2. Introduction:
The global agriculture industry faces many conflicting ideologies as a result
of two competing demands imposed on agricultural producers and policy makers;
the production of food for a growing population and the reduction of the
environmental impacts associated with that production (Robertson and Swinton
2005). Creating an effective policy to reduce agriculture pollution within Alberta
presents many challenges due the diverse geological, political, and producer
landscape resulting from contrasting productivism and environmentalism ideals.
Pollution generated by agricultural activities presents many challenges because it
generally involves a large number of diffuse pollution sources. The abatement
practices associated with each form of pollution are generally unobservable making
it difficult to regulate agricultural pollution in an efficient, cost-effective manner
(Weersink et al 1998). Specific pollution sources examined in this brief are mainly
crop inputs such as fertilizer and pesticide use. The agriculture input issues
explored are not a comprehensive list of all environmental hazards created by
agricultural activities, rather a focal point due to their effect on tangible issues such
as soil and water quality. Specifically in Alberta and western Canada, the spatial
distribution of heterogeneous agriculture producers across a large geographic area
presents many additional challenges not only in the implementation of
comprehensive, effective policy, but in the areas of monitoring and enforcement of
policy initiatives.
Soil and water quality, climate change, and the loss of wildlife habitat are
likely to grow with further globalization and increasing resource scarcity, thus
defining the need for effective environmental policy (Miranowski and Carlson
1993). Successful policy must be targeted at effective pollution reduction containing
both economic and environmental dimensions to remediate some of the social cost
caused by agricultural pollution.
Environmental Policy Options:
Weersink et al (1998) outlined many economic instruments policy makers
could utilize to achieve environmental objectives in agriculture. This study
examined the ability of alternative economic instruments to achieve environmental
objectives. The study presents three main categories of instruments: (i) charges on
subsidies; (ii) tradeable permits; and decentralized policies. Whether these
instruments can be utilized in a cost-effective manner depends largely on the ability
of the regulator to monitor and enforce the choices made by producers (Weersink et
al, 1998). Determining an effective environmental policy instrument targeted at
reducing Alberta’s agriculture pollution ultimately depends on which conditions
exist among the agriculture industry provincially. Charges and Subsidies generally
refer to an economic instrument (such as taxation) on emissions, ambient
concentrations, or subsidies provided based on design-based application. In order
for these individual instruments to be enforceable and effective, several socio-
economic conditions must exist (summarized in table 1).
3. Table 1. Conditions for economic instruments to be effective. Adapted from
“Economic Instruments and Environmental Policy in Agriculture,” by Weersink, J.
Livernois, J.E Shogren and J.S. Shortle, Canadian Public Policy,Vol. XXIV, p. 314.
Copyright 1998 by JSTOR.
Using a charge such as an emission tax or ambient fee, presents many
problems when applied to the agriculture industry because the conditions for the
instrument to be effective are not met. Some of these conditions include the inability
to measure individual producer emissions at a reasonable cost. Since agriculture
pollutants are generally from diffuse source occurring over a longer time period, an
accurate relationship between estimated emissions and observable inputs is poorly
defined (Braden and Segerson 1993). It would be difficult to effectively monitor
resource quality over a large area such as Alberta due to the heterogeneous
environment conditions (precipitation, soil type etc) and its influence on agronomic
production. Therefore in order for a charge-based instrument to be accurate and
effective, the input tax should in principle vary with location and application method
(Zilberman, Khanna and Lipper 1997). Due to the diffuse source nature of
environmental pollution resulting from agriculture, if a charge is implemented, it
must be addressed by preventing the generation of the residuals at their source.
Most other environmental policies associated with point-source problems such as
those that exist in the energy industry attempt to control the delivery of the
pollutant between its source and final delivery. This interception strategy cannot be
applied to the agriculture industry (Weersink et al 1998). Although an input tax may
4. reduce input use, another disadvantage of a pure tax is that it does not encourage
any other abatement actions. These actions may be more cost-efficient options such
as crop choice and tillage methods; therefore, the most cost-effective attainment of
pollution is not always achieved through the use of a tax (Weersink et al 1998).
Further to this, the inelasticity of farm input demand implies charges such as a tax
rate must be substantially high to induce the desired reduction in input use.
Therefore, it is unlikely such policy is politically feasible (Helfand & House 1995).
The origin of non-point, diffuse source pollution is difficult to trace, therefore all
policy options that require a monitoring or enforcing component are limited in
feasibility and effectiveness.
