Evaluation of cost-effectiveness of organic farming support as an agri-environmental measure at Swiss agricultural sector level

Summary

The economic efficiency of financial support of organic farming has been questioned by economists and policy makers. However, little empirical research has been done in order to evaluate the economic performance of these payments. Thus, the aim of this paper is to calculate the cost effectiveness of organic farming support in achieving environmental policy targets compared to other agri-environmental measures. The cost-effectiveness of agri-environmental measures can be understood as a function of policy uptake, environmental effects, and public expenditure. Taking the Swiss agricultural sector as an empirical case study, cost-effectiveness of organic farming support and other single agri environmental measures was calculated. For this purpose, the sector-representative PMP model FARMIS was extended by three modules encompassing a) life cycle assessments for fossil energy use, biodiversity and eutrophication according to the SALCA methodology, b) public expenditure, including policy-related transaction costs, and c) uptake of agri-environmental measures. The calculations revealed a slightly higher policy cost with organic farming support of 14 CHF/ha for a 1 % average improvement in the environmental indicators, compared to a combination of three single agri-environmental measures (11 CHF/ha), including both extensification of arable land and meadows. In view of an average public expenditure on agriculture of 2.5 kCHF per ha in Switzerland, these differences can be considered as marginal. Sensitivity analyses confirm that the cost-effectiveness of organic farming support is very similar to combined agri-environmental measures. Furthermore, the model reveals that the cost-effectiveness of specific agri-environmental measures is higher when implemented on organic farms rather than on non-organic farms.