European pesticide taxes loom

Europe is a step closer to the adoption of pesticide and nutrient taxes following a meeting of experts from eight countries at the European Environment Agency in Copenhagen on 13 May.

The meeting set out to review the current knowledge on both the positive and negative externalities of agriculture in Europe, and to assess current and proposed methods for internalising these costs into market prices via taxes (for the negative externalities) and payments or subsidies (for the positive externalities).
    It is clear that agriculture's negative externalities are substantial. Externalities are technically defined as the costs or benefits from production (or consumption) experienced by people other than the producers (or consumers). Modern agriculture has been hugely successful at increasing output, yet it has done so by depleting both natural capital (nature's goods and services) and social capital (the social cohesion, trust, and connectedness) in rural areas. In the transport sector, we now know that the externalities are massive-some 4% of Europe's GNP. But an equivalent figure for agriculture's total externalities has not yet been calculated. It may, indeed, be impossible, as it means putting a cost on damage to things like biodiversity and the aesthetic value of the countryside.
    But for those things that we can measure, the numbers are worrying. Gerd Fleisher and colleagues at the University of Hanover put the minimum externalities of pesticides in Germany in excess of DM 250 million annually (about £86 million) (see also PN39 p4).
    The researchers say this is a minimum set as there is much they have been unable yet to measure. The total is about 25% of the private costs to farmers of using pesticides.
    In the UK, the annual cost of cleaning up pesticide residues in drinking water alone is £121 million. Following £1 billion of investment by water companies, this puts the annual hidden subsidy to pesticide users who pollute at some £7.57 per kg of active ingredient, or £20-22 per hectare of arable land. Farmers spend  £490 million on pesticides each year-so these external costs account for 25% of the private costs-already equal to the German figure even without accounting for the other costs.
    Other studies in Denmark, Poland, Belgium, the Baltic states, and Scotland showed that the external costs of modern agriculture are high.

Conclusions from the meeting

• There is a need for input taxes (of possibly 25%). These taxes would tell producers about the direction of policy, and encourage changes in behaviour and greater innovation.

• All such taxes must be hypothecated-income raised must return to agriculture as an incentive to those with more sustainable practices. Allowing it to 'disappear' into treasuries would mean missing a substantial opportunity to see agriculture deliver positive social, environmental and economic benefits for the people of Europe.

• Information gaps still exist, and there is clearly much still to be researched.

• Taxes will not alone be enough to 'internalise' the costs-a range of institutional mechanisms, such as study groups for farmers, will also be essential to encourage a sustained transition in both attitudes and practices.

The European Environment Agency expects to publish a report on Externalities in Agriculture later this year.

Jules Pretty, Director, Centre for Environment and Society, University of Essex.

[This article first appeared in Pesticides News No. 40, June 1998, page 17]