Epsilon Archive for Student Projects

Abstract

Chemical fertilisers are common in the Swedish agriculture and even though there is a decreasing trend of using chemical fertilisers, they still have major negative impact on the environment (Swedish Board of Agriculture, 2019). This study focuses on the price elasticity of demand for phosphorus fertilisers in Swedish agriculture and how price changes of phosphorus fertilisers affect farmers. The aim is to contribute with estimations of the price effects on Swedish demand of phosphorus fertilisers.
A panel data set is used to estimate a log-log model through an OLS-technique. The data set is mainly aggregated on county level with data from fifteen southern counties in Sweden. Five models are produced with various number of variables. The results show that the long run price elasticity of phosphorus is approximately (-0.449) which indicates that phosphorus content in fertilisers is inelastic. The results also show that four out of five variables are significant.
The result from this study is in line with previous studies on nitrogen fertilisers. In addition, the conclusion is that farmers are affected by price changes to some extent. Yet a tax would not dramatically decrease the use of phosphorus fertilisers. However, a tax policy has several intentions and a combination of a small decrease in the use of fertilisers and a governmental tax revenue would enable investments in green technology and in the agricultural sector.
This study also discusses different policy instrument as a possible future solution. For instance, an import tariff would target unsustainable foreign phosphorus supply and simultaneously encourage innovation to enable domestic and sustainable extraction of phosphorus.