Introduction
In Finland, agricultural production and its land use produce approximately 16 Mt CO
2e/year greenhouse gas (GHG) emissions, which account 20% of total emissions (Statistics Finland
2021a). Reducing agricultural GHG emissions from current levels is important for meeting a national target of climate neutrality by 2035 (Koljonen et al.
2020). Reducing GHG emissions from agriculture significantly is however a challenge. Recent studies show that one potential source of emissions where reductions could be made effectively is peatlands. Peatlands comprise only 11% of agricultural land, but they produce over 50% of the total GHG emissions from agriculture and 75% of the emissions from agricultural land use in Finland (Kekkonen et al.
2019; Koljonen et al.
2020; Lehtonen et al.
2020).
The potential of peatlands in GHG emissions mitigation has also gained attention globally. Peatlands cover about 3% of the land area, store 30% of the soil carbon, and produce 6% of all carbon dioxide (CO
2) emissions globally (Joosten et al.
2012). Peatlands provide ecosystem services such as water provision, nutrient cycling, food and fiber production, recreation, habitats, and biodiversity, and are of interest to countries that aim for significant GHG emissions reductions (Bonn et al.
2016). For example, the UK GHG National Inventory has recently included emissions from degraded peatlands in to the inventory (UK Government
2021). This would lead to higher GHG emissions in the baseline but would also provide more opportunities for emissions reductions, for example, through peatland restoration.
Soil carbon has significant value for society as a means of carbon sequestration. Costs and benefits of different peatland restoration and conservation practices, which aim to maintain soil organic carbon, have been studied in different regions in Europe. Graves and Morris (
2013) estimated degradation on peatlands and the associated loss of soil carbon under different land-use and climate-change scenarios in United Kingdom in the period 2012–2080. When valuing emissions cost at £57/tCO
2e, the CO
2 sequestration benefit of peat restoration was estimated to about £300/ha for 2012 and about £40/ha for peatland conservation on extensive grassland. Moxey and Moran (
2014) estimated the abatement costs of achieving emissions reductions targets and used this as a value for carbon benefits. They valued the capital costs of restoration to range from £200/ha–£10,000/ha and ongoing costs in the range of £25/ha–£400/ha, depending on the circumstances.
Röder and Osterburg (
2012) estimated that rewetting peatlands in Germany would result in GHG mitigation costs in the range of €10–45/tCO
2e without engineering or transaction costs.
Krimly et al. (
2016) calculated the GHG abatement costs from peatlands in Germany. According to their results, the conversion of arable land of peat-soil type into medium-drained intensive grassland would lead to high abatement costs up to €92/tCO
2e, while the abatement costs of the rewetting and conversion as wet grassland would range from 5 to 57 €/tCO
2e.
Grossmann and Dietrich (
2012) calculated abatement cost estimates for cases of changed peatland management in a context of agricultural peatlands in the Elbe river basin in North-East Germany. They reported abatement costs as low as €7–14/tCO
2e for peatland restoration, while the median-estimated abatement costs for certain peatland-stabilization scenarios were within a range of €10–20/tCO
2e.
Rewetting, i.e., raising the level of the watertable on peatlands, is seen as an effective way of reducing GHG emissions in agriculture in northern conditions (Kekkonen et al.
2019). Such emissions reductions could be also accounted for in national GHG inventory, which is fully consistent with the United Nations Framework Convention on Climate Change (UNFCCC), the Kyoto Protocol, and the EU greenhouse gas monitoring mechanism that obliges members to monitor and report greenhouse gas emissions on an annual basis. A recent climate roadmap of the unions of Finnish agricultural producers (Lehtonen et al.
2020) find and suggest that the least productive peatlands could be rewetted and significant reductions of GHG emissions could be achieved. However, raising the watertable close to the surface is problematic for farmers because it restricts both the choice of cultivated crops and the machinery use of farms since conventional agricultural machinery is not feasible on very wet and soft peatlands (Wichtmann et al.
