Agricultural Policy, Environmental Impacts and Water Use Under Production Uncertainty

Abstract

The effect of agricultural policy on environment is an issue that has been widely addressed both at the theoretical and applied policy level.¹ Price support schemes occupy a central position in the design of agricultural policy, although policies such as production quotas or land set aside schemes are also very important. However, price support schemes, although very popular among farmers, have been associated with increased agricultural pollution. It has been argued that steadily rising farm prices are associated with highly intensive agricultural activities, which in turn progressively require the use of marginal land (agricultural extensification) and the excessive application of various intermediate inputs (agricultural intensification). Both extensification and intensification cause environmental problems. Agricultural extensification brings marginal and highly erodible land into production causing sediment and chemical run-off into surface water. As a result of the conversion of forest, wetlands, and other natural features to agricultural uses, wildlife habitat and the diversity of plants and animals is also affected. Agricultural intensification, on the other hand, tends to increase the use of fertilizers and pesticides, and the concentration of livestock.² It may also result in degradation of on-farm resources from salinization, chemical pollution and soil erosion.