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 protection products are related to the toxic effects on nontargeted organisms in environmental media. This paper describes a methodology for ex ante
and ex post 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 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 €1 792.2 for the flat tax and € 280.6 for the differentiated tax.