An incentive tax on nitrogen loss in Swiss agriculture?

Over the past two decades, Swiss agriculture has made almost no progress in dealing with its nitrogen surplus which is perhaps the sector’s main sustainability problem. One possible way to solve this problem would be to implement a market-based policy instrument that decreases the nitrogen surplus in a cost-efficient manner on the basis of a polluter-pays principle whilst protecting widely accepted pollution rights. This present paper discusses options for the design of such a mechanism. Based on these considerations, the most suitable instrument would be an incentive tax on nitrogen loss from mineral fertiliser and imported animal feed that would link to the existing fertiliser balance method (Suisse-Bilanz). Synergies with Suisse Bilanz and the direct payment system minimise the administrative burden. Declaration of mineral fertiliser and animal feed is ensured through a nitro- gen deposit that is levied on imports and refunded after deducting the tax. As the net tax revenue is redistributed to the farm sector, the income of sustainable farms is increased.