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Smart Environmental Policy for Animal Agriculture... Possibility or Pipe Dream?
Executive Summary The challenge before policymakers is to design smart environmental policy for animal agriculture that will control serious water and air pollution while maintaining the industry's economic viability. The policies must be economically sound, technologically feasible, attractive to producers, and assure the public of environmental protection -- a difficult balancing act indeed. The policy response is complicated by the transformation of the livestock industry from small farms to larger farms concentrating animal waste in certain areas. There has been a flurry of policymaking at the state and local levels, which is demonstrated in a new national survey by a consortium of universities and other organizations. While this may ultimately prove beneficial for the communities facing serious pollution problems, it has also created a patchwork of local policies and uneven environmental standards around the country. "We have to get that fine balance -- devolving and diffusing responsibilities to local and regional problem areas, but at the same time making sure that the national water quality objectives are met cost effectively," says Dave Ervin of the Henry A. Wallace Institute for Alternative Agriculture. This general task has many challenges. There is no single solution to the range of issues raised by animal waste. Many technological solutions have only been partially explored. Stimulating cost-saving innovations through clear performance objectives and incentives is a key element of smart environmental policy. As the Netherlands experience shows, achieving smart environmental policies for animal agriculture takes trial and error. And it will also take time. "Working towards a public policy to deal with animal waste management is an exercise in groping for answers," says Jeff Zinn of the Congressional Research Service. "The Congressional response is likely to be long and complicated. It's going to involve many steps, it's going to have many players and we're probably a long way away from the end of the trail on this issue." But there have been success stories, ones that were created by setting clear objectives and standards. When goals and performance standards are clarified, as a case study of Florida dairy farmers shows, it removes uncertainty for producers and can stimulate innovation. In the sunshine state, certain producers streamlined their operations to meet water quality rules, and in the process, boosted milk production to yield a net economic gain. States and localities are so far taking the lead on these issues, because of the diversity of the agricultural operations and the unique problems they create. Those with the most serious problems appear to be getting local attention. How can public research help to develop solutions? By studying what works. Here, greater federal support of interdisciplinary research grounded in economics could result in more effective policy initiatives. One study showed, for instance, that manure can be worth as much as $3 per hog when it's applied properly on an Iowa farm. "One policy that screams out right now: increase the value of manure," says Bruce Babcock of Iowa State University. "If you can do that, you're probably looking at lowering environmental problems." Several approaches can be taken to increase the value of manure, from private insurance schemes, to public incentives, to regulatory penalties when manure waste escapes into the off-farm environment. "It's pretty clear that we do not know as much as we would like to know in order to design smart policy," Ervin says. "Nonetheless policy is underway and is evolving. We cannot abdicate our responsibilities to try and inform and offer ideas and insights as that policy evolution takes place." The workshop papers identify five lessons from economics to guide smart policy design:
For more information contact David Ervin, Tel: 503-725-3935. Patchwork Policies: Localities Manage a Mounting National Problem Despite growing concerns about animal waste management in communities around the country over the past few years, the federal government has taken a hands-off approach. Capitol Hill has left it up to the states to set policies, and where they have fallen short, local governments have stepped in. The result? A patchwork of policies affecting animal agriculture and variations in environmental quality. "We have these layered policies at the state level, at the local level, and at the federal level. These programs are right now in a tremendous state of flux, evolving rapidly," Sandra Batie and Pat Norris, professors at Michigan State University, told the C-FARE symposium. What's driving policy? Bigger animal agriculture operations, the movement of citydwellers to the countryside, and new views on property rights. Animal megafarms often cluster around processing facilities, which is a double-edged sword for a community: it means more jobs but it also can tax air and water quality. And the traditional public generosity toward farmers has been in short supply because these large animal operations look like any other big business. Affluence has also affected effluence: wealthier citizens in rural areas are