raising fertilizer price by 236% for a reduction of 10% of nitrogen fertilizer quantity. The move from points G to F (Table 1) and from points P to O (Table 2) lead to similar results. Although, in this case a lower increase of nitrogen price (214% over the price considered on P) will lead to a higher TABLE 2 Extreme Efficient Solutions for the Bicriterion Problem: Gross Margin versus Nitrogen Applied (Model 2)
Extreme efficient solutions
Maximize." Gross margin (million pts)
I J K M O P Q R S
6-902 7.105 7.771 9.856 10.293 10.672 10-712 10.748 10.792
Minimize." Nitrogen applied (kg/year) 2 2 3 7 8 10 10 11 11
700 875 750 425 475 337 812 287 512
Trade-off (pts/kgs N applied)
1 155 433 433 416 204 85.88 74.89 21.68
Nitrogen applied (kg/year )
1 1 1 2 2
762 762 762 955 214 613 879 116 205
Slim Zekri, A. Casimiro Herruzo
252
TABLE 3 Extreme Efficient Solutions for the Bicriterion Problems: Gross Margin versus Drainage Water (Model 3)
Extreme efficient solutions
Maximize: Gross margin (million pts )
Minimize. Dra&age water (m3/year )
Trade-off (pts/kgs drainage water)
Nitrogen applied ( kg/year )
T U V
9.242 10.632 10.792
24 080 48 470 56 960
-57 19
1 393 l 619 2 205
decrease of the quantity of nitrogen applied (18%). In the same way the nitrogen price instrument would lead to the results obtained through BMPs when we consider the moves from O to M and from F to B. The minimum quantity of nitrogen that could be leached via the implementation of BMPs is 762 kg (point A). This could also be achieved by the input price mechanism (increasing nitrogen price and moving from M to K). Nonetheless, the gross margin achieved in A is larger than that reached in M, 8.507 million pts compared to 7-771 million pts. Thus, at this level the nitrogen price mechanism is no longer an efficient instrument for inducing farmers to adopt BMPs, since the reduction of the same quantity of nitrogen leached implies a larger decrease of gross margin. Moreover, as shown in Table 2, it is still possible to reduce the quantity of nitrogen applied (solution K to I) by a further increase of nitrogen price. But this will only lead to a decrease of gross margin without any improvement in the quantity of nitrogen leached. In summary, the nitrogen price mechanism could be used to encourage farmers to adopt BMPs till a certain level (solution M in Table 2). However, the use of this instrument beyond that level will only lead to a deterioration of farmers' income with no improvement in environmental quality. The comparison of Model 1 (Table 1) with Model 3 (Table 3) shows the performance of the instrument of drainage water taxing to induce farmers to adopt BMPs. As can be seen in Table 3, the gross margin ranges from 9.242 to 10-792 million pts. The quantity of drainage water varies considerably from 24 080 m3/year to 56 960 m3/year. The minimum quantity of nitrogen leachate is almost twice the quantity obtained with Model 1 (1393 kg and 762 kg, respectively). Figure 1 reproduces the information included in Tables 1 and 3 and shows the trade-off curves of gross margin versus nitrogen leachate (discontinuous line) and gross margin versus drainage water. The points A to H are the extreme efficient solutions of Model 1 (see Table 1). The points T to V are the extreme efficient solutions of Model 3: maximizing
253
Complementary instruments to EEC nitrogen policy
gross margin versus minimizing drainage water. As mentioned above, there is a strong relationship between water losses due to lixiviation (drainage water) and nitrogen leachate. Therefore, the comparison of these two curves reveals if a mechanism involving the reduction of drainage water helps in encouraging farmers to adopt BMPs. It is easily seen in Fig. 1 that segments VU and HG are almost identical. This means that the implementation of BMPs and the reduction of drainage water lead to similar results in terms of nitrogen leachate and gross margin. Drainage water could be easily measured, especially if it diverts to a drainage channel. This is not the case for the quantity of nitrogen leached for which more sophisticated measurement instruments are needed. Stated differently, the observation of the outcome is easier for drainage water than for the quantity of nitrogen leached. A tax could be imposed on the quantity of drainage water. For segment VU this tax amounts to 19 pts/m 3 (slope of VU) which could lead to a reduction of nitrogen leached of up to 37%, implying a loss of 1.5% in gross margin. Nevertheless, the observation of segment UT indicates that the instrument of drainage water reduction cannot be used indefinitely as a good surrogate to reduce nitrogen losses. In fact, reducing drainage water after point U leads to inefficient solutions in terms of gross margin and nitrogen leachate. DRAINAGE WATER ( m s / y e a r )
25000 47500 5000O
20000 I
11000-
I
I
/
1
/
1
1
/
50000 I
/
1
1
5.5000 1
1
F D n. "u
B
/
H Y
"--
U
C
10000 -! o r
z 0
1/1 14 0 0
J A
8000
!
