Forcing innovation to reduce nitrogen pollution
Nitrogen pollution is one of the most important environmental issues humanity faces, and yet most farmer-focused policies are ineffective. Our study proposes a new policy approach modeled on the U.S. fuel efficiency standards which focuses instead on the fertilizer industry.
This paper was borne of our frustration with the lack of progress on nitrogen pollution. Nitrogen is an essential resource for food production, and yet when used wastefully can cause a variety of environmental impacts: from air and water pollution to biodiversity loss and climate change. Unless there is a herculean effort to improve nitrogen management these impacts will only worsen over the coming decades as humanity adds three billion more mouths to feed.
Policies to reduce nitrogen pollution have traditionally focused on farmers, with often little effect, given the difficulty of monitoring and enforcement at the farm-level and the political power of the farm lobby. This encouraged us to brainstorm new policy ideas. We took our inspiration from efforts to increase vehicle fuel efficiency in the United States - officially known as the Corporate Average Fuel Economy or CAFE standards. A simple idea underpins this policy: instead of forcing millions of people to change their driving habits, the CAFE standards focus on the much smaller number of actors that constitute the automobile industry. They do so by mandating increases in the fuel economy of vehicle fleets over time. We asked ourselves what this would look like for nitrogen: instead of forcing farmers to change the products they use or how they apply fertilizer, why not force the fertilizer industry to improve the products they’re offering by mandating an increase in nitrogen use efficiency (the ratio of nitrogen applied to nitrogen harvested) or environmentally friendly fertilizer products? In that way you would not only be shifting the regulatory focus to a smaller, more manageable number of actors, you could also stimulate innovation by forcing companies to develop more advanced and affordable nitrogen management strategies tailored to specific crops, climates and soils.
What’s more, history shows us that environmental policies are often successful when the industry that is regulated can also profit from the regulation, because, for example, they control the patents on alternatives. This was the case with DuPont and CFCs during the ozone saga. And we found that such a dynamic exists in the fertilizer industry. Five companies control over 80% of the North American fertilizer industry, and four of them already produce either a more environmentally friendly fertilizer product or provide nitrogen management services to farmers (though in all cases, they are a very small part of the company’s portfolio). Using the US corn belt as a case study, our study shows that mandating increases in the proportion of more environmentally friendly fertilizer products sold with traditional fertilizers could generate net economic benefits for farmers, fertilizer industry and the environment of $5-$8 billion by 2030.
Looking ahead, we’re excited to explore ways to make this policy idea into a reality. Initial discussions with stakeholders, from government officials to fertilizer industry representatives, suggest that pilot projects would likely start small - focused on a specific region or crop where N use is especially intensive or that is particularly suited to more environmental friendly fertilizer products. Future work could then evaluate the economic and environmental impacts of such projects with a view towards expansion.