Agricultural primary production is extensively influenced by policies and regulation. On the level of European Union the common agricultural policy (CAP), frames the production environment. This study analyses the conflict of environmental and income policies in the context of CAP reform, eutrophication, the Water Framework Directive and Finnish policies. As targets of the policies do not coincide and often conflict, the environmental problems of farming have not been solved in the past decades. The comparative analysis is conducted quantitatively under static non-linear optimisation framework of representative farms of cereal and milk production regions of Finland. The results indicate that the decoupling of subsidies from production has enabled more efficient abatement policy. The current policies are still far away from the first best abatement solution. According to the results, main policy failures lie in uniform instruments, which even on a national level ignore the heterogeneous farm structures and environmental conditions. Instead of providing tailored instruments for nutrient load problems, the reform of Finnish agri-environmental subsidy scheme fails to respond to growth trends of nutrient loads on animal intensive regions.


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