Integrating Economic and Ecological Impact Modelling: Dynamic Processes in Regional Agriculture under Structural Change

Abstract

Water quality has long been an important part of agricultural policy debate in Finland because agricultural activities are responsible for a significant part of nutrient load of surface waters. Changes in agricultural production, its input and land use intensity, as well as regional concentration of production, are seen as primary drivers of agricultural water pollution. Despite the theoretical fact that decreasing production linked agricultural subsidies should decrease input use intensity and volume of agricultural production, no or little decrease has been observed in agricultural water pollution in Finland during the last 15 years (Ekholm et al. 2007). This observation, despite the fact that nitrogen surplus has decreased by 42 % and phosphorous surplus by 65 % in Finland 1995-2006, has been a disappointment since ambitious targets have been set for water quality improvements and significant agri-environmental subsidies have been paid for farmers in order to reach the targets (Turtola, 2007). Ekholm et al. (2007) conclude that simultaneous changes in agricultural production (e.g. regional specialisation) and in climate may also have counteracted the effects of agri-environmental measures. The actions to reduce agricultural loading might have been more successful had they focused specifically on the areas and actions that contribute most to the current loading. Such conclusions and the apparent need for integrated modelling of agricultural economy, structural change in agriculture, and consequent impacts on nutrient leaching, are the main motivation for the modelling efforts presented and discussed in this study. Climate change concerns, both mitigation and adaptation, as well links between agricultural production, climate change and biodiversity, further increase the need for consistent integrated analysis. We present an approach designed for combined analysis of agricultural production and markets, nutrient leaching and water quality. While our emphasis here is in agriculture and water quality, the basic set-up, i.e. the relationship between changing agriculture (production) and environment is rather general. Improvement in surface water quality has been so far the main objective of agri-environmental policy in Finland (Valpasvuo-Jaatinen et al. 1997). The quality of surface waters can be linked to agricultural production through estimating surplus of nutrients, which in turn provides indicator of potential runoff of nutrients. However, the actual nutrient runoff from a given parcel is only partly explained by estimated nutrient surplus in