750
i
I
i
1000
o
Gross M a r g / n
- Nitrogen Leaohate
o
Gross M s r g / n
-
I 1250
i
I
Drainage
i
1500
I
Water
i
1750
NITROGEN LEACHAT[ ( K g / y e a r )
Fig. 1.
T r a d e - o f f c u r v e s f o r M o d e l 1 a n d M o d e l 3.
I
2000
2250
254
Slim Zekri, A. Casimiro Herruzo
C O N C L U S I O N S A N D POLICY I M P L I C A T I O N S In this study a crop simulation model and a mathematical mixed multiobjective programming model are used to test the effects of nitrogen price increase and drainage water reduction on adopting BMPs. Under current technology, the voluntarily adoption of BMPs leads to economic losses varying from 6% to 21%. Thus, the implementation of specific instruments to promote BMPs is a necessity if the deterioration of environmental quality due to nitrates is to be prevented. The model shows that nitrogen price could be used, up to certain level, to stimulate farmers to adopt BMPs. An increase of at least 236% in nitrogen price could lead to a decrease of only 10% of nitrogen leached. Obviously, such an increase is not practically feasible. Moreover, after a certain level, it will lead to inefficient solutions in terms of nitrates pollution and gross margin. An alternative to nitrogen price increases is to induce farmers to reduce drainage water. The quantity of drainage water could be used as a good surrogate of the quantity of nitrogen leached. Imposing a tax on drainage water (19 pts/m 3) could lead to a reduction of up to 37% on the quantity of nitrogen leached with a decrease of only 1.5% in gross margin. It should be emphasized, however, that above a certain level, drainage water is no longer a useful instrument to reduce and control nitrogen losses. The problem with taxing drainage water is the inequity that could result. Drainage water diverts to drainage channels from a wide array of land, thus it is difficult to identify actual farmers causing the damage. An alternative instrument to reduce drainage water is to apply a tiered price for irrigation water to induce irrigation decisions at farm level to coincide with socially optimal choices (Wichelns, 1991). If such an instrument is unfeasible due to the difficulty of measuring individual farmer's use of irrigation water, then a subsidy could help to induce a change to more efficient irrigation technologies such as sprinkler and trickle irrigation systems (Zekri & Romero, 1992). This will probably result in a further reduction of nitrogen losses if 'fertigation' technologies were incorporated into irrigation systems. REFERENCES AMA, Agencia de Medio-Ambiente (1990). Medio ambiente en Andalucia: Informe de 1989. Consejeria de Cultura y Medio Ambiente de la Junta de Andalucia, Seville. Cohon, J. L., Church, R. L. & Sheer, D. P. (1979). Generating Multiobjective Trade-offs: An Algorithm for Bicriterion Problems. Water Resources Research, 15, 1001-10.
