Shaping a Smarter Environmental Policy for Farming

In the summer of 1997, Maryland Governor Parris Glendening suddenly closed two major rivers to fishing and swimming, after reports of people becoming ill from contact with the water. Tests uncovered outbreaks of a toxic microbe, Pfiesteria piscicida, perhaps caused by runoff of chicken manure that had been spread as fertilizer on farmers’ fields. Glendening’s action riveted national attention on a long-overlooked problem: the pollution of fresh water by agricultural operations. When the governor then proposed a ban on spreading chicken manure, the state’s poultry producers lashed back, claiming they would go out of business if they had to pay to dispose of the waste.

The controversy, and others springing up in Virginia, Missouri, California, and elsewhere, has galvanized debate among farmers, ranchers, environmentalists, and regulators over how to control agricultural pollution. The days of relying on voluntary controls and payments to farmers for cutbacks are rapidly ending. A final policy is far from settled, but even defenders of agriculture have endorsed more aggressive approaches than were considered feasible before recent pollution outbreaks.

Maryland’s proposed ban is part of a state-led shift toward directly controlling agricultural pollution. Thirty states have at least one law with enforceable measures to reduce contamination of fresh water, most of which have been enacted in the 1990s. Federal policy has lagged behind, but President Clinton’s Clean Water Action Plan, introduced in early 1998, may signal a turn toward more direct controls as well. After decades of little effort, state and federal lawmakers seem ready to attack the problem. But there is a serious question as to whether they are going about it in the best way.

The quality of U.S. rivers, lakes, and groundwater has improved dramatically since the 1972 Clean Water Act, which set in motion a series of controls on effluents from industry and in urban areas. Today, states report that the condition of two-thirds of surface water and three-fourths of groundwater is good. But where there is still degradation, agriculture is cited as the primary cause. Public health scares have prompted legislators to take action on the runoff of manure, fertilizer, pesticides, and sediment from farmland.

Although it is high time to deal with agriculture’s contribution to water pollution, the damage is very uneven in scope and severity; it tends to occur where farming is extensive and fresh water resources are vulnerable. Thus, blanket regulations would be unwise. There is also enormous inertia to overcome. For decades, the federal approach to controlling agriculture has been to pay farmers not to engage in certain activities, and agricultural interest groups have resisted any reforms that don’t also pay.

Perhaps the most vexing complication is that scientists cannot conclusively say whether specific production practices such as how manure and fertilizer is spread and how land is tiered and tilled will help, because the complex relationship between what runs off a given parcel of land and how it affects water quality is not well understood. Prescribing best practices amounts to guesswork in most situations, yet that is what current proposals do. Unless a clear scientific basis can be shown, the political and monetary cost of mandating and enforcing specific practices will be great. Farmers will suffer from flawed policies, and battle lines will be drawn. Meanwhile, the slow scientific progress in unraveling the link between farm practices and water pollution will continue to hamper innovation that could solve problems in cost-effective ways.

Better policies from the U.S. Department of Agriculture (USDA), the Environmental Protection Agency (EPA), and state agricultural and environmental departments are certainly needed. But which policies? Because the science to prove their effectiveness does not exist, mandating the use of certain practices is problematic. Paying farmers for pollution control is a plain subsidy, a tactic used for no other U.S. industry. A smarter, incentive-based approach is needed. Happily, such an approach does exist, and its lessons can be applied to minimizing agriculture’s adverse effects on biodiversity and air pollution as well.

Persistent pollution

Farms and ranches cover about half of the nation’s land base. Recent assessments of agriculture’s effects on the environment by the National Research Council (NRC), USDA, and other organizations indicate that serious environmental problems exist in many regions, although their scope and severity vary widely. Significant improvements have been made during the past decade in controlling soil erosion and restoring certain wildlife populations, but serious problems, most notably water pollution, persist with no prospect of enduring remedies.

The biggest contribution to surface water and groundwater problems is polluted runoff, which stems from soil erosion, the use of pesticides, and the spreading of animal wastes and fertilizers, particularly nitrogen and phosphorus. Annual damages caused by sediment runoff alone are estimated at between $2 billion and $8 billion. Excessive sediment is a deceptively big problem: As it fills river beds, it promotes floods and burdens plants for processing municipal drinking water. It also clouds rivers, decreasing sunlight, which in turn lowers oxygen levels and chokes off life in the water.