2016). Furthermore, there are limited markets and insufficient demand for crops, which would be feasible for paludiculture (wet agriculture and forestry on peatlands) (Niemi
2020) in Finland, as well as in other European countries. Thus, as the opportunity cost of adopting new sustainable practices is high, countries are oriented toward producing conventional crops and livestock products on drained agricultural land (Ferré et al.
2019). The share of peatland soils is highly variable in Finland (Kekkonen et al.
2019) and many farms and agriculture in smaller regions in Finland are quite dependent on using drained peatlands for agricultural production. Still, significant reductions in agricultural GHG emissions is not possible without reducing emissions from peatlands. Hence, there is an increasing demand for solutions that might facilitate both significant reductions in GHG emissions and still allow conventional agricultural production. The aim of this study is to analyze to what extent and cost GHG emissions from Finnish peatlands could be mitigated while still keeping the existing fields of peat soil in agricultural use.
Adjustable subsurface drainage is a potential solution that simultaneously enables conventional agricultural production and reduces emissions from peatlands. The watertable can be kept at a higher level, for example 30 cm below the surface or higher, temporarily or most of the year, while the watertable could be decreased for example to 60 cm below the surface to allow machinery operations and farm work when necessary during the sowing and harvesting periods. The oxygenated soil layer is thinner when the watertable is high, thus, the decomposition of organic matter is reduced, and there will be fewer greenhouse gas emissions into the atmosphere. The watertable is usually regulated by control wells with a simple mechanism for adjusting the discharge pipe height (Regina et al.
1996,
2015; Flessa et al.
1998; Myllys
2019).
For an individual farmer, it is important to know the costs of adjustable drainage and its effects on crop yields, while society as a whole is interested in GHG-mitigation costs. Some estimations of the effects of adjustable drainage on GHG emissions and crop yields have been made. A study by Evans et al. (
2021) suggests that adjusting the watertable depth is the most efficient way of controlling greenhouse gas emissions from peatlands in the UK context. Every 10 centimeters of reduction in the water-table depth was estimated to reduce the net warming impact of emissions by 3 tons of CO
2e per hectare per year, until the water-table depth is less than 30 centimeters and emissions reductions continue until the depth is within 10 centimeters of the surface.
Myllys (
2019) studied the effects of the water-table level on cereal yields and GHG emissions on Finnish peatlands with adjustable drainage in the years 2014–2016. A 10-cm rise in the water table reduced the GHG emissions by 20%. Yields were reduced slightly on the average. When there was high precipitation during the growing season, yields were reduced by about 1000 kg/ha, whereas 1000 kg/ha yield gain was obtained when the precipitation was low.
A study by Matysek et al. (
2021) found that raising the watertable from −50 cm to −40 and −30 cm on East Anglian fenlands (UK) reduced CO
2 emissions, while CH
4 emissions were not significantly affected. Simultaneously, the yields of romaine lettuce were reduced significantly. A water-table level of −40 cm was seen as a compromise where emissions are cut but agricultural production is maintained.
A study by Weideveld et al. (
2021) evaluated the effects of subsoil-irrigation systems on GHG emissions (CO
2, CH
4, and N
2O) for four dairy farms on drained peat meadows in the Netherlands in 2017–2018. The system prevented the groundwater table dropping below −60 cm. The outcome of the study was that the subsoil-irrigation system did not reduce the GHG emissions from peat meadows.
While some literature suggests varying evidence concerning the effectiveness of adjusting the watertable in reducing GHG emissions in different countries in Europe, based on larger literature study, Kekkonen et al. (
2019) concluded that raising the watertable would decrease GHG emissions from peatlands in northern conditions, e.g., in Finland. The IPCC (
2014) has estimated GHG emissions for different land-use options for different soil types (Table
1 in 2.3.2). These coefficients, which are also used in national greenhouse gas inventories (Statistics Finland
2021a) include both CO
2 and N
2O emissions from agricultural land converted as CO
2 equivalents.
