Reduction of nitrogen pollution in agriculture through nitrogen surplus quotas: an analysis of individual marginal abatement cost and different quota allocation schemes using an agent-based model

Nitrogen (N) pollution has mostly been controlled using command-and-control instruments. However, nitrogen surplus permits (NSPs), which are tradeable, can be more cost-efficient in addressing the problem. To model this instrument, we calculated the individual marginal abatement cost curve for a sample of about 3,400 Swiss farms using farm-optimization models implemented in the agent-based agricultural sector model SWISSland. We also used SWISSland to analyze the effects of two NSP distribution systems (grandfathering and land-based allocation) on different farm types. The results showed that different farm types range in their abatement costs to reduce N surplus from an average of −0.04 CHF kg−1 N on arable farms to 51.06 CHF kg−1 N on special crop farms. We also found that N surpluses hardly explain the level of abatement costs. The biggest differences in effects of the distribution scheme were found in intensive livestock farm types such as pig or poultry farms.