National data on groundwater quality have been scarce because of the difficulty and cost of monitoring. EPA studies in the late 1980s showed that fewer than 1 percent of community water systems and rural wells exceeded EPA’s maximum contaminant level of pesticides. Fewer than 3 percent of wells topped EPA’s limit for nitrates. However, the percentages still translate into a large number of unsafe drinking water sources, and only a fraction of state groundwater has been tested. The state inventory data on surface water quality is limited too, covering only 17 percent of the country’s rivers and 42 percent of its lakes. A nationally consistent and comprehensive assessment of the nation’s water quality does not exist and is not feasible with the state inventory system. We therefore cannot say anything definitive about agriculture’s overall role in pollution.

Nonetheless, we know a good deal about water conditions in specific localities, enough to improve pollution policy. Important progress is being made by the U.S. Geological Survey (USGS), which began a National Water Quality Assessment (NAWQA) in the 1980s precisely because we could not construct an accurate national picture. USGS scientists estimated in 1994 that 71 percent of U.S. cropland lies in watersheds where at least one agricultural pollutant violates criteria for recreational or ecological health. The Corn Belt is a prime example. Hundreds of thousands of tons of nutrients-nitrogen and phosphorus from fertilizers and animal wastes-are carried by runoff from as far north as Minnesota to Louisiana’s Gulf Coast estuaries. The nutrients cause excessive algae growth, which draws down oxygen levels so low that shellfish and other aquatic organisms die. (This process has helped to create a “dead” zone in the Gulf of Mexico– a several-hundred-square-mile area that is virtually devoid of life.) Investigators have traced 70 percent of the fugitive nutrients that flow into the Gulf to areas above the confluence of the Ohio and Mississippi Rivers. In a separate NAWQA analysis, most nutrients in streams-92 percent of nitrogen and 76 percent of phosphorus-were estimated to flow from nonpoint or diffuse sources, primarily agriculture. USGS scientists also estimated that more than half the phosphorus in rivers in eight Midwestern states, more than half the nitrate in seven states, and more than half the concentrations of atrazine, a common agricultural pesticide, in 16 states all come from sources in other states. Hence those states cannot control the quality of their streams and rivers by acting alone.

Groundwater pollution is another problem. Groundwater supplies half the U.S. population with drinking water and is the sole source for most rural communities. Today, the most serious contamination appears to be high levels of nitrates from fertilizers and animal waste. USGS scientists have found that 12 percent of domestic wells in agricultural areas exceed the maximum contaminant level for nitrate, which is more than twice the rate for wells in nonagricultural areas and six times that for public wells. Also, samples from 48 agricultural areas turned up pesticides in 59 percent of shallow wells. Although most concentrations were substantially below EPA water standards, multiple pesticides were commonly detected. This pesticide soup was even more pronounced in streams. No standards exist for such mixtures.

These results are worrisome enough, and outbreaks of illness such as the Pfiesteria scourge have heightened awareness. But what has really focused national attention on agriculture’s pollution of waterways has been large spills of animal waste from retention ponds. According to a study done by staff for Sen. Tom Harkin (D-Iowa), Iowa, Minnesota, and Missouri had 40 large manure spills in 1996. When a dike around a large lagoon in North Carolina failed, an estimated 25 million gallons of hog manure (about twice the volume of oil spilled by the Exxon Valdez accident) was released into nearby fields and waterways. Virtually all aquatic life was killed along a 17-mile stretch of the New River. North Carolina subsequently approved legislation that requires acceptable animal waste management plans. EPA indicates that as many as two-thirds of confined-animal operations across the nation lack permits governing their pollution discharges. Not surprisingly, a major thrust of the new Clean Water Action Plan is to bring about more uniform compliance for large animal operations.

Dubious tactics

Historically, environmental programs for agriculture have used one of three approaches, all of which have questionable long-term benefits. Since the Great Depression, when poor farming practices and drought led to huge dust storms that blackened midwestern skies, the predominant model for improving agriculture’s effects on the environment has been to encourage farmers to voluntarily change practices. Today, employees of state agencies and extension services and federal conservation agencies visit farmers, explain how certain practices are harming the land or waterways, and suggest new techniques and technologies. The farmers are also told that if they change damaging practices or choose new program X or technology Y, they can get payments from the state or federal government.