Instruments such as tradable permits in context of the agriculture industry
could be based on inputs such as fertilizer. However, since pollution derived from
fertilizer use is largely residual and heterogeneous in response to differing
geological areas, agronomic requirements, size of farming operations and the effect
on their respective environment, the relation between inputs and environmental
problems lacks clear definition. Since individual firms specific contribution to an
issue such as surface water quality is difficult to accurately quantify, issuing binding,
effective permits would be difficult. Though capitalist efficiencies do exist in terms
of a firms decision about design and location of pollution control equipment
(opposed to regulator decision), choosing a tax rate on emissions or inputs requires
full information on how polluters will respond to the charges. This information is
not likely known by the polluters themselves in the short run, and suggests tax rate
structures will have to be continually revised with changes in economic conditions
(Weersink et al, 1998). Further to this, the definition of a polluter would have to be
well-defined by a permit so that a sufficient market existed to make the permit
actually tradable. As previously discussed, the heterogeneous composition of
agriculture producers, various crop inputs, and geologic conditions prevent a
standardized definition of a polluter.
Decentralized policies such as liability rules, non-compliance fees,
performance bonds and property rights definitions present many challenges as an
economic instrument. Decentralized policies allow individuals to resolve
environmental problems through the legal system or negotiations. Liability laws
make polluters responsible for any damages they cause, while compliance fees
target individuals polluting above an ambient standard target. Due to the nature of
agriculture industry such as frequent pollution events, unclear cause and effect
relationships involving many parties, and relatively unobservable actions of the
polluter, the links between damage and causation are poorly defined. This makes a
decentralized policy such as a non-compliance fee’s, liability laws and performance
bonds also difficult to assess. Comparatively, in Alberta farmland is generally a
privately owned resource where little market for ecosystem goods and services
exists to the producer. Therefore property rights definition can influence whether
the producer has access to market non-agriculture goods and services such as the
hunting of wildlife. If property rights were defined to include wildlife on a producers
land, a market may exist for an ecosystem good such as hunting which could offset
5. the producers decline in agronomic-productivity for actions such as habitat
preservation (Weersink et al 1998).
Moreover, Weeersink et al (1998) suggests rather than relying on the best
solution though economic instruments, the most effective way of dealing with
diffuse source pollution in agriculture may be technological developments and
business lead initiatives. Technological developments are generally correlated to
business lead initiatives to provide producers with funding needed to adapt
technology. The prominent ideal here is that technological advancements focus on a
more accurate and efficient utilization of inputs such as fertilizers and pesticides.
Through more efficient use, quantity of inputs may be reduced and their effect on
the environment minimized. Policy makers generally use a subsidy mechanism to
encourage producers to adopt the most modern precision agriculture technology
because adaptations are generally costly to implement. Like a tax, subsidies can
occur based on inputs or outputs relative to production. Several disadvantages of a
subsidy mechanism include cost-ineffectiveness, universal availability and
inefficient allocation of subsidy funding (Weersink et al 1998).
Alberta’s Environmental Agriculture Policy:
Alberta’s Environmental Farm Plan is a policy that uses subsidy-based
instruments to initiate environmental awareness and land stewardship through the
adoption of beneficial management practices applicable to agriculture. Awareness
objectives are achieved through the producer documentation of environmental
liabilities. Alberta’s Environmental Farm Plan (EFP) provides producers with access
to subsidies upon proof of strategic environmental plans, contained in a document
submitted by the producer. These subsidies provide incentive and assist producers
in adopting strategies to mitigate the effects of agriculture production. Such
mitigation strategies may include the adoption of precision-based technologies
made available by a subsidy.
By definition, Alberta’s EFP is a cross compliance policy. This refers to a
program that ties eligibility for agricultural support to meeting a specific
environmental criterion.
Farmer, Rancher and Producer Incentive:
The Environmental Farm Plan (EFP) is a voluntary, whole farm, self-assessment
tool that helps producers identify their environmental risks and develop plans to
mitigate identified risks. A diverse range of producers are attracted to the
Environmental Farm Plan (EFP) program because it helps them identify and address
environmental risks in their respective operation, while increasing their
understanding of legal requirements related to environmental issues.
Protecting water, air and soil quality is key to the sustainable production of crops
and livestock thus it is a vested interest to producers. An EFP will identify what a
producer is already mitigating effectively and pinpoint where improvement in
6. environmental hazard mitigation can occur. Many producers value this information
because they are focused on leaving a farm legacy for future generations thus
focusing on water, air, and soil quality is a primary objective. By addressing some of
these risks in an EFP, producers may additionally increase operational efficiency by
reassessing fertilizer use or monitoring of fuel storage tanks for example.
