Report from the Sub-committee on Production, Economics and Employment.

6. Summary and conclusions

Background, aims and method

The use of pesticides in agriculture has resulted in increased productivity and rising production. However, the use of pesticides is increasingly giving rise to concern about the effect of the agents on the environment, meaning both harmful effects as a consequence of pollution of groundwater and products and the effect of pesticides on fauna and flora. Uncertainty concerning the long-term effects of pesticides has therefore led to demands that use of pesticides be reduced or, possibly, phased out altogether.

	the economic consequences of phasing out pesticides
	the cost of treating drinking water

The purpose of the present analyses is to assess the microeconomic and macroeconomic consequences of phasing out pesticides in agriculture, including the consequences for agricultural production and earnings and the employment consequences. In this connection, importance has been attached to determining the consequences for both primary agriculture and the upstream and downstream industries. The analyses include environment-related economic parameters, such as the cost of treating drinking water.

Unilateral Danish regulation of pesticide usage

This means that attention must be paid to the transboundary nature of the problems. Consideration must therefore be paid to the fact that international trade agreements do not allow special treatment of imported products and that requirements concerning production standards are only allowed in respect of a country’s own production. The present analyses are based on unilateral Danish regulation of pesticide use and an assumption that Danish consumers and producers are able to buy competing foreign products and means of production.

The analyses are divided into two sections: economic analyses of reduced pesticide usage in agriculture and economic valuation of environmental benefits. The first section comprises analyses of restructuring at crop-rotation level, farm level and sectoral and societal level, while the analyses of environmental improvements are focused on the cost of treating drinking water, health risks and biodiversity.

Economy of regulating agriculture’s use of pesticides

The above problems have been analysed by means of a number of scenarios designed to describe different levels of reduction of the use of pesticides in agriculture. The levels include a total phase-out (0-scenario) and partial phase-out (+scenario). The purpose of the latter is to show the situation in which limited use of pesticides is allowed for crops that would otherwise give big yield losses or not be produced at all. The analyses have been supplemented by analyses of the restructuring at farm level with different levels of restriction of the use of pesticides, cf. the discussion of different treatment frequency indices below.

Economic models describe restructuring at farm, sectoral and societal level

The economic aspects of reducing pesticide usage have been examined by means of economic models that have been adapted to the needs of the analysis and that show the economic consequences of phasing out pesticides at farm level and sectoral and societal level. The analyses are based on agronomic assumptions concerning yield losses and cultivation practice in the present situation and with phasing out of pesticides. The yield losses thus calculated have then been used as the basis for analyses of land use and pesticide usage and of the economic return at farm level, which is based on partial optimisation of the return in crop production. The calculations have also been used to establish the technical and biological assumptions for the sectoral and socioeconomic analyses, which are based on a general equilibrium model that includes the interaction with other economic sectors. This linkage of the concept of analysis ensures a coherent description of the consequences of different levels of phase-out of pesticides.

The analyses are in the nature of consequential analyses, the results of which reflect the model assumptions. For example, in the analyses at farm level, full knowledge and transparency are assumed in the decision-making process, which presumably reflects what the ablest production managers can achieve. The analyses at farm level also focus on relatively short-term restructuring, whereas, in the sectoral and socioeconomic analyses, importance is attached to the long-term consequences for agriculture and the Danish economy. The analyses are thus supplementary analyses that shed light on the consequences at different levels. Although such analyses are naturally encumbered with some uncertainty, it is believed that they give an indication of the direction and order of magnitude of the effects of the scenarios analysed.

Set-aside is treated differently

It should be noted that set-aside is treated differently at farm level and sectoral level. The farm model includes assumptions concerning the level of set-aside at the individual farm – minimum 10 per cent and maximum 33 per cent of the acreage with reform crops (including set-aside) – except in the case of dairy and pig farms, where set-aside must not exceed 10 per cent because of the problem of disposing of manure. The farm-level analyses thus give an idea of the extent of set-aside in selected forms of production. The macroeconomic model does not describe set-aside separately, but the set-aside acreage is included in the calculations together with the cultivated acreage. Therefore, in the sectoral analyses, increased set-aside is reflected in lower average yields per ha (extensified use of land).