Long-term studies indicate that these voluntary payment schemes have been effective in spurring significant change; however, as soon as the payments stop, use of the practices dwindles. The Conservation Reserve Program (CRP) now sets aside about 30 million acres of environmentally vulnerable land. Under CRP, farmers agree to retire eligible lands for 10 years in exchange for annual payments, plus cost sharing to establish land cover such as grasses or trees. About 10 percent of the U.S. cropland base has been protected in this way, at a cost of about $2 billion a year.

Although certain parcels of this land should be retired from intensive cultivation because they are too fragile to be farmed, we may be overdoing it with CRP. Some of this land will be needed to produce more food as U.S. and world demand grows. Much of it could be productively cultivated with new techniques, thereby producing profitable crops, reducing water pollution, and costing taxpayers nothing. One of the most prominent new techniques is no-till farming, which is done with new machines that cut thin parallel grooves in soil and simultaneously plant seeds, which not only minimizes runoff but reduces a farmer’s cost. Studies show that no-till farming is usually more profitable than full plowing because of savings in labor, fuel, and machinery.

Evidence suggests that CRP’s gains have been temporary. As with the similar Soil Bank program of the 1960s, once contracts expire, virtually all lands are returned to production. Unless the contracts are renewed indefinitely, most of the 30 million acres will again be farmed, again threatening the environment if farmers fail to adopt no-till practices.

The second approach involves compliance schemes. To receive payments from certain agricultural programs, a farmer must meet certain conservation standards. The 1985 Food Security Act contained the boldest set of compliance initiatives in history. Biggest among them was the Conservation Compliance Provision, which required farmers to leave a minimum amount of crop residues on nearly 150 million acres of highly erodible cropland. In effect, these provisions established codes of good practice for farmers who received public subsidies, and they were a first step toward more direct controls. However, these programs are probably doomed. The general inclination of government and the public to eliminate subsidies led to passage of federal farm legislation in 1996 that includes plans to phase out payment programs by 2002.

The third approach to reducing agriculture’s impact on the environment involves direct regulation of materials such as pesticides that are applied to the land. These programs have been roundly criticized from all quarters. Farm groups complain that pesticide regulation has been too harsh. Environmental groups counter that although the regulations specify the kinds of pesticides that can be sold and the crops they can be used on, they do not restrict the amount of pesticide that can be spread. Even if regulations did specify quantity, enforcement would be virtually impossible. The registration process for pesticide use has also been miserably slow and promises to get slower as a result of the 1996 Food Quality Protection Act, which requires the reregistration of all pesticides against stricter criteria.

In sum, current approaches to limit the environmental effects of agriculture have cost taxpayers large amounts of money with little guarantee of long-term protection. Unless a steady stream of federal funding continues, many of the gains will evaporate. And the idea of paying people not to pollute is becoming increasingly untenable, especially at the state level.

Getting smarter

Four actions are needed to establish a smarter environmental policy for agriculture.

Set specific, measurable environmental objectives. Without quantifiable targets, an environmental program cannot be properly guided. To date, most programs have called for the use of specific farming practices rather than setting ambient quality conditions for surface water and groundwater. This is largely because of political precedent and because of the complex nonpoint nature of many pollution problems. However, setting a specific water quality standard, such as nitrate or pesticide concentration in drinking water, presumes that the science exists to trace contaminants back to specific lands. Such research is currently sparse, although major assessments by the NRC and others indicate that clearer science is possible. Setting standards would help stimulate the science.

Several states are taking the lead in setting standards. Nebraska has set maximum groundwater nitrate concentration levels; if tests shows concentrations above the standard, restrictions on fertilizer use can be imposed. Florida has implemented controls on the nutrient outflows from large dairies into Lake Okeechobee, which drains into the Everglades. In Oregon, environmental regulators set total maximum daily loads of pollutants discharged into rivers and streams, and the state Department of Agriculture works with farmers to reduce the discharges. Voluntary measures accompanied by government payments are tried first, but if they are not sufficient, civil fines can be imposed in cases of excessive damages.

