Policies to reduce agricultural greenhouse gas emissions are more effective and more efficient if they are set at the regional level and not at the level of individual farms. This can help achieve climate targets.
Switzerland and other countries have set ambitious targets to reduce greenhouse gas (GHG) emissions for the agricultural sector. To meet these targets, farmers need to implement effective and efficient mitigation measures and governments are introducing policies that support the uptake of these measures. Often these policies are neither effective (i.e. do not reach targets) nor efficient (i.e. are too costly for taxpayers and farmers). Using a bio-economic modeling approach and data from 65 dairy farms in the Canton of Zurich, a recent study of ETH and Agroscope analyzes how emission reduction targets in agriculture could be set to be more effective and efficient.
Modelling the effectiveness of policy designs
The scientists have evaluated the differences in the cost-effectiveness of two policy designs. The first consists of setting emission reduction targets uniformly across farms (farm-level targets), thus, each farmer must reduce the same amount of emissions. The second design consists of setting a regional target that must be met by the collective of farms. This allows to consider the heterogeneity among farms, i.e., each farmer’s contribution to the overall reduction target differs.
The scientists use a simulation and optimization approach based on the bio-economic farm model FarmDyn, which is parametrized to the sample of 65 dairy farms, to calculate the differences in income reduction under different percentage emission reduction targets. The considered mitigation measures were: i) replacing concentrate feed with legumes grown on the farm, ii) increasing the number of lactations per dairy cow, iii) applying manure using trail hoses, and iv) introducing feed additives to reduce enteric fermentation in cattle. These four mitigation measures supported our modelling specification that agricultural production should not decline and were chosen as they can effectively lower the GHG emissions for each kilogram of milk produced by each farm.
Increasing cost-effectiveness with regional-level targets
The findings of the study indicate that regional-level emission reduction targets are more cost-effective than farm-level ones. For example, reducing GHG emission by 10% at each farm would imply an average income reduction of 4654 CHF per farm. In contrast, if all farms together must reach the 10% reduction the average costs per farm are only 545 CHF, making the regional reduction target 88% more cost-effective (Figure 1). The main mechanism behind is that marginal abatement costs for some farms are far lower than for others. Thus, some farms can achieve a reduction higher than the imposed target for less costs than other farms. This allows farms that have higher costs to reduce their emissions below the target while still collectively achieving the overall reduction.
- The costs of reducing greenhouse gas emissions are highly heterogeneous across farms.
- Setting regional-level targets can enhance cost-effectiveness for policies addressing agricultural emissions reduction. The total abatement costs are lower compared to targeting emissions at the individual farm-level.
- The efficiency gains are dependent on the combination of mitigation measures chosen by the farm. Therefore, financially rewarding instruments should focus on the amount of the emissions abated rather than supporting specific measures or technologies.
- Regional-level targets could also be used to promote stronger social networks and eventually increase communication and learning among farmers