Upon completion of an EFP, many farmers and ranchers are available to receive
funding to aid in the adoption of precision agriculture technologies if it correlates to
one of the beneficial management practices stated in their EFP. Producers are
attracted to precision agriculture technology because this technology can increase
the efficiency of machinery and input use. Precision agriculture can provide
producers with an opportunity to simultaneously reduce environmental impacts
while improving productivity and profits on the farm (Bongiovanni and Lowenberg-
DeBoer 2004). Projects available for funding through Growing Forward II under the
EFP are quite comprehensive and include but are not limited to projects such as
agriculture watershed enhancement, biosecurity, on-farm energy management,
confined feeding operation stewardship etc. Further to this, the EFP promotes
producers to pair environmental stewardship with agricultural production which
can be used in the marketing of agri-products. Consumers in modern day Canadian
society are increasingly concerned about the safety and quality of the food produced
within the nation. Sustainable sourcing is becoming a requirement of many major
food purchasers, from manufacturers to restaurants. Thus, completing an EFP
appeals to producers because it demonstrates to the public, government, and
investors that farmers and ranchers are managing their environmental risks. This
program is largely voluntary, thus agriculture producers perceive this program as
attainable and viable. Producers adapting environmental hazard mitigation
strategies can do so at their convenience and are able to prioritize tasks based on
their specific operation. This flexibility and attainability is a crucial factor
determining the success and adaptation of this provincial initiative. Since its
inception in 2003 the Alberta Environmental Farm Plan has had 8000 completed
plans which represents 24% of Alberta farms and just under two million acres of
agriculture land (Alberta Environmental Farm Plan, 2016).
Analysis of the Environmental Farm Plan:
One of the main incentives for producers to enrol in the Environmental Farm
Plan is their access to funding which aids in the adaptation of new technologies
possible of increasing farm operational efficiency. Determining the effectiveness of
precision based technologies can indicate the effectiveness of Alberta’s EFP at
achieving environmental objectives.
Schieffer & Dillon (2015) studied several precision agriculture technologies
(auto- steer tractor, variable rate nitrogen application, and a sprayer with automatic
section control) and their affect on the economic, agronomic, and environmental
performance of the farms in their study. Additionally, they correlated the adoption
7. of precision agriculture technologies and their interactions with different types of
agro-environmental policies (emission limits and taxes) and the change in relative
effectiveness of those policies. Understanding these impacts provides insight for the
effectiveness of Alberta’s Environmental Farm Plan in terms of its incentives
(subsidies) for producers to adapt the same precision agricultural technologies.
Schieffer & Dillon (2015) suggest:
“policy failure can occur when such policy is designed for traditional
production methods and fails to allow for the changes in abatement
costs associated with adoption of precision agriculture methods.
Although incentive-based policies are often desirable for pursuing
economic efficiency and cost-effectiveness when pollution sources
have heterogeneous abatement costs, policies designed without
information about the technology mix used by farms may be limited in
their effectiveness in reaching environmental goals. Quantity-based
policies (e.g., quotas) may be more robust to technological change or
uncertainty in terms of achieving targeted environmental
improvements.”
Bongiovanni & Lowenburg (2004) also support this idea and suggest precision
agriculture can lead to higher marginal abatement costs in the form of forgone
profits, decreasing producers’ responsiveness to those policies. Similarly, this
analysis suggests that Alberta’s EFP in terms of promoting the adoption of precision
methods, may be ineffective at mitigating environmental hazards with this incentive
based mechanism alone. Assuming Alberta’s abatement costs are largely
heterogeneous due to the geological variation, spatial distribution, and production
variations across the province, this may be ineffective at actually achieving overall
environmental improvements. Subsidies to support the adaptation of precision
based technologies may be more effective at achieving environmental
improvements in combination with input quantity-based limits or taxes on
pollution. Problems with a subsidy-based instrument can be seen if we assume
adoption of technology leads to an increase in use efficiencies of crop inputs
perceived by all producers. This adoption of this technology would actually make
any reduction target less binding. This adoption is less binding because the farmer
actually needs less reduction in nitrogen for example, in order to meet pre-existing
reduction targets. Essentially the reduction of inputs gained by technological
advances is offset by the producers continued input use at a less binding level. In
this case, the marginal abatement cost of pollution is actually higher with the
technological adaptation, so the producer has less incentive to reduce his input use
further. Therefore, without an adaptable limit or tax that can be binding, the
producer has no incentive to further reduce pollution caused by inputs. Scheiffer &
Dillon (2015) explored the use of a tax and a limit as a policy instrument in
combination with technology subsidy policy. With the adoption of multiple
technologies, the tax policies were less effective than were the limit policies in
reducing environmental impacts. This was exhibited by the larger decrease in net
return for tax policies and the greater decrease in nitrogen use for limit policies in
8. comparison to the adaptation of base technology individually (Scheiffer & Dillon,
2015, pg. 57).
