Direct and Indirect Economic Incentives to Mitigate Nitrogen Surpluses: A Sensitivity Analysis

The reduction of nitrogen (N) surplus is an ongoing topic in the agri-environmental policies of many countries in the developed world. The introduction of N balance estimation in agricultural sector models is therefore pertinent and requires an interdisciplinary approach. We extended the agent based agricultural sector model SWISSland with an N farm gate balance estimation to pre-evaluate the introduction of a levy on N inputs, particularly a levy on fertilizer and imported concentrates, on N surplus reduction in the Swiss agriculture. The model was based on the Swiss farm accountancy data network (FADN) for 3,000 farms. The model’s ability to represent the N balance was assessed by conducting a structured full factorial sensitivity analysis. The sensitivity analysis revealed the possibility to switch to organic farming and the hectare based payments for ensuring food security as key parameters with the largest influence on the modelled N surplus. The evaluation of N input levy scenarios suggested that an introduction of a tax of 800% of N price will reduce the N surplus by 10% indicating a price elasticity of -0.03. The sensitivity analysis and the results from the levy scenarios suggest that indirect instruments, such as optimizing the direct payments scheme, should be considered rather than direct instruments for an effective N surpluses mitigation in Swiss agriculture.