Socioeconomic cost of total phase-out DKK 7.3 billion

The analyses show that a total phase-out of pesticides would be very costly for society. In all, a total phase-out would result in a (quantitative) fall in gross national product of DKK 7.3 billion per year (0.8 per cent). Private consumption would fall by DKK 7.6 billion (1.7 per cent), corresponding to around DKK 1,500 per inhabitant. Investments would fall by DKK 2 billion. Exports and imports would increase by DKK 6.4 billion and DKK 3.8 billion, respectively. The main measure of the welfare-related economic effects is changes in private consumption.

At sectoral level, the effect is measured by the change in gross factor income, which expresses the sector’s contribution to income formation in society (return on labour, capital and land). Phasing out pesticides would reduce productivity in the sector, thereby impairing the sector’s ability to compete for manpower and capital. There would consequently be a "migration" of capital and manpower from agriculture to other sectors, although – in the latter case – at lower real wages. For the agricultural sector, that would mean a fall in the level of wages, i.e. the remaining manpower would suffer a loss of income. In addition, established farmers would suffer a loss of capital in the form of declining land rent and there might also be changes in the value of, for example, the milk quota.

Agriculture’s contribution to income formation falls

The analyses at sectoral level show that a total phase-out of pesticides would result in a real fall in gross factor income in primary agriculture of DKK 3.4 billion (15 per cent), of which the cereal sector alone would account for DKK 3 billion. The biggest fall in factor earnings would be on capital and manpower due, as mentioned, to the reduced input of these means of production, while land rent would fall by 13 per cent (DKK 470 million). The fall would be counteracted by a rise of just over DKK 700 million in the value of the milk quota. The farm-level analyses, which are based on partial and short-term restructuring of crop production, show a loss for agriculture of the order of DKK 2.5 billion per year in the event of a total phase-out of pesticides. The calculations thus underline the fact that the loss to agriculture would depend very much on the assumptions adopted concerning the mobility of the means of production and the length of the restructuring period. Besides this, there would be an effect in the form of a redistribution between arable farmers and dairy farmers as a consequence of a different effect on land rent and production rights.

Besides the above-mentioned changes, gross factor income would fall in agriculture’s processing industries and other manufacturing industries by DKK 1.1 billion and DKK 910 million, respectively. The latter covers a fall of DKK 3.7 billion in home-market industries (building and construction, commerce, services and housing) and a rise of DKK 2.8 billion in other industries (including, particularly, export industries). The figures must be seen in the light of the fact that employment in primary agricultural and the processing industries would fall by over 16,000 full-time jobs in the 0-scenario and that capital would be depreciated and manpower released from a number of home-market industries. To maintain employment, real wages would have to fall by 1 per cent. On the one hand, this would improve competitiveness in the industries facing competition, resulting in a reduction in imports and rising production and exports. On the other, falling real wages would reduce domestic demand, and that would affect particularly the home market industries, which do not have the same possibility of selling for export.

The analyses at farm level show that a ban on the use of pesticides would reduce the gross margin by 34 per cent on clayey soil and by 24-28 per cent on sandy soil, depending on the form of production. The fall would generally be bigger at arable farms with special productions, such as sugar beet, seed and potatoes, while the percentage fall in gross margin would be approximately the same at non-specialised arable farms, dairy farms and pig farms. However, in absolute terms, dairy farms would suffer the smallest fall. The analyses are based on all other input factors (including manpower) being paid at unchanged prices and on agriculture’s product prices not being affected by the intervention. The fall in gross margin would largely be reflected in a lower land rent.

