Abstract
We investigate crop rotation with legumes from economic and environmental perspectives by asking how effective they are at providing profits and reducing nutrient runoff and greenhouse gas emissions compared with monoculture cultivation. We study this effectiveness in three alternative policy regimes: the free market optimum, the Finnish agri-environmental scheme, and socially optimal cultivation, and also design policy instruments to achieve the socially optimal outcomes in land use and fertilization. We first develop an analytical model to describe crop rotation and the role of legumes, and examine its implications for water and climate policies. Drawing on Finnish agricultural data, we then use numerical simulations and show that shifting from monoculture cultivation to crop rotation with legumes provides economically and environmentally better outcomes. Crop rotation with legumes also reduces the variability in profits caused by stochastic weather. The optimal instruments implementing the social optimum depend on nutrient and climate damage (nitrogen tax), as well as carbon sequestration and nutrient reduction benefits (buffer strip subsidy).
Highlights
Agriculture contributes considerably to water pollution all over the world
Wider buffer strips for cereal monocultures are due to higher nutrient runoff and greenhouse gas (GHG) emissions compared with crop rotations with legumes, and the ability of buffer strips to sequester CO2 and reduce nutrient runoff
We examined crop rotation with legumes from economic and environmental perspectives and compared it with conventional cereal monoculture cultivation
Summary
Agriculture contributes considerably to water pollution all over the world. point-source polluters have reduced their loads as a result of regulatory policies, the control of pollution from nonpoint sources such as agriculture is mostly based on voluntary participation, and progress has been slow (Horan et al 2004; Ollikainen et al 2012; Hautakangas et al 2014). Only one yield response function, yi(·), is needed to describe the production, but, because of the nitrogen fixation by legumes, four different specifications must be developed for crop rotations (see Appendix I for agronomic details). Crop rotations with legumes always lower nitrogen runoff and GHG emissions relative to cereal monocultures.
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