Combining Dynamic Economic Analysis and Environmental Impact Modelling: Addressing Uncertainty and Complexity of Agricultural Development

Abstract: In this study the impacts of different agricultural policies on agricultural production and nutrient leaching from agricultural lands are evaluated using the economic DREMFIA agricultural sector model and a field scale nutrient transport model ICECREAM. DREMFIA includes an evolutionary scheme of technology diffusion which considers farm investments, evolving farm size structure and technological change explicitly. The technology diffusion model allows self-inforcing patterns of technical change driven by the spread of information and farmers ’ knowledge related to different technological alternatives. Hence the long-term changes in agriculture due to policy changes may be essentially larger than those predicted by traditional static equilibrium models. Larger potential for changes in production provides a larger perspective for evaluation of environmental impacts. The environmental effects are studied using the field scale nutrient transport model ICECREAM, based on the land use changes predicted by the DREMFIA model. The modelled variables are nitrogen and phosphorus losses in surface runoff and percolation. Eutrophication of surface waters is the considered environmental effect. In this paper the modelling strategy will be presented and highlighted using two case study catchments with varying environmental conditions and land use