Incentivising sustainable fertiliser management: dynamic causal evidence from Hungarian farms

Agri-environment-climate schemes (AECS) are intended to encourage farming practices that protect natural resources while sustaining agricultural production. This study examines whether participation in the Hungarian AECS was associated with changes in fertiliser use and land productivity between 2014 and 2020. Using a panel of 957 farms, we compare changes around entry into and exit from the scheme and test the robustness of the findings. Entry was not followed by broad or persistent reductions in total fertiliser, nitrogen or phosphorus use. Potassium use declined in the first year after entry, but the effect was not sustained. Estimates for farms leaving the scheme were small and statistically insignificant, although exits were heavily concentrated in 2015 and should therefore be interpreted cautiously. The first-entry analysis likewise found no statistically significant average effects at the 5% level, and the conclusions remained stable after propensity-score and weight trimming. Participation was also not associated with statistically significant changes in land productivity. Overall, the results do not indicate broad or persistent short-term reductions in fertiliser use, although potassium use declined in the first post-entry period. This does not imply an absence of environmental benefits, because scheme commitments and outcomes such as biodiversity, soil quality and nutrient losses are not directly observed.