Economic and environmental effects of a flat rate for Dutch agriculture

• Analysis of the effects of a flat rate for Dutch agriculture.
• A detailed agri-environmental programming model for Dutch agriculture has been used.
• The model includes impacts of risk attitudes on production and income.
• Milk production looses, arable crops and vegetables production gain.

The objective of this research is to give insights into the production, income and environmental effects of the introduction of a flat rate for Dutch agriculture that is lower than the present average direct income payment. For this purpose, a detailed agri-environmental programming model for Dutch agriculture is used.Results of a flat rate scenario are compared to a reference scenario comparing agricultural production in the Netherlands in 2020 in a situation without a flat rate. Results show that total gross margin in Dutch agriculture decreases because of the flat rate with 7%. The supply of starch potatoes and cow milk decreases most. Production of seed and consumption potatoes, vegetables and intensive livestock products increases slightly. This is largely due to a shift of farm payments from milk and starch potatoes production to arable crops and vegetable production. It was found that including risk aversion of income volatility amplifies these effects. In the flat rate scenario total emissions of nutrients from agricultural production to the environment decreases.