Table 1
Greenhouse gas emissions (N
2O and CO
2) from mineral and organic soils for different land use options converted as tCO
2e/ha (IPCC
2014)
Spring wheat | 2.0 | 35.1 | 21 |
Winter wheat | 2.0 | 35.1 | 21 |
Feed barley | 2.0 | 35.1 | 21 |
Malting barley | 2.0 | 35.1 | 21 |
Oats | 2.0 | 35.1 | 21 |
Oilseed rape | 2.0 | 35.1 | 21 |
Grass | 1.0 | 25.3 | 14.9 |
Set-aside | 0 | 25.3 | 14.9 |
NMF | 0 | 25.3 | 14.9 |
Current agricultural policy is poor at incentivizing farmers to maintain a high watertable on agricultural land, while there are incentives for keeping perennial crops on peatlands. There are two main reasons for this. First, a high watertable restricts the crop choice significantly since not all crops tolerate a high watertable and those that do are not all eligible for CAP subsidies. In fact, agricultural-support payments, including CAP-decoupled payments, payments for less-favored areas (LFAs), and agri-environmental payments, including payments for nature-management fields (NMFs) (a specific type of grassland aimed for nature conservation), require sufficient drainage on fields. Thus, it is less risky and less costly for a farmer, at least in the short term, not to invest in dams and other means of raising the water table in farmlands but rather to keep the watertable low and thus receive the farm subsidies mentioned above.
Second, water protection and biodiversity maintenance, not GHG emissions reduction, have been the focus areas of the agri-environment scheme implemented under the EU Common Agricultural Policy (CAP) in Finland (Hyvönen et al.
2020). This scheme pays subsidies for certain farm-level practices based on farm-level costs and foregone income, but does not reward farmers for GHG emissions reduction directly. The scheme includes only a few measures for peatland protection or maintenance of soil carbon on agricultural peatlands. Nature-management fields (NMF) with perennial grasses are incentivized with specific-area payments and this applies also to peatlands. Long-term perennial grass has been encouraged by a scheme where a farmer commits to no-tillage and continuous perennial grass on peatlands for 20 years. However, the payment based on cost compensation is only approximately €100/ha, and thus, this scheme has been adopted by only a few farmers and the budget allocation of public funds has been small for this measure (Hyvönen et al.
2020). Investment subsidies for adjustable drainage cover 40% of the investment costs (Pro Agria
2019). Despite this, adjustable drainage has been so far installed on only approximately to 3000 hectares of peatlands in Finland and there is no obligation, incentive, or monitoring to keep the watertable high on the peatlands (Hyvönen et al.
2020).
The weakness of the CAP system at mitigating GHG emissions in agriculture has been found also in other studies and elsewhere in Europe. Stronger programmed action has been suggested to meet local environmental and climate-related needs (European Court of Auditors
2017). Recent proposals for the CAP for the period 2022–2027 see a high need for mitigating climate change and there are increasing ambitions to reduce GHG emissions from agriculture (European Commission
2020).
To sum up, a farmer is very likely to lose money by permanently rewetting peatlands since there will be less crop income, fewer farm subsidies, and higher costs compared with the conventional mainstream practice where the water table is low (Ferré et al.
2019; Miettinen et al.
2020). Since the current agricultural policy system is obviously weak at addressing the challenge of achieving major reductions in GHG emissions, it is necessary to evaluate what could be achieved with policy measures incentivizing GHG emissions reductions directly. While many policy measures and incentives have been used with the aim of reducing GHG emissions from peatlands in many countries in Europe (Wichmann
2018), emissions taxes on GHG emissions are rare or nonexistent in Europe. However, the EU is considering a carbon tax as a measure for taxing imports and their GHG emissions in some sectors (not agriculture) under the Carbon Border Adjustment Measure (European Commission
2021). Emissions taxes on GHG emissions from soils are one way of internalizing the public cost of GHG emissions, not otherwise considered in farmers’ decision-making. For this reason, economists traditionally like such taxes. Hence, a tax on soil emissions as an emissions-reduction incentive is analyzed in this paper.
