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Alberta's Environmental Farm Plan_A review by Tyler Kueber for Green Hectares
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- 2. Introduction: The global agriculture industry faces many conflicting ideologies as a result of two competing demands imposed on agricultural producers and policy makers; the production of food for a growing population and the reduction of the environmental impacts associated with that production (Robertson and Swinton 2005). Creating an effective policy to reduce agriculture pollution within Alberta presents many challenges due the diverse geological, political, and producer landscape resulting from contrasting productivism and environmentalism ideals. Pollution generated by agricultural activities presents many challenges because it generally involves a large number of diffuse pollution sources. The abatement practices associated with each form of pollution are generally unobservable making it difficult to regulate agricultural pollution in an efficient, cost-effective manner (Weersink et al 1998). Specific pollution sources examined in this brief are mainly crop inputs such as fertilizer and pesticide use. The agriculture input issues explored are not a comprehensive list of all environmental hazards created by agricultural activities, rather a focal point due to their effect on tangible issues such as soil and water quality. Specifically in Alberta and western Canada, the spatial distribution of heterogeneous agriculture producers across a large geographic area presents many additional challenges not only in the implementation of comprehensive, effective policy, but in the areas of monitoring and enforcement of policy initiatives. Soil and water quality, climate change, and the loss of wildlife habitat are likely to grow with further globalization and increasing resource scarcity, thus defining the need for effective environmental policy (Miranowski and Carlson 1993). Successful policy must be targeted at effective pollution reduction containing both economic and environmental dimensions to remediate some of the social cost caused by agricultural pollution. Environmental Policy Options: Weersink et al (1998) outlined many economic instruments policy makers could utilize to achieve environmental objectives in agriculture. This study examined the ability of alternative economic instruments to achieve environmental objectives. The study presents three main categories of instruments: (i) charges on subsidies; (ii) tradeable permits; and decentralized policies. Whether these instruments can be utilized in a cost-effective manner depends largely on the ability of the regulator to monitor and enforce the choices made by producers (Weersink et al, 1998). Determining an effective environmental policy instrument targeted at reducing Alberta’s agriculture pollution ultimately depends on which conditions exist among the agriculture industry provincially. Charges and Subsidies generally refer to an economic instrument (such as taxation) on emissions, ambient concentrations, or subsidies provided based on design-based application. In order for these individual instruments to be enforceable and effective, several socio- economic conditions must exist (summarized in table 1).
- 3. Table 1. Conditions for economic instruments to be effective. Adapted from “Economic Instruments and Environmental Policy in Agriculture,” by Weersink, J. Livernois, J.E Shogren and J.S. Shortle, Canadian Public Policy,Vol. XXIV, p. 314. Copyright 1998 by JSTOR. Using a charge such as an emission tax or ambient fee, presents many problems when applied to the agriculture industry because the conditions for the instrument to be effective are not met. Some of these conditions include the inability to measure individual producer emissions at a reasonable cost. Since agriculture pollutants are generally from diffuse source occurring over a longer time period, an accurate relationship between estimated emissions and observable inputs is poorly defined (Braden and Segerson 1993). It would be difficult to effectively monitor resource quality over a large area such as Alberta due to the heterogeneous environment conditions (precipitation, soil type etc) and its influence on agronomic production. Therefore in order for a charge-based instrument to be accurate and effective, the input tax should in principle vary with location and application method (Zilberman, Khanna and Lipper 1997). Due to the diffuse source nature of environmental pollution resulting from agriculture, if a charge is implemented, it must be addressed by preventing the generation of the residuals at their source. Most other environmental policies associated with point-source problems such as those that exist in the energy industry attempt to control the delivery of the pollutant between its source and final delivery. This interception strategy cannot be applied to the agriculture industry (Weersink et al 1998). Although an input tax may
- 4. reduce input use, another disadvantage of a pure tax is that it does not encourage any other abatement actions. These actions may be more cost-efficient options such as crop choice and tillage methods; therefore, the most cost-effective attainment of pollution is not always achieved through the use of a tax (Weersink et al 1998). Further to this, the inelasticity of farm input demand implies charges such as a tax rate must be substantially high to induce the desired reduction in input use. Therefore, it is unlikely such policy is politically feasible (Helfand & House 1995). The origin of non-point, diffuse source pollution is difficult to trace, therefore all policy options that require a monitoring or enforcing component are limited in feasibility and effectiveness. Instruments such as tradable permits in context of the agriculture industry could be based on inputs such as fertilizer. However, since