Convergence of EU nitrogen surplus, the RDP indicator of water quality

Abstract

The EU Water Framework Directive (WFD), EU Nitrate Directive and EU Rural Development Policy (RDP) aim to improve water quality. The nutrient content of water can be decreased by reducing nitrogen emission. In this article a novel approach is applied to the evaluation of the impact of Agri Environmental Measures (AEM), which are part of axis 2 of the EU Rural Development Programme. The spending on AEM is linked to the reduction of nitrogen surplus, and hence, to the improvement of water quality. Reduction of nitrogen surplus is considered as a beta convergence process, in which the nitrogen surplus of EU member states converges to a steady state level. The convergence is tested, applying spatial econometrics on a panel data set of EU member states. The development over time of nitrogen surplus is explained applying the conditional beta convergence methodology. To allow for varying steady state nitrogen surpluses, structural variables are added to the analysis. RDP spending on AEM was added as structural variable to evaluate whether they affect the reduction of nitrogen surplus. The fixed effects panel data specification was tested to be the best model and preferred over spatial econometric specifications. A significantly negative effect is found between AEM expenditures and nitrogen surplus. Based on these estimation results it can be concluded that spending on AEM affects the convergence of nitrogen surplus towards a steady state level. A causal relationship cannot be tested with data on EU Member State level and additional analysis at smaller spatial level is warranted.