… but less in dairy farming

The smaller fall in gross margin at dairy farms is due to the fact that, in general, less use is made of pesticides in this type of farming than in both arable farming and pig farming. In the case of dairy farming, the loss would also to some extent be mitigated by the fact that fodder beet could be replaced by wholecrop and grass, which would significantly reduce the need for pesticides.

Big fall in crop production …

The above changes would result from a big fall in crop production. Cereal production would fall by 70 per cent and rape production would largely disappear. In addition, the production of special crops (sugar beet and potatoes) would fall by 63-69 per cent. The reason for these big falls is that Danish agriculture’s unit costs would rise, thereby impairing competitiveness. Owing to international competition, the price of cereals and rape would rise only slightly, while the price of potatoes and sugar beet, which are less exposed to international competition, would rise by 22 per cent and 30 per cent, respectively.

… but livestock production only slightly affected

Livestock production would be only slightly affected by the reduction in pesticide usage. There would, however, be a small increase in the production of pigs and poultry, due in part to lower wage costs. Milk production would not change because it is governed by the EU’s milk quota, but the value of the quota would rise because of lower production costs.

Increased intensity of fertilisation

The model concept used has not been developed to describe the effect on the fertiliser balance in the sector. The sectoral economic analyses, on the other hand, take explicit account of the relationship between change in production and use of fertilisers, as set out in the agronomic assumptions for the analyses. There, it is assumed that the intensity of fertilisation in crop production increases when pesticides are phased out. In the 0-scenario, consumption of commercial nitrogenous fertiliser falls by 63 per cent, while the nitrogen supply from manure remains largely constant. In all, nitrogen supply falls by use over 40 per cent. The increasing intensity of fertilisation naturally raises the question of whether the harmony rules could be met. In this connection, it must be remembered that the macroeconomic analyses are based on long-term restructuring, which means that production could, if necessary, be relocated. In the shorter term, the requirement of harmony between number of animals and acreage would imply increased costs for transport of manure, which would affect the yield in livestock production and make commercial crops more competitive.

Switch from winter cereal to spring cereal, larger acreage with greenfeed and increased set-aside

The effect on land use in agriculture has been thoroughly analysed at crop rotation level, farm level and sectoral level. The general picture is that farmers would switch from winter cereal to spring cereal, and would replace fodder beet by increasing the acreage with peas, wholecrop and grass in rotation. Owing to foreign competition, the acreage with potatoes would fall and so would the acreage with sugar beet. The acreage with greenfeed would increase overall and increased set-aside must be expected at arable farms.

Hectare payments affect land use

The hectare payments for commercial crops have a marked influence on the way farmers use their cultivated land. Despite a very sharp fall in cereal production, in the sectoral analyses this is not assumed to result in a corresponding reduction of cereal acreage, and acreage is still expected to be used for rape. The explanation lies in the fact that hectare payments would keep the land in production at a very low yield level, which in reality means that there would be a basis for considerable voluntary set-aside, particularly at arable farms. As described above, set-aside acreage has not been modelled separately in the sectoral analyses, but is included together with cultivated land. Set-aside would thus be reflected in extensified production on largely the same acreage.

Harmony requirements impair competitiveness in livestock production

In view of the calculated big fall in cereal production, it has been discussed whether the concept of analysis used can adequately describe the agronomic constraints between crop production, land use and use of fertiliser. It is believed that harmony requirements and other constraints on production would reduce the yield in livestock production in the short and medium term and thereby, through reduced demand for land for greenfeed, limit the fall in production of, for example, cereals. It is therefore important to bear in mind that the sectoral and socioeconomic analyses indicate a trend towards long-term equilibrium, where such constraints are assumed to be of no importance.

