Origin of the Problem
Farmland is a private good in Germany, owned and cultivated by roughly 374,000 agricultural businesses (Federal Ministry of Food 2010). Participating in a market economy, each of these businesses tries to maximise their profitability. Profitability in agriculture is mostly determined by the crop output per cultivated area (crop yield), which leads the market players to constantly seek out technology that increases productivity (Tongeren 2013). If the additional revenue from applying a certain technology exceeds its investment costs, farmers will adopt it. A central nutrient to increase crop productivity is Nitrogen, which is one of the core ingredients of fertilizer (Tongeren 2013). Organic fertilizers (such as liquid manure) are available at very low costs in Germany due to the extensive livestock population. If overall demand for liquid manure is low, livestock farmers will even give it away free of charge (Matheis 2014). This encourages farmers to apply large amounts of organic fertilizers to their farmland in order to guarantee a maximal crop yield. However, the practise only achieves minor productivity improvements as the relationship between nitrogen availability and crop productivity can be described as logarithmic: Productivity growth declines with increasing availability of Nitrogen (Leghari et al. 2016). Additionally, the practise causes substantial portions of fertilizer (and nitrogen) to spill over into the environment (Deutsche Welle 2018).
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