Nitrous oxide emission reductions from cutting excessive nitrogen fertilizer applications

Farmers may choose to apply nitrogen fertilizer at a rate that exceeds the average ex post agronomically optimal rate when the yield response to nitrogen varies across growing seasons. Negative environmental consequences such as nitrous oxide (N 2 O) emissions and/or water pollution can result when all the applied nitrogen is not needed by the crop. Here we consider a nonlinear market instrument targeting farmers’ nitrogen use, and by solving for the optimal nitrogen reduction using a model of expected utility of farm profits, we evaluate the induced N 2 O emission reductions that are consistent with the instrument introduced. The market instrument is nonlinear because of the expected nonlinear relationship between N 2 O and nitrogen application rates. Our simulations show that, in cases where farmers apply N at rates which exceed recommendations and the N 2 O response is likely to be non-linear, payments will induce participation in the program and will have a significant impact on both expected and actual N 2 O emissions without significantly harming expected or actual yields. Failure to consider this nonlinearity would deviate the attention away from N 2 O pollution because it would require large N reductions (and crop yields) to achieve equivalent N 2 O abatement. Copyright Springer Science+Business Media Dordrecht 2015