Innovation: Theoretical Developments And Empirical Measurement Of The External Costs Of Pesticides

Last update: 30.06.2013
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sustainable development, agriculture, production economics, environmental economics, economic aspects, agricultural policy
Pesticides are defined as chemical substances protecting plants from pathogens, insects, nematodes and weeds. They are used to secure yields, improve quality of food and facilitate harvesting. However, their heavy use in agriculture resulted in pest resistance, ground, surface and water contamination as well as possible health problems on farmers/operators and consumers. Within this context, the objective of the proposed research stems from the need to provide a solid methodological framework and empirical evaluation which will assist policymakers in identifying the true impact of pesticides on agricultural production. The obtained results may well serve as a benchmark for the foundation of future EU policy schemes aiming at achieving a sustainable use of pesticides in European agriculture. In this respect, the proposed project intends to provide an accurate assessment of the external costs of agricultural pesticide use and contribute to the relevant EU policies by developing tools
for designing a socially optimal tax and levy scheme aimed at the reduction of pesticide use to its socially optimal level. Specific consideration will be given to the effects of the accrued scheme and alternative policy tools on the socially optimal pesticide use, as well as on economic sustainability and social welfare. Moreover, the proposed research will identify means that can help in the promotion of more integrated pesticide management practices. The project fulfils its aims by combining traditional and well-established theoretical methodologies with the most recent advancements in economic theory, biological and technical scientific work, ultimately developing a consistent and integrated analytical framework. The validity of the employed theoretical models and policy tools will be extensively verified by applying them in selected EU countries, thereby accounting for the diversity in pesticide use among producers in different geographical locations.

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Project context and objectives:

1.1 Summary description of the project objectives
The ultimate goal of the project, which kicked off in May 2008, is to provide an accurate assessment of the external costs of agricultural pesticide use and contribute to the relevant European Union (EU) policies by developing tools for designing a socially optimal tax and levy scheme aimed at the reduction of pesticide use to its socially optimal level.

The project has two major scientific objectives, namely (i) to develop a consolidated methodological framework comprised of detailed qualitative and quantitative analytical tools, in order to identify external costs of pesticide use and to study the development of policy instruments that lead to sustainable pesticide use, and (ii) to validate the proposed regulatory system in different EU countries, so as to study the feasibility of alternative regulatory systems in practice.

The specific objectives of the project were to:
1. assess the impacts of pesticide use on yield, efficiency and productivity;
2. cast the impact of pesticide use on farm operators and on residents;
3. estimate the environmental effects induced by pesticide use;
4. assess the impact of pesticide use on consumers;
5. estimate the socially optimal level of pesticide use at the farm level;
6. design and study an effective tax and levy scheme that reduces the use of pesticides to a socially optimal level from the point of view of a policy maker;
7. assess the producers willingness to adopt low pesticide use production methods;
8. assess the policy schemes for reducing the indirect cost of pesticide use.

All the objectives are clearly measurable and tangible, given that each one refers to a specific Work package (WP), with explicit milestones and deliverables. To achieve these objectives, the project brings together partners with considerable expertise in a wide spectrum of scientific fields, such as agricultural economics, health economics, environmental economics, agricultural policy, and pesticide, chemical, and biological analysis. The project is fundamentally based on the development of a unique approach, based on interrelated and complimentary models that encompass these different scientific fields. Finally, these models will be connected into an amenable apparatus, which will be tested in a case study to determine the feasibility of various proposed policy schemes.

Project results:

1.2 Description of the work performed since the 18th month of the project
WP1 - Pesticide productivity, efficiency, and shadow pricing for stochastic agricultural production technologies
The main goal of WP1 is to examine the determinant characteristics of agricultural productivity under a stochastic setting and to guide policy makers through the latest results of theoretical and empirical developments in this area. Two models are being constructed. The development of a stochastic model of agricultural production (task 1.3) and the development of a dual econometric model for productivity measurement (task 1.4) have been produced and the empirical results have been presented. The stochastic nature of agricultural production has been acknowledged in these models and the level of mismeasurement of efficiency, productivity, and shadow prices has been indicated. The dual farm model for productivity measurement indicates the indirect role of pesticides on reducing yield variability, connecting the primal and dual representations of the production technology. This model permits measurement of the pesticide shadow price in farm production, which was used in turn for the
measurement of the total factor productivity.