The federal government can support the states’ lead by setting minimum standards for particular pollutants that pose environmental health risks, such as nitrates and phosphorus. The Clean Water Action Plan would establish such criteria for farming by 2000 and for confined animal facilities by 2005. Standards for sediment should be set as well.

There is no easy way around the need for a statutory base that defines what gets done, when it gets done, and how it gets done at the farm, county, state, regional, and national levels. Unless those specific responsibilities are assigned, significant progress on environmental problems will not be made.

Create a portfolio of tangible, significant incentives. Without sufficient incentives, we have little hope of meeting environmental objectives. The best designs establish minimum good-neighbor performance, below which financial support will not be provided, and set firm deadlines beyond which significant penalties will be imposed. Incentive programs could include one-stop permitting for all environmental requirements, such as Idaho’s “One Plan” program, which saves farmers time and money; “green payments” for farms that provide environmental benefits beyond minimum performance; a system for trading pollution rights; and local, state, or national tax credits for exemplary stewardship.

It is important to stress that a silver-bullet approach to the use of incentives does not exist. The most cost-effective strategy for any given farm or region will be a unique suite of flexible incentives that fit state and local environmental, economic, and social conditions. Although the use of flexible incentives can require substantial administrative expense, they can also trigger the ingenuity of farmers and ranchers, much as market signals have done for the development of more productive crops and livestock.

Although incentives are preferable, penalties and fines will still be needed. Pollution from large factory farms is now spurring states and the federal government to apply to farms the strict limits typically set for other industrial factories. Some of these farms keep more than half a million animals in small areas. The animals can generate hundreds of millions of gallons of wastes per year–as much raw sewage as a mid-sized city but without the sewage treatment plants. The wastes, which are stored in open “lagoons” or spread on fields as fertilizer, not only produce strong odors but can end up in streams and rivers and possibly contaminate groundwater. In 1997, North Carolina, which now generates more economic benefits from hog farms than it does from tobacco, imposed sweeping new environmental rules on hog farming. Under the Clean Water Action Plan, EPA is proposing to work with the states to impose strict pollution-discharge permits on all large farms by 2005. EPA also wants to dictate the type of pollution-control technologies that factory farms must adopt.

Because pollution problems are mostly local, states must do more than the federal government to create a mix of positive and negative incentives, although the federal government must take the lead on larger-scale problems that cross state boundaries. Both the states and the federal government should first focus on places a clear agriculture-pollution link can be shown and the potential damages are severe.

Harness the power of markets. Stimulating as much private environmental initiative as possible is prudent, given the public fervor for shrinking government. The 1996 Federal Agriculture Improvement and Reform Act took the first step by dismantling the system of subsidizing particular crops, which had encouraged farmers to overplant those crops and overapply fertilizers and pesticides in many cases. The potential for using market forces is much broader.

One of the latest and most effective mechanisms may be a trading system for pollution rights. A trading system set up under the U.S. Acid Rain Program has been very effective in reducing air pollution, and trading systems are being proposed to meet commitments made in the recently signed Kyoto Protocol to reduce emissions of greenhouse gases.

Trading systems work by setting total pollution targets for a region, then assigning a baseline level of allowable pollution to each source. A company that reduces emissions below its baseline can sell the shortfall to a company that is above its own baseline. The polluter can then apply that allowance to bring itself into compliance. The system rewards companies that reduce emissions in low-cost ways and helps bad polluters buy time to find cost-effective ways to reduce their own emissions.

A few trading systems are already being tried in agriculture. Farms and industrial companies on the North Carolina’s Pamlico Sound are authorized to trade water pollution allowances, but few trades have taken place thus far because of high transaction costs. Experiments are also under way in Wisconsin and Colorado, but the complications of using trading systems for nonpoint pollution will slow implementation.

Pollution taxes can also create incentives for change. Economists have proposed levying taxes that penalize increases in emissions. Some also propose using the proceeds to reward farmers who keep decreasing their emissions below the allowable limit. The tax gives farmers the flexibility to restructure their practices, but political opposition and potentially high administrative costs have hindered development.

