This study evaluates the impacts of risk management policies on the environment. The effects of public risk management programmes, such as subsidised crop insurance, on optimal nitrogen fertilizer use and land allocation to crops, were examined empirically by developing a mathematical programming model of a representative wheat-tomato farm in Puglia, a region in southern Italy. The results show that with current crop insurance programmes, for tomato the optimal nitrogen fertilizer rate slightly increases and the optimal acreage substantially increases whereas for wheat they both decrease.
Hence this type of public intervention could lead to an increase in surface and groundwater pollution by nitrates.