Despite the potential of modern agriculture for harming the natural environment, agricultural activities in developed economies have been regulated quite differently with respect to environmental consequences than have the activities of the mining, manufacturing, energy, and construction sectors from which similar environmental damages arise. Understanding the factors that have influenced how agriculture is regulated to achieve environmental goals provides important clues to the success of future agroenvironmental policy efforts and to the changing role of agriculture in a growing economy.
The contributions of modern agricultural practices to the depletion of natural resources and the degradation of the environment have been well documented. Modern agriculture is associated with depletion of underground water sources, degradation of soil resources, contamination of surface and ground water with substances that run off or percolate from agricultural land, destruction of wildlife habitat, and endangerment to biodiversity. Agriculture is really no different from other industries in that it generates waste materials. But unlike other sectors of the economy—in which pollution has increasingly been controlled through federal standards, fees and fines, restrictions, or (more recently) market-based incentives—agriculture is unique in having engendered relatively less federal government intervention with respect to its environmental consequences. When intervention has occurred, it has been achieved—more often than in other industries—through mechanisms that increase rather than decrease producers' incomes.
Federal agricultural resource and environmental programs have existed in the United States since the 1930s. As originally established and traditionally maintained, these programs have been largely voluntary and have relied on the use of positive incentives to achieve their goals. For instance, agricultural landowners have long had access to the Agricultural Conservation Program, the Soil Conservation Service, and the Great Plains Conservation Program, which, along with similar programs, offer technical and financial assistance for voluntary initiation of soil and water conservation planning and implementation at the farm level. The current Conservation Reserve Program—like its predecessor, the Soil Bank Program of 1956—allows farmers to receive annual rental payments from the federal government for retiring land on which cultivation may pose environmental hazards. Such programs mutually benefit the environment and the farmers who choose to participate in them.
Federal agricultural resource programs have traditionally relied on positive incentives to encourage resource conservation.
Only since 1985 have some penalties been added to the incentives offered to farmers for resource conservation. The 1985 Food Security Act prohibits farmers from receiving benefits through commodity, farm credit, and related farm programs if the farmer drains wetlands or cultivates erodible land without having a conservation plan in place. While involving penalties of a sort, these compliance programs are also voluntary. Any participant in a farm program is free to drop out of the program rather than comply with its environmental requirements. As conditions in agricultural markets improve (making farm program safety nets less necessary) or the level of farm program benefits declines, the penalty for noncompliance with environmental guidelines can rapidly diminish.
Despite the historical tendency for U.S. policy to treat farmers as willing stewards of the land, some environmental legislation since the early 1970s has directly affected farming. In particular, the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), under which pesticides are regulated, has reduced the number and variety of alternative substances available to farmers for pest control. FIFRA is unique in two ways: it addresses the safety and environmental effects of the use of products rather than the making of products; and it is among the few federal environmental acts that mandate a balancing of benefits and risks in decisions to ban or restrict a product. As a result of these characteristics, FIFRA has had limited economic effects on farmers. The need to balance the benefits of a pesticide's use against the risks that use poses has meant that, in most cases, uses have been banned only when there were close chemical or nonchemical substitutes available. (For an examination of how the U.S. Environmental Protection Agency [EPA] balances the risks and benefits of pesticides, see the article "An analysis of EPA pesticide regulation" in this issue.) Only those farmers who were especially dependent on a pesticide for a use that was banned have suffered economic losses. The farming sector at large may even have gained from the increases in revenue that come about when a regulatory action decreases the production of only some farmers and subsequently stimulates rises in commodity prices that benefit all producers. Paradoxically, costs have been restricted mainly to consumers, whose public health FIFRA was designed to protect.
Agriculture has thus far been overlooked by or excused from meeting the requirements of most other environmental policies. Federal policy regarding water quality and toxic substances has focused on point sources of pollution, postponing the more difficult problem of nonpoint sources, mainly agricultural. For instance, the Clean Air and Water Quality acts impose technology-based standards that affect the location, configuration, operating conditions, and costs of virtually all industrial and public utility facilities, yet they place no limits on effluents or emissions from agricultural and other nonpoint sources of air and water pollution. Similarly, industries and municipalities spend an estimated $23 billion to $30 billion annually to comply with the 1972 Federal Water Protection Control Act, yet that act authorizes federal subsidies to help states plan and farmers adopt water quality management strategies for which there are no associated standards.
The unique treatment of agriculture is apparent in a range of resource conservation and environmental policies. During the energy crisis of the 1970s, agriculture was routinely exempted from controls on the price and availability of fuels. At present, agricultural landowners whose practices have rendered land unusable (through accumulation of salts, heavy metals, or other toxic substances in the soil) are not subject to any law equivalent to that which requires land users to return areas scarred by surface mining to their original condition at private cost. Thus, while the centralized or command-and-control approach to environmental policy has been given precedence in nonagricultural sectors, incentive-based and subsidy approaches have predominated in the agricultural sector. Why is this so?
