Daniel Schuurmann and Alfons Weersink
A report[1] released in late September claimed Canada’s emissions targets on fertilizer could cost farmers over $48 billion by 2030. The report by the consulting firm Meyers Norris Penny (MNP), prepared for Fertilizer Canada, came in response to Environment Canada’s climate plan which set a target to reduce emissions from fertilizer by 30% below current levels.
The cost of emission reductions from fertilizer is proxied in this report by the value of the reduced crop yields stemming from a 20% reduction in fertilizer application following a proposal from the EU. The report claims that the 20% cut in fertilizer results in a greater percentage decline in crop yield - 23.6 bushels per acre for canola, 36.1 bushels per acre for spring wheat, and 67.9 bushels per acre for corn. The yield reduction is multiplied by crop price and crop area to arrive at the estimated cost of $48 billion. Based on this large cost figure, the report claims Canada’s emissions targets would be devastating for farmers and detrimental to the Canadian agri-food economy citing significant losses to productivity and reduced ability to meet export demand.
There are several problems with the simplistic approach to estimate the cost of achieving the desired reduction in GHG emissions from agriculture. First, the yield estimates in response to nitrogen fertilizer application rates are not consistent with current agronomic knowledge that suggests a 20% reduction in fertilizer use within a given year would reduce yields of these crops by an average of less than 5%[2],[3],[4]. Further, the cost-savings to farmers from reduced input costs are not considered. The pay-off functions near the economically optimal rate of fertilizer application are often flat, meaning small reductions in fertilizer can be made without major changes to farmer’s bottom-line[5]. There are, however, big differences in the optimal rate of fertilizer across years depending on the growing conditions. Unfortunately, farmers are not aware of the weather for the upcoming growing season when fertilizer is typically applied.
Second, the report assumes farmer’s practices would not adapt in response to a 20% reduction in fertilizer in whatever form that reduction would be imposed. However, farmers will adjust their cropping systems in response to any policy. For example, farmers may shift away from fertilizer-intensive crops to those requiring less fertilizer. A change in crop rotation, including the use of cover crops, could be a means to provide an alternative source of fertility rather than from the reduction in inorganic fertilizer. The result is that the reported estimate represents an upper bound and the reaction of farmers would reduce the actual costs of a forced reduction in fertilizer.
Third, the desired reduction in emissions is assumed to be achievable only through a loss in the fertilizer rate, which then reduces farm profits. Reducing emissions from fertilizer can be achieved through multiple avenues that increase the efficiency of the fertilizer applied without major changes to productivity and costs to the agri-food sector. Reduced fertilizer application is only one method of emission reductions. Splitting the application of fertilizer so it is not all applied around planting allows the farmer to adjust the rate based on growing conditions. Rather than apply a single uniform rate across the whole field, variable rate application technologies adjust the rate to account for spatial differences in soil fertility. These advancements in how farmers put fertilizer on their crop provide promising new methods of reducing fertilizer loss in corn[6], wheat[7], and canola without major changes to productivity[8] and costs to farmers[9]. Another technological advancement to reduce the amount of fertilizer required to achieve yield goals are nitrification inhibitors. Enhanced efficiency fertilizers, which slow the release of bio-available nitrogen, reduce large amounts (12-47.6%) of nitrous oxide emissions in corn[10] ,[11], canola, and wheat while crop yields typically remain unchanged or even see an increase[12],[13],[14].
To achieve the desired reduction in GHG emissions from crop production, it is important to understand the incentives farmers face when determining how fertilizer is applied and the associated rate. For example, farmers typically over-apply nitrogen as a risk management strategy so imposing a higher cost on the fertilizer will not change the rate[15]. There will be costs with any approach to reduce GHG emissions from agriculture but those costs will not be from 20% reduction in yields. Instead, new technologies that increase the efficiency of the fertilizer will lower the excess applied and nitrous oxide emissions. The appropriate question to ask is what are the policies and support programs that will encourage the adoption of these practices?
[1] The executive summary of the report by MNP can be retrieved from: https://fertilizercanada.ca/wp-content/uploads/2021/09/MNP-Economic-Report_Executive-Summary.pdf [2] Cutforth et al. (2009) “Fertilizer N response and Canola Yield in the semiarid Canadian prairies. [3] Franzen (2015) “Economics and nitrogen fertilization for corn and wheat in the Northern Great Plains”. [4] Boyer et al. (2013) “Stochastic Corn Yield Response Functions to Nitrogen for for Corn after Corn, Corn after Cotton, and Corn after Soybeans”. [5] Pannell, Gandorfer, and Weersink (2019) “How flat is flat? Measuring payoff functions and the implications for site-specific crop management. [6] Nasielski et al. (2019). “Effect of nitrogen source, placement and timing on the environmental performance of economically optimum nitrogen rates in maize” [7] An et al. (2021) “Nitrous oxide emissions with enhanced efficiency and conventional urea fertilizers in winter wheat” [8] Kabir et al. (2020). Adjusting Nitrogen Rates with Split Applications: Modelled Effects on N Losses and Profits Across Weather Scenarios. [9] De Laporte et al. (February 2021). Costs and Benefits of Effective and Implementable On-Farm Beneficial Management Practices that Reduce Greenhouse Gases [10] Recio (2018). The effect of nitrification inhibitors on NH3 and N2O emissions in highly N fertilized irrigated Mediterranean cropping systems. [11] Thapa et al. (2016). Effect of enhanced efficiency fertilizers on nitrous oxide emissions and crop yields: a meta-analysis [12] Yang (2016). Efficiency of two nitrification inhibitors (dicyandiamide and 3,4-dimethypyrazole phosphate) on soil nitrogen transformations and plant productivity: a meta-analysis. [13] Thilakarathna et al. (2020) “Nitrogen fertilization timing and formulation, soil nitrogen, and weather effects”. [14] Drury et al. (2017). “Combining Urease and Nitrification Inhibitors with Incorporation Reduces Ammonia and Nitrous Oxide Emissions and Increases Corn Yields” [15] Rajsic and Weersink (2007). “Do Farmers Waste Fertilizer?”
Recommended citation format: Schuurman, D., and A. Weersink. "Is Fertilizer Canada Crying Wolf?". Food Focus Guelph (119), Department of Food, Agricultural and Resource Economics, University of Guelph, October 21, 2021.