Complementary instruments to EEC nitrogen policy
255
Fern~mdez-Santos, J., Zekri, S. & Herruzo, A. C. (1993). On-farm costs of reducing nitrogen pollution through BMP's. Agriculture, Ecosystems & Environment, 34, 1-11. Hanley, N. (1991). The Economics of Nitrate Pollution Control in the UK. Farming in the Country Side, ed. N. Hanley. C.A.B. International, London, Chapter 6. Leathers, H. D. (1991). Best Management Practices versus Socially Optimal Practices. In Commodity and Resource Policies in Agricultural Systems, eds. R. E. Just & N. Bockstal. Springer-Verlag, Berlin. Rae, N. (1977). Crop Management Economics. Crosby Lockwood Staples, London. Schaffer, M. J. & Pierce, F. J. (1987). A User's Guide to NTRM, a Soil-Crop Simulation Model for Nitrogen, Tillage, and Crop-Residue Management. U.S. Department of Agriculture, Agricultural Research Service, Conservation Research Report, 34-2. Schrage, L. (1986). Linear, Integer, and Quadratic Programming with LINDO. Scientific Press, Chicago. Wichelns, D. (1991). Increasing Block Rate Prices for Irrigation Water Motivate Drainage Water Reduction. In The Economics and Management of Water and Drainage in Agriculture, eds. A Dinar & D. Zilberman. Kluwer Academic Publishers, Boston. Zekri, S. & Romero, C. (1992). Ecological versus Economical Objectives: A Public Decision Making Problem in Agricultural Water Management. In Sustainable Agricultural Development: The Role of International Cooperation, eds. M. Bellamy & B. Greenshields. IAAE Occasional Paper, number 6, Dartmouth Publishing Company.
Complementary Instruments to E E C Nitrogen Policy in Non-sensitive Areas: A Case Study in Southern Spain* Slim Zekri Ecole Suprrieure d'Agriculture de Mograne, 1121 Zaghouan, Tunisia
& A. Casimiro Herruzo ETSIAM, University of Crrdoba, 14080 Crrdoba, Spain (Received 10 April 1993; revised versions received 10 June 1993, 2 August 1993; accepted 16 September 1993)
ABSTRACT Current EC nitrogen legislation stipulates for the non-sensitive areas a preventive approach via the development of 'best management practices' (BMPs) within a context of voluntary implementation. Under existing technologies, the adoption of BMPs leads to economic losses. A crop simulation model ( N T R M ) and a mathematical mixed multi-objective programming model (NISE) are used to assess the effects of nitrogen price increase and drainage water reduction in inducing adoption of BMPs. The model shows that increasing nitrogen price cannot be used to stimulate farmers to adopt BMPs. On the other hand, imposing a tax on drainage water could lead to a reduction of up to 37% on the quantity of nitrogen leached with a decrease of only 1.5% in gross margin. However, above this level drainage water is no longer a useful instrument to reduce and control nitrogen losses, and could lead to inefficient solutions in terms of gross margin and nitrates pollution.
INTRODUCTION
Nitrate pollution is considered to be one of the most serious environmental problems originating from agriculture. Currently, nitrate from fertilizers * This research was initiated while the first author was a post-doctoral associate at the University of Crrdoba, Spain. 245
246
Slim Zekri, A. Casimiro Herruzo
is the major cause of non-point pollution of EC waters, threatening both the physical environment and/or human health (Hanley, 1991). Current EC legislation related to nitrate water pollution stipulates two kinds of actions which will be undertaken in the future. Mandatory measures for environmentally sensitive areas concerning the quantity of fertilizer used, soil management and animal waste management are being considered. For the rest of the areas, a preventive approach via the development and diffusion of 'best management practices' (BMPs) is to take place within a context of voluntary implementation (EEC Regulation 91/676, Article 4a). The concept of BMPs refers to a recommended level of input use (or a set of management practices) taking both environmental and economic factors into account (Leathers, 1991). At the current state of technology, maximization of farmers' income and environmental quality are competing objectives. Hence, the level of nitrogen use that best achieves farmers' goals differs from the level of nitrogen use which best achieves environmental objectives. The fundamental weaknesses of the voluntary BMPs approach is that, in many cases, the earnings from the more efficient use of fertilizer do