In order to make Alberta’s EFP more effective at achieving pollution
reduction targets, a quantity-based limit would be the most beneficial instrument.
To be most effective, this limit would have to correspond with the specific adopted
technology and the responding effect on marginal abatement cost (Scheiffer & Dillon
2015). However, since this program is largely voluntary compliance, a quantity
based limit would have to be a provincial mandate spanning all industry in order to
ensure compliance of those participating in the EFP were not at a disadvantage.
Extensive monitoring and enforcement efforts would be needed to ensure limit
compliance across the province. The political and economic feasibility of these
extensive measures poses as a barrier to using a quantity-based limit to increase
policy effectiveness.
In Alberta, upon adaptation of precision-based technologies, producers have
the opportunities to participate in the Agricultural Carbon Offsets Market. This
carbon-offset market is a government incentive intended to further reduce the
abatement cost of agricultural related pollution in terms of carbon emissions.
Similar to the EFP, this component is voluntary, however farmers and ranchers do
get paid for their efforts to reduce emissions. Although this has moderate financial
rewards, it provides a new opportunity for income, one that has the potential to
become a more developed market in the future. Though this incentive is not
exclusive to the EFP, used in combination with the EFP may increase producer
incentive to reduce pollution based on mitigation strategies. Moreover, as a market
for carbon-offsets is developed, this instrument may gain ground in terms of
providing more incentives to producers resulting in greater adoption of carbon
reduction strategies.
Schieffer & Dillon (2015) also suggests that the adoption of multiple
technologies such as auto- steer tractor, variable rate nitrogen application, and
automatic section control is more effective at achieving environmental
improvements than adopting one technology alone. This suggests that the subsidies
available through programs such as Growing Forward II-upon the completion of an
EFP, may be more effective if they are linked to multiple adaptations. However, the
cost of adopting multiple technologies ultimately places the burden on economic
feasibility for the producer and the viability of their enterprise when it comes to
implementing these changes. One could suggest a solution is to make more funding
available through the subsidy framework such as Growing Forward II, but this
ultimately leads to the issue of funding for the subsidies; who is paying for these
subsidies, and if the investment is still efficient at reducing environmental hazards
at this new cost. This point is supported by the Weersink et al (1998) study, which
suggests a major downfall of subsidy policy is the fact that is it incompatible with
debt reduction- a major goal of most governments. Moreover, the subsidy incentives
linked to Alberta’s Environmental Farm Plan are subject to the same criticisms
discussed by Weersink et al (1998); greatest pollution contributors may not apply
9. to a cost-sharing program if the incentive is insufficient; funding may be inefficiently
allocated in terms of its availability to non-polluting firms; and inefficient allocation
of funding to firms that would have adopted the abatement regardless.
An additional problem with Alberta’s Environmental Farm Plan is the lack of
enrolment by large producers. From the EFP statistic presented in the introduction,
the average size of farm completing a plan is 250 acres. This largely suggests that
the majority of large farms, or corporate farms have not completed an EFP. Lack of
enrollment in terms of large commodity producers is possibly because these large
producers do not reap the same rewards as other smaller producers. This could be
because large-scale producers do not rely as heavily on subsidy funding available
through programs such as Growing Forward II. One could argue that is policy is
ineffective for larger, less financially constrained producers because the marginal
cost of pollution abatement may higher to these producers than to smaller
producers. An additional explanation could suggest that the benefits in reducing
pollution residuals are difficult to assess, therefore large farms less reliant on
funding do not have any additional incentives to promote compliance (Weersink et
al 1998). Overall enrollment, specifically large farm enrollment, questions the
effectiveness of the EFP to reduce diffuse point source pollution, as some of the
largest contributors may not be adapting best management practices or mitigating
environmental hazards. However, if these practices provide economic incentive on
their own, the producers may adapt them without enrolling in the EFP. In either
regard, lack of data around program enrollment and technology utilization make it
difficult to assess the differing abatement costs perceived by the heterogeneous
groups of producers. This knowledge gap limits the accuracy of instruments that
could be employed to make the incentive greater. Overall, the effectiveness of this
subsidy incentive depends on whether it is fact a pollution-contributing farmer that
is enrolled in the program, and the magnitude of the individual’s pollution reduction
as a result of program compliance.