Partial phase-out gives somewhat smaller socioeconomic losses

Compared with a total phase-out, the +scenario would result in somewhat smaller losses – a quantitative fall in gross national product of DKK 3.1 billion (0.4 per cent), a fall in private consumption of DKK 3 billion, corresponding to about DKK 600 per inhabitant, and a fall in investments of DKK 950 million, while exports and imports would rise by DKK 1.6 billion and just over DKK 500 million, respectively.

Falling return on land, but rising value of milk quota

At sectoral level, there would be a real fall of DKK 1.8 billion (8 per cent) in gross factor income in agriculture, but a small rise in the processing industries because rising production in the livestock sectors would more than make up for a fall in sugar mill production. As above, the return on capital and manpower would suffer most, while the return on land would fall by 8 per cent (DKK 295 million). Against this, there would be a rise of DKK 380 million in the value of the milk quota. In this case, there would be a real fall of just over DKK 600 million in gross factor income in other sectors, covering falling production in home market industries and rising production in export industries. About 8,000 full-time jobs would be lost in agriculture, mostly in primary agriculture.

Continued considerable fall in gross margin

The analyses at farm level show that the gross margin in the +scenario would be reduced by 18 to 26 per cent on clayey soil and by 8 to 16 per cent on sandy soil. As above, arable farmers with sugar beet and potatoes would suffer the biggest fall. Dairy farms on clayey soil would suffer a relatively big fall in gross margin (26 per cent), while for dairy farms on sandy soil, the fall would be in line with that for pig farms (15-16 per cent).

According to the sectoral analyses, cereal production would fall by 32 per cent, while rape production would be largely discontinued despite a 4 per cent price rise. The price of cereals would rise only slightly (1 per cent), while the prices of potatoes and sugar beet would rise by 2 per cent and 3 per cent, respectively. Potato production would be largely halved, while production of sugar beet would fall by 6 per cent. Livestock production would be generally untouched by the reduction in the use of pesticides, but the price of greenfeed would fall, partly as a consequence of a lower land rent.

Increased intensity of fertilisation

It is calculated that consumption of commercial fertiliser would fall by 29 per cent, and total nitrogen supply by 19 per cent. However, as crop production would fall more, the intensity of fertilisation would increase.

Changed land use and increased set-aside

The analyses of land use show that there would also be a switch from winter cereal to spring cereal in the +scenario. It is estimated that the acreage with rape and the acreage with sugar beet would increase slightly, primarily reflecting the fact that some use could be made of pesticides in the production. The acreage with potatoes would fall, while the acreage with greenfeed would increase. As in the 0-scenario, there would be an increase in set-aside at arable farms on clayey soil.

Considerable economic benefit when going from total to partial phase-out

A comparison of the above-mentioned reduction in gross national product with the change in treatment frequency index shows that a considerable economic benefit is gained by moving from the 0-scenario to the +scenario. According to the analyses, the treatment frequency index in present production is 1.4 to 3.9 standard doses per hectare, depending on the main form of production and the type of soil. If limited use of pesticides were permitted, corresponding to the +scenario, the treatment frequency index would fall to 0.2 to 0.7 standard doses per hectare. Moving from the 0-scenario to the +scenario would more than halve the costs, even with a more than 80 per cent reduction in the treatment frequency index from the present level. The problem with the +scenario is that it is difficult to define the treatment that would ensure the expected reduction in treatment frequency index.

Global phase-out of pesticides strengthens production of pesticide-free cereals

The analyses are based on unilateral Danish regulation of pesticide usage, but with free access to import conventional products and means of production. This means that Danish-produced cereals would to a large extent be replaced by imported conventional cereals, which would help to maintain Danish livestock production. In the imaginary event of similar international regulation of pesticide usage, the global supply of cereals would fall and the price of cereals would consequently rise. Such a development would strengthen the competitiveness of pesticide-free Danish cereals, but at the cost of generally rising food prices and global economic losses for the consumers.

