THE EFFECTIVENESS AND FEASIBILITY OF ECONOMIC INCENTIVES OF INPUT CONTROL IN THE MITIGATION OF AGRICULTURAL WATER-POLLUTION

Agricultural water pollution in Finland is mainly caused by nutrient losses from fields. Nutrient losses can be mitigated, e.g., by changing management practices and by plant rotation. Adoption of the necessary measures may be voluntary, but economic incentives can also be used. Nutrient losses can be regulated, e.g., by incentives to decrease the use of fertilizers. Economic incentives include a change in product prices, an input tax or an input quota. So far an input tax has been applied in Finnish agriculture. The effectiveness and feasibility of these policy measures on the farm can be assessed by calculating the change in farm profit and nutrient losses. The input quota was found to be the least-cost measure at the farm level when the marginal abatement costs of measures were compared on a grain farm growing barley. Alternative policy measures caused bigger losses in profit on the farm and the reduction in nitrogen leakage was smaller.