Is agriculture special?
In some respects, unique approaches to minimizing potential environmental damages from farming might seem warranted. First, there is more uncertainty about the nature of nonpoint sources of pollution than there is about readily observable point sources. Contaminants from nonpoint sources cannot easily be traced either to agricultural activities (some could originate naturally or in a golf course or home garden) or to a specific parcel of land or land operator. Thus regulations based on limitations on or requirements for certain agricultural practices—with or without associated fees, fines, or taxes—are more difficult to design than are regulations for point sources of pollution, which can be monitored.
Second, in farming, individuals are making use of privately owned resources. In other industries, where environmental concerns focus on the private use of public goods such as air and water for discharge, there are few counterparts to the property rights issues involved in decisions about how farmers use their own land. Questions about whether farmers' property rights might be violated by environmental regulation that acts upon the public's right to an undegraded environment are also complicated by a pervasive paternalism toward American farmers. The special reverence with which small farms and family farms are regarded is not common to most other groups of producers, especially in the manufacturing sector, and creates a public desire to resolve environmental problems without hurting farmers.
Finally, agriculture in the United States and other developed countries is highly protected through a network of farm income and price support policies. The distortions created in agricultural markets by such intervention can offset regulatory incentives for changes in agricultural technology that are environmentally beneficial. In other words, the maintenance of farm income through production and price controls makes regulations that raise the cost of environmentally damaging farm practices weaker in agriculture than in other markets that remain unregulated.
Despite these constraints, a range of policy options for more efficient control of agricultural sources of pollution is readily identifiable. For instance, the sales price of agricultural chemicals known to pose risks could be taxed at rates consistent with their social costs. Farm income support could be linked to environmental stewardship instead of to commodity production levels. Markets for permits to use certain agricultural chemicals in closed biosystems could be established. The fact that such options have not been implemented suggests that there are other factors influencing the direction that agroenvironmental policy has taken to date. Research at Resources for the Future demonstrates that it is largely broader political and economic trends that have most influenced past patterns and that are likely to change future policy approaches to environmental regulation in American agriculture.
Critical factors
Trends in the value of gains and losses as perceived by public interests on the one hand and agricultural interests on the other, and the subsequent influence of competing interests on the policy process, best explain policy choices for environmental regulation of agriculture. How the public and its representatives view and value the goods arising from agricultural activities depends on many factors, one of which is economic growth.
Rising per capita income in the developed economies increases the level of demand for goods such as environmental quality, recreation, and aesthetics at a greater rate than it does the level of demand for basic goods like food and fiber. Demographics reinforce this demand as an aging population with greater leisure time exerts pressure for clean recreational and retirement sites. Consistent with these trends is a generally increasing valuation by the public of the environmental costs arising from agricultural production. As perceived costs rise, the proclivity to protect agriculture may decline in relation to the demand for environmental regulation of agriculture.
Whether federal legislation favors agricultural or environmental protection depends partly on relative farm income.
At the same time, the size of the agricultural sectors of developed economies tends to decrease as the economy continues to grow. The decline in the number of farmers implied by this phenomenon actually increases rather than decreases the political influence of agricultural interests; as the size of the agricultural community decreases, each member of that community has a larger personal stake in decisions about agroenvironmental policy. Thus economic growth can create tension and increased competitiveness between groups that have invested in agriculture and those that demand higher levels of environmental protection.
The response of legislators to these ofttimes competing interests is in part a function of how well farmers are faring in relation to the rest of the economy. There seems to be a strong correlation between relative farm income and the passage of agroenvironmental legislation, as well as the form that legislation takes. When farmers are perceived as being richer than the rest of us, it is more likely that restrictive legislation in the manner of FIFRA will be passed. Conversely, when farmers are suffering financially in relation to the rest of the economy, as in 1985, legislation addressing agroenvironmental problems is more likely to take the form of a subsidy that enhances farm income (see figure 1).
Because of farm program payments, fluctuations in the extent to which the capacity to produce agricultural goods corresponds to demand for those goods vary in a different way than does relative farm income over time. Yet the willingness of federal legislators to enact laws protective of agriculture or the environment also appears to be related to the size of surpluses. The larger those surpluses, the more likely it is that legislation favors environmental interests over agricultural ones.
