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Environmental good production in the optimum activities portfolio of a risk averse-farmer

Author

Listed:
  • Petr Havlik

    () (International Institute for Applied Systems Analysis (IIASA), Forestry Program, Schlossplatz 1, A-2361 Laxenburg, Autriche)

  • Geoffroy Enjolras

    (UMR LAMETA, Faculté d’Administration et Gestion, Université de Montpellier 1)

  • Jean-Marie Boisson

    (UMR LAMETA, Faculté d’Administration et Gestion, Université de Montpellier 1)

  • Florence Jacquet

    (INRA - UMR Economie publique, Grignon)

  • Michel Lherm

    (INRA, UR506 Laboratoire d’économie de l’élevage, Clermont Ferrand-Theix)

  • Patrick Veysset

    (INRA, UR506 Laboratoire d’économie de l’élevage, Clermont Ferrand-Theix)

Abstract

An analytical framework is proposed for analysis of environmental good production by farmers in the case of price uncertainty. Environmental good production contracted by means of agri-environmental agreements is treated as a riskless option in the farmer’s production activities portfolio. It is shown that agri-environmental agreements aiming at biodiversity competing with beef production are likely to increase management intensity on the non-enrolled land, and that the effect of the payments for these agreements on the number of hectares enrolled is ambiguous. It is also demonstrated that an increase in the output price variability and/or a decrease in the level of decoupled subsidies will induce an increase (decrease) in the area enrolled in agreements aiming at biodiversity competing with (complementary to) beef production. The obtained results are illustrated by means of efficient frontiers generated using mathematical programming farm level models of suckler cow farms in Monts du Cantal, in France.

Suggested Citation

  • Petr Havlik & Geoffroy Enjolras & Jean-Marie Boisson & Florence Jacquet & Michel Lherm & Patrick Veysset, 2008. "Environmental good production in the optimum activities portfolio of a risk averse-farmer," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 86(1), pages 9-33.
  • Handle: RePEc:rae:jourae:v:86:y:2008:i:1:p:9-33
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    References listed on IDEAS

    as
    1. S. R. Johnson, 1967. "A Re-examination of the Farm Diversification Problem," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 49(3), pages 610-621.
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    3. Veysset, P. & Bebin, D. & Lherm, M., 2005. "Adaptation to Agenda 2000 (CAP reform) and optimisation of the farming system of French suckler cattle farms in the Charolais area: a model-based study," Agricultural Systems, Elsevier, vol. 83(2), pages 179-202, February.
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    5. Petr Havlík & Patrick Veysset & Jean-Marie Boisson & Michel Lherm & Florence Jacquet, 2005. "Joint production under uncertainty and multifunctionality of agriculture: policy considerations and applied analysis," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 32(4), pages 489-515, December.
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    Cited by:

    1. Knoke, Thomas & Paul, Carola & Härtl, Fabian & Castro, Luz Maria & Calvas, Baltazar & Hildebrandt, Patrick, 2015. "Optimizing agricultural land-use portfolios with scarce data—A non-stochastic model," Ecological Economics, Elsevier, vol. 120(C), pages 250-259.

    More about this item

    Keywords

    uncertainty; portfolio optimisation; biodiversity; agricultural policy; mathematical programming;

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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