(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.
tion techniques. Of course, plant breeders regularly release new seed varieties having desirable properties such as improved disease and pest resistance.
Biotechnology is another important alternative technology. It is already having significant impacts on agricultural production in many countries and could lead to revolutionary changes in the types of crops and livestock produced and the ways in which they are produced (Fernandez-Cornejo and McBride, 2000). Plant biotechnology has the potential to yield crops with significantly greater resistance to a whole host of pests and diseases, necessi- tating fewer insecticides and herbicides. Work is under way to engineer pest vectors into beneficial insects as part of IPM strategies. Perhaps the most promising plant biotechnology from an environmental perspective, though years if not decades away, is nitrogen-fixing cereal varieties. These varieties would fix atmospheric nitrogen in a manner similar to legumes, which could dramatically reduce nitrogen fertilizer usage. Genetically modified organisms (GMOs) with tolerance to specific herbicides have also been developed.
Concerns have been raised that these may promote herbicide usage, although that has not happened to date (Heimlich et al., 2000). Animal biotechnology has the potential to yield livestock that process feed more efficiently, leading to reduced feeding requirements and fewer nutrients in animal wastes. Feed may also be genetically modified so as to reduce nutrients in livestock wastes.
Economic responses to new technologies
Analyses of the environmental impacts of potential new agricultural technologies often focus on their biological, chemical and physical properties relative to existing technologies (e.g. National Research Council, 1989;
Logan, 1993; OECD, 1994d). These analyses typically endeavour to assess environmental externalities associated with production of a given tonne of output, or production on a given hectare of land, using new technologies versus existing technologies. For example, how much of a given herbicide is required to produce a kilogram of a new maize variety versus an existing variety? Alternatively, what is the yield of wheat under no-till versus conven- tional tillage? These kinds of question are critical but, by themselves, they do not tell us the environmental impacts of new technologies, because they do not take into account the economic responses of producers and consumers to new technologies.
One key economic consideration is, of course, adoption. To have an impact, new technologies must be adopted. If they are to be adopted voluntar- ily, they must be expected to be profitable to producers. If use is mandated by law, then political acceptability and cost-effectiveness considerations would in most situations require any negative impact on producers to be small (Abler and Shortle, 1991a). However, widespread adoption is only one economic consideration.
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Environmentally friendly technologies can be broadly classified as either pollution prevention or pollution abatement. Pollution prevention (Freeman, 1993) is
the use of materials, processes, or practices that reduce or eliminate the creation of pollutants or waste at the source (e.g. no-till). Pollution prevention includes the practices that reduce the use of hazardous materials, energy, water, or other sources and practices that protect natural resources through conservation or more efficient use.
Pollution abatement, by contrast, involves ‘end-of-pipe’ solutions and other methods of treating pollutants once they have been created (e.g. buffer strips). Of course, there are many types of technical change that do not fit into either of these two categories, and other types may have both pollution prevention and pollution abatement characteristics. Current interest, both in agriculture and in other sectors, is centred heavily on changing production processes so as to prevent pollution in the first place rather than finding better ways to clean it up after the fact.
Pollution prevention technologies could be viewed in at least two ways.
First, they could be viewed as new methods of production that completely eliminate the need for one or more polluting inputs. One could think of many innovations that fall under the latter case – for example, ‘no-till’ farming has been adopted by a significant number of US grain producers, eliminating the use of tillage equipment that had contributed to soil erosion on those farms (USDA ERS, 1997). Provided these technologies are economically attractive enough to be adopted by producers, they will improve environmental quality.
Alternatively, one could see pollution prevention technologies as reducing the quantities of one or more polluting inputs required to produce any given level of output without making total elimination of those inputs profitable. This second case is more environmentally ambiguous.
Profit-maximizing producers will not voluntarily adopt new production processes unless they are less expensive than existing processes. If they are less expensive, they will be adopted and marginal cost will fall. At the market level, competition among producers will pass the cost reduction along to consumers in lower prices, which will stimulate the quantity of output demanded. This increase in output demand will work to raise the derived demand for all factors of production, including those associated with pollution.
At a minimum this implies a smaller reduction in pollution than would be obtained if output were held constant. If the increase in output were large enough, the total use of polluting inputs could actually rise, even though input usage per unit of output would fall. Simulation analyses by Abler and Shortle (1995, 1996) and Darwin (1992) indicate that such a scenario is not merely possible but plausible.