pollution derived from fertilizer use is largely residual and heterogeneous in response to differing geological areas, agronomic requirements, size of farming operations and the effect on their respective environment, the relation between inputs and environmental problems lacks clear definition. Since individual firms specific contribution to an issue such as surface water quality is difficult to accurately quantify, issuing binding, effective permits would be difficult. Though capitalist efficiencies do exist in terms of a firms decision about design and location of pollution control equipment (opposed to regulator decision), choosing a tax rate on emissions or inputs requires full information on how polluters will respond to the charges. This information is not likely known by the polluters themselves in the short run, and suggests tax rate structures will have to be continually revised with changes in economic conditions (Weersink et al, 1998). Further to this, the definition of a polluter would have to be well-defined by a permit so that a sufficient market existed to make the permit actually tradable. As previously discussed, the heterogeneous composition of agriculture producers, various crop inputs, and geologic conditions prevent a standardized definition of a polluter. Decentralized policies such as liability rules, non-compliance fees, performance bonds and property rights definitions present many challenges as an economic instrument. Decentralized policies allow individuals to resolve environmental problems through the legal system or negotiations. Liability laws make polluters responsible for any damages they cause, while compliance fees target individuals polluting above an ambient standard target. Due to the nature of agriculture industry such as frequent pollution events, unclear cause and effect relationships involving many parties, and relatively unobservable actions of the polluter, the links between damage and causation are poorly defined. This makes a decentralized policy such as a non-compliance fee’s, liability laws and performance bonds also difficult to assess. Comparatively, in Alberta farmland is generally a privately owned resource where little market for ecosystem goods and services exists to the producer. Therefore property rights definition can influence whether the producer has access to market non-agriculture goods and services such as the hunting of wildlife. If property rights were defined to include wildlife on a producers land, a market may exist for an ecosystem good such as hunting which could offset
- 5. the producers decline in agronomic-productivity for actions such as habitat preservation (Weersink et al 1998). Moreover, Weeersink et al (1998) suggests rather than relying on the best solution though economic instruments, the most effective way of dealing with diffuse source pollution in agriculture may be technological developments and business lead initiatives. Technological developments are generally correlated to business lead initiatives to provide producers with funding needed to adapt technology. The prominent ideal here is that technological advancements focus on a more accurate and efficient utilization of inputs such as fertilizers and pesticides. Through more efficient use, quantity of inputs may be reduced and their effect on the environment minimized. Policy makers generally use a subsidy mechanism to encourage producers to adopt the most modern precision agriculture technology because adaptations are generally costly to implement. Like a tax, subsidies can occur based on inputs or outputs relative to production. Several disadvantages of a subsidy mechanism include cost-ineffectiveness, universal availability and inefficient allocation of subsidy funding (Weersink et al 1998). Alberta’s Environmental Agriculture Policy: Alberta’s Environmental Farm Plan is a policy that uses subsidy-based instruments to initiate environmental awareness and land stewardship through the adoption of beneficial management practices applicable to agriculture. Awareness objectives are achieved through the producer documentation of environmental liabilities. Alberta’s Environmental Farm Plan (EFP) provides producers with access to subsidies upon proof of strategic environmental plans, contained in a document submitted by the producer. These subsidies provide incentive and assist producers in adopting strategies to mitigate the effects of agriculture production. Such mitigation strategies may include the adoption of precision-based technologies made available by a subsidy. By definition, Alberta’s EFP is a cross compliance policy. This refers to a program that ties eligibility for agricultural support to meeting a specific environmental criterion. Farmer, Rancher and Producer Incentive: The Environmental Farm Plan (EFP) is a voluntary, whole farm, self-assessment tool that helps producers identify their environmental risks and develop plans to mitigate identified risks. A diverse range of producers are attracted to the Environmental Farm Plan (EFP) program because it helps them identify and address environmental risks in their respective operation, while increasing their understanding of legal requirements related to environmental issues. Protecting water, air and soil quality is key to the sustainable production of crops and livestock thus it is a vested interest to producers. An EFP will identify what a producer is already mitigating effectively and pinpoint where improvement in
