Taxing intensive farming

The UK Government has published the long-awaited report on the design of possible charges for pesticides(1) that has come out in favour of a purchase tax. Tim Jenkins of Friends of the Earth provides an environmentalist view to counter the agrochemical stance.

Despite policies to control the adverse environmental and human health effects of pesticides, over the past few years additional threats to the environment and human health have continued. A growing body of evidence points to the indirect impacts of pesticides on wildlife. Pesticides have been shown as the major cause of the decline of the grey partridge(2) and the corn bunting(3) by removing plants and invertebrates that these birds feed on from farmed habitats. There is strong circumstantial evidence that pesticides are a major cause of the decline of 19 other bird species(4). Alongside the direct acute impacts on human health of pesticide residues on food there is increasing evidence that quite low doses of some pesticides can disrupt the human endocrine system(5).
    Existing policies attempt to control pesticide damage by encouraging the use of relatively less risky pesticides and the improving and controlling their application. But tackling pesticide pollution requires a dual approach of less risky pesticides and application techniques alongside less pesticide use.
    A tax on pesticides would, for the first time in the UK, create a powerful incentive to reduce unnecessary pesticide use. Friends of the Earth has advocated such a measure for several years and welcomes the comprehensive ECOTEC report (see box) and the consultation release by the Department of Environment, Transport and the Regions (DETR) as significant steps forward to achieving this goal.
    A pesticide tax would send a clear signal discouraging environmental pollution and would encourage growth where environmental and social objectives, such as human health, were more fully accounted for in line with the government's commitment to sustainable development and environmental taxation.
    The rationale for introducing a tax is to complement the pesticides approvals and regulatory systems. It adds a dynamic incentive for pesticide minimisation which delivers environmental benefits to society at least cost to pesticide users. No other measures are as effective for achieving this.
    The main design issues of the tax are coverage, its base and the options for banding. The ECOTEC report suggests that  non-agricultural uses of pesticides and imports should be included. The report chooses the weight of active ingredient as the base of the tax assuming the adoption of a banding system. A flat rate weight-based tax would encourage the use of more concentrated products which may in some instances increase risk but as the trend is toward more concentrated products anyway it would also fail to provide a strong incentive to reduce pesticide use.
    Friends of the Earth is concerned that efforts to reflect the impacts of individual pesticides in the tax design could lead to unnecessary delay in implementing this important measure and potentially conflict with the role of the approval system and regulations. The banding system suggested by ECOTEC appears to address these concerns and we believe it offers a good basis for a banding system. However, the indirect impacts of pesticides upon wildlife are not reflected properly in the methodology. One option is to add an indicator of selectivity, as it is broad spectrum chemicals that are more likely to have significant indirect effects. Further consideration should be given to indicators that reflect impacts upon key species.
    The final two issues for consultation are the economic impacts of the tax and complementary measures are best considered together. The impact of the tax upon farming and rural economies is a vital consideration in designing the tax and the deciding how to use the revenues. Trends in agricultural policy in Europe are to cut the subsidies that have kept commodity prices high, and supported chemically intensive farming. Agricultural reform will make cutting pesticide use become both easier and more attractive for farmers; and as a consequence will increase the strength of the incentives introduced by a pesticide tax. The rapidly expanding market for organic produce, for example, offers farmers the opportunity to meet consumers' preferences without paying such a tax. A proportion of the revenues from a pesticide tax should be used to directly support existing organic operations, and the conversion from chemical intensive systems to organic and other sustainable farming systems. The tax revenues can also be used to finance education and stewardship programmes and targeted research. Experience from countries such as Sweden, Austria and Denmark can inform the details of the package.  
    The vast majority of the revenues from the tax should be recycled back to farming which has long suffered from policies that have distorted the market and encouraged the development and uptake of risky technologies leading to avoidable problems, such as agrochemical pollution, the BSE crisis, and genetically modified crops. The incentive of a pesticide tax and the targeted use of the revenues have a vital role in developing sustainable agriculture.

The main findings of the ECOTEC pesticides tax report  
The report(1) is intended as a contribution to the official policy of minimising pesticide use. It sets out possible charges for pesticides use. The objectives for such a charge are:

  • to secure reductions in pesticide usage  

  • to substitute the use of some pesticides by less harmful ones or alternative non-chemical techniques  

  • to improve efficiency in usage by improving the targeting of pesticides  

  • to provide incentives for environmental protection measures 

The report clearly recognises the current dangers to the environment, noting:  

The approvals process does not take into account the full environmental effects of pesticides.  

A precautionary approach is needed because of the detection of increasing levels of pesticides in groundwater; the lack of practical analytical methods for half the pesticides in use; bioaccumulation and effects resulting from long term low level pesticide exposure; impacts on non-target organisms, and the recognition of potential endocrine disruption. 
   
In consequence, the polluter pays principle is invoked to mitigate the estimated range of external costs of pesticide use-between £100-£300 million pa. The proposals are:

  • a differential tax on pesticides based on five hazard bands, with higher rates for the more hazardous products

  • the charge would be on a per kg basis and would be levied at the first point of sale or use, levied on manufacturers or importers

  • the revenue from the tax would support the dissemination of information, advice and training.

The impact of a tax of 30% on product price, which is on average an extra £6 per kg, has been modelled. Between 8% and 20% reduction of use might be achieved, although there would be larger reductions for more hazardous pesticides.  

1. Design of a Tax or Charge Scheme for Pesticides. Final Report to the DETR, ECOTEC Research and Consulting Ltd, DETR, London. March 1999, 314pp.
2. LH Campbell, et al, A Review of the Indirect Effects of Pesticides on Birds, JNCC Report 227, Peterborough, 1997.  
3. N Brickle, Decline of the Corn Bunting in Britain, Pesticides News, No 43, March 1999.  
4. Op. cit. 1.  
5. The Lancet, Editorial. Male Reproductive Health and Environmental Oestrogens, The Lancet 1995, 345, pp933-935.

Tim Jenkins works for Friends of the Earth's London's office on economic instrument issues.

[This article first appeared in Pesticides News No. 44, June 1999, page 16]