Designing climate and water policies for agriculture

Research output: ThesisDoctoral ThesisCollection of Articles


This thesis studies the design of socially optimal policies for climate mitigation and water protection for two agricultural production lines: crop and dairy production. It provides analytical insights into optimal management, both in the absence and presence of nutrient runoff and greenhouse gas emissions, and develops policies to incentivize private production when externalities to water and atmosphere exist. Special attention is devoted to the coeffects of agricultural water protection measures on climate mitigation and of climate mitigation measures on water protection and their implications for marginal abatement costs and optimal policies. The thesis studies crop rotations with legumes and dairy production in detail. It additionally derives cost functions for reducing emissions by combining individual measures, such as fertilization, buffer strips, catch crops, tillage methods, afforestation and green fallow.

In general, Pigouvian taxes on greenhouse gas emissions or on diffuse nutrient
loading as first-best policies are not possible due to problems in measuring nonpoint source loading. Therefore, second-best policies, such as uniform taxes levied on animal numbers or fertilization or subsidies based on buffer strip width or transporting manure, are developed and applied numerically. Based on the findings, in comparison to the first-best policies, the second-best policies are relatively effective in producing the desired policy goals. Study I of the thesis shows how legumes in crop rotations outperform cereal monocultures economically and environmentally in many cases, provided there is adequate demand for legumes, and develops differentiated nitrogen tax and buffer strip subsidies based on the cultivated crop. Study II focuses on the use of nitrogen, land use, dairy cow diet and climate emissions within dairy production. This study demonstrates the overall spatial pattern of manure application and illustrates the main measures to reduce greenhouse gas emissions and nutrient runoff. Uniform nutrient taxes are found functional, although spatially differentiated taxes produce higher welfare. Study III highlights the importance of accounting for multiple pollutants and their coeffects when designing environmental policies and calculating marginal abatement costs. In the case of cobenefits, the optimal tax on the focus pollutant is relatively higher, increasing abatement and the supply of cobenefits.
Original languageEnglish
  • Ollikainen, Markku, Supervisor
Award date1 Jul 2020
Print ISBNs978-951-51-6207-6
Electronic ISBNs978-951-51-6208-3
Publication statusPublished - 1 Jul 2020
MoE publication typeG5 Doctoral dissertation (article)

Fields of Science

  • 511 Economics
  • 4111 Agronomy
  • 1172 Environmental sciences

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