Financial Barriers to Reducing Nitrogen Pollution in Dutch Dairy Farms

Abstract

SummaryNitrogen fertiliser boosts agricultural yields, but its excessive use destabilises ecosystems. That is why Dutch policy makers want to reduce nitrogen pollution on dairy farms. Cleaner technologies and structural changes could reduce farm emissions. We benchmarked farms, organised an expert consultation, and reviewed the literature to determine the degree to which the lack of available internal and external finance is a barrier to reducing nitrogen pollution. Although the average dairy farm in our sample can finance these investments, a significant share of farmers cannot. We find that investments vastly drain the currently accessible finances available to dairy farmers. Subsidies to reduce the price of investments and measures to increase farm net cash flows could mitigate this problem, while equity funds or preferential interest rate systems would be ineffective. Farm management is not bound by access to finance. Our findings suggest that improved management could vastly reduce the accumulation of nitrogen surplus on farms. Interestingly, we estimate that this can be achieved while increasing profits. The wide‐scale adoption of best practices can be facilitated by establishing and financing advisory services and peer learning programmes to spread knowledge and awareness.