pushing for more aggressive waste management policy. These former urban dwellers are more savvy and politically active and they strongly advocate to protect their property values. Maryland is an example of an emerging state policy. Propelled by the pfisteria problem in the mid-1990's, in which agricultural run-off is accused of contributing to outbreaks of bacteria infecting fish in state waterways, the state moved rapidly. It changed voluntary nitrogen based regulations to a comprehensive mandatory, phosphorus based program that covers virtually every commercial agriculture acre in the state. The state also has adopted an unusual pollution prevention requirement - the use of the feed additive phytase for poultry that is produced under contract. Phytase lowers the phosphorus content in poultry droppings. The patchwork quilt of animal regulations is troublesome to an agricultural industry that is increasingly global. "Indeed, the desire for more uniformity may have been one of the reasons that the pork industry worked with EPA for a uniform federal nonpoint pollution framework," said Batie. Yet, the patchwork also means it is difficult to design a federal approach that is acceptable to the states. Drs. Batie and Norris noted that, while some states may be laggards and others leaders in this area, most have a program in which they are vested. Thus, they resist federal programs that are not similar to theirs - particularly when these federal programs dictate how animal waste is to be managed. "While the federal approach may be less threatening to states if it focuses on federal standards for water quality, establishing enforceable standards are quite difficult in practice," said Dr. Sandra Batie. "Thus, my best guess is that we will continue to see fragmented and inconsistent policies at the federal, state, and local levels in the near future." For more information contact Sandra Batie, Tel: 517-355-4705;or Patricia Norris, Tel: 517-353-7856. Dairies in the Sunshine State A Case Study While regulations limiting pollutants are often viewed as a cost burden for farmers, that isn't always the case. In Florida, state regulations to clean up phosphorus runoff actually fostered innovation and boosted production for certain farms in the dairy industry. Professor William Boggess of Oregon State University said that beginning in the 1980's, Florida state officials launched a three-pronged attack on runoff from dairy manure into Lake Okeechobee. The pollutants threatened to make the lake unusable and the water undrinkable for the millions of people living in south Florida. Dairies were required to treat wastewater and runoff from milking parlors and intensive use areas before it reached state waters. A buyout program was instituted where farmers received $602 for every cow they took out of production. Lastly, a phosphorus concentration standard was established for drainage water. The regulations stimulated innovation on some farms, according to Boggess, who studied the economic effects of the water quality programs. Milk production on those farms rose 13 percent per cow after farmers installed feed barns to control manure and other modifications. Other farmers took the buyout or relocated to areas where water quality was not such a serious concern. "Savvy producers made some really interesting optional investments that weren't required as part of the rule that led to the increase in milk production and lowered their costs," Boggess told the C-FARE symposium. "They tell us they probably wouldn't have done that if these regulations hadn't made them stop and rethink their operations from the ground up." They were also encouraged by government cost sharing for some of the practices. The increase in milk production more than offset the estimated $1.14 per cwt cost to producers to comply with the regulations. The problems at Lake Okeechobee and the ways in which state officials have tried to solve them offer a good example of the evolution that has taken place in policy towards animal waste management. Economics, innovation, and incentives were key factors. Over time, the state has moved from voluntary to mandatory programs and from public funding to projects in which the "polluter pays." Most recently, Florida moved from a command and control technology standard to an emissions standard that gave producers more flexibility, Boggess said. In this way, the innovations were similar to what had been achieved in the Netherlands. The Florida study found:
For more information contact Bill Boggess, Tel: 541-737-1395 Governance at the Ground Level Mark Edelman of Iowa State University co-chaired a university task force to set up a national database to track states' policies toward large confined animal feeding operations (CAFOs.) He unveiled the preliminary survey results at C-FARE's symposium. "The pattern that emerges across the country is that just about every state has a state agency that is involved, but about half the states have local governments fairly heavily involved in the process," Edelman told the group. Forty-six states said they had state agencies regulating big animal agriculture enterprises. Six states had developed sub-state regional agencies to work on the issues. On the local level, 21 states reported county government action and eight states