European Nitrate Pollution Regulation and French Pig Farms’ Performance

This chapter highlights the usefulness of the directional distance function in measuring the impact of the EU Nitrate directive, which prevents the free disposal of organic manure and nitrogen surplus. Efficiency indices for the production and environmental performance of farms at an individual level are proposed, together with an evaluation of the impact caused by the said EU regulation. An empirical illustration, based on a sample of French pig farms located in Brittany in 1996, is provided. This chapter extends the previous approach to good and bad outputs within the framework of the directional distance function, by introducing a by-product (organic manure), which becomes a pollutant once a certain level of disposability is exceeded. In this specific case, the bad output is the nitrogen surplus - resulting from the nutrient balance of each farm – that is spread on the land. This extension to the model allows us to explicitly introduce the EU regulation on organic manure, which sets a spreading limit of 170kg/ha. Our results show that the extended model provides greater possibilities for increasing the level of production, and thus the revenue of each farm, while decreasing the bad product (nitrogen surplus) and complying with the mandatory standard on the spreading of organic manure.