No-till technology: benefits to farmers and the environment? Theoretical analysis and application to...

No-till technology: benefits to farmers andthe environment? Theoretical analysis andapplication to Finnish agriculture

Jussi Lankoski

Agrifood Research Finland, Helsinki, Finland (and OECD, Paris, France;

years 2005–2006)

Markku Ollikainen

University of Helsinki, Helsinki, Finland

Pekka Uusitalo

Agrifood Research Finland, Helsinki, Finland

Received March 2004; final version received February 2006

Summary

We assess theoretically and empirically the private profitability and social desirabilityof conventional tillage and no-till when crop yields, production costs and nutrient andherbicide runoff damages are taken into account. Based on Finnish experimental data,no-till provides higher social and private profit than conventional tillage for barley butnot for oats and wheat, for which the production cost advantage of no-till does notcompensate for lower yields in the private optimum. As regards social returns, no-till provides slightly better overall environmental performance but, given the existingvaluation of nutrient and herbicide runoff damage, this is not enough to give no-till anadvantage in oats and wheat cultivation. Thus, the key factors determining the privateand social profitability of no-till and conventional tillage are yields and productioncosts rather than environmental performance.

Keywords: agri-environmental policy, buffer strips, herbicide runoff, nutrient runoff,tillage

JEL classification: Q16, Q18

1. Introduction

Conservation tillage refers to cultivation practices that decrease disruption of thesoil’s structure, composition and natural biodiversity, thereby decreasingerosion and degradation and also contamination (Anonymous, 2001). Amongconservation tillage methods, no-till refers to a tillage system, such as direct dril-ling, that leaves the soil undisturbed from harvest to planting, as the only soil

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European Review of Agricultural Economics Vol 33 (2) (2006) pp. 193–221doi:10.1093/erae/jbl003

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disturbance is caused by planting made directly through crop residues. No-tilland other conservation tillage technologies are widespread in North andSouth America and Australia, and are becoming increasingly used in tropicalregions (Lal, 2000). No-till covers 37 per cent of total acreage in cultivationin the USA and Canada and 48 per cent in South America (Holland, 2004).Interestingly, no-till has not been applied much in Europe, possibly because

in Europe no-till provides mostly off-farm environmental benefits, whereas inNorth and South America and Australia on-farm monetary benefits play amuch greater role (Holland, 2004). In the USA, no-till and other forms of con-servation tillage have been promoted through federal policies since the 1930s(see Fuglie and Kascak (2001) and Baylis et al. (2002) for the US policies).What are the potential off-farm benefits of no-till in European agriculture?

No-till is generally found to provide considerable environmental benefits inreduced soil erosion, nitrogen runoff and particulate phosphorus runoff(Soileau et al., 1994; Stonehouse, 1997).1 Not all environmental effects ofno-till are favourable, however. Three possible problems have been identified.First, many studies report that dissolved (orthophosphate) phosphorus runoffmay increase due to the accumulation of phosphorus in soil surface (see,e.g. McIsaac et al., 1995; Holland, 2004). Second, whereas surface waterrunoffs decrease, leaching to groundwater may increase (see, e.g. Holland,2004; Wu et al., 2004). Third, although no-till may initially have lowerherbicide runoff (e.g. sediment-bound active ingredients), it may increaseweeds, thus requiring a higher use of herbicides. This may eventually increaseherbicide runoff (e.g. Sturs et al., 1997; Tebrugge and During, 1999; see alsoFuglie (1999), who found no evidence of higher herbicide application).As for the on-farm benefits, no-till seems to provide unambiguous cost

reductions because of lower labour requirements and fuel consumption (seeUri (1998) for the USA and Nielsen (1987) for Danish agriculture). Also,capital investment and maintenance costs may be reduced (depending onfactors such as farm size), because no-till requires only one tillage operation(direct planting) compared with two or more tillage operations plus plantingfor conventional mouldboard tillage. North American studies generally findthat yields for many crops are roughly the same under conventional andno-till (see, e.g. Baylis et al., 2002). Evidence in Europe is sparse or indirect.Tebrugge and During (1999) argued that no-till is often competitive with con-ventional tillage in Germany. According to Rasmussen (1999), in Scandinaviano-till (for winter wheat, winter oil seed rape and late harvested potatoes)performs best in the heaviest clay soils, which are the most difficult soils toprepare with conventional tillage.In this paper we focus solely on no-till2 within the class of conservation

tillage methods and ask under what conditions its adoption is socially and

1 See Holland (2004) for a survey of the adoption of conservation tillage in Europe, Tebrugge and

During (1999) for results from a very long experiment in Justus Liebig University (Giessen), and

Rasmussen (1999) for a review of no-till in Scandinavia.

2 Other reduced tillage techniques include strip-till (or zone-till), ridge-till and rotary harrows

cultivation. Our focus is solely on the no-till technique and our data also represent no-till.

194 Jussi Lankoski et al.


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privately optimal when yields, production costs and runoff damages intosurface water are explicitly taken into account.3 We extend the conventionalcrop production model to cover basic features of no-till technology. Fromthis theoretical framework, we develop a parametric model and calibrate itto Finnish agriculture. This model exhibits the same features of mixedeffects on nutrient runoff, increased use of herbicides, and lower productioncosts as reported above.4 It allows us to quantify and assess more closelythe mixed effects of no-till on runoff and to estimate the range where no-tillcan provide the same returns as conventional tillage.Our paper relates to the existing literature as follows. Many US studies

focus on farmers’ incentives to adopt no-till or other conservation tillagemethods subject to prevailing policies (Rahm and Hufman, 1984; Klemme,1985; Soule et al., 2000; Kurkalova et al., 2001, 2003; Zhao et al., 2003).These studies typically take the environmental benefits for granted withoutanalysing them explicitly. Closest to our approach are Aase and Schafer(1996), Wu and Babcock (1998) and Wu et al. (2004), which, however, arebased on US institutional, environmental and economic conditions. Moreover,they do not explicitly analyse the potential trade-offs in terms of dissolvedphosphorus and herbicide runoff. Unfortunately, there are no integrated eco-nomic studies in Europe focusing systematically on the economic and environ-mental conditions of adoption of no-till technology. A notable exception isFykse et al. (2004), which focuses on the trade-off between soil erosion andweed control under alternative tillage methods, including no-till.The rest of the paper is organised as follows. Section 2 describes the frame-

work for analysing no-till and conventional technologies, and analyses thesocially optimal choice between them. Section 3 develops a parametricmodel and calibrates it to Finnish agricultural and environmental conditions.Section 4 provides our empirical results. Concluding, Section 5 ends the paper.

2. Social choice between conventional and no-tilltechnology

Before examining the socially optimal conditions for the adoption of no-tilltechnology, we first describe the properties of both technologies in terms ofproduction and the nutrient and herbicide runoff resulting from input use. Wethen conduct the analysis for homogeneous cultivated land of (any) quality q.

2.1. No-till and conventional technology

We consider a parcel of cultivated land, of homogeneous quality. Becauseit is cultivated differently under conventional and no-till technology, both

3 Besides benefits in water quality, no-till reduces CO2 emissions from agriculture (see Lal et al.,

1999; Smith, 2003) but we omit this aspect from our analysis because of lack of data.

4 This is in line with observations that no-till does not suit all types of land, and also with the fact

that farmers are not necessarily able or willing to adopt no-till on all their land, and thus apply

both no-till and conventional tillage (see, e.g. CTIC, 2002).

