Environmental and economic effects of a fall in cereal prices in the EU internal market: The case of Denmark

Reform of the European Common Agricultural Policy (the CAP) will reduce cer eal prices in the Internal Market while simultaneously increasing direct su pport to farmers (Agenda 2000). This paper examines the possible effects of liberalisation of the CAP by modelling the effects of a 10 per cent reduct ion in cereal prices combined with compensation to farmers. We applied an i ntegrated modelling system suitable for estimating both the economic and en vironmental consequences of agricultural and environmental policy measures and calculated the effects of a 10 per cent fall in cereal prices on nitrog en loading of the Danish marine waters, on private consumption, GDP, the ba lance of payments, and employment. The results indicate that price reductio ns do not have significant effects on nitrogen loading relative to the 50 p er cent reduction target, since a 10 per cent reduction in cereal prices on ly leads to a 2.4 per cent reduction in loading.