Impacts of agri-environmental policy on land use and nitrogen leaching in Finland

• Agri-environmental policy (AEP) has inhibited intensity of agricultural production.
• Abolishing AEP would exacerbate nutrient leaching in intensive regions considerably.
• AEPs may indirectly maintain production in less intensive regions.
• AEPs should be checked to prevent economically suboptimal production.
• Obtaining these results is difficult without model based counterfactual analysis.

Agri-environmental policies are challenging to be evaluated since they are often implemented in combination with other policies and regulations affecting agriculture. Also input and output markets affect agriculture. We provide impact assessment of agri-environmental scheme implemented in Finland 2007–2013 based on integrated economic and hydrological modelling and counterfactual scenarios. Development of crop specific fertilisation and land use changes, simulated using a multi-regional economic sector model, is included in a nutrient leaching model implemented in a typical agricultural region. Our results on agricultural production, land use, and nitrogen leaching show that the agri-environmental policy successfully mitigates nutrient leaching in intensive production regions but some mitigation potential is lost in less intensive regions.