No-till technology: benefits to farmers and the environment? 195


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production process and environmental effects will differ between thetechnologies.

2.1.1. Production

The conventional technology includes mouldboard ploughing and seedbedtillage before drilling, whereas in no-till technology the direct drilling equip-ment inserts the fertiliser input and the seed directly through residues of theprevious crop. Reflecting the difference in technologies, the pattern of cropgrowth will differ as well. Conventional technology gives higher growth atthe beginning of the growing season, but no-till technology catches up dueto faster growth later in the season. In the absence of weeds, the productionof crop under technology i in a parcel of quality q in a general form is

yi ¼ f iðli; qÞ; i ¼ 1; 2 ð1Þ

where f i indicates yields under both technologies and li is fertiliser input withfl

i . 0, flli , 0.5 In what follows, the subscript 1 refers to the conventional tech-

nology and subscript 2 to no-till technology.6

Weeds cause damage by decreasing yields but this damage can be reducedby herbicides. Let weed population size be Hi and herbicide application xi.According to Lichtenberg and Zilberman (1986), the damage-abatementfunction of weeds depends on the weed population and its control:Fi(Hi, xi), defined on the interval [0, 1] with Fx

i . 0 and Fxxi , 0. In the pre-

sence of weeds, the actual yield, y, can be expressed as a product of maximumyield and damage-abatement function,

yi ¼ f iðli; qÞFiðHi; xiÞ: ð2Þ

In (2), the amount of weeds, Hi, is a technology-dependent variable. Wespecifically assume that H1 � H2, i.e. that no-till entails weeds at least asmuch as, or more than conventional technology.7 This assumption impliesthat, ceteris paribus, Fx

2�Fx

1, i.e. the marginal productivity of herbicideuse is higher under no-till technology.

2.1.2. Profit from production

Let p denote the crop price, c the price of fertiliser and a the price of herbicide.Labour costs, wh, and fuel costs, wff, can be directly linked to the working

5 To avoid unnecessary notation, we drop the subscript i from the derivatives of production and

runoff and weed damage functions in what follows.

6 It is sometimes argued that no-till may adversely affect the quality of crops produced. For

instance, Finnish studies suggest that no-till may slightly increase the moisture content at harvest

(one percentage difference from other tillage methods), but successful weed control (e.g. Elymus

repens) will mitigate this effect.

7 Both technologies apply post-emergence weed control during the growing season. In addition,

no-till requires the use of pre-emergence control for Elymus repens and other perennial weeds.

Usually Glyphosate is applied at the beginning of the growing season about 1 week before direct

drilling.



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hours, hi, spent on the parcel, denoted by whi, where w ¼ wh þ wff. We assumea constant unit price for capital, ki, which measures the annual per parcel costsof capital (including depreciation, interest and maintenance). From ourprevious assumptions it follows that h1 . h2 and k1 . k2. Finally, weassume that, under both technologies, field edges have an important role inpreventing surface runoff. Hence, a share of the parcel, m, is allocated to abuffer strip between the field and waterways. Note that the size of bufferstrips does not affect the size of capital costs. The agricultural profit undertechnology i is defined by

pi ¼ ð1� miÞ pf iðli; qÞFiðHi; xiÞ � cli � a xi � whi

� �� ki: ð3Þ

2.1.3. Surface runoff

Aggregate surface nutrient runoff is a function of fertiliser use, buffer stripsand the chosen technology.8 The runoff differs between our technologiesbecause of the inherent features of the tillage methods. Conventional techno-logy includes mouldboard ploughing in the autumn, which leaves soil bareduring winter. In spring, soil is harrowed before drilling. Hence, the land issubject to soil erosion during autumn precipitations and spring meltingsnow. No-till technology has plant cover throughout the year (either crop orstubble), which reduces soil erosion.Following agricultural production practices, we assume that the fertiliser

input contains all necessary nutrients in fixed proportions, the main nutrientsbeing nitrogen, phosphorus and potassium. The runoff depends on the amountof fertiliser actually applied, li, which is a function of fertiliser intensity (fer-tiliser per hectare) and of the share of the hectare allocated to the buffer strip,i.e. li ¼ (12 mi)li. Thus, nutrient runoff from technology i can be expressed asa function of fertiliser use and buffer strips,

zni ¼ giðli;miÞ: ð4aÞ

The effects of fertiliser use and buffer strip size on runoffs are conventional.Thus, g

l

i . 0, gll

i . 0; and gim , 0, gi

mm . 0 (Lankoski and Ollikainen, 2003).Herbicide runoff is assumed to depend on the amount of herbicide actually

applied, given by xi ¼ (12 mi)xi and on the share of the hectare allocated tothe buffer strip. Thus, we have

z hi ¼ eiðxi;miÞ ð4bÞ

with similar assumptions concerning herbicide runoff as for nutrientrunoff.

8 The two technologies differ with respect to nutrient leaching to groundwater (Holland, 2004).

Groundwater quality is not a special problem in Finnish clay soils, however, so that we omit

this aspect here.



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Empirical evidence suggests that for an equal amount of fertiliser, herbicideand buffer strips (l1 ¼ l2; x1 ¼ x2; m1 ¼ m2) no-till technology has lowernutrient and herbicide runoff because of lower surface runoff. Using equations(3), (4a) and (4b), we now study the socially optimal choice of technologiesand the use of inputs under both technologies.

2.2. Socially optimal choice of cultivation technology

Society will choose the cultivation technology that produces the highest socialwelfare.9 We assume that the social planner maximises the sum of consumerand producer surplus. Under exogenous crop prices and input costs, this entailsmaximising producer surplus, defined in equation (3), augmented by thedisutility to consumers from nutrient and herbicide runoff damages,d(gi(li, mi)) and D(ei(xi, mi)), respectively, with d0(.) . 0, D0(.). 0 andd00(.). 0, D00(.). 0. Thus, for both technologies, the social planner’seconomic problem is to

maxli;xi;mi

SWi ¼ p i � dðgiðli;miÞÞ � Dðeiðxi;miÞÞ; i ¼ 1; 2: ð5Þ

The first-order conditions for the problem are

SWili¼ pf i

l Fið�Þ � c � d0ð�Þgi

l ¼ 0 ð6aÞ

SWixi¼ pf ið�ÞFi

x � a� D0ð�Þeix ¼ 0 ð6bÞ

SWimi

¼ �½ pf ið�ÞFið�Þ � cli � axi � whi� � d0ð�Þ½gi

m � gi

ll�

� D0ð�Þ½eim � ei

x x� ¼ 0: ð6cÞ

Economic interpretation of (6a) and (6b) is straightforward. The use offertiliser (herbicide) input is increased up to the point where the value ofthe marginal product of fertiliser (herbicide) equals the sum of its unit priceand marginal environmental damage. From (6c) we have that the size of thebuffer strip is chosen so that the value of foregone rent/profit is equal to thenet marginal benefits from reduced runoff damages.By setting the marginal damage terms equal to zero in (6a)–(6c), we can

extract the farmer’s privately optimal solution in the absence of policy. Forfertiliser and herbicide application, we obtain pfl

iFi(.)2 c ¼ 0 andpf i(.)Fx

i 2 a ¼ 0, respectively. For the buffer strip we obtain2 [pf i(.)Fi

(.)2 cli 2 axi 2 whi] � 0, which indicates that buffer strips would not beestablished without a buffer strip payment (or a mandatory requirement).The first-best policy entails a combination of a fertiliser and herbicide tax,

9 The maximum social welfare under both technologies can be defined by solving the socially opti-

mal use of inputs and then inserting them back into the social welfare function. A comparison of

these (indirect) social welfares indicates which technology gives the highest social welfare.



