Resolving the conflict between environmental damage and agricultural viability on less favoured areas
Production linked supports are paid for agriculture in less favoured areas (LFA) in Finland in order to maintain agricultural production and farms. The CAP reform increased the importance of LFA payments and other payments which are still partly coupled to production. We evaluate if any significant environmental damage can be avoided without risking maintenance agricultural production in less favoured areas. We also evaluate the relative effectiveness of alternative policy measures to decrease nutrient surplus, promote biodiversity, and maintain production and farm income. The policy options evaluated are full decoupling, fertiliser tax, both combined and explicit payments for reduced nutrient surpluses. The impacts of the options are compared to the baseline assuming milk quota abolition and continuation of production linked CAP beef premia. Sector model results suggest that decoupling of certain degree would improve the effectiveness of targeted agri-environmental support measures, and in some cases considerable reduction in nutrient surplus is possible with relatively minor reduction in agricultural production and farm income. Fertiliser tax appears to be efficient especially when combined to decoupling while explicit payments on nutrient surpluses as well as full decoupling have some negative side-effects.
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- Markus Lips & Peter Rieder, 2005. "Abolition of Raw Milk Quota in the European Union: A CGE Analysis at the Member Country Level," Journal of Agricultural Economics, Wiley Blackwell, vol. 56(1), pages 1-17.
- Thomas L. Cox & Jean-Paul Chavas, 2001. "An Interregional Analysis of Price Discrimination and Domestic Policy Reform in the U.S. Dairy Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(1), pages 89-106.
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