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How Important are Agricultural Externalities? A Framework for Analysis and Application to Dutch Agriculture

Author

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  • Roel Jongeneel
  • Nico Polman
  • G. Cornelis van Kooten

Abstract

In this paper, we develop a theoretical model for identifying the appropriate welfare measures associated with the positive and negative externalities of agricultural production. Implications of methodological assumptions are discussed, and the model is then used to estimate the costs and benefits associated with the negative and positive externalities of the Dutch agricultural sector. Efforts are made to cross-validate cost estimates empirically, and we also estimate the value of the non-commodity outputs that Dutch farmers provide. The non-market costs and benefits attributable to farming are then set against the value-added of the agricultural sector as a whole. Total value-added benefits are estimated to be €10,604 million a year. The external annual costs are calculated to be €1,868 million, significantly greater than estimated external gross benefits of €263 million, but much less than value added. Using all available information, total average annual net benefits from agriculture in the Netherlands are estimated to be €8,736 million per year for the period 2005 to 2012. Nonetheless, net external costs are equivalent to €849 per ha of arable, horticultural and pasture land, and are high relative to estimates found for other countries.

Suggested Citation

  • Roel Jongeneel & Nico Polman & G. Cornelis van Kooten, 2016. "How Important are Agricultural Externalities? A Framework for Analysis and Application to Dutch Agriculture," Working Papers 2016-04, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    • Handle: RePEc:rep:wpaper:2016-04
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    File URL: http://web.uvic.ca/~repa/publications/REPA%20working%20papers/WorkingPaper2016-04.pdf
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    References listed on IDEAS

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    1. Pretty, J. N. & Brett, C. & Gee, D. & Hine, R. E. & Mason, C. F. & Morison, J. I. L. & Raven, H. & Rayment, M. D. & van der Bijl, G., 2000. "An assessment of the total external costs of UK agriculture," Agricultural Systems, Elsevier, vol. 65(2), pages 113-136, August.
    2. Pretty, J.N. & Ball, A.S. & Lang, T. & Morison, J.I.L., 2005. "Farm costs and food miles: An assessment of the full cost of the UK weekly food basket," Food Policy, Elsevier, vol. 30(1), pages 1-19, February.
    3. Boyd, James & Banzhaf, Spencer, 2007. "What are ecosystem services? The need for standardized environmental accounting units," Ecological Economics, Elsevier, vol. 63(2-3), pages 616-626, August.
    4. Jules Pretty & Craig Brett & David Gee & Rachel Hine & Chris Mason & James Morison & Matthew Rayment & Gert Van Der Bijl & Thomas Dobbs, 2001. "Policy Challenges and Priorities for Internalizing the Externalities of Modern Agriculture," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 44(2), pages 263-283.
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    Cited by:

    1. Adrian Sadłowski & Wioletta Wrzaszcz & Katarzyna Smędzik-Ambroży & Anna Matras-Bolibok & Anna Budzyńska & Marek Angowski & Stefan Mann, 2021. "Direct Payments and Sustainable Agricultural Development—The Example of Poland," Sustainability, MDPI, vol. 13(23), pages 1-20, November.
    2. Felix Schläpfer, 2020. "External Costs of Agriculture Derived from Payments for Agri-Environment Measures: Framework and Application to Switzerland," Sustainability, MDPI, vol. 12(15), pages 1-19, July.

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    More about this item

    Keywords

    environmental spillovers; applied welfare measurement; agricultural externalities; agricultural value added; non-agricultural commodities;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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