Agricultural non-point pollution problems often involve small producers who, because of their size and the fixed costs of acquiring information, may not invest much in information on techniques for limiting water pollution. Public agencies may have significantly better information than producers about pollution control or pollution prevention practices. Disseminating such knowl- edge could provide environmental improvements if this knowledge encouraged producers to operate in more environmentally friendly ways – either with exist- ing methods and technologies or by adopting alternative technologies.
Education programmes are an important part of non-point pollution pro- grammes in many countries and will likely remain so. In the US, for example, education plays a significant role in every state and federal non-point source water quality programme, most recently in the Clinton Administration’s Clean Water Action Plan (USEPA, 1998c; Nowak et al., 1997). Education pro- grammes supply producers or consumers with information on practices for reducing non-point pollution, technical assistance to facilitate adoption, and encouragement to adopt, out of either self-interest or concern for broader societal well-being. Common mechanisms for conveying information to farmers include demonstration projects, technical assistance, newsletters, seminars and field days.
Education is popular for a number of reasons. It is less costly to imple- ment than many other programmes, and the infrastructure for carrying out such a programme is largely in place (e.g. through agricultural extension offices). In addition, there is some empirical evidence that education can be
68 R.D. Horanet al.
effective in getting farmers to adopt certain environmentally friendly practices (Gould et al., 1989; Bosch et al., 1995; Knox et al., 1995). Education programmes are most effective when encouraging ‘environmentally friendly’
actions that also happen to be profitable (Feather and Cooper, 1995; Musser et al., 1995). Indeed, educational assistance is often seen as a means of achieving so-called win–win solutions to water quality problems, whereby net returns and water quality are both improved (USEPA, 1998c).
Some practices that could help to protect and enhance water quality and that have been shown to be more profitable than conventional practices in many settings include conservation tillage, nutrient management, irrigation water management and integrated pest management (Fox et al., 1991;
Conant et al., 1993; Bull and Sandretto, 1995; Ervin, 1995). Extension edu- cation to encourage and support the adoption of integrated pest management (IPM) is a key component of pesticide control programmes in Canada, Denmark, The Netherlands, the USA and Sweden. Basic IPM practices, such as pest scouting to detect whether it would be profitable to apply pesticides, are now used by a significant proportion of US farmers, though use of more sophisticated IPM techniques has been limited (Fernandez-Cornejo et al., 1998). Pesticide use in Sweden has been greatly reduced since the early to mid-1980s through a mixed approach of regulations, incentives and educa- tion, along with fortuitous developments in low-dose application and spraying pesticide technology (Weinberg, 1990; Bellinder et al., 1993; Pettersson, 1994). The independent contribution of education is unclear. Agricultural extension programmes in most OECD countries now include environmental components (OECD, 1989, 1993a).
Education when producers only care about profitability
Opportunities for simultaneously increasing water quality and farmer profits would seemingly make water quality protection easy to accomplish. However, even though education may encourage a producer to operate along a more socially efficient production frontier, private and public objectives will still gener- ally differ. As long as producers only consider profitability, competition will gener- ally drive them to operate in ways that will not necessarily coincide with environmental goals. In fact, it is entirely possible that providing education about production practices might even lead to changes in the scale of production and input mix that cause water quality to worsen (Ribaudo and Horan, 1999).
These arguments can be illustrated graphically using a simple example involving a single farm (which may be one of many contributors to non-point pollution in a watershed) in which a single input leads to water quality impairment, and pollution creates no on-farm costs. The relationships between production and expected water quality are depicted graphically in Fig. 3.1. We say expected water quality because actual water quality is stochastic due to the weather, particularly precipitation. Quadrant I illustrates
Voluntary Policy Instruments 69
the relation between input use and the producer’s net returns (i.e. the restricted profit function). Without loss of generality, the Profit axis could be thought of as the expected utility of profits for risk-averse producers when there is production uncertainty. Quadrant II illustrates the relationship between input use on the farm and expected water quality, taking the actions of all other non-point polluters as given. Quadrant III projects the relations from Quadrant II into Quadrant IV, which depicts the relation between expected water quality and net returns. The way in which producers account for water quality in their production decisions is reflected in this quadrant.