- 6. environmental hazard mitigation can occur. Many producers value this information because they are focused on leaving a farm legacy for future generations thus focusing on water, air, and soil quality is a primary objective. By addressing some of these risks in an EFP, producers may additionally increase operational efficiency by reassessing fertilizer use or monitoring of fuel storage tanks for example. Upon completion of an EFP, many farmers and ranchers are available to receive funding to aid in the adoption of precision agriculture technologies if it correlates to one of the beneficial management practices stated in their EFP. Producers are attracted to precision agriculture technology because this technology can increase the efficiency of machinery and input use. Precision agriculture can provide producers with an opportunity to simultaneously reduce environmental impacts while improving productivity and profits on the farm (Bongiovanni and Lowenberg- DeBoer 2004). Projects available for funding through Growing Forward II under the EFP are quite comprehensive and include but are not limited to projects such as agriculture watershed enhancement, biosecurity, on-farm energy management, confined feeding operation stewardship etc. Further to this, the EFP promotes producers to pair environmental stewardship with agricultural production which can be used in the marketing of agri-products. Consumers in modern day Canadian society are increasingly concerned about the safety and quality of the food produced within the nation. Sustainable sourcing is becoming a requirement of many major food purchasers, from manufacturers to restaurants. Thus, completing an EFP appeals to producers because it demonstrates to the public, government, and investors that farmers and ranchers are managing their environmental risks. This program is largely voluntary, thus agriculture producers perceive this program as attainable and viable. Producers adapting environmental hazard mitigation strategies can do so at their convenience and are able to prioritize tasks based on their specific operation. This flexibility and attainability is a crucial factor determining the success and adaptation of this provincial initiative. Since its inception in 2003 the Alberta Environmental Farm Plan has had 8000 completed plans which represents 24% of Alberta farms and just under two million acres of agriculture land (Alberta Environmental Farm Plan, 2016). Analysis of the Environmental Farm Plan: One of the main incentives for producers to enrol in the Environmental Farm Plan is their access to funding which aids in the adaptation of new technologies possible of increasing farm operational efficiency. Determining the effectiveness of precision based technologies can indicate the effectiveness of Alberta’s EFP at achieving environmental objectives. Schieffer & Dillon (2015) studied several precision agriculture technologies (auto- steer tractor, variable rate nitrogen application, and a sprayer with automatic section control) and their affect on the economic, agronomic, and environmental performance of the farms in their study. Additionally, they correlated the adoption
- 7. of precision agriculture technologies and their interactions with different types of agro-environmental policies (emission limits and taxes) and the change in relative effectiveness of those policies. Understanding these impacts provides insight for the effectiveness of Alberta’s Environmental Farm Plan in terms of its incentives (subsidies) for producers to adapt the same precision agricultural technologies. Schieffer & Dillon (2015) suggest: “policy failure can occur when such policy is designed for traditional production methods and fails to allow for the changes in abatement costs associated with adoption of precision agriculture methods. Although incentive-based policies are often desirable for pursuing economic efficiency and cost-effectiveness when pollution sources have heterogeneous abatement costs, policies designed without information about the technology mix used by farms may be limited in their effectiveness in reaching environmental goals. Quantity-based policies (e.g., quotas) may be more robust to technological change or uncertainty in terms of achieving targeted environmental improvements.” Bongiovanni & Lowenburg (2004) also support this idea and suggest precision agriculture can lead to higher marginal abatement costs in the form of forgone profits, decreasing producers’ responsiveness to those policies. Similarly, this analysis suggests that Alberta’s EFP in terms of promoting the adoption of precision methods, may be ineffective at mitigating environmental hazards with this incentive based mechanism alone. Assuming Alberta’s abatement costs are largely heterogeneous due to the geological variation, spatial distribution, and production variations across the province, this may be ineffective at actually achieving overall environmental improvements. Subsidies to support the adaptation of precision based technologies may be more effective at achieving environmental improvements in combination with input quantity-based limits or taxes on pollution. Problems with a subsidy-based instrument can be seen if we assume adoption of technology leads to an increase in use efficiencies of crop inputs perceived by all producers. This adoption of this technology would actually make any reduction target less binding. This adoption is less binding because the farmer actually needs less reduction in nitrogen for example, in order to meet pre-existing reduction targets. Essentially the reduction of inputs gained by technological advances is offset by the producers continued input use at a less binding level. In this case, the marginal abatement cost of pollution is actually higher with the technological adaptation, so the producer has less incentive to reduce his input use further. Therefore, without an adaptable limit or tax that can be binding, the producer has no incentive to further reduce pollution caused by inputs. Scheiffer & Dillon (2015) explored the use of a tax and a limit as a policy instrument in combination with technology subsidy policy. With the adoption of multiple technologies, the tax policies were less effective than were the limit policies in reducing environmental impacts. This was exhibited by the larger decrease in net return for tax policies and the greater decrease in nitrogen use for limit policies in
