Organic Farming Certification – the Costs of Reducing Transaction Costs

Summary

Since 1991, the European Union regulates the organic food market. By implementing the organic regulation and the corresponding inspection and certification system, organic markets were fostered, but the financial costs and bureaucratic drift of this system are controversial. Up to now, there exist only very rough estimates of the overall burden of organic producers, mostly considering only the cash costs and neglecting opportunity costs of the certified entities, which are likely to be of considerable magnitude. As a first step in approximating the amount of these costs, this paper uses the concept of Transaction Costs in order to identify and structure the relevant cost types. The quantification of this concept needs data which will soon become available.