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set at the level of respective marginal damages, and a buffer strip payment, setat the level of marginal benefits from runoff reduction.We ask next how input intensities relate to each other under no-till and

conventional technologies. Let the superscript star (zero) refer to the socially(privately) optimal choice of l, x and m. Then we can provide the answer in thefollowing Lemma.

Lemma. If fl2F2(.) � fl

1F1(.), then (a) at the social optimum it holds alwaysthat l�2 . l�1 and m�

2 , m�1, but x�2 . x�1 holds only over a some range of herbi-

cide runoff; (b) at the private optimum it holds always that l20� l1

0 and x20� x1

0.If fl

2F2(.) , fl1F1(.), then (a) at the social optimum the relationships between

input uses remain ambiguous, (b) at the private optimum l20 , l1

0 and x20� x1

0.

Proof. Follows directly from the first-order conditions.

Inserting the socially optimal values of inputs, l�i, x�i, m�i, into the respective social

welfare functions allows us to compare the social welfare outcomes, yielding

Proposition. If no-till technology has higher yields than conventional technol-ogy then (a) its adoption is socially optimal provided that the herbicide runoffdamages under both technologies are ‘close enough’, (b) its adoption isalways privately optimal. If conventional technology has higher yields thanno till, then the socially and private optimal outcome is indeterminate.

Proof. See Appendix 1.

From the Proposition, if yields under no-till are as high as under conventionaltechnology no-till is privately adopted. In fact, yields can be even lower,because no-till implies cost reductions relative to conventional cultivation.The condition for the social adoption contains the vague requirement of herbi-cide runoffs being ‘close enough’. As we discuss in detail in Section 4, no-tillentails the same post-emergent treatment as conventional technology and inaddition one extra pre-emergence control at the beginning of the growingseason. Given that many herbicides degrade fast, the additional runoffdamage of this early pre-emergent treatment may be rather small.

3. Data and parametric model

In this section we develop a parametric model, based on Finnish data, toexamine social and private profitability of conventional and no-till technology.We focus on wheat, barley and oats production on clay soils, which is thetypical soil type in South and South-Western Finland.

3.1. Costs, production and profit

We define conventional tillage as mouldboard plough tillage and no-till as directdrilling. Mouldboard plough tillage includes primary tillage (ploughing),



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seedbed tillage (harrowing), combidrilling (fertiliser and seed are applied atthe same time) and plant protection (herbicide application). Direct drillingsystem includes Glyphosate application into stubble before direct drilling,direct drilling and plant protection (herbicide application). Drawing onNikula (2005), we give the machinery use on a 40 ha model farm for conven-tional tillage and no-till in Appendix 2, Table A1.Table 1 shows the cost structure in this 40 ha model farm under both

technologies. Fixed tractor costs include depreciation, interest and insurance.Variable tractor costs include fuel and lubrication costs, and repair cost. Fixedmachinery costs include depreciation and interest, and variable costs includerepair costs. Costs and prices are for 2002. Fertiliser, seed and plant protection(herbicide) costs will be introduced later.Fixed costs are lower for no-till technology, because it requires the use of only

one tractor. Under conventional technology, variable tractor costs are almostthree times and labour costs over three times higher than under no-till. Thecost difference between technologies is E99.6 per ha in favour of no-till. Thus,Table 1 confirms the findings of Nielsen (1987), Danfors (1988) and Latti (2002).We next define the farmer’s nitrogen response function under both techno-

logies. The farmer applies compound NPK fertiliser (l) (nitrogen content 20per cent, phosphorus 3 per cent), by choosing the level of nitrogen application(N). We use a quadratic nitrogen response function with parameters estimatedfor spring wheat, barley and oats in clay soils by Backman et al. (1997), given by

yi ¼ Ai þ xiNi þ giN2i ; for i ¼ 1; 2 ð7Þ

where yi is yield response in kg/ha, Ai is the intercept parameter, Ni is the nitro-gen intensity in kg/ha, and xi and gi are parameters, xi . 0, gi , 0. Parametersxi and gi are derived from experimental yield data so that the nitrogen response

Table 1. Per hectare annual costs (E/ha) for conventional and no-till technology

(Nikula, 2005)

Cost item Conventional

(E/ha)No-till

(E/ha)

Fixed costs

Tractors 59.3 12.2

Machinery 79.6 76.8

Subtotal 138.9 89.0

Variable costs

Tractors 19.5 6.8

Machinery 22.4 21.6

Labour 50.8 14.5

Subtotal 92.6 42.9

Total costs 231.5 131.9



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function for both technologies reflects the experimental yields for different cropsreported in Table 2. These yields are from the same experimental trials for bothtechnologies, which were conducted on clay soils (clay content 30–60 per cent)(Alakukku, 2003; Salo, 2003). Table 2 shows the average yields for wheat, barleyand oats in clay soils for conventional and no-till technology.As Table 2 reveals, only in the case of barley are the average yield levels

close to each other. Moreover, in the two other cases, the yield differencebetween the two technologies is large. One possible explanation for this isthat the reported no-till yields involve some yield penalty because of the tran-sitional period of no-till technology. To be more precise, Salo (2003) andAlakukku (2003) note that failures in the timing of direct drilling and in choos-ing the proper drilling depth mainly explain the low yield level of no-till wheatin these field experiments. In one experimental year, the direct drilling ofwheat was done too early in the spring, so that the surface layer of the claysoil was not dry enough to break into aggregates during drilling. Because ofthe resulting lack of proper soil cover for the seed and the weak soil–seedcontact, the sprouting rate of the seed was only 43 per cent. In another experi-mental year, excessively deep direct drilling hampered no-till wheat sproutingand the sprouting rate was only 28 per cent. In the case of no-till oats, failure inthe timing of direct drilling mainly affected yield losses.A transitional period of several years is usually needed for the soil conditions

and structure (e.g. abundance of macropores and earthworms) to change toreflect no-till technology. Thus, Table 2 may give an over-pessimistic view ofno-till yields. Hence, given that the maximum yields for no-till are clearlyabove the average yields, one could expect that the average yields could increaseafter the transitional period. This would also be more in line with Latti (2002),according to whom farmers reported higher yields than our averages.10

Table 2. Yields (kg/ha) for wheat, barley and oats on clay soil under conventional and

no-till cultivation from experimental data (Alakukku, 2003; Salo, 2003)

Crop Conventional No-till

Average Max. Min. Average Max. Min.

Wheat 4,655 5,387 3,276 2,960 4,111 1,799

Barley 4,191 5,750 3,108 3,946 5,526 3,191

Oats 5,122 6,154 4,400 4,196 4,840 2,796

There are four replicates per observation in this data. The number of observations for conventional wheat is 36,for barley 48, and for oats 16. The number of observations for no-till wheat is 28, for barley 36, and for oats 16.In Table 2, max. and min. are averages from these replicates.

10 Some Finnish and international research suggests that the difference is, in practice, quite small.

For instance, Holma (2000) reports winter wheat (our case is spring wheat) experimental results

for no-till, which are equal to or even higher than yields under conventional technology. We

recall also that, in the same vein, Baylis et al. (2002) found that the estimated yields for

corn–soybean rotations were roughly the same under conventional and no-till over different

regions in the USA.



