Modelling the Marginal Abatement Cost of Mitigating Nitrogen Loss from Agricultural Land

With the deadline identified by the Water Framework Directive (2000/60/EC) approaching in 2015 there is increasing pressure on policymakers to introduce new regulations to achieve water quality targets. Agriculture is one of the contributors of diffuse pollution entering watercourses and will come under pressure to reduce pollutant loads. This paper produces Marginal Abatement Cost (MAC) Curves for eight policy measures that could potentially reduce nitrate leaching from agricultural land on Irish dairy farms. These include: 1) reduction of fertiliser application by 10%; 2) reduction of fertiliser application by 20%; 3) livestock unit reduction to limit organic N to 170 kg ha-1; 4) reduction of livestock units by 20%; 5) change of feed mix to reduce cow dietary N intake; 6) fencing off watercourses to introduce a buffer zone; 7) improved dairy cow genetic merit by introducing higher performing dairy breeds; 8) more efficient slurry application. Results from this study indicate that there will be reductions in farm gross margins across nearly all policy measures. However, MAC and the ranking of MAC vary across individual farms and aggregate MAC does not reflect the heterogeneity of impacts across individual farms. This paper shows that any measure introduced in a “one size fits all command-control” fashion will not yield efficient economic results.