Define Q* to be the Pareto or economically efficient level of expected water quality (with production occurring at point C on curve T1). Expected water quality levels will be below Q* when: (i) producers do not consider the economic impacts of their production decisions on water quality, and/or (ii) producers face uncertainty or have a limited understanding of the production and environmental impacts of their management choices. The purpose of educational programmes is to reduce producers’ uncertainty and to improve their knowledge about production and environmental relationships (both for production technologies they are currently using and for alternative tech- nologies). Proponents of such programmes believe expected water quality will be improved if the information provided encourages producers to: (i) consider the environmental impacts of their choices, and/or (ii) simultaneously improve expected water quality and profitability by using existing technolo-
70 R.D. Horanet al.
IV Profit
C
B
E A
S2
Q1
Q*
D C
E B
A
T3 T2
T1
x R1 S3
S1
Expected water quality
Expected water quality III II
I
Fig. 3.1. Profit maximizing production decisions and their effects on water quality.
gies more efficiently or by adopting alternative, more environmentally friendly technologies (Nowak et al., 1997). Assuming that the producer’s only objec- tive is to maximize profits (and thus has no altruistic motivations), only (ii) has any chance of success.
For simplicity, assume that the only source of uncertainty relates to the production frontier, which may lead producers to use inputs inefficiently.3 This situation is represented by curves T1 and T2 in Fig. 3.1. T2 reflects the production technology that the producer is currently using (i.e. the set of practices in use) and the skill with which it is being used. T1 reflects the government agency’s expectations about the production frontier, which are assumed to be more accurate than the producer’s due to better information from publicly supported research.4
Initially consider the case in which the producer’s only objective is to maxi- mize profits. A profit-maximizing producer will produce (inefficiently, according to T2) at point A in Fig. 3.1. In the absence of any outside programmes or inter- vention, the producer would not voluntarily move to point D so that economic efficiency is achieved, since net returns would be reduced without any compen- sating private benefits. In Quadrant IV, profit maximization indicates that the producer operates at point A. It would be pointless to educate the producer about the relationships between production and water quality because the producer has no altruistic or stewardship motives. However, by educating the producer about the frontier T1, where profits are higher for each level of input use, the producer could be encouraged to use existing management practices more efficiently or to adopt alternative practices so that he/she operates along T1.5Once on T1, the producer could operate at the efficient point C to meet the expected water quality goal and at the same time increase net returns relative to operation at point A on T2 (though there may be values of C for which net returns might be reduced). Such an outcome appears to be a win–win solution for the farmer. However, even though producing along a more socially efficient production frontier, the producer’s goals will still gener- ally differ from society’s goals. As long as producers only consider profitability, competition will drive the producer to operate at point B (note that point C is necessarily to the left of B). The expected water quality levels that correspond to B are an improvement over the initial situation when the producer produced at A, but are still less than efficient levels. Thus, educational assistance alone is not enough to ensure that the water quality goal is met.
It is entirely possible that providing education about production practices might even reduce expected water quality. Suppose the producer originally produced according to T3, so that profits were maximized at E. After receiving educational assistance, the producer would have an incentive to produce at point B on T1. Net returns increase in this case, but so does the use of input x.
The result is that expected water quality is worse than it was before education was provided. This result is more than just a curiosity. For example, there is evidence that some IPM practices have actually increased the amounts of pesticides farmers use (Fernandez-Cornejo et al., 1998).
Voluntary Policy Instruments 71
Education when producers care about the environment
Research has demonstrated that farmers are well informed of many environ- mental problems, and that most US farmers perceive themselves to be stewards of the land (Camboni and Napier, 1994). Educational programmes could take advantage of altruism or land stewardship motives by informing farmers about local and on-farm environmental conditions and about how a change in management practices could improve local and on-farm water quality.
Figure 3.2 considers the case where farmers have some altruistic or land stewardship motives that influence their decision-making. It is possible in this case to construct a utility indifference map showing the rates at which a producer is willing to trade net returns for increased water quality. The point along the water quality/net returns frontier (Quadrant IV) where a producer will operate is at the point of tangency with an indifference curve (e.g. U1 or U2), or where the marginal rate of substitution (MRS) between net returns and water quality is equal to the slope of the net returns/water quality fron- tier. At this point, the producer’s utility is maximized.
