Policy commentary

Enhancing Productivity While Safeguarding Environmental Quality

Jan 28, 2008 | David Zilberman, Steven Sexton

This week we are delighted to introduce David Zilberman, one of the foremost experts on agricultural and environmental issues. He and Steven Sexton discuss the complex trade-offs involved in regulating agricultural use of pesticides and how current policies might be improved. For example, regulators must be concerned with the health risk to consumers and farm workers posed by chemical pesticide use, as well as broader environmental damages from farm run-off and the risk that extensive pesticide use will speed up the evolution of pest resistance. On the other hand, regulation comes at a cost in terms of forgone productivity gains on the farm, and reduced incentives for the development of new, more effective pesticides.

Next week, RFF Senior Fellow Dallas Burtraw will discuss plans for the next phase of greenhouse gas reductions in the European Union.

Calculating the benefits and costs of pesticides is highly controversial. On the one hand, they are responsible for considerable improvement in the human condition. They have increased food supply and enabled agricultural production in regions where it would otherwise be impossible. By reducing the damage pests inflict on crops, pesticides improve farm yield as much as 100 percent in some cases. They reduce the costs of agricultural inputs like labor and energy. Also, they confer environmental benefits by reducing pressure for agricultural expansion and by enabling environmentally beneficial farming practices, like low-tillage, which reduces soil erosion and permits carbon sequestration in the ground.

On the other hand, chemical pesticides can be harmful to humans and the environment, potentially causing health problems in farm workers exposed to toxic materials and to consumers exposed to residues on food. They can pollute the environment by runoff and drift, contaminating ground and surface water and affecting nontarget species. In addition to these negative side effects, excessive pesticide use can also reduce pest susceptibility, a resource that may suffer the tragedy of the commons. These negative side effects of pesticide use make a strong case for regulation. 

The current pesticide regulatory structure in this country doesn’t take sufficient account of the public health benefits of pesticides (in terms of diseases prevented or reduced cost of food) and regulators are too quick to react to public opinion and do not fully acknowledge the results of the risk/benefit balancing they are required to do under law. As a result, no one is well served – not consumers, who face higher prices; nor farmers, who contend with higher costs and lower productivity; nor pesticide manufacturers, who have weaker incentives to innovate. And it’s not clear whether there’s an improvement in public health or environmental quality, given the problem of regulating pesticides sequentially.

First off, the process of testing potential chemicals and the criteria and standards imposed on final products should be consistent and integrated across the three government agencies that have a role in pesticide regulation: the U.S. Department of Agriculture, the Food and Drug Administration, and the Environmental Protection Agency. An essential step will be to eliminate the inevitable redundancies that exist between the agencies.

While the current system of testing and screening chemicals before they are approved for market is necessary, it is not without very real costs. It takes roughly $15 million to bring a pesticide to market in this country, certainly enough to act as a barrier to entry and lead to market concentration in the agro-chemical industry. As per-capita income rises, consumers are demanding ever-lower levels of human and environmental risk.

But the pursuit of safety must have its limits. Risk is inherent in all new technologies. While laboratory testing should ensure a basic level of safety, chemicals that fare well in the lab should be brought to market where monitoring in the field can provide additional validation. Should pesticides approved for market prove unsafe in some respect, domestic and international regulations permit their use to be restricted or banned altogether.

Regulators all too often respond to revelations of adverse effects by banning implicated pesticides altogether, ignoring the benefits they provide as well as the potential for narrower responses. Some pesticides may be beneficial from a social perspective despite some risks. The much-maligned DDT, for example, was banned after it was known to cause significant environmental damage and substitutes were available. However, it enabled eradication of malaria in parts of the United States and Europe, and selective use could have saved tens of thousands of lives in Africa.

The use of chemicals that have negative impacts under certain circumstances, such as in specific areas or weather conditions, should be restricted accordingly. As much as 80 percent of the benefit of some chemicals is derived from as little as 20 percent of their applications, suggesting that use restrictions dominate pesticide bans from a social welfare perspective. Bans not only eliminate the benefits of pesticide use, they also increase the likelihood of resistance by restricting the damage control portfolio of farmers and making them dependent on a small set of pesticides.

Regulatory compliance poses additional challenges. Pesticide application guidelines are far from binding and leave users with considerable latitude. Enforcement is difficult because pesticide contamination is a non-point source pollutant; for example, many farmers may contribute to contamination of a watershed. However, new technologies make monitoring and enforcement more feasible. California has developed a strong regime of pesticide-use reporting that capitalizes on wireless technologies.

The value and effectiveness of pesticides can vary by chemical, crop, location, application technology, weather, and other factors. Policy must recognize this heterogeneity and aim to permit pesticide applications where the total social benefits exceed the total social costs. A pesticide fee, for example, would discourage chemical use in instances when the benefits are small. Another policy option to achieve more efficient pesticide use would be a regional cap-and-trade program (similar to the sulfur dioxide trading program under the Clean Air Act) that limits the use of pesticides in a region and permits farmers to trade allowances.

Regulators can go one step further and develop incentives that vary by location, recognizing that contamination of certain area poses greater risk to environmental services, biodiversity, and human health than others. In the same vein, policies should provide disincentives for application technologies that result in drift and runoff, such as aerial spraying. Incentives that account for all forms of heterogeneity may be too costly and information intensive from a regulatory standpoint, but to the extent policy can rely on new information and communication technologies and employ economic instruments, it should.

The introduction of better monitoring and traceability requirements can lead to reliance on financial incentives that penalize misuse and reward decisions that lead to environmental benefit, such as carbon sequestration. Pesticides have been essential in enhancing agricultural productivity and improving human welfare, but they have substantial negative side effects. It is crucial to develop systems that result in better products and improve pesticide use. Pesticide regulation should be an ongoing activity that takes advantage of new scientific and technical capacities, utilizes better information, and incorporates more intensively refined and enforceable incentives that result in better outcomes.


Views expressed are those of the author. RFF does not take institutional positions on legislative or policy questions.

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Further Readings: 

Just, Richard E., Julian M. Alston, and David Zilberman, editors. 2006. Regulating Agricultural Biotechnology: Economics and Policy. New York: Springer.

Laxminarayan, Ramanan. 2003. Battling Resistance to Antibiotics and Pesticides: An Economic Approach. Washington, D.C.: Resources for the Future Press (2003).

Sexton, Steven E., Zhen Lei, and David Zilberman. 2007. "The Economics of Pesticides and Pest Control," International Review of Environmental and Resource Economics, Vol. 1. September. pp. 271-326.

Travisi, Chiara Maria, Peter Nijkamp, and Gabriella Vindigni. 2006. "Pesticide Risk Valuation in Empirical Economics: A Comparative Approach." Ecological Economics, Vol. 56, Issue 4. April. pp. 455-474.

Zilberman, David, Andrew Schmitz, Gary Casterline, Erik Lichtenberg, and Jerome B. Siebert. 1991."The Economics of Pesticide Use and Regulation." Science, Vol. 253, No. 5019 (August 2, 1991), pp. 518-522.