Although many enviornmentalists like to blame markets for causing enviromental degradation, as often as not government policies provide incentives to degrade the environment. Such is the case with the European Union’s olive subsidy.
From a purely economic point of view, the subsidy is stupid. The subsidy is based on the volume of olive oil produced, so that those who produce the most receive the largst state subsidies. The preditable result has been a glut of olive oil which, of course, has further driven down the price of olive oil.
The other thing the subsidized glut of oil has done is promote extremely intensive farming. As one farmer told the Christian Science Monitor, the only way to keep up with the falling prices is to keep expaniding production, which means higher water usage, more pesticides and more olive trees.
The Monitor reports that up to 20 percent of Spain is turning into desert as a result of the soil degradation problems. An estimated 80 million metric tons of soil are lost annually from olive plantations in the state of Andalusia alone.
And yet while the EU has modified its beef subsidy so that it is not connected to production, it won’t even discuss doing something about the olive oil subsidy until 2003.
Source:
A harvest of bounty. Otto Pohl, The Christian Science Monitor, August 22, 2001.