Modelling Policy Coherence Between Adaptation, Mitigation and Agricultural Productivity

This paper develops theoretical and quantitative analysis to identify the potential synergies and trade-offs inherent in various policy instruments that address agricultural productivity, climate change mitigation and adaptation, and water quality objectives. The theoretical model used describes crop production choices made by farmers given different sets of government policies and whereby crop yields can be impacted by climate change. Quantitative results on the basis of Finnish data show that decoupled area payment appears to provide more trade-offs than other policy instruments as it increases greenhouse gas (GHG) emissions and nutrient runoff, and decrease total factor productivity and social welfare relative to a situation with no policy. Nitrogen fertiliser tax, a soil GHG emission tax, and a subsidy for green set-aside perform well with respect to all other objectives with the exception of adaptation to climate change. These policy instruments significantly reduce GHG emissions and nutrient runoff, and thus their social welfare performance is high.