Environmental Economics of the Farm Firm

Wageningen Agricultural University
Wageningen, Gelderland, Netherlands
Instructors: Berentsen, Paul; Wossink, Ada
Subject area: Economics
Department: Agriculture, Economics, Management
Year taught: 1998
Level: Graduate

Please note that the copyright for this syllabus is retained by the instructor.

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Overview: In this course economics is applied to the environmental aspects of the farm firm. The focus is on three interrelated items: (1) assessment of environmental economic aspects at the farm level, (2) quantification of the interrelations between environmental stress and farm economic result, (3) development and use of environmental-economic (farm) models. Central in the presentation is that insights from environmental-economics farm models can be used to support policy analysis and to support environmental management decisions of the farm firm. It is contended that basic technical knowledge is essential to relevant and practical environmental economics analysis.

The contents of the lectures will be centered around the chapters in the text. Practicals have been arranged to put material presented in the lectures into practice through exercises, which will be distributed separately. During the practicals, student will also be trained to use and adapt different computer models on the PC for environmental economic analysis at the farm level. In addition, a farm visit is scheduled towards the end of the course to discuss environmental records and the real-life environmental economic management.

In this course the focus is on the decision making process in environmental farm management: (1) recognition and formulation of the problem by means of analysis of detailed farm data, (2) assessment of optional changes in farming practice with their economic and environmental implications, (3) comparison and choice of an alternative by means of environmental-economic models, (4) implementation on the farm, and (5) evaluation which may lead to a new decision making problem. The decision maker facing environmental issues might either be an individual farmer who has to respond with environmental regulations or a policy maker developing these regulations. Environmental economic research of the farm firm aims at presenting insights for both categories of decision makers, i.e. to support: (a) farm management decision making (planning), and (b) agricultural policy development and the selection of policy instruments (conditional forecasting). Central in the presentation is that insights from environmental-economic farm models can be used to support both categories of decision makers. Furthermore it is contended that basic technical knowledge is essential to relevant and practical environmental economics analysis.

The items are presented in three stages: context and theory, methods and analyses. There is a movement from the abstract to the concrete in the course that is particularly noticeable as we progress from one stage of this volume to another and to the practicals. Context and theory are set out in Part One of this volume. General concepts and issues in environmental economics are discussed. Next, Part Two provides an overview of analytical methods and modeling techniques for environmental economic research of the farm firm. In Part Three, environmental policy and management issues related to specific agricultural inputs, as pesticides and nutrients, are explored as applications of the analytical concepts.

The contents of the lectures will be centered around the chapters in this volume. Practicals have been arranged to put material presented in the lectures into practice through exercises, which will be distributed separately. During the practicals, student will also be trained to use and adapt different computer models on the PC for environmental economic analysis at the farm level. In addition, a farm visit is scheduled towards the end of the course to discuss environmental records and the real-life environmental economic management.

The course in "Environmental Economics of the Farm firm" finishes with a written examination, consisting of both multiple choice and short answer questions. The subjects to be prepared for the examination include: (1) the contents of this syllabus, (2) additional information presented during the lectures, and (3) the subjects and exercises treated during the practicals.

Contents of the Syllabus
PART ONE: INTRODUCTION

-1. General introduction
1. Background and purpose
2. Organization of the text

-2. Dutch agriculture and the environment: issues and policies
1. Introduction
2. Environmental issues in Dutch agriculture, Environmental issues in livestock farming
--a. Environmental issues in crop production
--b. Other environmental issues in Dutch agriculture
3. Environmental policies for agriculture in The Netherlands
--a. Nutrient policies in the Netherlands
--b. Crop protection policies in The Netherlands
--c. Nature conservation policies in The Netherlands
4. Environmental policy for agriculture in the European Union
5. Concluding remarks


PART TWO: THEORETICAL BACKGROUND

Introduction

-3. Environmental management at the farm level
1. Introduction
2. Insights from the natural sciences
3. Insights from the social sciences
4. Concepts of normative decision models
--a. The concept of the static, deterministic model
--b. The concept of the static, stochastic model
--c. The concept of the dynamic decision model
5. The concept of the behavioural decision model
6. Concluding remarks

-4. Environmental management at the aggregated level
1. Introduction
2. Sustainability
3. Productivity and efficiency
4. Technical change
5. Institutional change
6. A framework for policy design
--a. Farm classification
--b. Scenario assessment
--c. Forecasting changes
--d. Appraising the consequences
7. Final remarks


PART THREE: METHODS TO SUPPORT THE DECISION
MAKING PROCESS

Introduction

-5. Farm accounting and the environment
1. Introduction
2. Requirements for information systems on agriculture and the environment
3. Environmental indicators
--a. Theoretical considerations
--b. Indicators for environmental management at the farm level
--c. Aggregated indicators for environmental management
4. Accounting methodology and the environment
5. Case study
6. Summary

-6. The measurement of environmental performance from an
efficiency perspective
1. Introduction
2. Relative environmental performance
3. Relative environmental performance in the scope of production efficiency
4. Assessing the environmental efficiency frontier
5. Case study
6. Summary

-7. The use of ecological production and emission models to assess alternatives
1. Introduction
2. Differences in time and spatial scales in ecological and economic models
3. Ecological production models
4. Ecological emission models
5. Activity analysis
6. Case study
7. Summary

-8. Methods for normative multi-objective decision support
1. Introduction
2. Partial budgeting
3. Mathematical programming methods
--a. Linear Programming
--b. Dynamic Programming
--c. Including risks in programming models
4. Summary

-9. Behavioural aspects in environmental economics of the farm firm
1. Introduction
2. Methodology: questionnaires, perception analysis and conjoint analysis
3. Case study: Farmers' perceptions of unsprayed crop edges in the Netherlands
4. Summary


PART FOUR: APPLICATION OF METHODS

10. Governmental policy options for decreasing N and P₂O₅ losses on dairy farms

11. Costs of reducing nitrogen and phosphorus emissions on pig farms

12. Pesticide use in arable farming: comparison of different policy instruments

13. What, how and where: nature con-servation and restoration in sustainable agriculture

14. Reprise

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