- 8. comparison to the adaptation of base technology individually (Scheiffer & Dillon, 2015, pg. 57). In order to make Alberta’s EFP more effective at achieving pollution reduction targets, a quantity-based limit would be the most beneficial instrument. To be most effective, this limit would have to correspond with the specific adopted technology and the responding effect on marginal abatement cost (Scheiffer & Dillon 2015). However, since this program is largely voluntary compliance, a quantity based limit would have to be a provincial mandate spanning all industry in order to ensure compliance of those participating in the EFP were not at a disadvantage. Extensive monitoring and enforcement efforts would be needed to ensure limit compliance across the province. The political and economic feasibility of these extensive measures poses as a barrier to using a quantity-based limit to increase policy effectiveness. In Alberta, upon adaptation of precision-based technologies, producers have the opportunities to participate in the Agricultural Carbon Offsets Market. This carbon-offset market is a government incentive intended to further reduce the abatement cost of agricultural related pollution in terms of carbon emissions. Similar to the EFP, this component is voluntary, however farmers and ranchers do get paid for their efforts to reduce emissions. Although this has moderate financial rewards, it provides a new opportunity for income, one that has the potential to become a more developed market in the future. Though this incentive is not exclusive to the EFP, used in combination with the EFP may increase producer incentive to reduce pollution based on mitigation strategies. Moreover, as a market for carbon-offsets is developed, this instrument may gain ground in terms of providing more incentives to producers resulting in greater adoption of carbon reduction strategies. Schieffer & Dillon (2015) also suggests that the adoption of multiple technologies such as auto- steer tractor, variable rate nitrogen application, and automatic section control is more effective at achieving environmental improvements than adopting one technology alone. This suggests that the subsidies available through programs such as Growing Forward II-upon the completion of an EFP, may be more effective if they are linked to multiple adaptations. However, the cost of adopting multiple technologies ultimately places the burden on economic feasibility for the producer and the viability of their enterprise when it comes to implementing these changes. One could suggest a solution is to make more funding available through the subsidy framework such as Growing Forward II, but this ultimately leads to the issue of funding for the subsidies; who is paying for these subsidies, and if the investment is still efficient at reducing environmental hazards at this new cost. This point is supported by the Weersink et al (1998) study, which suggests a major downfall of subsidy policy is the fact that is it incompatible with debt reduction- a major goal of most governments. Moreover, the subsidy incentives linked to Alberta’s Environmental Farm Plan are subject to the same criticisms discussed by Weersink et al (1998); greatest pollution contributors may not apply
- 9. to a cost-sharing program if the incentive is insufficient; funding may be inefficiently allocated in terms of its availability to non-polluting firms; and inefficient allocation of funding to firms that would have adopted the abatement regardless. An additional problem with Alberta’s Environmental Farm Plan is the lack of enrolment by large producers. From the EFP statistic presented in the introduction, the average size of farm completing a plan is 250 acres. This largely suggests that the majority of large farms, or corporate farms have not completed an EFP. Lack of enrollment in terms of large commodity producers is possibly because these large producers do not reap the same rewards as other smaller producers. This could be because large-scale producers do not rely as heavily on subsidy funding available through programs such as Growing Forward II. One could argue that is policy is ineffective for larger, less financially constrained producers because the marginal cost of pollution abatement may higher to these producers than to smaller producers. An additional explanation could suggest that the benefits in reducing pollution residuals are difficult to assess, therefore large farms less reliant on funding do not have any additional incentives to promote compliance (Weersink et al 1998). Overall enrollment, specifically large farm enrollment, questions the effectiveness of the EFP to reduce diffuse point source pollution, as some of the largest contributors may not be adapting best management practices or mitigating environmental hazards. However, if these practices provide economic incentive on their own, the producers may adapt them without enrolling in the EFP. In either regard, lack of data around program enrollment and technology utilization make it difficult to assess the differing abatement costs perceived by the heterogeneous groups of producers. This knowledge gap limits the accuracy of instruments that could be employed to make the incentive greater. Overall, the effectiveness of this subsidy incentive depends on whether it is fact a pollution-contributing farmer that is enrolled in the program, and the magnitude of the individual’s pollution reduction as a result of program compliance. In the future, issues such as sustainable sourcing for agri-products are expected to be increasingly in demand in the marketplace. Another incentive type mechanism employed by the EFP is the establishment of sustainable sourcing criteria. The Alberta Environmental Farm Plan in particular has partnered with Alberta Barley on a project to determine whether sustainable sourcing standards within the EFP meet global standards. Determination of these standards could foster marketplace premiums for Canadian products produced under these conditions. Based on this incentive, the EFP holds great future value to producers, as it is a tool that can aid in achieving environmental objectives correlated with attaining sustainable sourcing status. Due to the relatively undefined existing standards in terms of global standards, the future effectiveness of this incentive is largely unknown at this time. Additional to agriculture input use and sustainable sourcing guidelines, the EFP recently added a new Species at Risk (SAR) component. This component is largely based around promoting habitat conservation for species at risk by arming