not offset additional costs and/or yield reductions. Under such circumstances, it is almost certain that farmers will not be motivated to adopt BMPs. Taking this into account, the EC legislation contemplates the development of specific programs to promote BMPs (EEC Regulation 91/676, Article 4b). However, even if such programs are designed, there still remain the problems of control and monitoring. It is obvious that a relationship exists between the quantity of nitrogen fertilizer used and the quantity of nitrogen leached. So the reduction of nitrogen applied could result in a decrease in the amount of nitrogen leached. This relationship is non-linear, varies from crop to crop, and depends on other factors such as soil condition, and the amount of irrigation water. In irrigated areas, it is thought that the second major cause of nitrogen losses is the level and timing of irrigation together with the efficiency of the irrigation system. Thus, a complementarity exists between the quantity of drainage water and that of nitrogen leached. Consequently, minimizing drainage water could lead to a minimization of nitrogen leached. Besides, drainage water is observed and quantified more easily than nitrogen losses. The area selected for this study has 2000 ha of irrigated land, situated in the province of C6rdoba, southern Spain. The irrigation water is elevated from the Guadalquivir river. The presence of a shallow impermeable layer makes the drainage return flow divert to the Guadalquivir river. Current nitrate concentration in the Guadalquivir river (flowing through the considered area) is around 18 mg/liter (AMA, 1990). Following the
Complementary instruments to EEC nitrogen policy
247
EC classification, this area has a nitrate level in its waters below 50 mg/liter and is thus not considered as an environmentally sensitive area. The EC preventive approach involves first the identification of the BMPs the farmers should adopt and second the promotion of its use by farmers. In a previous paper we identified the BMPs farmers should adopt. It appeared that the adoption of BMPs could lead to losses varying from 6% to 21% of farmers' gross margin (FernS.ndez-Santos et al., 1993). Thus, there is a need to develop specific programs in order to induce the farmers to adopt the BMPs. The aim of this paper is to show how nitrogen price increase and drainage water taxation perform in encouraging farmers to adopt BMPs. The paper stresses the opportunity of nitrogen pollution control through drainage water in a context of limited information. METHODOLOGY This study is based on a simulation model and a mixed multi-objective programming model. The simulation model considered is the N T R M (Schaffer & Pierce, 1987). The simulations were based on 1990 weather conditions considering three crops: corn, cotton and sunflower. The key variables used for the simulations are the quantity and timing of nitrogen fertilizer applied as well as the quantity of irrigation water. This resulted in a variety of management practices for each crop. It is assumed that high nitrogen fertilizer rates together with inefficient irrigation systems are the principal factors responsible for water quality degradation by high nitrate concentration. The reduction of nitrogen quantity and the increase in the number of split applications will certainly lead to a considerable reduction of nitrate leached. Although the timing of irrigation is a key variable in reducing nitrogen pollution, it is not considered in this study, since under the current irrigation system farmers can irrigate their lands only every 10 days. Nevertheless, the level of irrigation is considered as a variable in the N T R M model. In this context 234 management practices are simulated for cotton, 71 for sunflower and 64 for corn. Each management practice is characterized by the quantity and timing of nitrogen fertilizer, the quantity of irrigation water, crop yield, drainage water and quantity of nitrate leachate. This information is used as technical coefficients in the mathematical multi-objective model. The mathematical mixed multi-objective model is designed for a representative farm of 40 ha. Four objectives are considered in this paper: (1) maximization of gross margin measured in pesetas (pts)/ha (2) minimization of nitrogen leachate measured in kg/ha
Slim Zekri, A. Casimiro Herruzo
248