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Following Lichtenberg and Zilberman (1986), we employ an exponentialspecification for damage-abatement function

Fi ¼ 1� expð�h0 � h1xÞ ð8Þ

with h0 � 0 and h1 � 0. According to Finnish experiments on herbicidetreatments in spring cereal fields (MTT, 2004), MCPA treatments are effectivein reducing perennial weeds such as Cirsium arvense and Sonchus arvensis,which, in addition to Elymus repens, are the most typical perennial weeds incereal fields in Finland. Experiments reveal that, in comparison with untreatedplots, MCPA applications increase spring wheat, barley and oats yields onaverage by 10 per cent. We calibrated damage-abatement function parameters,h0 and h1 for each crop and technology to reflect these herbicide treatmentresults.A parametric version of equation (3) describing the farmer’s profit per

hectare for technology i in the absence of government intervention is given by

p i ¼ ð1� miÞf pðAi þ xiNi þ giN2i Þð1� expðh0 � h1xÞÞ

�cNi � whi � ax �Cg � ki ð9Þ

where C denotes the variable costs related to tractors (fuel and lubrication),machinery, seed, and in the case of no-till the use of pre-emergent applicationof Glyphosate (see Appendix 3, Table A2).

3.2. Nutrient and herbicide runoffs

We start with the surface runoffs of nutrients by defining nitrogen, particulatephosphorus, and dissolved (orthophosphate) phosphorus runoffs under bothtechnologies. Because the compound NPK fertiliser contains the main nutri-ents in fixed proportions, nitrogen fertiliser intensity also determines theamount of phosphorus used. Part of this phosphorus is taken up by the crop,and the rest accumulates and builds up soil P. Concentration of dissolved phos-phorus in surface runoff is found to depend linearly on the easily soluble soil P,as determined by extractions employing deionised water or acidic ammoniumacetate solution (Uusitalo and Jansson, 2002). Runoff of particulate phos-phorus depends on the rate of soil erosion and P content of eroded soil material(see Uusitalo et al., 2000).We start by tailoring the following nitrogen runoff function (Simmelsgaard,

1991) for our purposes,

ZiN ¼ fi expðb0 þ bNiÞ; for i ¼ 1; 2 ð10Þ

where ZNi is the nitrogen runoff at fertiliser intensity level Ni, kg/ha, fi is the

nitrogen runoff at average nitrogen use, b0 , 0 and b . 0 are constants and Ni



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is the nitrogen fertilisation in relation to the normal fertiliser intensity for thecrop, 0.5 � N � 1.5. We incorporate the reductive effect of the buffer strip onthe runoff ZN

i via two channels, via nitrogen uptake by buffer strips and viareduction of the actually applied fertiliser, as follows:

ZiN ¼ ½1� m0:2

i �fi e�0:7½1�0:01ð1�miÞNi�: ð11Þ

The first right-hand side brace term of (11) describes nitrogen uptake by bufferstrips. It is calibrated to reflect Finnish experimental studies on grass bufferstrips (Uusi-Kamppa and Ylaranta, 1992, 1996; Uusi-Kamppa and Kilpinen,2000). The second right-hand side term represents nitrogen runoffs generatedby a nitrogen application rate of Ni per hectare when buffer strips take up ashare of land mi. Parameter fi reflects technology differences and calibratesequation (11) to both technologies by describing their nitrogen runoffsgenerated by a nitrogen application rate of 100 kg per hectare in theabsence of buffers strips. Based on Puustinen (2004) and Puustinen et al.(2005), fi ¼ 15 kg N/ha for conventional technology and fi ¼ 8 kg N/hafor no-till technology.For phosphorus we explicitly describe both dissolved and particulate

runoffs. Drawing on Finnish experiments (Saarela et al., 1995) it is assumedthat 1 kg increase in soil phosphorus reserve increases the soil P status (i.e.ammonium acetate-extractable P) by 0.01 mg/l soil. Uusitalo and Jansson(2002) estimated the following equation between soil P and concentrationof dissolved phosphorus in runoff:

water soluble P in runoff (mg/l) ¼ 0:021� AAAc P � 0:015

where AAAc refers to ammonium acetate buffer and P to soil phosphorus(Vuorinen and Makitie, 1955). Surface runoff of potentially bioavailableparticulate phosphorus is approximated from the rate of soil loss and theconcentration of potentially bioavailable phosphorus in eroded soil materialas follows (Uusitalo, 2004):11

potentially bioavailable particulate phosphorus PP ðmg/kg eroded soilÞ

¼ 250 ln½AAAc P � 150�:

Drawing on Finnish experimental studies on grass buffer strips (Uusi-Kamppa and Kilpinen, 2000) the potentially bioavailable particulate (PP)and dissolved reactive phosphorus (DRP) uptake by buffer strips is calibratedas follows: (12 m0.3)PP and (12 m1.3)DRP. Thus, the parametric description

11 This estimation is based on 32 samples from 18 experimental sites in different parts of Finland.

Average soil P status of samples is 16 and the median is 11.



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of surface phosphorus runoffs is given by

ZiDRP ¼ ð1� m1:3

i Þsi½Cið0:021ðuþ 0:01� 0:15ð1� miÞNiÞ � 0:015�=100

ð12aÞ

ZiPP ¼ ð1� m0:3

i ÞDi½zif250 lnðuþ 0:01� 0:15ð1� miÞNiÞ � 150g� � 10�6

ð12bÞ

where Ci is runoff volume (mm), u is AAAc_P (common to both technologies)and z is erosion kg/ha, and 0.15(12 mi)Ni is the amount of phosphorus applied.As in the case of nitrogen, the technology-based difference in the runoffs ofdissolved and the potentially bioavailable particulate phosphorus is capturedby parameters si and Di, respectively. As for the AAAc_P, following Puustinenet al. (2005) we set u ¼ 18.6. For runoffs, erosion and technology differences weuse experimental results from South-Western Finland by Puustinen (2004) andPuustinen et al. (2005), which examined surface runoffs of erosion, particulatephosphorus, dissolved phosphorus, and total nitrogen under conventional andno-till technology presented in Table 3.12

The experimental data presented in Table 3 are quite revealing. No-till tech-nology reduces erosion and particulate phosphorus by 70 per cent and nitrogenby 43 per cent relative to conventional technology. However, it increases therunoffs of dissolved phosphorus more than three-fold.13

Next we focus on the herbicide runoffs. Glyphosate is applied to stubble beforedirect drilling under no-till as a (fixed) pre-emergence control for Elymus repens.The standard application rate is 1,500 g/ha and it costsE19.0 per hectare.MCPAapplication (kg/ha) is a post-emergent weed control variable, and is thus acontinuous choice variable under both technologies. Both herbicides aredegradable. Therefore, we assume that Glyphosate is applied on stubble on 1May, which is 1 week before direct drilling. MCPA is applied on 15 June.Herbicides decay according to equation Bie

kt, where Bi denotes the amount ofherbicide applied, t is the number of days after application and the coefficient ofdegradation, k, is defined as k ¼ ln 2/DT50. We obtain the following degra-dation equations for Glyphosate (GLY) and for MCPA:

GLY ¼ 1500� e�0:014145t and MCPA ¼ xi � e�0:0693t: ð13Þ

Equations (13) define the amount of herbicides in the soil at each point of time.They imply that the half-life for Glyphosate is 49 days in the uppermost 20 cmof the soil surface, and 10 days for MCPA.For Glyphosate, the adsorption coefficient, k, indicates how the herbicide is

divided between liquid and solid phases, because it defines the ratio of liquid

12 This experimental field, cultivated with winter cereals, is located in Aurajoki. The soil has a clay

content of 45–60 per cent. The average slope of the field is 8 per cent, runoffs being mainly sur-

face runoffs. Data have been collected since 1990.