In this article, the effects of different GHG emissions tax rates on GHG emissions, production and income are analyzed for the two most important and typical farm types in Finland: a cereals farm and a dairy farm. These farm types are common, especially in regions with abundant peatlands (Official Statistics of Finland (OSF)
2021). Simulations show how a large tax will trigger investments in adjustable drainage and what other farm-level changes would follow from a GHG emissions tax. The results are based on a dynamic-optimization farm model with a time span of 30 years. The model is capable of accounting for explicit crop-rotation dynamics with crop-yield effects on different field parcels. At this point, methane emissions from livestock, which are approximately 15% of the total agricultural GHG emissions in Finland (Lehtonen et al.
2020; Statistics Finland
2021b) are not considered. This is because research results on the effects of methane inhibitors suggest high variability and high costs for reducing methane emissions from dairy cows in Finnish conditions (Sairanen
2021). Hence, methane-emission abatement costs are very likely to be high and we do not consider them in this study, which focuses on GHG emissions from soils.
The aim of this paper is to evaluate the GHG emissions abatement costs from soils on farms with peatlands, and how a policy instrument addressing GHG emissions directly such as a GHG emissions tax could affect GHG emissions, farm production, and farm income.
This analysis is relevant and valid in the conditions in Finland and other Nordic countries such as Sweden and Norway located in Northern Europe. There are also several other countries in Europe with abundant peatlands: Estonia, Germany, the Netherlands, the United Kingdom, and Ireland (Tanneberger et al.
2017). Thus, the results might be of interest to other countries as well since the EU has confirmed a target of climate neutrality by 2050 (European Commission
2018).
Discussion
The results show that a GHG emissions tax can reduce emissions significantly and at reasonable costs on a farm that has an average or higher share of organic soils. Large reductions of GHG emissions can be achieved on such soils by increasing grasslands on organic field parcels, and especially by investing in adjustable drainage, which reduces the costs of GHG emissions, but still allows cultivation of crops using conventional machinery. However, emissions tax can be an expensive instrument for a farmer. Farm income decreases relatively more than the GHG emissions at increasing rates of emissions tax on cereals farms, while on dairy farms, the farm income decreases relatively less than the GHG emissions. Still, the income losses due to emissions tax are significant also on dairy farms. The cost per tCO2e-emission reductions is even higher on dairy farms than on cereal farms. Income losses can be compensated using lump sum payments not coupled to production, while the costs of reducing GHG emissions can be reduced to a level of €22–35/tCO2e by making investments in adjustable investment when emissions tax rates are €15–30/tCO2e. If there is no option for adjustable drainage, GHG abatement costs are as high as €77–125/tCO2e, depending on the farm type, according to the results.
If the GHG emissions tax is higher than €30/tCO2e, the cost of cutting GHG emission increases and farms have limited means of reducing the GHG emissions after implementing the adjustable drainage. On the studied cereal farm (10% share of peatlands), the costs of GHG-emission reduction increase from €22/tCO2e up to €43.5/tCO2e when the emissions tax increases from €15.1tCO2e (threshold tax) to €50/tCO2e. On a dairy farm (10% share of peatland), the costs of GHG-emission reduction increase from €26/tCO2e up to €51/tCO2e if the emissions tax increases from €19.1/tCO2e (threshold tax) to €50/tCO2e.
If the share of peatlands was 30% of the available farmland area on the cereals and dairy farm the GHG reduction costs due to adjusted drainage option are between €16 and 45/tCO2e, but the farm income decreases 55–97% at emissions tax rates €12–27/tCO2e (CF) and 24–62% at tax rates €15–40/tCO2e (DF). Hence, the economic viability of agricultural production is severely reduced already in low levels on emissions tax. However, lump sum compensations to avoid income losses due to the emissions tax may prevent income losses but may not maintain production levels and motivation on farms in the long run with high shares of organic soils.
