Reducing phosphorus emissions:

Why voluntary programs struggle and market-based instruments are likely to work

best

Brent Sohngen (OSU)

Current Subsidy Policy

• Subsidize the implementation of practices aimed at trapping nutrients on the land– 63% of all cropped acres in US have some form of

conservation tillage– Conservation Reserve Program (CRP enrolled over 14 million

ha in US and over 140,000 ha in Ohio.– Manure storage structures trap nutrients in hardened

structures– Cover crops trap some nutrients in plant material

• Create legacy effects.

Farm Bill Payments

Data from R. Claasen, USDA-ERS

Average payment in Ohio = $14/acre

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Tons

P

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Land Retirement

Working Lands

Emissions

Why do emissions keep getting worse even as subsidies and regulations have increased?

Problems• Difficult for agencies to target pollution reduction– Funds need to spread out to achieve political goals.

– Example: Do cover crops have the same effects on all soils? Should they be targeted to soils with the greatest soil P?

– When targeting does occur, it focuses on practices, not pollution reduction• CREP, cover crops, conservation tillage

– Problem with practice-based targeting is that the array of practices will not be effective, is focused on the last issue, and misses important trends (CREP program ignored sub-surface flows).

Problems• Little incentive to innovate– When faced with market incentives for crops or inputs,

farmers adopt new varieties and techniques quickly. • Conservation tillage widely adopted when technologies

combined with higher off-farm labor rates in the 1990s and 2000s.

– With conservation programs, payments are for pre-defined activities. Farmers have no incentive to innovate. They stand to gain little if they make a really large contribution to reducing pollution.• All the activities allowed, and the specifications for

implementing those activities, are defined in the Field Office Technical Guide.

Problems• Funds are skewed towards capital expenditures

rather than management.– EQIP funds have historically been shifted towards

funding livestock activities, and heavily towards implementing the federal CAFO rules.

– These expenditures were not geared towards reducing nutrient loads.

• When management is addressed, it’s problematic– E.g., Nutrient management plans have a limited impact

because they need to be implemented on a continual basis.

Problems• Trapped nutrients do not appear to be all that

stable.– It looks like we have done exactly what we set out

to do 40 years ago when we decided to focus on using conservation tillage to reduce soil erosion and maintain P in fields.

– We did not count on it coming out.

Problems

• Trapping is expensive

• Cover crops (CP 327)– $40-$120/ac

• Conservation crop rotation (CP 328)– $80-$200/ac

• Nutrient Management Plans (CP590)– 50-$80/ac

• Critical Area Planting (CP 342)– $250/ac + 90# P2O5/acre

• Avg CRP rental rates $125/acre with CREP lots higher.

How to address?Change the incentive farmers face

• Tax P• P prices do not account for the damages P

release causes (they are too low), so we should tax P fertilizer to raise the price farmers pay.

• This will cause farmers to adopt the 4Rs more widely and robustly.

• Would this work?– Evidence is that past price increases have reduced

emissions.

Effect of recent high P prices?

• High Phosphorus prices in 2006-2011 period reduced soluble P emissions by 28% in Maumee and 21% in Sandusky.

• Prices increased by around 92% relative to earlier averages

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kg p

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Maumee srp

base

avg dapP of 2003-05

Pros and Cons of P taxPlus Side

• Raise the costs to farmers, so they change behavior.

• Institutions available: Sales tax already collected.

• Reduces future legacy P.• Provides strong incentive to

use 4R practices.• Less costly than the current

subsidy programs that are ineffective and cost $14 per acre.

Negative Side

• Costly to farmers – a 135% tax would be needed to achieve a 40% reduction, costing $6 per acre.

• Could lead to yield losses that increase those losses

• Does not include manure nutrients (that only makes things worse if farmers add animals to increase fertilizer).