13 Table 3 differs from other related studies in one respect. The ratio of runoffs under no-till and

conventional technology is unity, whereas other studies show considerably lower runoffs for

no-till. Whether this feature is typical or not remains to be ascertained by future studies.



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and solid phases. Thus, letting a denote the share of Glyphosate in soilparticles and (12 a) in soil water, an estimated value (k) of the adsorptioncoefficient can be used to define the actual shares of Glyphosate (GLY)from k ¼ aGLY/(12 a)GLY. From Finnish experiments, Autio et al.(2004) estimated an adsorption coefficient of 58 for Glyphosate.14

Using degradation of Glyphosate and its adsorption coefficient, we obtainthe following liquid and solid runoffs for Glyphosate under no-till technology:

ZiGLYl

¼ ð1� m1:3i Þ Cið0:02� GLYlÞ=100½ � for i ¼ 2 ð14aÞ

ZiGLYs

¼ ð1� m0:3i Þ ziðGLYsÞ � 10�6

� �for i ¼ 2 ð14bÞ

where Ci is runoff volume (mm), zi is erosion kg/ha, GLYl is the concen-tration of glyphosate in soil water (mg/l) and GLYs is the adsorption ofglyphosate in soil particles (g/ha), which is converted into eroded soil(mg/kg) and then multiplied by erosion (kg/ha).MCPA runoffs behave differently and are modelled using equation (15),

adapted from Kreuger and Tornqvist (1998):

logZiMCPA ¼ ð1� m0:3

i Þ½1:1þ ð1:1� logMCPAðkg=haÞ

þ 0:00004� Koc � 0:005� DT50�; i ¼ 1; 2 ð15Þ

where Koc is the soil sorption coefficient (normalised to soil organic carboncontent) which is 125 in our case, DT50 is the soil half-life, 10 days forMCPA. Equation (15) is calibrated to reflect the MCPA runoff experimentson steep clay soils (Laitinen et al., 1996).

3.3. Social welfare function

The final step in developing our parametric model is to define the socialwelfare function, whose arguments are profit (already defined in (9)) and

Table 3. Surface runoffs of erosion, particulate phosphorus, dissolved phosphorus and

total nitrogen under conventional and no-till technology (Puustinen, 2004; Puustinen

et al., 2005)

Technology Runoff

(mm)

Erosion

(kg/ha)Particulate

phosphorus

(kg/ha)

Dissolved

phosphorus

(kg/ha)

Total

nitrogen

(kg/ha)

Conventional 234 2,100 3.71 0.58 15.7

No-till 233 620 1.13 2.02 9.00

14 For example, at t ¼ 30 the amount of Glyphosate in soil is 981.3 g/ha. Using the above equation

we obtain a ¼ 0.983051, giving an amount 964.6 g sorbed to soil particles and 16.6 g as the

concentration in soil water (mg/l).



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damages from nutrient and herbicide runoff. We next define the socialdamages from the runoff, starting with the nutrient runoff.To express the social valuation of nutrient runoff damages, we follow a

strategy suggested by Kiirikki et al. (2003) in the context of the Gulf ofFinland. As in that study, we transform total P into N equivalents in thedamage function by multiplying total P by the Redfield ratio 7.2. The Redfieldratio describes the optimum N/P ratio for the growth of phytoplankton,relevant for algal growth in coastal waters. Moreover, we assume that themarginal damage from nitrogen equivalents is constant, so that the damagefunction is given by

dðZiÞ ¼ RnðNi þ 7:2PiÞ ð16aÞ

where Ni is defined in equation (11), Pi is the sum of equations (12a) and (12b)and Rn is the constant social marginal damage. Drawing on Aakkula (1999)and Yrjola and Kola (2004), Finnish consumers experience a damage valueof E35 from average per hectare agricultural nutrient runoff (13 kg/ha Nand 2 kg/ha P).For the herbicide runoff we also postulate constant marginal damage, so that

the damage function is given by

DðZiÞ ¼ RhZhi ; for i ¼ 1; 2 ð16bÞ

where Z1h consists of MCPA runoff only and Z2

h consists of the sum of MCPAand GLY runoff. As for the value of Rh, herbicide runoff differs from nutrientrunoff because of the toxic nature of herbicides. Thus, one can expect that thesocial value of herbicide runoff damage is higher than that of nutrient runoffdamage. Siikamaki (1997) suggested an average WTP E189.3 per kg ofactive ingredients in the case of the total abandonment of herbicide use inFinnish agriculture, and we use this estimate.Combining equations (9)–(16b) allows us to express our social welfare

function for both cultivation technologies in the following simple form:

SWi ¼ pi � dðZni Þ � DðZh

i Þ; i ¼ 1; 2: ð17Þ

4. Comparison of no-till and conventional technologies:empirical findings

This section presents our empirical results. We start with private and socialprofitability, and then continue to policy instruments and sensitivity analysis.

4.1. Private profitability of no-till and conventional technologies

Table 4 presents the privately optimal nitrogen and herbicide application andthe resulting production and profits under both technologies.



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Both nitrogen and MCPA application levels differ between technologiesand are higher under conventional technology than under no-till. TheMCPA application under no-till technology is slightly lower than rec-ommended by the manufacturer (0.975–1.5 kg/ha), whereas it lies in thisrange under conventional technology.15 Only for barley do we find that no-till technology gives higher profit than conventional technology. For oats,the cost advantage of no-till technology is not enough to compensate for itslower yields. Profit is considerably lower for no-till wheat than for conven-tional wheat. This is not surprising, given that the yield difference inTable 4 between conventional and no-till wheat is so large.

4.2. Social profitability of no-till and conventional technology

The social returns of conventional tillage and no-till depend, in addition toprofit, on nutrient and herbicide runoff damages. Table 5 presents the sociallyoptimal input use and resulting production under both technologies.Accounting for runoff damages results in less intensive use of nitrogen and

MCPA for both technologies than in the private solution. As in the privateoptimum, nitrogen and MCPA are used more intensively under conventionaltechnology than under no-till. Buffer strips (absent in the private optimum)are used in the social optimum. Their size is calculated as the share of theparcel, and is shown in Table 5 as a width in metres for a field of200 m � 50 m. The socially optimal buffer strip width is larger for conventionaltechnology than for no-till under barley and oats cultivation. The amount of cropproduction slightly decreases (0.8–2.6 per cent) relative to the private optimum.Table 6 presents the values of the main components of profit, nutrient runoff

and herbicide runoff damages at the social optimum. Nutrient runoff damage isthe sum of nitrogen, dissolved phosphorus and particulate phosphorus runoffdamages. Herbicide runoff damage includes MCPA runoff damage for

Table 4. Private optimum: per hectare nitrogen application (N), MCPA application,

production and profit under conventional and no-till technologies

Crop N application

(kg/ha)MCPA application

(kg/ha)Production

(kg/ha)Profit

(E/ha)

Conv. No-till Conv. No-till Conv. No-till Conv. No-till

Wheat 148.2 104.8 1.02 0.86 4,725 2,707 155.4 14.6

Barley 119.1 116.1 0.99 0.97 4,522 4,216 73.7 124.8

Oats 104.8 97.7 1.01 0.95 5,163 4,161 170.6 149.5

15 MCPA application clearly increases the per hectare yields in comparison with no-treatment. For

wheat, the increase in conventional and no-till production was 462 and 260 kg/ha, respectively.

