Reducing Nitrogen Pollution while Decreasing Farmers’ Costs and Increasing Fertilizer Industry Profits

Nitrogen (N) pollution is emerging as one of the most important environmental issues of the 21st Century, contributing to air and water pollution, climate change, and stratospheric ozone depletion. With agriculture being the dominant source, we tested whether it is possible to reduce agricultural N pollution in a way that benefits the environment, reduces farmers' costs, and increases fertilizer industry profitability, thereby creating a "sweet spot" for decision-makers that could significantly increase the viability of improved N management initiatives. Although studies of the economic impacts of improved N management have begun to take into account farmers and the environment, this is the first study to consider the fertilizer industry. Our "sweet spot" hypothesis is evaluated via a cost-benefit analysis of moderate and ambitious N use efficiency targets in U.S. and China corn sectors over the period 2015-2035. We use a blend of publicly available crop and energy price projections, original time-series modeling, and expert elicitation. The results present a mixed picture: although the potential for a "sweet spot" exists in both countries, it is more likely that one occurs in China due to the currently extensive overapplication of fertilizer, which creates a greater potential for farmers and the fertilizer industry to gain economically from improved N management. Nevertheless, the environmental benefits of improving N management consistently dwarf the economic impacts on farmers and the fertilizer industry in both countries, suggesting that viable policy options could include incentives to farmers and the fertilizer industry to increase their support for N management policies.