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Case Study

Cost-effective Regulation of Diffuse Pollution

By Ashar Aftab

Modern intensive agricultural production produces numerous unwanted side-effects or externalities that, if unregulated, may damage the environment, human health and society. These externalities include, among others, diffuse water pollution from nitrogen and phosphorus fertilizers as well as sediment pollution from water runoff following intensive soil tillage. The UK Environment Agency estimates the economic cost of diffuse agricultural pollution to be between £322-627 million/year. In England and Wales up to 82% of rivers, 53% of lakes and 75% of ground waters may fail to achieve ‘good ecological status’, a legal requirement under the EU Water Framework Directive, because of diffuse nitrogen, phosphorus and/or sediment pollution. Regulating such externalities has proven to be very complicated and expensive.

This interdisciplinary research investigates novel cost-effective approaches to controlling multiple agricultural externalities from intensive agricultural production by designing spatially targeted and coordinated intervention policies. Just as agricultural productivity varies across the landscape, similarly some ‘high-risk’ land contributes more to agricultural externalities due to its management and/or its geophysical/hydrological characteristics. Thus, investment in pollution mitigation should be spatially targeted or prioritised on ‘high-risk’ land. Recognizing this insight provides the most cost-effective way to optimise the use of environmentally damaging input and land use.

This interdisciplinary research combines recent advances in science and innovative economic incentives to develop forward-looking and practically implementable spatially targeted incentives and policies to regulate agricultural externalities. Efficiency savings from spatial targeting are substantial and offer a rare ‘win-win-win’ outcome for regulators, farm businesses and the environment. Present regulation does not discriminate at a sufficiently precise scale between lands at high and low risk of generating and transporting pollution. So, indiscriminate blanket measures are implemented on all land, irrespective of its tendency to generate pollution and its hydrological connectivity i.e., the probability of it being ‘linked’ or able to transfer the pollution to a water body. Subjecting all land to the same restrictive controls irrespective of actual contribution to catchment NP is neither efficient nor fair, a burden on farmers and expensive to enforce.

Our interdisciplinary research will quantify the economic and environmental benefits of using spatially targeted regulation only on high-risk land units (prone to generating pollution and hydrologically connected to the receiving waters) by using SCIMAP – a hydrological risk profiling tool. Thus, farmers will mainly take control measures, and regulators will mostly inspect practices, on targeted high-risk ‘leaky’ land. Our Biophysical Economic modelling of two English catchments will allow us to simulate the impact of using various spatially targeted incentives/policies and estimate their relative cost-effectiveness. By working with DEFRA this research will help inform diffuse pollution policy making in the UK and hopefully beyond.