For barley, the corresponding production increases were 438 and 407 kg/ha, and for oats, 503

and 402 kg/ha.



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conventional technology and the sum of MCPA, liquid and solid Glyphosaterunoff damages for no-till.The decrease in profit at the social optimum relative to the private optimum is

in the range 0.8–12.3 per cent, depending on the crop and technology. Nutrientrunoff damage is higher under conventional technology than under no-till for allcrops. In monetary terms, herbicide runoff damage plays a very small role. Thisreflects peculiarities of Finnish agriculture, where the use of herbicides is small.In line with previous discussion, herbicide runoff damage is clearly higher forno-till because, in addition to MCPA runoff damage, it also includes damagefrom liquid and solid glyphosate runoff. Again we find that adoption of no-tilltechnology is optimal only for barley cultivation. Thus, accounting for nutrientand herbicide runoff damages does not change the ranking of technologies com-pared with the private optimum. The presence of runoff damage, however,nearly closes the gap between conventional and no-till technology in the caseof oats. Social returns for no-till wheat are negative, reflecting the above-men-tioned yield failures in no-till wheat experiments.

4.3. Does no-till imply lower overall nutrient runoffs?

The above empirical findings indicate that no-till decreases particulate phos-phorus runoff but this reduction may be offset by increased dissolved

Table 5. Social optimum: per hectare nitrogen application (N), MCPA application, buffer

strips (share and meters) and production under no-till and conventional technologies

Crop N application


(kg/ha)Buffer strips, share

(m)

Production

(kg/ha)


Wheat 145.2 102.2 0.97 0.81 0.0149 (3.0) 0.0165 (3.3) 4,624 2,638

Barley 117.2 114.8 0.94 0.91 0.0208 (4.2) 0.0063 (1.3) 4,404 4,171

Oats 103.5 96.8 0.96 0.89 0.0117 (2.3) 0.0049 (1.0) 5,086 4,127

Table 6. Social optimum: profit from production, nutrient runoff damage, herbicide runoff

damage and social welfare under no-till and conventional technologies

Crop Profit

(E/ha)Nutrient runoff

damage (E/ha)Herbicide runoff

damage (E/ha)Social welfare

(E/ha)


Wheat 150.1 12.8 35.2 24.4 1.07 1.61 114.6 213.2

Barley 69.1 123.4 31.8 26.2 0.99 1.84 36.4 95.4

Oats 166.9 148.3 33.2 25.8 1.08 1.84 132.7 120.7



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phosphorus runoffs. To see whether no-till leads to unambiguously loweroverall nutrient runoffs, we calculated the nitrogen and phosphorus runoffsassociated with the socially optimal solution.Table 7 demonstrates that nitrogen runoff is 37 per cent and 43 per cent

lower under no-till than conventional technology for barley and oats, respect-ively, and 61 per cent lower for wheat. Particulate phosphorus runoff is almost70 per cent lower but dissolved phosphorus runoff is 3.5 times higher underno-till than conventional technology. Changes in phosphorus runoff overcrops are modest. The total phosphorus runoff for all crops under conventionaltechnology is about 3.2 kg/ha, and under no-till 2.8 kg/ha, a difference of0.4 kg/ha in favour of no-till technology.

4.4. Herbicide runoffs of MCPA, solid glyphosate, and

liquid glyphosate

To sharpen the focus on the effect of herbicide runoff, we take t ¼ 45 forGlyphosate and t ¼ 5 for MCPA as the representative of average runoff.Table 8 shows that MCPA runoff is not very different between technologies

and is on average 0.5–0.6 per cent of the amount applied. The reason for thissimilarity between technologies is that MCPA is a rapidly degradable herbi-cide with weak adsorption in soil. Only no-till entails Glyphosate runoffs.Solid GLY runoffs are 0.06 per cent of the applied amount and liquid GLYrunoffs are 0.21 per cent. Hence, total herbicide runoff and related socialdamage is higher for no-till, because MCPA runoffs are similar but Glyphosateis used only with no-till technology.

4.5. First-best policy instruments

How should agri-environmental policies be specified under each technology?The first-best policy can be obtained by equating the socially optimalconditions (6a)–(6c) to the respective private conditions subject to a nitrogentax, herbicide tax and a buffer strip payment. Denoting the nitrogen tax by t,

Table 7. Socially optimal solution: surface runoffs of nitrogen (N), particulate phosphorus

(PP) and dissolved phosphorus (DP) under conventional and no-till technologies

Crop Conventional (kg/ha) No-till (kg/ha)

N PP DP N PP DP

Wheat 11.5 2.678 0.564 4.5 0.801 1.929

Barley 9.0 2.566 0.561 5.6 0.884 1.937

Oats 9.0 2.750 0.562 5.1 0.901 1.935



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MCPA tax by j, and a concave buffer strip payment by l, we express privateprofit as

pi ¼ ð1� miÞfpðAi þ xiNi þ giN2i Þð1� expðh0 � h1xÞÞ � cð1þ tÞNi

� whi � að1þ jÞx �Cg � ki þ ðl� l miÞmi; i ¼ 1; 2: ð20Þ

Following a standard procedure, we equate the private optimality conditions inthe presence of policy instruments with the socially optimal conditions andsolve the simultaneous equation system for instruments to obtain the followingresults shown in Table 9. The first-best nitrogen and herbicide taxes differbetween technologies and crops. Despite the range of 1.6 percentage pointsunder conventional cultivation, uniform nitrogen and herbicide taxes couldperform quite well within each technology. The fact that the nitrogen tax islower and the herbicide tax slightly higher under no-till is in line with thetheoretical analysis. The optimal buffer strip payment differs markedlybetween technologies, and between crops within each technology, as theopportunity costs of establishing buffers vary significantly. Thus, in terms ofthe optimal buffer strip payment, differentiation between technologies andeven between crops within each technology may well be warranted.

Table 8. Socially optimal solution: surface runoffs of MCPA, solid glyphosate and liquid

glyphosate under conventional and no-till technologies

Crop Conventional (g/ha) No-till (g/ha)

MCPA MCPA Solid GLY Liquid GLY

Wheat 5.64 4.59 0.78 3.11

Barley 5.21 5.74 0.86 3.13

Oats 5.71 5.71 0.88 3.13

Table 9. Levels of the first-best policy instruments (the nitrogen and MCPA taxes are

reported in percentages of price and the buffer payment in euros)

Crop Conventional No-till

Nitrogen MCPA Buffer Nitrogen MCPA Buffer

tax (%) tax (%) payment (E) tax (%) tax (%) payment (E)

Wheat 7.2 19.3 289.7 2.9 19.1 102.6

Barley 5.6 18.6 212.7 3.6 20.9 210.5

Oats 5.6 19.8 308.8 3.3 21.3 236.0



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4.6. Sensitivity analysis

We performed sensitivity analysis for the key economic and environmentalvariables. We start with the economic factors (critical yield loss, prices andcosts) and then examine how variability in environmental conditions wouldaffect our results. We represent environmental heterogeneity by the variationin the propensity to runoff that results from different field slopes.

