On‐Farm Costs of Reducing Residual Nitrogen on Cropland Vulnerable to Nitrate Leaching

Abstract

Though nitrogen is an essential plant nutrient required to produce food and fiber, it can become a pollutant when excessive amounts enter surface and groundwater. Residual nitrogen fertilizer, which is the amount of nitrogen applied to a crop in excess of nitrogen absorbed by the crop, has been identified as a major contributor to the elevated concentration levels of nitrates in groundwater (e.g., Office of Technology Assessment; Nielsen and Lee; United States Environmental Protection Agency (EPA) 1984). The EPA's recent Pesticide Survey (1990) contains further indication that many community water systems and rural wells where extensive application of nitrogen is found contain nitrates exceeding the Maximum Contaminant Level. High concentration levels of nitrates in drinking water supplied from groundwater have become a public concern because of their real and suspected risks to human health (Freshwater Foundation; Cantor). To reduce excess use of nitrogen fertilizer that is a threat to the groundwater, explicitly limiting nitrogen fertilizer use might be required. Although limiting nitrogen use may be costly to regulate, there are various reasons for its usefulness. For example, it is an effective tool to reduce nitrogen fertilizer use when the fertilizer price is very low relative to the com modity price. The cost would be lower to farmers in comparison with other approaches such as imposing an input or output tax (Huang and Lantin) to reduce nitrogen fertilizer use. Limiting nitrogen has been considered an effective tool for promoting the adoption of farming practices that can reduce nitrogen fertilizer use (Taylor and Swanson), and also a least-cost approach for society to combat the pollution problem, such as nitrate leaching, which often is subject to the stochastic influence of weather (Baumol and Oates). The main objective of this article is to evaluate costs to profit-maximizing farmers of reducing nitrogen fertilizer use on cropland vulnerable to nitrate leaching. In particular, this article investigates the relationship between the cost for a profit-maximizing farmer to comply with the reduction of nitrogen fertilizer use, and the vulnerability of cropland to nitrate leaching. This information can be useful for policy makers interested in providing equitable financial incentives to farmers to encourage them to mitigate nitrate leaching problems such as the green payments program (Heimlich). This article addresses four areas: (1) delineation of residual nitrogen as a measure for limiting nitrogen fertilizer use; (2) development of a dynamic model that incorporates nitrogen carry-over effects to determine the steady-state relationships among the application rate of fertilizer nitrogen and residual nitrogen available for leaching; (3) investigation of the effect of cropland's vulnerability on the farmers' compliance cost of reducing residual nitrogen using the steady-state solutions of the model; and (4) empirical estimation and comparison of the compliance cost associated with reducing nitrogen fertilizer application rates on high-leaching and moderateleaching cropland, using an Iowa case study. Wen-Yuan Huang and David Shank are with the Economic Research Service, United States Department of Agriculture, Washington, DC. Tracy Irwin Hewitt is with the Henry A. Wallace Institute for Alternative Agriculture. The views expressed are those of the authors and do not necessarily represent the views of the United States Department of Agriculture. The authors wish to thank Otto Doering, the journal reviewers, and the editor for their valuable comments and suggestions. We take responsibility for any remaining errors.