Our results, specific to farms and GHG emissions factors of peatlands in the Boreal pedoclimatic zone in Finland, cannot be directly compared with other studies on farm-level costs of GHG reduction on peatlands in other areas. Krimly et al. (
2016) calculated reduction costs for greenhouse gas emission reduction on typical farm types in southern Germany where the average share on peatland on farms was 19%. The farm types and their size were close to the same as in our study. Krimly et al. (
2016) used linear-optimization farm-modeling methods, while dynamic optimization model used in this study has several nonlinear components. According to their results, the conversion of arable peat-soil land into medium-drained intensive grassland leads to high reduction costs up to €92/tCO
2e, while the reduction costs of rewetting and conversion into wet grassland range from €5/tCO
2e to €57/tCO
2e. We did not analyze the option of restoration in this study due to lack of data.
Grossmann and Dietrich (
2012) used a water-management model and an econometric approach to calculate GHG emissions abatement cost estimates for cases of changed peatland management in the context of agricultural peatlands in the Elbe river basin in North-East Germany. They reported reduction costs as low as €7–14/tCO
2e for peatland restoration, while the median-estimated reduction costs for certain peatland-stabilization scenarios were within a range of €10–20/tCO
2e, which is close to our cost estimates. However, wetland restoration implies raising the water table close to the surface and thus the results are not comparable to our study. Our results show reduction costs as low as €22–44/tCO
2e even if the watertable is raised to 30 cm from surface only. This is encouraging since the watertable can be temporarily adjusted to lower levels and farmers dependent on peatlands, and often living in remote northern areas with abundant peatlands but with few alternative sources of income, could still use peatlands in conventional production while significantly reducing the GHG emissions. True incentives for GHG reduction on peatlands would also send a signal to farmers to reduce their dependency on peatlands.
GHG emissions reduction costs of raising the water table higher than 30 cm from the surface were not calculated in this study. While Koljonen et al. (
2017) report low GHG abatement costs at a broad range of €6–20/tCO
2e, we considered it too early to evaluate such costs due to inadequate cost estimates of raising the watertable, costs of field work on very wet peatlands, and estimates on the value of the crop output in the context of very wet peatlands in Finland. There are too few studies and experiences to our knowledge.
At first was assumed that average yields on organic soils would remain the same when an adjustable-drainage investment has been made. Recent studies related to adjustable drainage have focused on the GHG emissions reduction potential. In the study by Myllys (
2019), average yields on adjustable drainage parcels were close to the average yields on organic soil parcels without adjustable drainage, but the variation in the yields was quite large, depending on the weather conditions. With low precipitation and long drought periods during the growing season, adjustable drainage resulted in a yield increase. We found in our sensitivity analysis that if 10% higher long-term average crop yields could be achieved on peatland parcels using adjustable drainage, then the GHG reduction cost becomes smaller, and a lower emissions tax is needed to trigger investments in adjustable drainage. Thus, if crop-yield gains can be reached, then adjustable drainage is an even more economic option for GHG emissions reduction. As climate change proceeds, extreme weather conditions, including long drought periods, will become more frequent, and adjustable drainage might potentially secure more stable yields simultaneously with GHG emissions reduction.
Climate change is prolonging growing seasons in the north and is moving agroclimate zones northward (Ruosteenoja et al.
2011; Rötter et al.
2013; Tao et al.
2015), which might lead to increasing shares of annual crops in production (Purola et al.
2018). This would lead to increasing GHG emissions from the organic soils. Our results suggest that adjustable drainage and emissions taxes can contribute to keeping the GHG emissions low or reducing them.