(3) minimization of nitrogen fertilizer applied measured in kg/ha (4) minimization of drainage water measured in m3/ha year. Mathematically the model is expressed as follow: Maximise:
234
71
64
Z GM~COT,.+
Z GMjSj+
]~ GM k C O R k
i=1
j=l
234
k=l
71
64
~, N I T i COT t + ~, NITj Sj + ~, N I T k COR k
Minimise:
i=1
j=l
234
k=l
71
64
~. NFQi COT~ + ~. NFQj Sj + ~. NFQk COR k
Minimise:
i=1
j=l
234
71
Z DWjCOT~+
Minimise:
k=l 64
~, D W j S j +
i=1
Z DWkCORk
j=l
k=l
subject to 234
71
64
Z Wim C O T i + Z Wjm Sj q- Z Wkm COR k < A V W m
i=1 234
Z i=1
6
j=l
71
Z W~mcor~ + Z m=l
j=l
6
64
6
Z wj,. sj + Z m=l
Y~ w~m COR~ <_r o r w
k=l
234
71
64
j=l 71
(2)
m=l
~, COT i + ~. Sj + Z COR k < 4 0 i=1
(1)
k=l
(3)
k=l 64
Z s~ < 2 COR~ j=l
(4)
k=l
x~- COT~ < O
(5)
COT~ - 26 X~ < 0
(6)
234
Zx~<_l
(7)
i=1
Yj- sj_
(8) (9)
Complementary instruments to EEC nitrogen policy
249
71
Z Yj < 1
(10)
j=l
Z k - COR k < 0
(11)
COR k - 24 Zk < 0
(12)
64
Zk -< 1
(13)
k=l
where G M i = gross margin for the i-th management practice (pts/ha); COT" = area of i-th management practice for cotton; Sj = area ofj-th management practice for sunflower; CORk = area of k-th management practice for corn; NIT~ = nitrogen leachate of i-th management practice (kg/ha); NFQi = nitrogen fertilizer quantity of i-th management practice (kg/ha); D W~ = drainage water of i-th management practice (m3/ha); W,m ----water requirement for i-th management practice during m-th m o n t h (m3/ha), m = 1-6; 1 = March-6 = August; A VWm = water available during the m-th m o n t h (m3/ha); T O T W = total available water during the irrigation season (m3/ha); X, = a zero/one variable = 1, if and only if COT,. > 0; Yj = a zero/one variable = 1, if and only if Sj > 0; Z k = a zero/one variable = 1, if and only if CORj, > O. The first two constraints refer to monthly and irrigation season water limitations, respectively. Constraint (3) represents the total allowed area to be grown. Constraint (4) is an agronomic restraint that expresses the fact that sunflower can be grown only after corn. Constraints (5), (6) express the fact that if cotton is to be chosen in the crop mix the m i n i m u m area must be 1 ha and the upper b o u n d must be 26 ha (Schrage, 1986). The upper b o u n d is a restraint on individual crops for reasons related to diseases and weed control (Rae, 1977). Constraint (7) expresses the fact that only one m a n a g e m e n t practice for cotton can be chosen at a time. Constraints (8)-(10) and (11)-(13) express the same as constraints (5)-(7) for cotton, sunflower and corn. The decision-makers here are interested in two objectives: maximizing farmers' income and minimizing nitrogen pollution. Maximizing farmers' income is undertaken by maximizing the gross margin. The minimization of nitrogen pollution could either be achieved through the adoption of BMPs, the reduction of nitrogen fertilizer quantity, or the reduction of drainage water. Thus, three bicriterion models follow. Model 1 analyses the conflict between the maximization of gross margin and minimization of the quantity of nitrogen leached corresponding to each possible management practice in order to determine the BMPs and their opportunity costs in terms of gross margin. Model 2 consists of the maximization of gross margin versus mini-
250
Slim Zekri, A. Casimiro Herruzo
mization of nitrogen fertilizer quantity. Model 3 tackles the bicriterion problem: maximization of gross margin versus minimization of drainage water. In real life it is very difficult to measure the nitrate quantity produced by each farmer. The simulation model used in this study allows the quantification of nitrate leached. Model 1 was developed in Fern/mdez-Santos et al. (1993), and helped estimate the economic losses farmers would incur if they adopt the BMPs identified. Model 1 provides then an efficient frontier to which the solutions of Model 2 and Model 3 will be compared. Model 2 and Model 3 are used in order to test how well reducing the quantity of nitrogen fertilizer (through price enhancing) and decreasing the quantity of drainage water (through taxation) perform in reducing nitrate pollution and hence on BMPs' adoption. The non-Inferior Set Estimation Method (NISE) developed by Cohon et al. (1979) which allows the generation of extreme efficient solutions for problems with two or three objectives is used in this paper to resolve the three bicriterion models mentioned above. The NISE method also allows the estimation of trade-offs between any two objectives.
