The Effects of Domestic Agricultural Policy Reform on Environmental Quality

A general equilibrium model is developed to study the environmental implications of agricultural policies. Model results show that declines in the acreage reduction program (ARP) would reduce agricultural fertilizer use, but the return of ARP land to production would lead to an overall increase in sedimentation and offsite environmental damage. In contrast, if land and fertilizers are highly substitutable, declines in deficiency payments and other commodity price support programs would reduce offsite environmental damages by reducing fertilizer use. Agricultural policy reform would be consistent with conservation policy because it would encourage a reduction in the use of fertilizer-intensive production practices.