In 2018, the Dutch government introduced the so-called phosphate rights for dairy farms. This was done in response to the dramatic increase in the number of dairy cattle after the abolition of milk production quota, which was inevitably followed by a severe transgression of the agricultural phosphate production ceiling set by the EU (even after the negotiated derogation of this ceiling for the Netherlands).
Each dairy farm was assigned an amount of phosphate rights in accordance with the number of cattle that existed at that farm at the onset of the legislation (i.e. January 1st, 2018). Farmers are allowed to trade rights, but the absolute number of rights can never grow. Also, with each transaction, the government withdraws 10% of the rights exchanged. This way, the number of rights, and thus the number of dairy cattle, will slowly but gradually decline.
The phosphate rights instrument is elegant in that it combines top-down restrictions with flexible, market-based mechanisms. All farmers can take part in the trading of rights, and those who decide to de-intensify, receive an extra financial incentive for doing so. However, the instrument has a much bigger potential when it is used as a spatial planning instrument. For example, designating zones where rights can exclusively be sold (e.g. in and around ecologically fragile areas) will be of great help in achieving biodiversity goals. Alternatively, stimulating the collective buying or selling of rights (by discounts or premiums respectively) can improve spatial coherence of landscape developments. Such spatial coherence allows for the realization of larger-scale projects (e.g. meandering of streams, elevating ground water tables, establishing ecological corridors), and also aligns with the new regulations for agri-environmental subsidies, which can only be applied for in collective form.
The spatialization of the phosphate rights instrument is very interesting for provincial policymakers concerned with landscape quality, water management, and nature development. Since the decentralisation of spatial planning, provinces have become responsible for the design and implementation of large-scale spatial assignments, but often feel they lack the instruments to realize their ambitions (in particular since zoning plans are the responsibility of municipalities). A tool that allows steering land use developments while being flexible and market-based is just right for the provincial level: it allows policymakers to realize large-scale landscape ambitions, but also respects their reluctance to impose top-down restrictions (such as the failed law on the restructuring of intensive livestock-keeping), as policymakers can choose which level of top-down interference they want to apply.
Nevertheless, experimentation with laws should not be done lightly, which is why we propose to explore the potential of a spatialized phosphate rights market in an agent-based model (ABM). First, a basic ABM will be created that simulates the current, unspatialized phosphate rights market. This model will be based partly on economic theory (i.e. shadow prices of cows, which are farm and environment specific), and partly on behavioural theory (e.g. prospect theory and theories of social learning and social control, informed by questionnaires). This model can be calibrated on observed trade data. Next, a set of spatialization options will be explored, such as (i) providing premiums and discounts for collective buying and selling rights (with various levels of premiums and discounts); (ii) providing premiums and discounts for selling and buying in specific zones (again, with various levels of premiums and discounts); and (iii) prohibiting the buying of rights in specific zones. Outputs will consist of spatially explicit maps of gains and losses of phosphate rights, accompanied by an interpretation of what the patterns mean in terms of landscape quality, water management and nature development. Furthermore, a scientific reflection will be provided about the legitimacy, fairness and efficiency of each policy option.