Economic instruments and environmental policy in agriculture

Economic instruments can achieve environmental goals at least cost and prov ide incentives for further improvements. There are limited opportunities fo r the use of such instruments in agriculture where the pollution problems c an be traced as in the case of intensive livestock operations. However, mos t environmental problems in agriculture involve a large number of diffuse p ollution sources whose abatement practices are unobservable rendering it di fficult to achieve cost-effective pollution control with any single instrum ent. Rather than relying on first-best solutions through economic instrumen ts, the most effective way of dealing with diffuse-source pollution problem s in agriculture may be technological developments and business-led initiat ives.