The results from Abler and Shortle (1995, 1996) suggest that, in general, two conditions must be met in order for total usage of environmentally damaging inputs to go down. Firstly, the alternative technology must be a good substitute for environmentally damaging inputs. Secondly, the demand for the agricultural
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product in question must not be too price-elastic. The first condition is necessary to reduce significantly the usage of environmentally damaging inputs per unit of output. The second condition is necessary to hold in check the increase in product demand, and in turn output.
Pollution abatement technologies have no impact on production relation- ships, but they do reduce pollution for any given level of input usage. For example, buffer strips may be made more effective in filtering out nutrients before they reach waterbodies. The environmental benefits of pollution abatement technologies are reasonably obvious. However, because these tech- nologies typically impose costs on users, farmers are unlikely to adopt them unless they are provided with financial incentives or are required to do so.
Environmental policy and incentives for R&D
The section above considers responses by producers and consumers to pollution prevention and pollution abatement technologies once they have been devel- oped. In this section we consider how environmental policies for agriculture might affect incentives in the public and private sectors to conduct R&D on pollution prevention and pollution abatement technologies. In the US, both public and private agricultural research have historically been biased in favour of chemical-intensive techniques (e.g. Antle, 1984; Huffman and Evenson, 1989; Fawson and Shumway, 1992). It is widely acknowledged that similar forces have been at work in the EU. For example, Becker (1990a,b) found that technical change in Germany has been fertilizer- and breeding stock using (Chambers, 1988).
The economic literature on the development and adoption of environmen- tally friendly technologies dates from the late 1970s. Magat (1978, 1979) was one of the first authors to investigate how environmental policies affect the types and speed of firms’ innovations. Downing and White (1986) extended Magat’s work to include additional policy instruments and to examine the implications of different strategies on the part of the regulatory authority. Milliman and Prince (1989) and Jung et al.(1996) ranked several policy instruments in terms of their potential to induce the development and adoption of pollution abatement tech- nologies. In general, these studies found that emissions taxes or other schemes that put a ‘price’ on pollution, such as marketable pollution permits, provide the greatest incentives for environmentally friendly R&D. The reason is that firms can reduce their tax liability or expenses on pollution permits by developing technolo- gies that reduce their emissions. On the other hand, schemes that provide the producer with no financial incentives to reduce pollution beyond a certain point – such as emissions standards or technology standards – provide few incentives for environmentally friendly R&D. The producer has incentives to develop tech- nologies that help to reduce the cost of meeting the standard, but there are no incentives to develop technologies that reduce emissions beyond what the standard requires.
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One important limitation of these studies is that they consider firms that do all their own R&D. In agriculture, hardly any commercial farms are involved in research. Nearly all farms rely on technologies developed by input suppliers (seed companies, farm equipment companies, etc.) and government agencies. Input suppliers have different objectives than farmers. They seek to maximize profits from the products and services that they provide, not profits from sale of farm commodities. Environmental policies imposed on farmers will affect the amount and direction of R&D by input suppliers only to the extent that there are good market linkages between farms and input suppliers.
This condition holds in developed countries but not in many developing coun- tries. Zilbermanet al.(1997) found that improper incentives associated with socially suboptimal input prices led to socially inefficient investment (and adoption) of precision technologies that would require fewer inputs.
In the case of government agencies, there are no direct market linkages to transmit signals from farmers to researchers. Signals must instead be transmitted through public institutions such as agricultural extension and through political channels. This is problematic because the signals may become ‘noisy’ and may compete with other signals that researchers are receiving. For example, simulation analyses by Abler (1996) indicated that a tax on fertilizers and pesticides in US maize production could lead to environ- mentally beneficial changes in private-sector research, but that these benefits could be muted by offsetting changes in public-sector research. The reason was that none of the politically important groups with respect to public- sector maize R&D decisions in the US stood to gain from research that reduced the use of polluting inputs. In related work, simulation analyses by Shortle and Laughland (1994) indicated that a tax on fertilizers and pesticides in US maize production could lead to offsetting adjustments in farm price and income support policies (in order to mollify farm constituencies) that greatly reduced the environmental benefits of the tax.
R&D as part of a more comprehensive policy
R&D cannot stand on its own as a water pollution control tool, because technology is only one component of water quality improvement. Even with the most efficient, environmentally friendly technology, farmers will still have incentives to over-apply inputs that contribute to non-point source pollution, because the off-farm costs of pollution do not show up on the farmer’s bottom line. However, R&D can be a valuable component of other approaches that provide farmers with more direct incentives to reduce non-point source pollution. Indeed, one can find examples from many countries of how environmental policies have encouraged the development of new production processes, new products and even entirely new industries (e.g. Caswell et al., 1990; Kemp et al., 1992; Porter and van der Linde, 1995).
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