Economics of nutrient management systems for compliance with phosphorus regulations: Method and case study

Livestock manure management regulations are transitioning from being nitrogen-based to phosphorus (P2O5)-based in many countries, including regions of the United States and Canada, due to environmental concerns about phosphorus loadings. For example, in the province of Manitoba (Canada) concerns about phosphorus loadings in Lake Winnipeg and other water bodies led to the introduction of phosphorus-based nutrient management regulations. This paper develops a method to analyze the economics of changing systems of manure management to comply with the transition from nitrogen-based to phosphorus-based regulations. The method employs GIS mapping to determine the minimum short-run and medium-run costs of compliance at levels of the individual livestock operation, which can be aggregated up to the levels of rural municipality or county, watershed, and the province or state. The method is applied in a case study for pig producers from the province of Manitoba. The results of the case study estimate the added annual short-run cost to the Manitoba pig industry under a maximum threshold regulation of twice phosphorus removal to be CAD 17.88 million and the estimated added annual cost to the industry under a maximum threshold regulation of once phosphorus removal to be CAD 27.86 million. The costs work out to be $40.57 and $63.22 per animal unit and represented 18% and 28% of the estimated annual net income accruing to pig producers in the Province, respectively. The estimated added annual medium-run cost to pig producers in the Province under a maximum threshold regulation of twice phosphorus removal work out to between CAD 25.48 and 27.46 million. Due to the sheer size of the compliance costs, results should be of interest to livestock producers, their industry organizations, the greater livestock industry, policy makers, and politicians, as well as environmental economists.