RESULTS Tables 1-3 show the extreme efficient solutions of Models 1 3, respectively. As mentioned above, Model 1 determines the BMPs as well as their opportunity cost. Model 2 determines the necessary increase in nitrogen price for any given level of nitrogen fertilizer application to induce farmers to reduce the quantity of nitrogen applied. Finally, Model 3 gives the amount of tax to be imposed on drainage water in order to stimulate farmers to reduce the quantity of drainage water diverting to the Guadalquivir river. The comparison of Model 1 with Model 2 shows how a program involving punishment for nitrogen use via price enhancing performs in encouraging farmers to adopt BMPs. The solutions H (Table 1) and S (Table 2) correspond to the ideal of gross margin, 10 792 million pts, and the anti-ideals of nitrogen leached and nitrogen applied, respectively, 2205 kg and 11 512 kg. The move from points H to G via the adoption of BMPs allows a 24% reduction of nitrogen leachate. Between these two points the opportunity cost of reducing 1 kg of nitrogen leached is 220 pts. Point P (Table 2) has a gross margin almost equal to that of point G (Table 1). The move from point S to point P reduces the applied nitrogen quantity by 1175 kg (10%), implying an opportunity cost of 102 pts/kg, that is the reduction of 1 kg of nitrogen applied implies a loss of 102 pts. The quantity of nitrogen leached corresponding to solution P is also similar to the quantity corresponding to
Complementary instruments to EEC nitrogen policy
251
TABLE 1 Extreme Efficient Solutions for the Bicriterion Problem Gross Margin versus Nitrogen Leachate (Model 1)
efficient solutions
Maximize: Gross margin (million pts )
Minimize: Nitrogen leachate (kg/year )
A B C D E F G H
8-507 9.905 10-124 10.294 10.445 10.560 10.676 10.792
762 973 028 070 153 259 675 205
Extreme
1 1 1 1 1 2
Trade-off (pts/kgs N leached)
6 3 4 1 1
620 980 050 820 080 280 220
Total Nitrogen applied ( kg/year ) 8 8 9 9 9 10 10 11
250 900 075 425 775 125 562 512
solution G. Therefore, the reduction of nitrogen leachate obtained by the BMPs (Model 1) could also be achieved by an increase in nitrogen price. Currently nitrogen price is about 75 pts/kg. Thus, if farmers are to use the quantity of nitrogen corresponding to point P, nitrogen price must be increased by 102 pts/kg. This amounts to raising fertilizer price by 236% for a reduction of 10% of nitrogen fertilizer quantity. The move from points G to F (Table 1) and from points P to O (Table 2) lead to similar results. Although, in this case a lower increase of nitrogen price (214% over the price considered on P) will lead to a higher TABLE 2 Extreme Efficient Solutions for the Bicriterion Problem: Gross Margin versus Nitrogen Applied (Model 2)
Extreme efficient solutions
Maximize." Gross margin (million pts)
I J K M O P Q R S
6-902 7.105 7.771 9.856 10.293 10.672 10-712 10.748 10.792
Minimize." Nitrogen applied (kg/year) 2 2 3 7 8 10 10 11 11
700 875 750 425 475 337 812 287 512
Trade-off (pts/kgs N applied)
1 155 433 433 416 204 85.88 74.89 21.68
Nitrogen applied (kg/year )
1 1 1 2 2
762 762 762 955 214 613 879 116 205
Slim Zekri, A. Casimiro Herruzo
252
TABLE 3 Extreme Efficient Solutions for the Bicriterion Problems: Gross Margin versus Drainage Water (Model 3)
Extreme efficient solutions
Maximize: Gross margin (million pts )
Minimize. Dra&age water (m3/year )
Trade-off (pts/kgs drainage water)
Nitrogen applied ( kg/year )
T U V
9.242 10.632 10.792
24 080 48 470 56 960
-57 19
1 393 l 619 2 205
