Impact of Spatial Differentiation of Nitrogen Taxes on French Farms’ Compliance Costs

Abstract

The spatial differentiation of input-based pollution fees should in theory decrease compliance costs in the case of nitrate pollution of water bodies from agriculture because both the damage and the compliance costs vary over space. However, the empirical evidence in the literature does not agree on the extent of the potential savings from differentiation. We address this issue in the case of France, using a mathematical programming model of agricultural supply (AROPAj). The modeling approach used accounts for the spatial diversity of nitrate pollution and the heterogeneity of farming systems. Our results reveal the efficiency gains from differentiating pollution fees among polluters and water bodies. For instance, firm-specific and water body-specific taxes represent respectively 5.8% and 32.5% of farmers' gross margin in terms of compliance costs, whereas a uniform policy at the river-basin district or national level leads to major economic losses and abandonment of the agricultural activity. These results stem from the lower tax rates faced by farmers in less polluted areas, for scenarios based on spatial differentiation. Our estimates suggest that realistic regulation via input-based pollution fees should be differentiated in order to significantly reduce the financial burden on farmers of conforming to predefined pollution levels. Some potential adverse effects related to input-based taxation and land use change call for additional fine-scale nitrogen pollution regulation (e.g. limitations on crop switching).

Identification of the Factors That Affect the Environmental Administrative Burden for Businesses

“…Other recent research focuses more on estimation of compliance costs connected to selected industry on farming [40,41], on transportation [42], to methodology used issues [43][44][45][46] or to single issues connected to environmental regulation (selected law in Prause and Olaniyi [18]; influence of environmental regulation in Taheri and Stevenson [47] and Lade and Rudik [48]; effect of company characteristics on the effectiveness of environmental regulation in Wang, Yin and Chen [49]; critical factors for environmental regulation change management in Ribeiro and Kruglianskas [50]; and how to secure high levels of business compliance with environmental laws in Kellett [51]).…”

Impacts of Land Use and Climate Change on Freshwater Ecosystems in France

“…There are 187 hydrographic sectors in metropolitan France. This geographical scale has been used in other studies of water quality (Lungarska and Jayet, 2018).…”

Optimal coverage of an emission tax in the presence of monitoring, reporting, and verification costs

“…This model has been used in several empirical assessments of agricultural and/or climate policies in Europe (e.g. De Cara et al, 2005;De Cara and Jayet, 2011;Leclère et al, 2013;Lungarska and Jayet, 2016). For a general presentation of (a previous version of) the model, see e.g.…”