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The Potential for Nitrogen Abatement Trading in Agriculture: A Hypothetical Market Experiment

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  • Line B. Hansen
  • Mette Termansen
  • Berit Hasler

Abstract

The effectiveness of nitrogen abatement trading as a policy measure relies on both heterogeneity in costs and environmental effectiveness across landscapes. Cost‐efficient implementation may therefore critically depend on spatial distributions of farm and farmer characteristics in water catchments. We use a spatially specific hypothetical market experiment to analyse the likelihood of farmers’ enrolment into nitrogen abatement trading contracts, and derive demand and supply functions for farmers’ nitrogen abatement. We find that farm characteristics influence both the decision whether to supply or purchase nitrogen abatement, as well as the amounts being traded. The derived demand and supply functions for farmers’ N abatement, using hypothetical market experiment data, can be used to reveal the variability in costs of abatement within a market. This provides valuable information to test potential trading schemes ex ante, to evaluate potential economic gains from policy implementation.

Suggested Citation

  • Line B. Hansen & Mette Termansen & Berit Hasler, 2019. "The Potential for Nitrogen Abatement Trading in Agriculture: A Hypothetical Market Experiment," Journal of Agricultural Economics, Wiley Blackwell, vol. 70(3), pages 812-839, September.
    • Handle: RePEc:bla:jageco:v:70:y:2019:i:3:p:812-839
    DOI: 10.1111/1477-9552.12319
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    Cited by:

    1. Xi, Xuan & Zhang, Jixiang, 2020. "Complexity analysis of a decision-making game concerning governments and heterogeneous agricultural enterprises with bounded rationality," Chaos, Solitons & Fractals, Elsevier, vol. 140(C).
    2. Filippelli, Raphael & Termansen, Mette & Hasan, Syezlin & Hasler, Berit & Hansen, Line & Smart, James C.R., 2022. "Water quality trading markets – Integrating land and marine based measures under a smart market approach," Ecological Economics, Elsevier, vol. 200(C).
    3. Thiago Morello, 2023. "An Agri-environmental Scheme for Reducing Inputs Subjected to Accidental Spillage: An Application to Agricultural Burnings by Smallholders," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 84(2), pages 383-408, February.
    4. Xi, Xuan & Zhang, Yulin, 2021. "Complexity analysis of production, fertilizer-saving level, and emission reduction efforts decisions in a two-parallel agricultural product supply chain," Chaos, Solitons & Fractals, Elsevier, vol. 152(C).
    5. Syezlin Hasan & Line Block Hansen & James C. R. Smart & Berit Hasler & Mette Termansen, 2022. "Tradeable Nitrogen Abatement Practices for Diffuse Agricultural Emissions: A ‘Smart Market’ Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(1), pages 29-63, May.
    6. Alcon, Francisco & de-Miguel, María Dolores & Martínez-Paz, José Miguel, 2021. "Assessment of real and perceived cost-effectiveness to inform agricultural diffuse pollution mitigation policies," Land Use Policy, Elsevier, vol. 107(C).

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