4.6.1. Critical yield loss for no-till under private and social optimum

First, we ask how much lower yields could be under no-till whilst still provid-ing private or social profit that are equal to those of conventional technology.This critical yield loss defines the point where the adoption of no-till becomesprivately or socially optimal.Table 10 shows that the critical yield loss is roughly the same for both

solutions. No-till can yield, on average, 900 kg/ha less than conventionaltechnology and still be a viable solution. The yield losses given in Table 4for no-till are 306 kg/ha for barley and 2,018 kg/ha for wheat. Thus, forthese crops, the results are robust. By contrast, the yield difference for oats(1002 kg/ha) is closer to the critical yield loss.Using the values in Table 10 and crop prices, we calculate the value of the

critical yield loss at private optimum to be E131/ha for wheat, E84/ha forbarley and E89/ha for oats.

4.6.2. The effects of crop prices and nitrogen and herbicide costs

To see how crop prices and nitrogen and herbicide (both MCPA andGlyphosate) costs affect the private profitability, we increased their value by10 per cent (see Table 11).

Table 10. Critical yield loss at the private and social optima

Solution Wheat (kg/ha) Barley (kg/ha) Oats (kg/ha)

Private optimum –971 –778 –808

Social optimum –1,040 –779 –901

Table 11. Sensitivity analysis: profit under a 10 per cent increase in crop prices, nitrogen

prices and herbicide prices

þ10% crop price:

profit (E/ha)þ10% nitrogen price:

profit (E/ha)þ10% herbicide price:

profit (E/ha)

Conv. No-till Conv. No-till Conv. No-till

Wheat 219.4 51.6 138.6 3.1 154.8 12.2

Barley 122.7 170.5 60.2 111.7 73.1 122.3

Oats 227.5 195.5 158.7 138.5 170.0 147.1



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The profitability ranking of the technologies remains unchanged for a 10 percent increase in exogenous crop, nitrogen and herbicide prices. However, incomparison with the base case (Table 4), an increase in the crop and herbicideprice favours conventional technology, whereas a nitrogen price increasefavours no-till.

4.6.3. The effect of environmental heterogeneity

Sensitivity analysis of the role of environmental heterogeneity was conductedby assuming a different field slope, which leads to different nutrient and her-bicide runoffs.16 The effect of the slope is obtained from the ICECREAMmodel, which simulates runoff, soil loss, and nitrogen and phosphorusrunoff, and from the GLEAMS model, which simulates pesticide runoff (Lai-tinen et al., 1996). Our base case represents an experimental field with a steepslope (8 per cent). The sensitivity analysis, therefore, examines the case of afield with a slope of less than 3 per cent.Table 12 shows that the socially optimal nitrogen application increases

slightly (relative to Table 5), reflecting the smaller propensity to runofffrom a flatter field. The most important change takes place in the sociallyoptimal buffer strip width, which is on average only 30 per cent of thewidth reported in Table 5.Table 13 presents the values of the main components of the social welfare,

assuming a less steep slope. In comparison with Table 6, nutrient runoffdamage is clearly lower for both technologies, but especially so for the con-ventional technology. Hence, it seems that a less steep slope is more favour-able for conventional technology. However, the effect of the flatter slope onsocial returns is not enough to alter the social welfare ranking of thetechnologies.Finally, Tables 14 and 15 show the nutrient and herbicide runoff for conven-

tional and no-till technologies for a field parcel with a slope of less than 3 percent. Relative to the corresponding Tables 7 and 8, nitrogen runoff decreases

Table 12. Sensitivity analysis: field slope under 3 per cent; social optimum: per hectare

nitrogen application (N), MCPA application, buffer strips (share and meters) and

production under no-till and conventional technologies

Crop N application


(kg/ha)Buffer strips, share

(m)

Production

(kg/ha)


Wheat 146.4 103.2 0.97 0.81 0.0045 (0.9) 0.0053 (1.1) 4,685 2,677

Barley 118.0 115.3 0.94 0.91 0.0061 (1.2) 0.0022 (0.4) 4,479 4,195

Oats 104.0 97.2 0.96 0.89 0.0034 (0.7) 0.0017 (0.3) 5,134 4,145

16 The effect of the slope on the amount of runoff is significant for erosion and soil sediment-bound

nutrients and herbicides (particulate phosphorus and solid Glyphosate), and smaller for nutri-

ents and herbicides in dissolved form (dissolved phosphorus, nitrogen, and liquid Glyphosate).



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about 40 per cent in both technologies, slightly more in no-till. Particulatephosphorus runoff decreases equally in both technologies, by 63–66 per centdepending on the crop. Dissolved phosphorus decreases more in conventionalcultivation. Interestingly, the herbicide runoff decreasesmore in no-till (MCPA2–6 per cent and aggregate GLY 27–28 per cent). Thus, again, we find amixedeffect on the overall environmental performance of both technologies.

Table 13. Sensitivity analysis: field slope under 3 per cent; social optimum: profit from

production, nutrient runoff damage, herbicide runoff damage and social welfare under

no-till and conventional technologies

Crop Profit

(E/ha)Nutrient runoff

damage (E/ha)Herbicide runoff

damage (E/ha)Social

welfare (E/ha)


Wheat 154.0 14.0 17.0 16.2 1.05 1.39 136.0 –3.6

Barley 72.3 124.3 15.4 16.8 0.99 1.57 55.9 105.9

Oats 169.5 149.1 15.5 16.5 1.06 1.56 152.9 131.0

Table 14. Sensitivity analysis: field slope under 3 per cent; surface runoffs of nitrogen (N),

particulate phosphorus (PP) and dissolved phosphorus (DRP) under conventional and

no-till technologies

Crop Conventional (kg/ha) No-till (kg/ha)

N PP DRP N PP DRP

Wheat 6.7 0.963 0.436 2.6 0.287 1.569

Barley 5.3 0.940 0.435 3.1 0.306 1.572

Oats 5.2 0.981 0.435 2.8 0.310 1.570

Table 15. Sensitivity analysis: field slope under 3 per cent; surface runoffs of MCPA, solid

glyphosate and liquid glyphosate under conventional and no-till technologies (g/ha)

Crop Conventional (g/ha) No-till (g/ha)

MCPA MCPA Solid GLY Liquid GLY

Wheat 5.6 4.5 0.32 2.54

Barley 5.2 5.4 0.34 2.54

Oats 5.6 5.4 0.34 2.54



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5. Conclusions and policy implications

