Cost-Effective Farm-Level Nitrogen Abatement in the Presence of Environmental and Economic Risk

This paper evaluates the consequences of considering environmental and economic risk in the analysis of cost-effective nitrogen abatement options in crop production. A farm-level mathematical programming model incorporating nitrogen leaching variability, field time variability, yield variability, and output price variability is developed. The empirical results reveal that requiring a high reliability with respect to a desired abatement target can be extremely costly, due to the high variability of nitrogen emissions. It appears to be sufficient to reduce average nitrogen load in order to reduce the environmental risk associated with nitrogen leaching variability, since a change to crops with lower average load also results in lower variability of nitrogen emissions. A farmer's degree of risk aversion has some effect on the economically optimal choice of crop mix. However, it is more important to consider the utilisation of machinery and labour resources and crop rotation effects, than considering risk aversion