Minimum Distance Requirements and Liability: Implications for Co-Existence

The co-existence of conventional and transgenic products in the food chain introduces new elements in the evaluation of the profitability of transgenic crops and, consequently, on the farmer’s adoption decision. In particular, one emerging problem farmers are facing in Europe is related to the legal liability of transgenic crop cultivation. In Europe, a mixture of ex-ante regulations and ex-post liability rules governing transgenic crops emerges. One of the predominant ex-ante regulations discussed at the EU-level is a minimum distance requirement to neighbouring fields in order to avoid cross-pollination. The ex-post liability rules differ. They depend on the legal frameworks of individual members of the EU. The current interpretation of, for example, Italian and German law does not exclude ex-post liability for farmers planting transgenic crops in the case of cross-pollination. In this paper, we analyze the value of planting transgenic crops when farmers face ex-ante regulatory and ex-post liability costs under irreversibility and uncertainty. The regulatory instrument analyzed is the minimum distance to neighbouring fields. First results indicate that under irreversibility and uncertainty the value of cultivating transgenic crops presents a trade-off between ex-ante regulatory and ex-post liability costs with respect to farm size. From this, it is not possible to conclude a priori the net effect on the size of the adopting farms, if, ceteris paribus, a minimum distance regulation is adopted within the EU and farmers can be held liable ex-post.