The expanding role of environmental interests in agricultural policy - includes related article

The Expanding Role of Environmental Interests in Agricultural Policy

Agriculture in the present day 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.(1/) A recent survey by an Iowa firm cited by The Wall Street Journal found that 86 percent of farmers feel townspeople see them as polluters. The perception would certainly not be greatly different in European countries where fertilizer application rates are several times higher than in the United States, or in many other developed countries, for that matter.

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 1930's. As originally established and traditionally maintained, these programs have been largely voluntary and have relied on 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.

Only since 1985 have some penalties been added to the incentives offered to farmers for resource conservation. (See the article in this issue by Tobey.) While involving penalties of a sort, these compliance programs are also voluntary. Any participant in a farm program is free to drop out 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.

Agriculture has thus far been overlooked by or excused from meeting the requirements of most environmental policies that apply to other sectors of the economy. Federal policy regarding water quality and toxic substances had 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 1970's, 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 it 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 had been given precedence in nonagricultural sectors, incentive-based and subsidy approach 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. (An important exception is the waste disposal problem in the intensive livestock sector discussed in this issue by Vocke.)

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 favorable public attitude 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 benefits from a network of farm income and price support programs. These programs weaken proposals for legislating incentives for environmentally beneficial changes in agricultural practices.

The fact that policyf options for more efficient control of agricultural sources of pollution have not been implemented more frequently suggests that there are other factors influencing the direction that agroenvironmental policy 2/ has taken to date. Research at Resources for the Future shows 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 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 representa-tives 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. Concomitant 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.

At the same time, the relative size of the agricultural sectors of developed economies tends to decrease as the economy continues to grow. The decline in the number of farmers associated with the more advanced agricultural economies 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.

The response of legislators to these oftentimes 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 agro-environmental 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 will be passed. The Safe Drinking Water Act was passed in 1974, when farm income was high. Conversely, when farmers are suffering financially in relation to the rest of the economy, legislation addressing agroenvironmental problems has tended to take the form of a subsidy that enhances farm income. For example, the Conservation Reserve Program was written into the 1985 farm bill just as farm income was beginning to recover from the crisis of the early 1980's.

The political strength of environmental interest groups lobbying to represent public interests in agroenvironmental quality is also an important factor. 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 public's demand for environmental regulation of agriculture will be determined by the extent of evidence about levels and possible consequences of environmental contaminants from agricultural sources.

Implications for the Future

Many of the factors that have affected the levels and direction of U.S. agroenvironmental policies in the past are still in evidence or are gaining in influence today. The long-term outlook for the economy is continued growth, implying a continued general shift of public preference toward environmental regulation of agriculture. Farm income has recovered from the crisis of the early 1980's, reinforcing trends that place greater weight on environmental interests in policymaking. Furthermore, the size and influence of environmental and other public interest groups concerned with agroenvironmental policy are growing.

Other factors may produce more Federal 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 which raises for the first time the issue of uniform scientific standards.

U.S. agricultural productivity increased an average of 2 percent per year during the 1980's. 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 - or reserves committed to agriculture are reduced or used less intensively). These rising costs could threaten the political support for agricultural programs in the face of rising resistance by taxpayers, implying a future decrease in agricultural protection relative to environmental protection.

As for trade, some observers have suggested that in the context of the Uruguay Round of multilateral negotiations under the General Agreement on Tariffs and Trade (GATT), reduced distorting subsidies to agricultural producers could be partially offset by agricultural assistance programs that are oriented toward environmental protection or conservation. (The situation in Australian agriculture is discussed in this issue by Hyberg and Pascoe.)

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-oriented commodities, 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 1980's. This increase was partly in response to Federal mandates for States to develop customized environmental protection efforts, and partly a result of public clamor and responsive legislatures in some States. At present, a sizeable proportion of State environmental legislation specifically targets or has direct implications for agriculture.

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 pressure 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 environ-mental legislation is applied to nonpoint pollution sources, the level of environmentally motivated government intervention in agriculture could 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.

The form that new legislation takes could depend on the unique characteristics of agriculture, the public's view of agriculture, and the influence of private interests. However, recent trends suggest the increasing possibility that the agricultural sectors of developed countries will be subject to more centralized 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-control 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.

(1/) The variety of plant and animal species.

(2/) Agricultural policy that affects the environment, and environmental policy that affects agriculture.

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