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Incorporating environmental impacts into value added from organic and conventional farming

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  • Huhtala, Anni
  • Marklund, Per-Olov

Abstract

We aim to improve the policy relevance of the aggregate welfare indicators regarding the economic and environmental features of farming practices. First, an analytical framework for measurement of environmentally adjusted net national product for agricultural sector is provided. Second, shadow pricing of direct disutility of environmental deterioration is illustrated with implications of the Finnish water protection policy measures restricting the use of manure on conventional and organic livestock farms over the period 1994-2002. Our simulated shadow prices per cubic meter manure are quite considerable reflecting the potentially high opportunity costs in terms of value added forgone if the only option to comply with regulation is to cut output. In practice, the organic farms seem to comply well with current regulation, and the environmentally harmful contribution of conventional farms to welfare is relatively small.

Suggested Citation

  • Huhtala, Anni & Marklund, Per-Olov, 2005. "Incorporating environmental impacts into value added from organic and conventional farming," 2005 Annual meeting, July 24-27, Providence, RI 19259, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea05:19259
    DOI: 10.22004/ag.econ.19259
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    References listed on IDEAS

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    1. Martin L. Weitzman, 1976. "On the Welfare Significance of National Product in a Dynamic Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(1), pages 156-162.
    2. Marklund, Per-Olov, 2004. "Essays on Productive Efficiency, Shadow Prices, and Human Capital. PhD Thesis," Umeå Economic Studies 621, Umeå University, Department of Economics.
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    5. Marklund, Per-Olov, 2003. "Analyzing Interplant Marginal Abatement Cost Differences: A Directional Output Distance Function Approach," Umeå Economic Studies 618, Umeå University, Department of Economics.
    6. Fare, Rolf & Grosskopf, Shawna & Noh, Dong-Woon & Weber, William, 2005. "Characteristics of a polluting technology: theory and practice," Journal of Econometrics, Elsevier, vol. 126(2), pages 469-492, June.
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    Environmental Economics and Policy;

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