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Damage costs of nitrogen fertilizer in Europe and their internalization

Author

Listed:
  • H. Von Blottnitz
  • A. Rabl
  • D. Boiadjiev
  • T. Taylor
  • S. Arnold

Abstract

This paper estimates the environmental impacts and damage costs ('external costs') of synthetic nitrogen fertilizer and discusses options for reducing these impacts, including their consequences for farmers and for producers of fertilizer. The damage costs of the fertilizer life cycle that could be estimated are large, about 0.3 €/kgN (compared to the current market price of about 0.5 €/kgN); much of that is due to global warming by N2O and CO2 emissions during fertilizer production and N2O emissions from fertilized fields. Policy options for internalizing these costs are discussed, and the consequences of reduced fertilizer input on crop yield are explored. If the damage costs were internalized by a pollution tax or tradable permits that are auctioned by the government, the economic consequences would be heavy, with a large revenue loss for farmers. However, if it is internalized by tradable permits that are given out free, the revenue loss for farmers is small. The loss for fertilizer producers increases linearly with the amount of external cost that is internalized, by contrast to the loss for farmers which increases quadratically but is very small for a damage cost of 0.3 €/kgN. Expressed as a change in the fertilizer-dependent part of the farmers' revenue (crop yield × crop price - fertilizer used× fertilizer price), the decrease is less than 0.5% for most crops; the losses are larger only for crops with low €/ha revenue. Averaged over wheat, barley, potatoes, sugar beet and rapeseed, the loss to farmers is about 0.1% in the UK and 0.4% in Sweden. The revenue loss for fertilizer producers is larger, about 8% in the UK and 14% in Sweden.

Suggested Citation

  • H. Von Blottnitz & A. Rabl & D. Boiadjiev & T. Taylor & S. Arnold, 2006. "Damage costs of nitrogen fertilizer in Europe and their internalization," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 49(3), pages 413-433.
  • Handle: RePEc:taf:jenpmg:v:49:y:2006:i:3:p:413-433
    DOI: 10.1080/09640560600601587
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    References listed on IDEAS

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    1. Anil Markandya & Patrice Harou & Lorenzo G. Bellù, 2002. "Environmental Economics for Sustainable Growth," Books, Edward Elgar Publishing, number 2001, April.
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    Cited by:

    1. Benjamin Dequiedt & Emmanuel Servonnat, 2016. "Risk as a limit or an opportunity to mitigate GHG emissions? The case of fertilisation in agriculture," Working Papers 1606, Chaire Economie du climat.
    2. Finger, Robert, 2012. "Nitrogen use and the effects of nitrogen taxation under consideration of production and price risks," Agricultural Systems, Elsevier, vol. 107(C), pages 13-20.
    3. Balázs Égert, 2011. "France's Environmental Policies: Internalising Global and Local Externalities," OECD Economics Department Working Papers 859, OECD Publishing.
    4. Finger, Robert, 2011. "Reductions of Agricultural Nitrogen Use Under Consideration of Production and Price Risks," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114356, European Association of Agricultural Economists.
    5. Blanco, Maria Isabel & Azqueta, Diego, 2008. "Can the environmental benefits of biomass support agriculture?--The case of cereals for electricity and bioethanol production in Northern Spain," Energy Policy, Elsevier, vol. 36(1), pages 357-366, January.
    6. Jayed, M.H. & Masjuki, H.H. & Saidur, R. & Kalam, M.A. & Jahirul, M.I., 2009. "Environmental aspects and challenges of oilseed produced biodiesel in Southeast Asia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 13(9), pages 2452-2462, December.

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