had town or township involvement. Policies vary state-by-state, reflecting local priorities and attitudes towards agriculture. For example, in Colorado voters passed a statute that requires up to a mile between manure handling facilities and neighboring homes, Edelman said. In Iowa, by comparison, that same distance must be roughly a quarter mile to a half mile. These differences stem from the unique social and economic conditions in each state. According to the survey, 36 states require manure management plans. Thirty-three impose nutrient standards or other limits that restrict manure application, 14 states have specific requirements to control flies and 16 states have odor standards. Animal megafarms are a hot button issue. Thirty-eight states reported that big animal agriculture operations were controversial in their state. Twenty-two states said legislation had been proposed in the past year and 19 reported court action. Financial incentives appear to be a popular policy tool. Over half the states in the survey provide their own cost-sharing programs to encourage environmental compliance above and beyond federal programs. But more economic research is needed to understand the differential costs that these policies impose and their effect on competitiveness and industry location. The results of the continuing survey, and a state-by-state breakdown, are available on the Internet at http://cherokee.agecon. clemson.edu/confine.htm. For more information contact Mark Edelman, Tel: 515-294-6144. What Are States Doing? Mark Edelman of Iowa State University has set up a national database to track states' policies towards large confined animal feeding operations (CAFOs.) Number of States: 46 - state agencies regulate CAFOs. 21 - county governments regulate CAFOs. 22 - proposed legislation in the past year. 16 - report new ordinances or policies passed by local jurisdictions. 36 - require manure management plans. 38 - say animal megafarms are controversial in their state. 19 - report court action involving confined livestock operations.The Netherlands Approach "You Need Regulation" The Netherlands has been working since the early 1980's to tackle air and water pollution from intensive livestock production in a densely populated country. What can their experience teach us? This is what Jan Groenveld, agricultural counselor at the Netherlands Embassy in Washington, had to say. The basic message was similar to the Florida experience in cleaning up pollution from dairies near Lake Okeechobee. Q. Describe the situation in the Netherlands. A. We have 4.4 million acres and 15 million people, 14 million pigs, 1.5 million dairy cows and 90 million chickens. We export 60 percent of all our animal products and we import a lot of our feed. There are a lot of people who say we export the good things while the bad things, the manure, remain in the Netherlands. Q. What are the environmental consequences? A. We have problems with high mineral losses. They contribute to the eutrophication of the surface water, nitrogen pollution of groundwater and we have a lot of ammonia that is released that is a major source of acidification and grass invasion. Q. What are some of the important policy innovations to deal with these problems? A. The minerals accounting system. Under this system, farmers keep records of the exact amount of minerals they use, the quantities that leave the farm (i.e., in meat) and the quantities lost to the environment (i.e., in fertilizers.) If these losses exceed a given standard, the farmer pays a heavy fine. So there is a real inducement for farmers to transport manure to less intensive livestock production areas instead of applying it in high quantities on their own land. The second revolutionary element is a forced reduction of numbers per herd for pigs. Farmers have attacked this policy in court. For the moment it means that it's not applicable and I think this is a big problem because it was one of the basic elements of the policy. Q. How are you curbing the release of ammonia into the environment? A. We have several measures for this very important problem. One of them is to inject manure directly into the land. A whole new technology has been developed on the basis of this technique and even new companies because it's not the farmer himself who's doing it, it's a kind of a broker. Also farms need a license from the municipalities if they are bigger than a certain size. And there is a policy under consideration to move farms from areas that have a landscape or environmental value because we are afraid the ammonia released might hurt the landscape. Q. What were the main lessons the Netherlands learned from trying to tackle these problems? A. Voluntary programs don't work. You need regulations. But not the command and control variety that leaves farmers with little flexibility in adaptation. The government has to be involved very severely but in such a way that the problem doesn't become a problem of the government. You should offer farmers economic incentives to work towards meeting policy objectives. You need a comprehensive integrated policy. Farmers need to see animal waste not just as waste but as raw material. Farmers also should take into consideration that manure policy may help improve management policies on the farm. For more