The results have been tested for the case studies in Greece and the Netherlands and illustrate clearly that failure to account properly for the role that pests and pesticides play in the underlying production relationships leads to biases in the empirical result. In particular, the traditional damage measures systematically misstate the actual economic damage associated with pests while the presence of pests is an important determinant of productivity changes and that ignoring it could bias the assessment of the actual rate of technical change.

WP2 - Analysis of the effects of pesticide use on farmers health status and on their individual productivity levels
The main purpose of WP2 is to analyse in detail the effects of pesticides use on the farmers health and on their productivity levels. During the reference period, the theoretical and empirical analysis provides important insights about the mechanism that underlines the relation amongst pesticides use, farmers health status, and farms productivity performance. An integrated theoretical model has been developed for the analysis of the effects of pesticides use on the farms productivity growth along with the associated adverse effects due to the deterioration of farmers health. Finally, an empirical analysis was developed and experimentally applied to the data set obtained from the survey, providing quantitative results as far as the impact of pesticides use on farmers health and on their productivity growth. WP2 and WP1 are highly interconnected as they both refer to producers. So the two leaders and teams had seven sub-meetings and strong collaboration throughout the reporting

WP3 - The costs of achieving environmental targets for pesticides
The main objective of WP3 is to examine the relation between changes in agricultural production and environmental damage on surface waters, employing a pesticide indicator of environmental damage. In addition, WP3 addresses how costs of adopting beneficial management practices, resulting in reduced deterioration of surface water quality, can be calculated using mathematical modelling. During the reporting period, WP3 completed deliverables 3.2, 3.3 and 3.4. The study at the field level shows that it is possible to estimate the environmental and economic effects of a proposed tax policy. The study has also demonstrated that targeting the most toxic substances can have a very large beneficial effect on the environment at a low cost to producers. Furthermore, the methodology used in the study has been shown to be of interest for ex ante policy analysis as it allows comparisons to be made between policy alternatives that take into account environmental changes and associated costs.

WP4 - Indirect pesticides costs on consumers willingness to pay
The main objective of WP4 is to examine the impact of pesticides reduction from the consumers point of view. The results are obtained through experimental markets, carried out in Portugal, France, Greece, and in the Netherlands. In the Netherlands, two types of organic certification were tested: the conventional organic certification, tested in the previous countries (where no chemical pesticides have been used in the production process) and a certification Organic Plus where no chemical and organic pesticides have been used. On the other side, the Greek case has focused more on the effect of health and the environment relative to the model. The results are also put into perspective in relation to all published work to date on consumer demand for organic certification.

WP5 - Economic sustainability, biodiversity loss and socially optimal pesticide use
The WP5 objectives for the reference period were to evaluate the impacts of the tax and levy scheme on farm-level decision making, to gauge the micro-foundations of the alternative macro-level solutions and to implement an empirical investigation of pesticide tax and levy schemes to assess the impacts on agriculture and the environment.

WP6 - Agricultural support policies and optimum tax and levy scheme on pesticide use in farm production
The aim of WP6 is to develop agricultural support policies and estimate an optimum tax and levy scheme on pesticide use in farm production. On the production side, pesticide use has a negative effect on farmers productivity through the negative effects of pesticide use on farmers health. To the extent that farmers underestimate these health effects of pesticide use, a negative externality is introduced in the production side. As a result, the decentralised choice of pesticide use is greater than its socially optimum level. On the consumption side we assumed that consumers care about the quality of the agricultural good consumed, and the quality of the environment, both of which are negatively affected by the use of pesticides. In a decentralised economy, farmers choose the amount of pesticides that maximises profits without taking into account its negative externality on the utility of the consumers. WP5 and WP6 have had continuous and close collaboration to homogenise the work and
feed the same parameters with the rest of the WPs (WP1, WP2, WP3, WP4).