The political strength of environmental interest groups lobbying to represent public interests in agroenvironmental quality is also an important factor in whether legislation favors agricultural protection or environmental protection. The number of environmental groups involved in agricultural policy, their membership, and the resources available to them have grown dramatically over the last two decades. As environmental groups become increasingly efficient at exerting pressure, the degree to which environmental interests influence policymaking may rise. Independent of the activities of these groups, the rapid accumulation of information on the levels and possible consequences of environmental contaminants from agricultural sources is likely to raise the public's demand for environmental regulation of agriculture.
Implications for the future
Many of the factors that have affected the level and direction of U.S. agroenvironmental policies in the past are still in evidence or are gaining in influence today.
Figure 1. Average farm income as a percentage of average U.S. income
The long-term outlook for the economy is continued growth, implying a continued general shift of public preference toward environmental regulation of agriculture. Relative farm income is on the rise, reinforcing trends that place greater weight on environmental interests in policy-making. Furthermore, the size and influence of environmental and other public interest groups concerned with agroenvironmental policy is growing.
Other factors may accelerate the shift toward regulation of agriculture for the purpose of environmental protection. One is the changing composition of the House of Representatives, which with each redistricting in recent years has lost some proportion of representation from rural and farming-dependent regions. Others include increasing agricultural productivity, shifts in agricultural trade patterns, and the proliferation of environmental regulation at the state level.
U.S. agricultural productivity increased an average of 2 percent per year during the 1980s. As the efficiency of production continues to increase, the costs to the public of agricultural programs will rise (unless demand increases at the same rate—a phenomenon not expected in the short run). These rising costs will likely decrease the political strength of agricultural interests relative to that of taxpayers, implying a future decrease in agricultural protection relative to environmental protection.
As for trade, current negotiations under the General Agreement on Tariffs and Trade (GATT) are attempting to decrease the level of subsidies to domestic agricultural producers while exempting agricultural programs that are oriented toward environmental protection or conservation from similar cuts. If successful, GATT reforms could promote agriculture as an industry that must be more responsive to environmental concerns.
Regardless of the outcome of GATT negotiations, continued or increased reliance by U.S. agricultural producers on the export market will reinforce pressure for reforms in the agricultural sector. This is because the costs to the public of agricultural support tend to be greater in the relatively price-sensitive export market, and because the direct and indirect costs of environmental degradation associated with production are not passed on to foreign consumers.
Finally, the number of environmental standards established, laws enacted, and programs implemented at the state level increased dramatically during the 1980s. This increase was partly in response to federal mandates for states' development of customized environmental protection efforts, and partly a result of public clamor and responsive legislatures in progressive states. At present, a fair proportion of state environmental legislation specifically targets or has direct implications for agriculture. In California, Proposition 65 may restrict some uses of agricultural pesticides otherwise allowed under FIFRA. In Connecticut, liability has been imposed on individuals (including farmers) shown to have contaminated drinking water sources. In Iowa, fertilizers and pesticides are taxed to raise revenues for improvements in water quality.
Great variation in the environmental laws of individual states can create problems for agricultural industries that operate nationally. If and when such variation becomes a serious constraint, the agribusiness industry itself may exert pressure for federal provision of some uniformity—a move that suggests the possibility of increased centralization of agroenvironmental policy in the future.
As the U.S. economy grows, new information on the environmental effects of agriculture is made available, and existing environmental legislation is applied to nonpoint pollution sources, the level of environmentally motivated government intervention in agriculture will begin to approach that in other industries. This is not likely to happen overnight or in a continuous fashion. Just as a generally growing economy experiences periodic recessions and expansions, the influence of economic factors on environmental regulation of agriculture is likely to wax and wane. An example of this is the recent defeat of the Big Green initiative in California, public support for which was seen to diminish in direct response to the developing recession in the state's economy.
There is little chance that agricultural protection will be overrun by environmental protection in the near future; only that the level of agricultural protection relative to environmental protection will decline. The form that new legislation takes will depend on the unique characteristics of agriculture, the public's view of agriculture, and the influence of private interests. However, in the future it is increasingly likely that the agricultural sectors of the United States and other developed countries will be affected by a centralized form of environmental regulation. Moreover, federal budget deficit problems in the United States will make it increasingly difficult to address agroenvironmental problems chiefly through subsidy programs, as has been typical in the past. The choice that farmers, agribusiness, and policymakers face is whether to increase environmental regulation of agriculture through a command-and-con-trol approach or a market-based one. Experience in other industries suggests that the more efficient market-based approach has greater potential for creating a climate under which production that is sensitive to environmental protection is also good for agricultural business.
Katherine H. Reichelderfer is a senior fellow in the National Center for Food and Agricultural Policy at RFF.
A version of this article appeared in print in the January 1991 issue of Resources magazine.
A version of this article appeared in print in the January 1991 issue of Resources magazine.