information contact Jan Groenveld, Tel: 202-244-5300. Policy Innovations Economic Tools Help Manage Agricultural Waste Like Florida, other states are also relying on economics as a tool for potential policy innovations, from a pollution credit trading scheme to curb water pollution in North Carolina to insurance to deter Iowa farmers from overapplying fertilizer. In the Tar-Pamlico river basin in North Carolina, a coalition of 13 firms that produce 80 percent of the point source phosphorus and nitrogen discharge in the region, together with state officials and a local environmental group, hatched a plan to meet national water quality goals that included setting up a market to trade pollution credits. Under the program, the firms can trade credits among each other and with local farmers. "The idea is that there is somebody out there that can reduce pollution cheaper than somebody else," Dana Hoag, a professor at Colorado State University, explained at the C-FARE symposium. "So (you) basically allocate pollution at least cost." This market-based alternative to command-and-control regulations is promising, but so far, trades aren't being made. Economists like Hoag are trying to figure out why. It could be because of poor implementation. An even bigger stumbling block however might be the intangible costs of public perception, with traders fearful of being labeled as polluters. Additional research will help economists understand and develop strategies to address the problems. In Iowa, officials are looking at nitrogen deficiency insurance as a tool to reduce excessive fertilizing, says Bruce Babcock of Iowa State University. Currently, many Iowa farmers use commercial fertilizer on their fields in addition to applying manure to ensure the soil is not short of nitrogen. "You put a financial instrument in there that pays an indemnity if farmers don't put on commercial fertilizer and they might hold off on that extra application," says Babcock. It could also help to increase the value of manure because the size of the insurance premium would demonstrate to farmers that the additional commercial fertilizer has very little value. Another economic policy innovation that appears to have great potential is nutrient management planning, Marc Ribaudo of the U.S. Agriculture Department's Economic Research Service (ERS) told the symposium. An ERS survey of corn enterprises found that farmers who used a higher number of practices consistent with comprehensive nutrient management planning had better results than farmers using few or no practices consistent with such planning. These producers had significantly higher yields, higher net returns, and significantly lower expenses on a per bushel basis. Plus, nutrient management planning can reduce nutrient runoff and improve environmental quality. "Nutrient management planning is a flexible tool, it's not one size fits all. It takes into account the characteristics of the land, the characteristics of the farm operation and the management capabilities of the operator," says Ribaudo. "This flexibility also enhances the economic efficiency of this tool compared to other approaches." Roberta Parry from the Environmental Protection Agency's Office of Policy and Reinvention said that animal waste management policies need to be more systematic to achieve environmental goals. Successful policies need to include pollution prevention, assessment, comprehensive nutrient management plan development, implementation, enforcement, and evaluation. They will also have to tackle several difficult questions. What is the livestock integrator's responsibility for the appropriate utilization of the waste? What tools and process are necessary for the development, approval, and compliance checks of comprehensive nutrient management plans? How can cost-share programs, compliance checks, and technical assistance be targeted effectively? Finally, how can the political will to fully implement successful animal waste management policy be mustered? Even with this more comprehensive approach, social concerns, other environmental concerns (i.e., air quality, pathogens, animal pharmaceuticals, and heavy metals), and fertilizer use on croplands may remain unaddressed. For more information contact: Dana Hoag, Tel: 970-491-5549
C-FARE An Organization of Agricultural Economists C-FARE is a non-profit and non-partisan professional organization of agricultural economists working to bring the results of economics research to key public sector decision makers in the Administration and the Congress. C-FARE/AAEA Business Office Acknowledgements The C-FARE Board of Directors would like to thank the speakers and the following organizations for their support of this project: The Economic Research Service, USDA; The Cooperative State Research Education and Extension Service, USDA; The Natural Resource Conservation Service, USDA; The National Agricultural Statistical Service, USDA; The Environmental Protection Agency; and the Farm Foundation. The views represented here are those of the authors and do not represent an official position of the U.S. Government. All material contained in this document may be used without permission provided credit is given. 2000 C-FARE Board of Directors Public Statements
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