Evaluating the Environmental and Economic Impact of Taxes on Pesticides: Case Study of a Tax on Toxicity

• Regulation of pesticides has often followed a command and control approach. However, economic instruments allow for environmental goals to be used for targeting as well as provide users (farmers) with flexibility in their response. The primary environmental effects of concern from the use of plant pesticides are related to the toxic effects on non-targeted organisms in environmental media. This paper describes a methodology for ex ante evaluation of policy alternatives for reducing the impact on the aquatic environment from pesticide use.The proposed methodology consists of several components. It uses the Pesticide Toxicity Index (PTI) for defining an environmental goal and for evaluation of the environmental effect of policy alternatives, a field based model MACRO-DB for describing the impact of crop management programs and agricultural land use on concentrations of active compounds from pesticide use and the use of economic modelling to determine the effect on farm income from alternative tax schemes. The paper presents an application of this method using empirical data from a small agricultural catchment in Southern Sweden and compares the economic and environmental effects of a differentiated tax on the most toxic class of pesticides and a flat tax on all pesticides. On average the costs of reducing environmental impacts by one unit of PTI were estimated to be €1 009 for the flat tax and €71,5 for the differentiated tax.

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