How to address?Change the incentive farmers face

• Limit P inputs on each acre• Current average in agricultural areas is

somewhere around 16 lbs P per acre (37 lbs P2O5).– 30 lbs P on corn (>90% acres), 24 lbs P on soy and

wheat (20% and >90% acres repsectively).• Start to reduce average application per farmer.• Farmers choose crops, rates, timing, etc.

How much P needs to be reduced?• To achieve the P task force suggested 40%

reduction, need to reduce 1300 tons at Maumee and Sandusky mouth, or 12,000 tons on farms.

• Each 9 lb reduction in P inputs by farmers will reduce 1 lb of P in the lake.

• To attain a 40% reduction in emissions need to reduce 5.4 lbs P, or 12.4 lbs P2O5 per acre.

Example for 1000 acre farm• 500 acres soybean, 350 acres corn and 150 acres wheat, applications

average 16 lbs P per acre, or 16000 lbs. – 1440 lbs make their way into Lake Erie.

• To achieve a 40% reduction, you need to reduce your inputs so as to achieve a reduction of 576 lbs of your P delivery at the lake.

• This is a reduction of 5299 lbs from your farm, or roughly 5.3 lbs per acre.

• One myth out there is that you just need to reduce your emissions by a half a pound per acre (576 lbs/1000 acres)

• That is false. A half a pound per acre reduction on your farm will deliver a reduction of only 50 lbs downstream, which is nowhere near the needed reduction of 40%.

How to implement a P limit?

• Start with a 15 lb per acre of farmed land limit on P (34.4 lbs P2O5).

• Reduce over time to 11 lb

• To further reduce costs and provide incentives for farmers to adapt to the policy, can allow trading.

Pros and Cons of P limitsPlus Side

• Raise the costs to farmers.• Easier to include manure

nutrients.• Institutions available with new

regulations on fertilizer applicators.

• Reduces future legacy P• Provides strong incentive to use

4R practices.• Less costly to society than

current programs.

Negative Side

• Should cost farmers about the same as the P tax, but could achieve further cost savings with trading market.

• Could lead to yield losses that increase those losses.

• More cumbersome and costly to measure, monitor and verify.

How to address?Change the incentive farmers face

• Adjust Tri-state recommendations to include externalities and enforce the recommendations on farms in specific watersheds (e.g., watersheds in distress)

Soil test

FertilizerRate Critical level Maintenance

limit

Tri-State P Recommendations without externalities

Soil test

FertilizerRate Critical level Maintenance

limit

Tri-State P Recommendations with externalities

Can the 4Rs be successful?

• If purely voluntary, they will face difficulties achieving a 40% reduction in P delivered to Lake Erie.

• If linked with other policies, such as P taxes, P limits, or externality adjusted tri-state recommendations, then they will be very successful.

Other Issues

• Weather

• Legacy P

• Crop yields

Changing weather patterns increased emissions• If we apply the weather from 1980-1995 to

the period 1996-2011, SRP emissions fall by 28% in Maumee and 46% in the Sandusky.

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Actual weather

weather from 1981-1995

What do changing weather patterns mean for policy?

• Changing weather patterns suggest that policy has to be more strict, not less strict.

Other issues: Legacy P

• P is a stock pollutant that builds up in soils and leaks out over time, particularly with the use of conservation tillage to hold soils on the landscape.

• The presence of legacy P implies that policies have to be more stringent than otherwise.– We cannot reduce our past applications.

Higher crop yields appear to lead to more emissions.

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Sandusky SRP concentration relative to average year

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Maumee SRP concentration relative to average year

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Summertime concentrations should be lower if higher yields take up more nutrient, but concentrations actually are higher in years with higher yields

Good crop years also appear to be good years to release trapped nutrients.

Conclusions

Responding to P emissions will require a different approach for the conservation community, an approach that recognizes the limits to policies that trap nutrients and focus on specific activities, like conservation tillage or cover crops.

Policy needs to increase the incentive landowners have to reduce pollutants in order to gain efficiencies and reduce overall costs.

There are a number of good policy approaches for doing this.