Effect of different treatment frequent indices

Different levels of phase-out analysed

With a view to determining the consequences of different levels of phase-out of pesticide usage in agriculture, farm-level analyses have been carried out of the relationship between pesticide usage, production and economy with different treatment frequency indices. The analyses are based on different intermediate scenarios designed to show different treatment frequency indices with optimised production as described in the Farm-level Pesticide Model (FPM). The scenarios in question include the so-called ++scenario, which, with respect to treatment frequency index, largely corresponds to the goal of the Pesticide Plan from 1986.

Yield level can be maintained with limited phase-out of pesticides …

Farm-level analyses with different levels of pesticide usage indicate that, assuming use of best known technology and with optimum warning conditions, it should be possible to reduce pesticide usage to some extent without any reduction in yield level, but that yield levels would fall sharply with any further reduction of the treatment frequency index. In these analyses, efforts have been made to present optimal solutions in the sense of aiming to maintain the highest possible yield by adjusting production methods to cope with reduced use of pesticides. The analysed scenarios thus represent different technologies.

… but uncertainty about the necessary technology

In practice, it would be difficult to meet the conditions for reduced pesticide usage without economic losses. The necessary damage thresholds have not been developed in all areas, and the necessary warning systems require long-term weather forecasts that are not available today. It is thus very difficult to indicate the treatment frequency indices that would significantly reduce the losses. In addition, considerable additional costs must be expected for monitoring of the crops. Lastly, action would be needed to ensure access to disease-resistant varieties and the necessary knowledge.

Price-sensitivity of the results

Reduction of price support paid to farmers …

Analyses have also been carried out of the price-sensitivity of pesticide usage at farm level. As illustration, use is made of a 30 per cent fall in the price of cereal, combined with a higher hectare payment, assumed to be paid as a non-production-related subsidy to farmers. However, the hectare payment is included in the gross margin and thus affects the land rent. It is also assumed that the price of herbicides and fungicides is increased by 25 per cent, and the price of insecticides by 50 per cent, corresponding to the latest taxes introduced.

The results of the analyses show that the return on land with optimised production and the given assumptions would fall by 40 per cent, but that the treatment frequency index would fall at the same time from 2.3 to 1.4 standard doses per hectare. The lower cereal prices would thus help to reduce the use of pesticides. However, the analyses also show that the losses from phasing out pesticides are halved when the analysis is based on the lower product prices. The results are for clayey soil. For sandy soil, the phasing-out costs after a price fall would be even smaller.

Pesticide use and cultivation risk

The farmer tries to even out the economic return

The importance of pesticides to the stability of crop production has been analysed at farm level. In this connection, it should be noted that the farmer does not necessarily aim for a constant yield level but tries to even out the economic return, in which product prices also play a role. For some crops (e.g. potatoes), there is often a negative correlation between fluctuations in yields and price, so the market itself has a regulating effect, which the farmer can take into account in his planning.

Uncertainty concerning effect of pesticide usage on yield variation

The problem is that basic data are not available for a sufficiently reliable analysis of whether stability of cultivation would be greater or smaller if pesticides were phased out. Observations from all-year trials within conventional and organic farming have not revealed differences with respect to yield variation. The explanation for this is that organic farmers use resistant varieties and, by changing crop rotation and cultivation practice, have managed to eliminate the increased cultivation risk in return for lower yields. For special crops, where there is a generally greater likelihood of yield losses from pests, there is a lack of data that might throw light on the effect of pesticides on cultivation stability. However, there is generally little doubt that pesticides help to stabilise production by preventing big yield losses from pests.

Weeds a problem

It is stated in the analysis that good production management would become more important if pesticides were phased out and that production would be more climate-dependent. It would not normally have irremediable consequences if pests or plant diseases were to result in big yield losses in a single year, but the situation with weeds would be entirely different. If weeds were allowed to spread for just a single year, extra mechanical weed control might be necessary for many years, and in the worst event, some economically interesting crops, such as seed grass, fodder beet and winter cereal, would have to be left out of the crop rotation.