One other market mechanism that is cost-effective and nonrestrictive is facilitating consumer purchases of food that is produced by farmers who use minimal amounts of pesticides and synthetic fertilizers. Food industry reports indicate that a growing segment of the public will pay for food and fiber cultivated in environmentally friendly ways. The natural foods market has grown between 15 and 20 percent per year during the past decade, compared with 3 to 4 percent for conventional food products. If this trend continues, natural foods will account for nearly one-quarter of food sales in 10 years. Because organic foods command higher prices, farmers can afford to use practices that reduce pollution, such as crop rotation and biologically based pest controls.

Government can play a stronger role in promoting the sale of natural foods. It should make sure that consumers have accurate information by monitoring the claims of growers and retailers and establishing production, processing, and labeling standards. One experiment to watch is in New York, where the Wegman’s supermarket chain is promoting the sale of “IPM” foods grown by farmers who have been certified by the state as users of integrated pest management controls.

Stimulate new research and technology. One of the most overlooked steps needed to establish smarter environmental policy for agriculture is better R&D. Most research to date has focused on remediation of water pollution, rather than forward-looking work that could prevent pollution. Over the years, research for environmental purposes should have increased relative to food production research, but it is not clear that it has.

What is most needed is better science that clarifies the links between agricultural runoff and water quality. As stated earlier, this will be forced as regulations are imposed, but dedicated research by USDA, EPA, and state agricultural and environmental departments should begin right away.

R&D to produce better farm technology is also needed. Despite an imperfect R&D signaling process, some complementary technologies that simultaneously enhance environmental conditions and maintain farm profit have emerged. Examples include no-till farming, mulch-till farming, integrated pest management, soil nutrient testing, rotational grazing (moving livestock to different pastures to reduce the buildup of manure, instead of collecting manure), and organic production. Most of these techniques require advanced farming skills but have a big payoff. No-till and mulch-till farming systems, for example, have transformed crop production in many parts of the nation and now account for nearly 40 percent of planted acres. However, these systems were driven by cost savings from reduced fuel, labor, and machinery requirements and could improve pollution control even further if developed with this goal in mind. Integrated pest management methods generally improve profits while lowering pesticide applications, but they could benefit from more aggressive R&D strategies. A farmer’s use of simple testing procedures for nutrients in the soil before planting has been shown to reduce nitrogen fertilizer applications by about one-third in some areas, saving farmers $4 to $14 per acre, according to one Pennsylvania study.

Other technologies are emerging that have unknown potential, including “precision farming” and genetic engineering of crops to improve yield and resist disease. Precision farming uses yield monitors, computer software, and special planting equipment to apply seeds, fertilizers, and pesticides at variable rates across fields, depending on careful evaluation and mapping techniques. This suite of complementary technologies has developed mostly in response to the economic incentive to reduce input costs or increase yields. Their full potential for environmental management has been neglected. It is time to make pollution prevention and control an explicit objective of agricultural R&D policy.

Accountability and smart reform

The long-standing lack of public and legislative attention to agricultural pollution is changing. Growing scrutiny suggests that blithely continuing down the path of mostly voluntary-payment approaches to pollution management puts agriculture in a vulnerable position. As is happening in Maryland, a single bad incident could trigger sweeping proposals–in that case, possibly an outright ban against the spreading of chicken manure on fields–that would impose serious costs on agriculture. A disaster could cause an even stronger backlash; the strict clean-water regulations of the 1970s came in torrents after the Cuyahoga River in Ohio actually caught fire because it was so thick with industrial waste.

The inertia that pervades agriculture is understandable. For decades farmers have been paid for making changes. But attempts by agricultural interest groups to stall policy reforms, including some important first steps in the Clean Water Action Plan, will hamper farming’s long-term competitiveness, or even backfire. Resistance will invite more direct controls, and slow progress on persistent environmental problems will invite further government intervention.

Under the smarter environmental policy outlined above, farmers, environmental interest groups, government agencies, and the scientific community can create clear objectives and compelling incentives to reduce agricultural pollution. Farmers that deliver environmental benefits beyond their community responsibilities should be rewarded for exemplary performance. Those that fall short should face penalties. We ask no less from other sectors of the economy.