- 10. producers with an online tool to identify opportunities to conserve those species at risk on their agricultural land. This implementation has incentive as it can potentially links to other issues such as sustainable sourcing status. Through the adaptation of the SAR component, sustainable sourcing status may be unattainable to the producer if species at risk are present on agricultural land. Producers are motivated by the market place advantage of labels such as sustainable sourcing, therefore habitat conservation may be a priority depending on the net gain perceived by the producer as a result of this implementation. Though the awareness of conservation ideals for species at risk is enhanced with this component, the net gain to the producer will not be enough based on market place premiums alone. Furthermore this added component targets the potential for producer compensation in response to habitat conservation on agricultural lands. In other provinces, habitat conservation is currently funded by Environment and Climate Change Canada’s Species at Risk Partnerships on Agricultural Lands program. Though in effect in other provinces, the effectiveness of this instrument in Alberta is questionable because other decentralized-type of policies already exist outside the EFP framework. Other national initiatives such as the Ducks Unlimited program represent pre-existing decentralized policies in terms of its impact to property right economics and habitat conservation. The Ducks Unlimited variation allows land owners to sell conservation easements against the title of the land in return for restricting land use to practices that would preserve habitat. Though Ducks Unlimited primarily corresponds to wetland conservation, other initiatives such as Buck for Wildlife are already in existence. In order for this component to be more effective than the decentralized policies already in existence, more extensive compensation under this component will be needed in order to increased enrollment if that is the policy goal. One exception to this could be species that are not already protected under the Species at Risk Act and/or species not targeted by other decentralized policies. In this case, in order to be an effective instrument, the SAR component included under the EFP would need to be more specialized and pertain to the loopholes that other decentralized policies do not already address. Overall, the same monitoring and enforcement issues that reduce the Species at Risk Act effectiveness will also limit the effectiveness of this EFP component. Additional to promoting the most efficient technology and habitat conservation through incentives, another the main initiative within the EFP is to educate and increase awareness of environmental issues to the farming and ranching communities. Though education and awareness cannot be equated with quantifiable pollution reduction, its impacts on the producer ideals may provide ecological benefits that exist, however in a less tangible way. Through the use of education and awareness concepts, the EFP focuses on sustainability for future generations. This focus on future generations can use the concept of moral suasion to changing producer ideals of “good farming”. This can lead to a shift from the formerly productivist “good farming” ideals to more sustainability oriented ideals (Burton and Paragahawewa, 2011). Although difficult to assess, the increase of sustainability-focused ideals promoted by the EFP can lead to greater program compliance through adaptation of environmentally friendly practices. In turn, this
- 11. creates some additional value for Alberta’s environmental farm plan and its ability to increase land stewardship initiatives. Conclusion: Overall, Alberta’s Environmental Farm Plan is an effective policy instrument to mitigate the effects of agricultural pollution. Though many criticisms of this incentive based policy exist, undoubtedly, it promotes agricultural land stewardship while offering flexibility and attainability to foster producer appeal and political feasibility. The program’s flexibility extends to reach Alberta’s farming and ranching communities so that the Environmental Farm Plan may be adopted and utilized by a wide range of producers with differing interests and ideals. Additional economic instruments have been explored to increase the effectiveness of this policy such as an input quantity-based limit. Many issues characteristic of the agriculture industry act as a barrier that prevents these economic instruments from being employed effectively. For those enrolled, Alberta’s Environmental Farm plan helps producers attain greater social license. Farmers participating in the Environmental Farm Plan are proving their due diligence to society on environmental issues. In a society that increasingly demands more accountability from landowners, Alberta’s Environmental Farm Plan is a framework that aids agriculture producers in their pursuit of becoming efficient, effective and responsible stewards of the land.
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