In the future, issues such as sustainable sourcing for agri-products are
expected to be increasingly in demand in the marketplace. Another incentive type
mechanism employed by the EFP is the establishment of sustainable sourcing
criteria. The Alberta Environmental Farm Plan in particular has partnered with
Alberta Barley on a project to determine whether sustainable sourcing standards
within the EFP meet global standards. Determination of these standards could foster
marketplace premiums for Canadian products produced under these conditions.
Based on this incentive, the EFP holds great future value to producers, as it is a tool
that can aid in achieving environmental objectives correlated with attaining
sustainable sourcing status. Due to the relatively undefined existing standards in
terms of global standards, the future effectiveness of this incentive is largely
unknown at this time.
Additional to agriculture input use and sustainable sourcing guidelines, the
EFP recently added a new Species at Risk (SAR) component. This component is
largely based around promoting habitat conservation for species at risk by arming
10. producers with an online tool to identify opportunities to conserve those species at
risk on their agricultural land. This implementation has incentive as it can
potentially links to other issues such as sustainable sourcing status. Through the
adaptation of the SAR component, sustainable sourcing status may be unattainable
to the producer if species at risk are present on agricultural land. Producers are
motivated by the market place advantage of labels such as sustainable sourcing,
therefore habitat conservation may be a priority depending on the net gain
perceived by the producer as a result of this implementation. Though the awareness
of conservation ideals for species at risk is enhanced with this component, the net
gain to the producer will not be enough based on market place premiums alone.
Furthermore this added component targets the potential for producer
compensation in response to habitat conservation on agricultural lands. In other
provinces, habitat conservation is currently funded by Environment and Climate
Change Canada’s Species at Risk Partnerships on Agricultural Lands program.
Though in effect in other provinces, the effectiveness of this instrument in Alberta is
questionable because other decentralized-type of policies already exist outside the
EFP framework. Other national initiatives such as the Ducks Unlimited program
represent pre-existing decentralized policies in terms of its impact to property right
economics and habitat conservation. The Ducks Unlimited variation allows land
owners to sell conservation easements against the title of the land in return for
restricting land use to practices that would preserve habitat. Though Ducks
Unlimited primarily corresponds to wetland conservation, other initiatives such as
Buck for Wildlife are already in existence. In order for this component to be more
effective than the decentralized policies already in existence, more extensive
compensation under this component will be needed in order to increased
enrollment if that is the policy goal. One exception to this could be species that are
not already protected under the Species at Risk Act and/or species not targeted by
other decentralized policies. In this case, in order to be an effective instrument, the
SAR component included under the EFP would need to be more specialized and
pertain to the loopholes that other decentralized policies do not already address.
Overall, the same monitoring and enforcement issues that reduce the Species at Risk
Act effectiveness will also limit the effectiveness of this EFP component.
Additional to promoting the most efficient technology and habitat
conservation through incentives, another the main initiative within the EFP is to
educate and increase awareness of environmental issues to the farming and
ranching communities. Though education and awareness cannot be equated with
quantifiable pollution reduction, its impacts on the producer ideals may provide
ecological benefits that exist, however in a less tangible way. Through the use of
education and awareness concepts, the EFP focuses on sustainability for future
generations. This focus on future generations can use the concept of moral suasion
to changing producer ideals of “good farming”. This can lead to a shift from the
formerly productivist “good farming” ideals to more sustainability oriented ideals
(Burton and Paragahawewa, 2011). Although difficult to assess, the increase of
sustainability-focused ideals promoted by the EFP can lead to greater program
compliance through adaptation of environmentally friendly practices. In turn, this
11. creates some additional value for Alberta’s environmental farm plan and its ability
to increase land stewardship initiatives.
Conclusion:
Overall, Alberta’s Environmental Farm Plan is an effective policy instrument
to mitigate the effects of agricultural pollution. Though many criticisms of this
incentive based policy exist, undoubtedly, it promotes agricultural land stewardship
while offering flexibility and attainability to foster producer appeal and political
feasibility. The program’s flexibility extends to reach Alberta’s farming and ranching
communities so that the Environmental Farm Plan may be adopted and utilized by a
wide range of producers with differing interests and ideals. Additional economic
instruments have been explored to increase the effectiveness of this policy such as
an input quantity-based limit. Many issues characteristic of the agriculture industry
act as a barrier that prevents these economic instruments from being employed
effectively.
For those enrolled, Alberta’s Environmental Farm plan helps producers
attain greater social license. Farmers participating in the Environmental Farm Plan
are proving their due diligence to society on environmental issues. In a society that
increasingly demands more accountability from landowners, Alberta’s
Environmental Farm Plan is a framework that aids agriculture producers in their
pursuit of becoming efficient, effective and responsible stewards of the land.
