Abstract
The use of nitrogen (N) fertilizer substantially contributes to greenhouse gas (GHG) emissions due to N2O emissions from agricultural soils and energy-intensive fertilizer manufacturing. Thus, a reduction of mineral N fertilizer use can contribute to reduced GHG emissions. Fertilizer tax is a potential instrument to provide incentives to apply less fertilizer and contribute to the mitigation of GHG emissions. This study provides model results based on a production function analysis from field experiments in Brandenburg and Schleswig-Holstein, with respect to risk aversion by calculating certainty equivalents for different levels of risk aversion. The model results were used to identify effective and cost-efficient options considering farmers’ risk aversion to reduce N fertilizer, and to compare the potential and cost of GHG mitigation with different N fertilizer tax schemes. The results show that moderate N tax levels are effective in reducing N fertilizer levels, and thus, in curbing GHG emissions at costs below 100 €/t CO2eq for rye, barley and canola. However, in wheat production, N tax has limited effects on economically optimal N use due to the effects of N fertilizer on crop quality, which affect the sale prices of wheat. The findings indicate that the level of risk aversion does not have a consistent impact on the reduction of N fertilizer with a tax, even though the level of N fertilizer use is generally lower for risk-averse agents. The differences in N fertilizer response might have an impact on the relative advantage of different crops, which should be taken into account for an effective implementation of a tax on N fertilizer.
Highlights
For more than two decades, the United Nations Framework Convention on Climate Change (UNFCCC) has moderated the intergovernmental process of finding appropriate ways to combat climate change, especially by setting common goals, standards and policy recommendations for the member states
Optimal N rates were found to be lower with increasing levels of tax on N fertilizer for all considered crops in Brandenburg and Schleswig-Holstein (Figure 1)
This paper shows the effectiveness and cost-efficiency of a tax on N fertilizer to create incentives for reduced N fertilizer levels and mitigate greenhouse gas (GHG) emissions from agriculture
Summary
For more than two decades, the United Nations Framework Convention on Climate Change (UNFCCC) has moderated the intergovernmental process of finding appropriate ways to combat climate change, especially by setting common goals, standards and policy recommendations for the member states. Agreement, “Shared Socioeconomic Pathways” (SSPs) have been suggested [2] to provide narratives of possible future developments, including policies on GHG mitigation serving as inputs for economic. Instead of focusing on specific socio-economic pathways for the future, analytical tools can identify the impacts of specific policy interventions (e.g., taxes) on actors in the markets to identify the most promising cost-efficient policies [5]. In this sense, this paper aims to investigate a tax on nitrogen (N) use in agriculture as a possible policy to mitigate GHG emissions from agriculture
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