Frontiers of organic and conventional farming technologies – environmental efficiency, productivity and learning

Summary

The objective of the first part of the study is to investigate the environmental efficiency of Finnish farms using conventional and organic farming technology. From a policy point of view, a special emphasis is placed on examination of a potential trade-off between conventional production (in)efficiency and environmental (in)efficiency. The trade-offs should be identified to recognize potentially contradictory targets implemented in agricultural-environmental policy. For example, adoption of the most efficient production tecnologies necessitates an increase in a parcel/farm size whereas fragmented agricultural areas may have positive environmental effects. The method employed determines shadow prices for environmentally detrimental outputs such as runoff of nutrients, and animal waste. The shadow values derived reflect the costs of negative environmental effects of agriculture.
Finally, we analyze an appropriate intervention policy for organic farming. Promoting demand for organic food is a topical issue within the EU, since most governments devote considerable resources to the provision of domestic agricultural goods appealing to food security and safety. The purpose of the second part of the study is to point out that such policy schemes can unintentionally redistribute income among consumers when there is preference heterogenity and organic food is demanded for distinct motives.