decrease of the quantity of nitrogen applied (18%). In the same way the nitrogen price instrument would lead to the results obtained through BMPs when we consider the moves from O to M and from F to B. The minimum quantity of nitrogen that could be leached via the implementation of BMPs is 762 kg (point A). This could also be achieved by the input price mechanism (increasing nitrogen price and moving from M to K). Nonetheless, the gross margin achieved in A is larger than that reached in M, 8.507 million pts compared to 7-771 million pts. Thus, at this level the nitrogen price mechanism is no longer an efficient instrument for inducing farmers to adopt BMPs, since the reduction of the same quantity of nitrogen leached implies a larger decrease of gross margin. Moreover, as shown in Table 2, it is still possible to reduce the quantity of nitrogen applied (solution K to I) by a further increase of nitrogen price. But this will only lead to a decrease of gross margin without any improvement in the quantity of nitrogen leached. In summary, the nitrogen price mechanism could be used to encourage farmers to adopt BMPs till a certain level (solution M in Table 2). However, the use of this instrument beyond that level will only lead to a deterioration of farmers' income with no improvement in environmental quality. The comparison of Model 1 (Table 1) with Model 3 (Table 3) shows the performance of the instrument of drainage water taxing to induce farmers to adopt BMPs. As can be seen in Table 3, the gross margin ranges from 9.242 to 10-792 million pts. The quantity of drainage water varies considerably from 24 080 m3/year to 56 960 m3/year. The minimum quantity of nitrogen leachate is almost twice the quantity obtained with Model 1 (1393 kg and 762 kg, respectively). Figure 1 reproduces the information included in Tables 1 and 3 and shows the trade-off curves of gross margin versus nitrogen leachate (discontinuous line) and gross margin versus drainage water. The points A to H are the extreme efficient solutions of Model 1 (see Table 1). The points T to V are the extreme efficient solutions of Model 3: maximizing
253
Complementary instruments to EEC nitrogen policy
gross margin versus minimizing drainage water. As mentioned above, there is a strong relationship between water losses due to lixiviation (drainage water) and nitrogen leachate. Therefore, the comparison of these two curves reveals if a mechanism involving the reduction of drainage water helps in encouraging farmers to adopt BMPs. It is easily seen in Fig. 1 that segments VU and HG are almost identical. This means that the implementation of BMPs and the reduction of drainage water lead to similar results in terms of nitrogen leachate and gross margin. Drainage water could be easily measured, especially if it diverts to a drainage channel. This is not the case for the quantity of nitrogen leached for which more sophisticated measurement instruments are needed. Stated differently, the observation of the outcome is easier for drainage water than for the quantity of nitrogen leached. A tax could be imposed on the quantity of drainage water. For segment VU this tax amounts to 19 pts/m 3 (slope of VU) which could lead to a reduction of nitrogen leached of up to 37%, implying a loss of 1.5% in gross margin. Nevertheless, the observation of segment UT indicates that the instrument of drainage water reduction cannot be used indefinitely as a good surrogate to reduce nitrogen losses. In fact, reducing drainage water after point U leads to inefficient solutions in terms of gross margin and nitrogen leachate. DRAINAGE WATER ( m s / y e a r )
25000 47500 5000O
20000 I
11000-
I
I
/
1
/
1
1
/
50000 I
/
1
1
5.5000 1
1
F D n. "u
B
/
H Y
"--
U
C
10000 -! o r
z 0
1/1 14 0 0
J A
8000
!
750
i
I
i
1000
o
Gross M a r g / n
- Nitrogen Leaohate
o
Gross M s r g / n
-
I 1250
i
I
Drainage
i
1500
I
Water
i
1750
NITROGEN LEACHAT[ ( K g / y e a r )
Fig. 1.
T r a d e - o f f c u r v e s f o r M o d e l 1 a n d M o d e l 3.
