The scope for regulatory incentives to encourage increased efficiency of input use by farmers

Managing diffuse water pollution from agricultural land continues to be one of the more intractable challenges for environmental policy. The advent of the Water Framework Directive places the onus on EU member states to identify reasons why water bodies fail or are at risk of failure to meet good ecological status. In such cases, programmes of measures are to be enacted to mitigate the causes at least cost. Failing this, users may ultimately be faced with the full costs of pollution. This paper considers the scope for measures that address nitrogen and phosphorus pollution at source. Specifically the paper relates the diffuse pollution problem to the extent of over application of nitrogen and phosphorus. Data envelopment analysis applied to English cereal and dairy farmers, provides an indication of resource use and evidence of over application. This inefficiency provides a potential basis for either a least cost abatement approach using effective information and advice, or alternatively a pollution charge.