Combining dynamic economic analysis and environmental impact modelling: Addressing uncertainty and complexity of agricultural development

In this study, the impacts of different agricultural policies on agricultural production and nutrient leaching from agricultural land are evaluated using the economic DREMFIA agricultural sector model and the field-scale nutrient transport model ICECREAM. DREMFIA simulates competitive markets of agricultural products and includes an evolutionary scheme of technology diffusion which explicitly considers farm investments, evolving farm size structure and technological change. The technology diffusion model allows self-enforcing patterns of technical change driven by the spread of information and farmers' knowledge related to different technological alternatives. Hence, the long-term changes in agriculture due to policy changes may be essentially larger than those predicted by traditional static equilibrium models. Larger potential for changes in production provides a larger perspective for evaluation of environmental impacts. The modelled variables in ICECREAM are nitrogen and phosphorus losses in surface run-off and percolation. The considered environmental effect is eutrophication of surface waters. In this paper, the modelling strategy will be presented and highlighted using two case-study catchments with varying environmental conditions and land use.