Current policy includes voluntary measures such as payments for permanent grasslands on peatlands. This has not been popular among farmers. Our results suggest that grasslands on peatlands do not facilitate low-cost GHG emissions reductions on cereal farms or on dairy farms, but grasslands can still contribute to reasonably priced GHG emissions reductions if coupled to adjustable drainage with increased watertable levels. Thus, incentivizing adjustable drainage should be emphasized in climate policy aiming for cost-effective GHG emissions reduction on peatlands, especially on farms, which cannot operate on very wet peatlands.
Conclusions
There is increasing demand to reduce GHG emissions in agriculture. Significant reductions of GHG emissions can be achieved on agricultural peatlands by using adjustable drainage systems and by increasing grassland cultivation. However, there has been little incentive for farmers to reduce GHG emissions on peatlands in Finland and most of the EU.
Our results based on dynamic farm modeling over a period of 30 years applied to a cereal and dairy-farm case in southwest Finland show that emissiosn tax can be an effective policy instrument if adjustable drainage is available as an option. Tax rates of €12–20/tCO2e are sufficient, depending on the farm type and share of peatlands (10–30% in our analysis) to trigger adjustable drainage on peatlands and imply significant GHG emissions reductions on both cereals and dairy farms. The cost of reducing GHG emissions is approximately €16–26/tCO2e by making an adjustable-drainage investment in combination with grassland management in our calculated cases. These GHG abatement costs are not much higher than those calculated for cases of establishing very wet peatlands, reported in other European studies.
Our results also show that higher emissions tax than €20/tCO2e lead to high reduction costs. On a cereal farm (share of peatlands 10%), the cost of GHG emissions reduction increases from €22/tCO2e up to €43.5/tCO2e if the emissions tax is increased from €15/tCO2e to €50/tCO2e. On a dairy farm (share of peatlands 10%), the cost of GHG emissions reduction increases from €26/tCO2e up to €51/tCO2e when the emissions tax increases from €19/tCO2e to €50/tCO2e. This is because farms have limited means of reducing the GHG emissions further after implementing the adjustable drainage.
An emissionst tax can be an expensive instrument for farmers, even if applying the adjustable drainage option, due to income losses 15–55% in our Finnish farm cases, if not compensated by lumpsum payments not coupled to the production of the farm, or to the land. Introducing such a payment would not destroy the incentive effect of the emissions tax, but major income losses resulting from the emissions tax and implied production and land-use adjustments could be avoided.
The calculated costs of GHG emissions reduction can be considered reasonable when compared with the emission trading prices in the EU, which were higher than €20/tCO
2e during most of the year in 2020 and reached €50/tCO
2e in May–June 2021 (EMBER
2021).
If any crop-yield gains can be reached by the means of an adjustable water-table, e.g., during dry-growing periods, then adjustable drainage is little more economic from the farm-level point of view. Small yield gains, however, do not make an adjustable-drainage option economically viable. It is also noteworthy that according to our results, emissions tax is inefficient and expensive in reducing GHG emissions from organic soils if there is no adjustment-drainage option.
Since the current agrienvironmental scheme in Finland is weak in incentivizing GHG emissions reduction on peatlands, based on our results, we see that an emissions tax is needed and would be effective at incentivizing farmers to make GHG emissions reductions on peatlands, while the economic losses to farms should be compensated for by a lumpsum payment fully decoupled from production or land. This opportunity should not be missed since significant GHG emissions reductions are possible on peatlands, covering 11% of agricultural lands in Finland, while the climate targets of Finland are more ambitious than those of the EU. However, practical implementation of emissions tax may be challenging since the soil type of every field parcel may not be possible without ambiguity.
This study contributes also in terms of methodology since we added the adjustable drainage option and GHG emissions tax in a dynamic-optimization model with explicit field parcels and farm-level management with crop rotations and input-use yield responses over a 30-year time span, which is an appropriate length in a climate change-related analysis where long-term investments are also included. We may include the restoration option, i.e., very wet peatlands, not yet included in this study, in further studies of GHG emissions reduction and farm economy.