I
2000
2250
254
Slim Zekri, A. Casimiro Herruzo
C O N C L U S I O N S A N D POLICY I M P L I C A T I O N S In this study a crop simulation model and a mathematical mixed multiobjective programming model are used to test the effects of nitrogen price increase and drainage water reduction on adopting BMPs. Under current technology, the voluntarily adoption of BMPs leads to economic losses varying from 6% to 21%. Thus, the implementation of specific instruments to promote BMPs is a necessity if the deterioration of environmental quality due to nitrates is to be prevented. The model shows that nitrogen price could be used, up to certain level, to stimulate farmers to adopt BMPs. An increase of at least 236% in nitrogen price could lead to a decrease of only 10% of nitrogen leached. Obviously, such an increase is not practically feasible. Moreover, after a certain level, it will lead to inefficient solutions in terms of nitrates pollution and gross margin. An alternative to nitrogen price increases is to induce farmers to reduce drainage water. The quantity of drainage water could be used as a good surrogate of the quantity of nitrogen leached. Imposing a tax on drainage water (19 pts/m 3) could lead to a reduction of up to 37% on the quantity of nitrogen leached with a decrease of only 1.5% in gross margin. It should be emphasized, however, that above a certain level, drainage water is no longer a useful instrument to reduce and control nitrogen losses. The problem with taxing drainage water is the inequity that could result. Drainage water diverts to drainage channels from a wide array of land, thus it is difficult to identify actual farmers causing the damage. An alternative instrument to reduce drainage water is to apply a tiered price for irrigation water to induce irrigation decisions at farm level to coincide with socially optimal choices (Wichelns, 1991). If such an instrument is unfeasible due to the difficulty of measuring individual farmer's use of irrigation water, then a subsidy could help to induce a change to more efficient irrigation technologies such as sprinkler and trickle irrigation systems (Zekri & Romero, 1992). This will probably result in a further reduction of nitrogen losses if 'fertigation' technologies were incorporated into irrigation systems. REFERENCES AMA, Agencia de Medio-Ambiente (1990). Medio ambiente en Andalucia: Informe de 1989. Consejeria de Cultura y Medio Ambiente de la Junta de Andalucia, Seville. Cohon, J. L., Church, R. L. & Sheer, D. P. (1979). Generating Multiobjective Trade-offs: An Algorithm for Bicriterion Problems. Water Resources Research, 15, 1001-10.
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Fern~mdez-Santos, J., Zekri, S. & Herruzo, A. C. (1993). On-farm costs of reducing nitrogen pollution through BMP's. Agriculture, Ecosystems & Environment, 34, 1-11. Hanley, N. (1991). The Economics of Nitrate Pollution Control in the UK. Farming in the Country Side, ed. N. Hanley. C.A.B. International, London, Chapter 6. Leathers, H. D. (1991). Best Management Practices versus Socially Optimal Practices. In Commodity and Resource Policies in Agricultural Systems, eds. R. E. Just & N. Bockstal. Springer-Verlag, Berlin. Rae, N. (1977). Crop Management Economics. Crosby Lockwood Staples, London. Schaffer, M. J. & Pierce, F. J. (1987). A User's Guide to NTRM, a Soil-Crop Simulation Model for Nitrogen, Tillage, and Crop-Residue Management. U.S. Department of Agriculture, Agricultural Research Service, Conservation Research Report, 34-2. Schrage, L. (1986). Linear, Integer, and Quadratic Programming with LINDO. Scientific Press, Chicago. Wichelns, D. (1991). Increasing Block Rate Prices for Irrigation Water Motivate Drainage Water Reduction. In The Economics and Management of Water and Drainage in Agriculture, eds. A Dinar & D. Zilberman. Kluwer Academic Publishers, Boston. Zekri, S. & Romero, C. (1992). Ecological versus Economical Objectives: A Public Decision Making Problem in Agricultural Water Management. In Sustainable Agricultural Development: The Role of International Cooperation, eds. M. Bellamy & B. Greenshields. IAAE Occasional Paper, number 6, Dartmouth Publishing Company.