This report reviews the evidence base on how agricultural policies impact environmental sustainability and productivity of the agriculture sector, including the potentially contradictory signals policies may send. It considers impacts for specific policy types, classified according to the OECD’s Producer Support Estimate (PSE) classification for agricultural support. At the farm level, key pathways for environmental impacts identified in the literature are firstly incentivising a change in agricultural production at the intensive margin, extensive margin or entry-exit margin, and secondly the dynamic impacts of land use choice. Beyond this, policies can also affect agriculture’s environmental performance by stimulating (or stifling) the provision of environmental services. Environmental impacts from agricultural policy depend on several factors. Individual responses to economic incentives created by agricultural policies vary, producing variations in environmental impacts. Variation also occurs due to location-specific physical factors, including landscape characteristics, as well as the cumulative effects of decisions across actors and across time. Finally, impacts may differ across scales.