Need for better production management and warning systems

In the intermediate scenarios the situation would be different. An unfortunate development with increased weed problems could be remedied by means of herbicides, i.e. mechanical weed control would no longer have top priority in the planning of the crop rotation. On the other hand, production managers would need to keep up with new pesticides and their uses, and there would also be a need for new warning and monitoring systems. Advisers and farmers would need regular supplementary training in the use of such technology.

Market gardening and forestry

Phasing out pesticides would affect production in market gardening and forestry to a varying degree, depending on the products and production methods. Taken together, restructuring for pesticide-free market gardening (0-scenario) would result in considerable reductions in the sector as a whole. A partial phase-out of pesticides (+scenario) could probably in time be accommodated in vegetable production, but in the case of pot plants, producers would have difficulty in meeting the quality requirements and there would undoubtedly be a considerable fall in production. It is also considered very doubtful whether commercial production of apples, pears and cooking cherries could be maintained if pesticides were phased out altogether, whereas some production of blackcurrants and strawberries could probably be maintained.

… nurseries …

It is estimated that the economic return in nursery production would be halved with a total phase-out of pesticides, whereas, in the +scenario, it should be possible to maintain some cultures. The problem with limiting the use of pesticides in nurseries is that nurseries are subject to quality control with respect to quarantine and quality pests and would have difficulty in meeting the requirements without pesticides.

… and forestry

Compared with farming and market gardening, little use is made of pesticides in forestry. Most of the pesticides used are herbicides, which are used to control grass etc. in young stands. It has been estimated that a ban on the use of pesticides would result in a fall of 30-50 per cent in economic yield in old forest areas and a fall of almost 80 per cent in the production of ornamental greenery. The loss in the case of afforestation on arable land would be smaller. However, the possibility cannot be excluded of new production methods being developed in the longer term that would reduce the need for – particularly – herbicides.

Marked socioeconomic effects

It is assumed that gross factor income from market gardening and forestry would drop by 20 per cent in the event of a total phase-out of pesticides (0-scenario) and by 10 per cent in the event of a partial phase-out (+scenario). That equates to about DKK 500 million in marketing gardening and DKK 225 million in forestry in the 0-scenario and about half those figures in the +scenario. Compared with the losses in agriculture, of DKK 3.8 billion and DKK 2.0 billion, respectively, the losses in market gardening and forestry would thus probably increase the total socioeconomic loss by 10-15 per cent in the event of a pesticide phase-out.

Economic valuation of environmental benefits and health effects

Valuation of environmental benefits and health effects …

The purpose of the valuation study has been to set up tentative measures for the socioeconomic value of the environmental benefits that a ban on pesticides can be expected to produce. Since it has not been possible to carry out a valuation of environmental benefits within the framework of this study, the analyses are based mainly on studies of the international literature.

… not possible owing to lack of scientific data

The valuation studies have not provided a basis for a real cost-benefit analysis of a pesticide ban because the scientific part of the Pesticide Committee’s work has not generally led to conclusions on which valuation estimates can be based. That applies, for example, in the health sphere, where it has not been possible to arrive at quantified estimates of the health effects of pesticides. In the case of biodiversity and other "soft" values, it has not been possible to find foreign valuation studies sufficiently similar to the scenarios used here for the unit values found to be used.

Cost of treating drinking water

Analyses have, on the other hand, been carried out of savings within water supply from a ban on pesticides. Use has been made here of the alternative cost method, in which the expected socioeconomic savings within drinking water supply in the event of a ban on pesticides are used to evaluate the value of clean drinking water. Two development scenarios have been used in the analyses. One comprises direct remedial measures and expanded treatment, while the other comprises only remedial measures in the form of moving well-places and amalgamating waterworks. The analyses show that the economic cost would be in the region of DKK 100-120 million per year if treatment were allowed, compared with DKK 150-180 million if treatment were only allowed as a temporary measure.