WP7 - Socio-economic factors influencing willingness to adopt low pesticide input systems amongst arable and horticultural producers
Since the beginning of the project, work has been performed in three tasks of WP7: i) task 7.2 has involved basic analysis of FADN data; ii) task 7.3 has modelled different scenarios of relative profitability; and iii) task 7.4 has identified producers willingness to adopt low pesticide input systems under different scenarios.

The main conclusion to draw from the focus groups is that a tax on crop protection costs is unlikely to result in a decrease in the use of crop protection products or a significant change in the way high input farmers farm. It is very unlikely, given these results that farmers would move from high input crop protection systems to low input or organic systems.

WP8 - Implementing policy recommendations for reducing the indirect cost of pesticide use
During the reporting period, WP8 has completed task 8.1 Monitoring of model testing and applications and task 8.2 Synthesis of the results. The WP8 team worked very closely with the leaders of WPs 5, 6 and 7, discussing on project meetings and via e-mails their WPs, and especially D5.2 Designing socially optimal tools at the farm level. These activities are in line with the annex and there are no deviations. In addition, WP8 produced deliverables D8.1 and D8.2, where the policy tools and recommendations provided in all WPs, as well as the proposed tax scheme was applied in two case study countries (Bulgaria and Portugal) were summarised. The main results achieved in second reporting period were in fact the final results of WP8.

WP9 - Demonstration and dissemination of results
During the reporting period, numerous dissemination activities to the scientific community, to policy makers, stakeholders, private companies, consumer and producer organisations, health and pesticide experts, modelling experts, and to the broader public, at the regional, national, European and international level have taken place. All deliverables have been made publicly available through the project website to facilitate dissemination of results. Furthermore, each deliverable is accompanied by an extended summary, indices, glossaries, tables, figures, boxes and policy related results that make exposition of the theoretical models, empirical results and policy recommendations easier to apprehend for the widest possible audience. Extensive interaction and feedback from consumer groups representatives, private industry stakeholders and health officials have greatly improved the deliverables. In addition, the coordinator and researchers have given lectures in seminars at various

WP10 - Project management and assessment
WP10 has provided timely and efficient scientific, financial, and administrative management of the project. During the second 18 months, WP10 has assured the day-to-day coordination and financial management of the project, monitored the project costs, followed-up the pre-financing European Commission (EC) payment, assisted the partners on specific administrative issues, produced the forms for the midterm report (scientific and financial) and sent them in advance to all partners for completion, organised the second sub-meeting on WPs integration and interaction, prepared the agenda and minutes for all meetings, regularly updated the project website with links, project-relevant material and project-related meetings presentations and deliverables, and completed the final project report according to the documentation and feedback provided by the respective experts.

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This innovation is the result of the project

Title: Theoretical Developments And Empirical Measurement Of The External Costs Of Pesticides


01.05.2008 to 30.04.2011

completed project

Organisations and people involved in this eco-innovation.

Please click on an entry to view all contact details.



Role in project: Project Coordination

Contact person: Prof. MATTAS Konstadinos


Phone: +30-2310-998807



(United Kingdom)

Contact person: Mr. REYNOLDS Emyr Huw


Phone: + 44 1970 622257




Contact person: Prof. DESCHAMPS Anne Marie


Phone: +33-142759005




Contact person: Dr. GOMES Ramiro

Phone: +351-213027000




Contact person: Dr. MAKRIDES Gregory


Phone: +357-22894288




Contact person: Dr. BREMMER Johan

Phone: +31-703358209




Contact person: Ms. RAGNARSDOTTER JAJKE Ingrid


Phone: +46-18671437




Contact person: Ms. KOPANAKI Varvara


Phone: +30-2831077948




Contact person: Prof. MISHEV Plamen


Phone: +359-2-629298




Contact person: Mr. PRINS Erik


Phone: +31-317485657