We developed a theoretical framework and a parametric model to assess theprivate profitability and social desirability of conventional tillage and no-tilltechnology. Our analysis integrates crop yields, production costs, and nutrientand herbicide runoff damages resulting from fertiliser and herbicide appli-cations. The empirical model was calibrated with Finnish data. We foundthat no-till provides higher social returns and private profit than conventionaltillage only for barley, but not for oats or wheat. For oats the production costadvantage of no-till is not enough to compensate for the lower yields no-tillprovides in the private optimum. Moreover, the slightly better environmentalperformance of no-till for oats at the social optimum is not enough to make itsocially preferable. This holds more strongly for wheat. Thus, the key factorsdetermining the private and social profitability of no-till and conventionaltillage are yields and production costs, rather than environmental performance.Our model predicts that in order for no-till to be adopted, average yield lossescompared with conventional technology should not exceed 900 kg/ha.Comparison of the environmental performance of the two technologies is

revealing. No-till seems to provide only slightly better overall performancethan conventional tillage. No-till reduces nitrogen and particulate phosphorusrunoffs considerably. However, and in line with previous studies, dissolvedphosphorus runoff increases markedly, making the amount of total phosphorusrunoff almost the same as in conventional cultivation. Total herbicide runoff isslightly higher for no-till because of the need to use pre-emergence Glyphosatetreatment to control perennial weeds, which are more abundant under no-tillthan conventional tillage. Hence, the adoption of no-till entails trade-offsconcerning the types of environmental effects. The importance of thesetrade-offs depends on society’s valuation of herbicide and runoff damages.Using estimates of these values for Finland, the role of herbicide damagesat the social optimum is very small. Moreover, nutrient damage valuation isnot enough to make the slight environmental performance advantage ofno-till a decisive factor in the technology choice.Sensitivity analysis with respect to exogenous factors, input and output prices,

and environmental heterogeneity (measured by field gradient) reveals that theranking of technologies is rather robust. Interestingly, however, we found thatthe steeper the field is, the more attractive no-till becomes. This suggests thatno-till may provide local solutions for watersheds that are surrounded by verysteep fields, or where water quality impairment is mainly due to nitrogen orsoil sediment-bound pollutants such as particulate phosphorus.Overall, given the short-term experimental data used, no-till does not

provide a general win–win possibility for agri-environmental policy inFinnish agriculture. However, its adoption may be optimal for some crops(barley) and for some environmentally sensitive areas. Further field experi-ments are needed to investigate whether the no-till yields can be increased,which would strengthen the case for its adoption. Following de Koeijeret al. (1999), we stress that the adoption of any new cultivation technology



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entails many dynamic agronomic and biological changes that are not includedin conventional economic models. In the case of no-till, there are many suchchanges, including improved soil structure and stability, enhanced drainageand water-holding capacity, and richer soil biota improving nutrient recycling.Thus, including these important environmental and agronomic aspects may

make no-till more socially desirable. One additional example is the potentialof no-till to promote net carbon sequestration in croplands as an importantmeans for reducing greenhouse gas emissions. Also, one would like toknow how no-till relates to species diversity (birds, weeds, herbivores andsoil micro-organisms), and what the implications for biodiversity are of poten-tial increase in herbicide use.

Acknowledgements

The opinions expressed in this paper should not be ascribed to the OECD or its member

governments.

This paper is a part of the project ‘Multifunctional Agriculture and Policies’, funded by the

Ministry of Agriculture and Forestry. This funding is gratefully acknowledged. Ollikainen

thanks Academy of Finland for the grant No. 204476 for the position of Senior Researcher for

the academic year 2003–2004. We are grateful for Laura Alakukku, Markku Puustinen, Katri

Siimes and Risto Uusitalo, who kindly advised us on many details concerning nutrient and

herbicide runoff under no-till. We thank Hannu J. Mikkola and Antti Nikula for data and

helpful comments, and Stefan Backman and Eirik Romstad for insightful advice. The comments

by the Editor and three anonymous referees are gratefully acknowledged.

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Appendix 1: Proof of proposition

(a) Social optimum

Express first the difference in social welfare as

SW2 � SW1 ¼ ðr�2 � r�1Þ þ w½�ð1� m�2Þh2 þ ð1� m�

1Þh1�

þ ð�d2 þ d1Þ þ ð�D2 � D1Þ

where

r�i ¼ ð1� m�i Þ pf iðl�i ; qÞFi

ðHi; x�i Þ � cl�i � ax�i � whi

� �

� ki; with i ¼ 1; 2:

ð�d2 þ d1Þ ¼ �d2ðg2ðl�2;m�2ÞÞ þ d1ðg1ðl�1;m�

1ÞÞ . 0

and

ð�D2 þ D1Þ ¼ �D2ðe2ðx�2;m�2ÞÞ þ D1ðe1ðx�1;m�

1ÞÞ , ð�Þ 0:

Assume first that fl2F2

� fl1F1, then all other terms are positive except the last

one, which can be positive or negative. If this term is small enough relative toothers, no-till is adopted. But if fl

2F2 , fl1F1, then the first, third and fifth

terms can be either positive or negative, making social returns of either con-ventional or no-till higher.

(b) Private optimum

Define the difference in private profit as p22 p1 ¼ (u22 u1)þ (2k2 þk1)þ w�(2h2þ h1), where ui ¼ pf(li

0, q)Fi(Hi, xi0)2 c�li

02 a�xi0, i ¼ 1,

2. If fl2F2

� fl1F1, then the difference in profit is positive, as all terms are

unambiguously positive. If, however, fl2F2 , fl

1F1, then the difference(u2–u1) becomes negative and offsets the last two positive terms, makingthe outcome ambiguous.

Appendix 2: Cost structure of conventional and no-till

The cost structure of conventional and no-till technology is from Nikula(2005). Fixed tractor costs include depreciation, interest and insurance.Fixed machinery costs include depreciation and interest. Depreciation timefor tractors is 10 years and for machinery 12 years, interest rate is 4 percent and repair cost is 3 per cent. By assumption, under conventional tillagethe annual use of tractors is 300 hours for a 70 kW tractor and 200 hoursfor 55 kW tractor. Under no-till annual tractor use is 400 hours for a 70 kWtractor.



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Appendix 3: Parameter values in the numericalapplication

Table A1. Fixed costs of tractors and machinery (depreciation, interest, insurance and

maintenance cost), total annual ownership costs, E/year (Nikula, 2005)

Machinery Conventional

(E/year)No-till

(E/year)

Tractor

70 kW 3,726 3,726

55 kW 2,644

Mouldboard plough, 3 � 1600 1,102

Harrows, 6.5 m and 4.5 m 327þ 1,107 ¼ 1,434

Grain drill, 2.5 m 1,171

Direct planter, 3.0 m 3,569

Plant protection sprayer, 700 l per 12 m 370 370

Table A2. Parameter values in the numerical application

Parameter Symbol Value

Price of crop pi E/kgWheat 0.135

Barley 0.108

Oats 0.110

Price of nitrogen fertiliser c E1.15/kgPrice of MCPA a E6.25/kgGlyphosate cost for no-till E18.9/haSeed cost E/ha

Wheat 74.0

Barley 40.0

Oats 39.0

Labour input h/haConventional 4.58

No-till 1.31

Fuel cost wff E0.34/lConventional E19.45/haNo-till E6.84/ha

Labour cost whh E11.1/hConventional E50.8/haNo-till E14.5/ha

Damage-abatement function parameters h0 –2.3

Wheat h1 –3.50

Barley –3.28

Oats –3.40

(continued on next page )



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Corresponding author: Markku Ollikainen, Department of Economics and Management,P.O. Box 27, FIN-00014, University of Helsinki, Helsinki, Finland. Phone: þ3589 19158065. Fax: þ358 9 19158096. E-mail: [email protected]

Table A2 (continued)

Parameter Symbol Value

Nitrogen response function

Wheat A 1,274

Barley 1,010

Oats 1,414

Wheat (conventional; no-till) g –0.100; –0.050

Barley (conventional; no-till) –0.159; –0.147

Oats (conventional; no-till) –0.243; –0.182

Wheat (conventional; no-till) xi 38.19; 19.04

Barley (conventional; no-till) 48.57; 44.83

Oats (conventional; no-till) 61.40; 46.07

All prices and costs are from the year 2002. The price of nitrogen is calculated on the basis of a compound NPKfertiliser.



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