Goals include safeguarding the population against contamination of food products with pesticide residue, greater biodiversity and a reduction of CO₂ emission in connection with the production of pesticides. It has not been possible to estimate the socioeconomic value of this group of goals.

Decision requires political weighing of economic and environmental considerations

The analyses thus do not provide a basis for assessing all the benefits from phasing out pesticides in agriculture, whereas the socioeconomic costs are reasonably well covered. It will therefore depend on a political assessment of whether the achieved value of clean groundwater and other, unquantified, environmental benefits from phasing out pesticides outweigh the socioeconomic costs of doing so and thus warrant such intervention.

Decisions affected by uncertainty and irreversibility

Such an assessment would be encumbered with uncertainty, and the question of the irreversibility of the harmful effects would also have to be considered. Empirical research shows that it is difficult to explain people’s assessment of risk on the basis of rational economic criteria. One reason for this may be that people regard scientifically based estimates of the probability of damage as incomplete information, which means that a safety premium has to be included in the assessment of the costs and benefits of reducing pesticide usage. It has not been possible within the framework of this analysis to estimate the size of such a safety premium. However, economic theory can provide support for policy-makers in situations in which damage to the environment is characterised by uncertainty and irreversibility and can also provide a guide to where input is needed to reduce the uncertainty of the basis for decisions.

Regulation and choice of instruments

Regulation must be targeted

It is pointed out in the report that regulation of pesticide usage in agriculture should as far as possible be targeted on the problems in focus. For example, a general reduction of the use of pesticides on the total acreage would probably have a far less positive effect on flora and fauna than if the reduction were achieved through the establishment of pesticide-free buffer zones and a ban on the use of pesticides in environmentally sensitive areas. Similarly, in the basis for the regulation, account could be taken of the fact that the risk of percolation to the groundwater varies from one pesticide to another and from one place to another.

Detailed control is administratively demanding

The choice of regulatory instruments (and their objectives) must thus be sufficiently detailed to reflect the variation in the environmental impact of pesticide use, both geographically and in relation to the individual product’s effect. Against this, there is consideration of the cost of administering the policy. As a general rule, the greater the degree of detail in the formulation of a policy, the greater will be the cost of controlling and administering the policy. The choice of regulatory instruments must therefore depend on an assessment of the efficiency of the schemes that also takes account of the cost of administering them.

Taxes are generally easy to administer, and if the goal is a general reduction of pesticide usage, a tax would be an effective instrument, since it would ensure reduction in the economically most rational way. However, substantial taxes would be required to ensure a big reduction in pesticide usage. The same applies to the use of quotas, provided these are made negotiable. In this connection, it might be worth looking into the possibility of differentiating the tax on the basis of the harmful effect of the agents and the risk of percolation and perhaps of graduating the tax in relation to recommended treatment frequency. Enforcement of the "polluter pays" principle could possibly be used as a supplement to traditional regulation.

A tax does not meet the requirement of differentiated action

A general tax on pesticide consumption would not meet the requirement of differentiated action against pollution in geographically limited areas. For that, regulatory instruments would be needed – for example, a ban on the use of pesticides in environmentally sensitive areas or restrictions on the cultivation of particularly problematical crops. The problem with such a policy is that it would be difficult to ensure an economically optimal solution and that regulation is generally administratively demanding. The choice of political control instruments therefore requires careful consideration, including consideration of the possibility of combining regulatory and economic instruments.

Taxes on conventional production

It has been mentioned that, instead of regulating the use of pesticides, one could impose taxes on conventional production. Such a measure would require certification of pesticide-free products as with the Ø-label scheme. However, for taxes to be accepted internationally, they would have to be non-discriminatory. In addition, the imposition of taxes on uncertified products would have to be based on objective environmental and health factors (product standards). It is not certain that restrictions based on the way products are produced (product standards) would be compatible with EU and WTO rules.