Dutch Farm

Pesticide use is very high in the E.U. and policies to reduce use have been adopted. Under consideration are taxes on pesticides. Some people believe that pesticides are not essential and that alternatives are available and, as a result, believe that taxes would cause farmers to reduce their use of pesticides. However, recent research in the Netherlands shows that, due to their essential importance, pesticide use is unlikely to go down even with very high taxes. The main effect of high taxes on pesticides would be to reduce farmer income.

“Pesticides are integral components of modern crop production systems. Recently, attention is focused on the use of economic incentives to reduce pesticide use and its related indirect effects. The European Union’s (EU) pesticide policy envisages the use of pesticide tax and levy schemes.

The aim of this study is to assess the effectiveness of different fiscal measures in reducing pesticide use and environmental spillovers by using detailed farm-level data from Dutch arable crop production.

Increasing the tax rate (for both high- and low-toxicity products) to 80% and 120%, total pesticide use is decreased by almost 3% and 4%, respectively. These scenarios show that even high taxes are not able to achieve significant reductions in pesticide use. Moreover, high taxes decrease farm revenues as the 4% pesticide decrease is accompanied by a 22% decrease in farm revenue. Producers’ rigidity in reducing pesticide use, thus avoiding the tax burden, may be attributed to the damage preventing role of pesticides and their capacity to reduce output variability.

The dilemma inherent in pesticide taxation is that the use of pesticides may be so essential for some crops or regions that tax rates would have to be very high to impact pesticide use. This could result in a major reduction in farm income as depicted through the pesticide tax scenarios presented in this work… Results show that even high (and politically challenging) tax rates would result in a small reduction in the use of pesticides due to the rigidity of Dutch farmers in reducing pesticide use.”

Authors: Skevas, T., et al.
Affiliation: Wageningen University
Title: Can economic incentives encourage actual reductions in pesticide use and environmental spillovers?
Source: Agricultural Economics. 2012. 43:267-276.