river quality, WFD, microsimulation modelling, farm level models, policy impact, agriculture, farm management, water pollution
With the deadline identified by the Water Framework Directive (Directive 2000/60/EC) approaching in 2015, policymakers face increasing pressure to introduce new regulations to achieve water quality targets. Agriculture is one of the contributors of diffuse pollution entering watercourses and hence will come under pressure to further reduce pollutant loads. This paper describes a microsimulation model that allows the Cost per Unit Abated (CPUA) for eight farm-level measures that could potentially reduce nitrate loss from agricultural land on Irish dairy farms to be estimated. Results from this study indicate that almost all of the considered measures will lead to reductions in farm gross margins. However, some of these measures can be still implemented at preferable cost-effectiveness ratios. Furthermore we observe variation in the ranking of the measures by CPUA across farms suggesting that a “one-size-fits-all command-control” approach may place unnecessary costs on some farms where alternative policies may lead to N reduction at lower cost. We also conduct a sensitivity analysis of impact of input/output price changes on the CPUA ranking and show that the ranking of the CPUAs is sensitive to price and resultant quantity changes. Hence, focusing on the average CPUA nationally overlooks the heterogeneity of impacts across individual farms, potentially leading to suboptimal policies being implemented and highlights that policies should incorporate a degree of flexibility over time to reflect changing market realities.