Suppose an altruistic producer does not believe he or she is contributing to water quality problems and is not aware of T1. Production will initially take place along T2 at A (or at A in Quadrant IV). Since the producer is unaware of R1, the MRS between net returns and water quality is 0. Suppose
72 R.D. Horanet al.
IV U1 Profit
C G
F A
S2
Q1
Q*
F CG
A
T2 T1
x R1 S1
Expected water quality
Expected water quality III II
U2 I
Fig. 3.2. Utility maximizing production decisions.
that the producer is informed of how the use ofxis affecting water quality so that the relationships expressed by R1 and S2 are revealed to the producer.
The response of the producer to this information will depend on their willing- ness to give up some net returns to protect water quality, expressed by the indifference curves in Quadrant IV. Production on T2 will now occur to the left of A, at F (Fin Quadrant IV), where indifference curve U2 is tangent to S2. In the example, water quality is improved and utility increased (point A lies below U2). This is a win–win situation for the producer, even though net returns are reduced.
Suppose now the producer is educated about T1. The altruistic producer will have an incentive to make production decisions based on the trade-offs defined by S1 and U1, operating now at point G. In this example, both water quality and net returns are higher than for points A and F, a win–win situation.
However, this need not be the case. The ultimate impacts on water quality will generally depend on the nature of T1 and R1 relative to T2, and on the MRS between net returns and water quality. If expected water quality does improve as a result of education, the degree of improvement relative to Q* depends on how strongly the producer values environmental quality. Efficiency is obtained only for the special case in which each producer makes production decisions while fully internalizing their marginal contribution to expected environmental damages.
Farmers have been shown to respond to education programmes when their own water supply is at stake (Napier and Brown, 1993; Anderson et al., 1995; Knox et al., 1995; Moreau and Strasma, 1995). However, the perceived benefits to farmers of significant changes in existing practices are often small (Beach and Carlson, 1993; Norton et al., 1994). Similarly, experience with edu- cation programmes and empirical evidence indicates that altruism or concern over the local environment plays only a very small role in farmers’
decisions to adopt alternative management practices (Camboni and Napier, 1994; Franco et al., 1994; Weaver, 1996). Agricultural markets are competitive and market pressures make it unlikely that the average farmer will adopt costly or risky pollution control measures for altruistic reasons alone, especially when the primary beneficiaries are downstream (Bohm and Russell, 1985; Nowak, 1987;
Abler and Shortle, 1991a; Napier and Camboni, 1993).
A basic requirement for altruism to be the motivating factor for change is that farmers believe there is a problem that needs to be addressed, and that their actions make a difference (Padgitt, 1989; Napier and Brown, 1993).
Surveys of producer attitudes and beliefs toward the relationship between their actions and water quality consistently find that farmers generally do not perceive that their activities affect the local environment, even when local water quality problems are known to exist (Hoban and Wimberly, 1992;
Lichtenberg and Lessley, 1992; Pease and Bosch, 1994; Nowaket al., 1997).
For example, USDA’s Water Quality Demonstration Projects did not signifi- cantly change farmers’ perceptions about their impacts on water quality even though the projects were located in areas with known water quality problems
Voluntary Policy Instruments 73
(Nowak et al., 1997). One could easily imagine that convincing farmers of their contribution to a non-point source pollution problem may be difficult, especially given that non-point source pollution from a farm cannot be observed and that its impacts on water quality are the result of complex processes and are often felt downstream from the source. If there are many other farmers in the watershed, a single farmer may, justifiably, believe that his/her own contribution to total pollution loads is very small. Even if farmers do take appropriate actions to improve water quality, they generally will not be able to observe whether these changes in management actually improve water quality. Farmers will have to take as a matter of faith any information provided about the water quality impacts of changes in their production practices.
Education as part of a more comprehensive policy
There is ample evidence that public perceptions about environmental risks are often at odds with expert assessments and that people do not necessarily respond to risk information in ways that experts consider logical (e.g. Fisher, 1991; Lopes, 1992). To the extent that information programmes are used in an attempt to change producer behaviour, it is important that they be designed with a good understanding of the kinds of message and delivery mechanism that will have an impact on the target audiences.
Education’s greatest value may be as a component of a pollution control policy that relies on other tools. By providing the information that farmers need for efficient implementation of changes in production practices, overall pollution control is attained at lower cost.