Policy options to account for the environmental costs and benefits of agriculture

Abstract

The environmental performance of agriculture has been mixed. Environmental health in many countries, particularly water quality, has been negatively affected by nutrient and pesticide loading from agricultural production. However, there are positive impacts to the environment provided by agriculture in the form of wildlife habitats, amenity values associated with green space, and sinks for greenhouse gases. Improving environmental quality will depend on implementing mechanisms that will cause farmers to take account of the negative and positive spillovers of their actions when making individual management decisions. The appropriate policy to enhance the environmental performance of agriculture involves comparing the costs and benefits. Costs are faced by farmers in changing their practice and by government in administering the policy, while the benefits of reducing the negative impacts and improving upon the positive benefits are enjoyed by society in general. No single policy option from among the three major categories of options (moral suasion, direct regulations, and economic instruments) emerges as the ideal choice for improving the environmental performance of agriculture. The use of these options in North America has been on dealing with the negative environmental impacts in agriculture. However, in Europe, policy efforts are increasingly placed on supporting the positive externalities associated with agriculture. Support is provided for farmers to be stewards of the rural landscape rather than producers of food. However, the demand for the environmental benefits is not likely sufficiently high enough to justify the incentives necessary for Canadian farmers to change their focus. As a result, environmental policy in Canadian agriculture will continue to involve searching for the mix of instruments to reduce the negative environmental impacts.