On the Choice of Cost and Effectiveness Indicators in the Context of the European Water Policy

The Water Framework Directive requires EU Member States to analyse economic impacts of the Directive's implementation. To reach a "good status", instruments have to be judged according to their cost-effectiveness. We evaluate costs and effects of measures to reduce nitrate emission of Austrian agriculture. Results are based on a model that integrates production decisions with stochastic environmental outcomes. The Directive's requirement to involve stakeholders may make it necessary to take a large number of indicators into consideration. We find that alternative calculations of the effectiveness criterion give different rankings of the most effective combination of measures.sustainable water management, environmental policy, cost-effectiveness analysis, eco-eco-modelling, Resource /Energy Economics and Policy, Q25, Q28, Q18,

Organic Farming and the New CAP - Results for the Austrian Agricultural Sector

In 2003, the Common Agricultural Policy (CAP) has been reformed and decoupling direct payments from farm output is one of its core elements. We estimate the likely responses in organic product supply due to the reform at regional and sectoral levels. In addition, we analyse how the new programme for rural development, to be implemented in 2007, might affect organic farming. Our results show that organic farming will become more attractive after the 2003 CAP reform in Austria. Our results support the view that interactions among agri-environmental measures affect farmers' choice to maintain, abandon or adopt organic farming practices.agricultural sector modelling, Common Agricultural Policy, organic farming, Agricultural and Food Policy, Research Methods/ Statistical Methods, Q11, Q18, Q21,

Modelling Organic Farming at Sector Level An Application to the Reformed CAP in Austria

We analyse whether the 2003 CAP reform and the anticipated new program of rural development will lead to an expansion or a reduction of organic farming. An extended version of the Positive Mathematical Programming (PMP) method is developed in order to differentiate organic farming from conventional and other agri-environmental management practices in a sector model. Austria is chosen for the case study because 8 % of its farmland are managed organically, and detailed data on alternative management practices are available. The results suggest that the recent agricultural policy reforms will make organic farming more attractive for farmers, given the price premiums relative to conventional products will remain at observed levels.Organic farming, Common Agricultural Policy, Program for Rural Development, Agricultural sector modelling, Agricultural and Food Policy, Farm Management, Q11, Q18, Q21,

Integrated land use modelling of agri-environmental measures to maintain biodiversity at landscape level

Integrated land use models (ILM) are increasingly applied tools for the joint assessment of complex economic-environmental farming system interactions. We present an ILM that consists of the crop rotation model CropRota, the bio-physical process model EPIC, and the farm optimization model FAMOS[space]. The ILM is applied to analyze agri-environmental measures to maintain biodiversity in an Austrian landscape. We jointly consider the biodiversity effects of land use intensity (i.e. nitrogen application rates and mowing frequencies) and landscape development (e.g. provision of landscape elements) using a rich indicator set and region specific species-area relationships. The cost-effectiveness of agri-environmental measures in attaining alternative biodiversity targets is assessed by scenario analysis. The model results show the negative relationships between biodiversity maintenance and gross margins per ha. The absence of agri-environmental measures likely leads to a loss of semi-natural landscape elements such as orchard meadows and hedges as well as to farmland intensifications. The results are also relevant for external cost estimates. However, further methodologies need to be developed that can jointly and endogenously consider the complexities of the socio-economic land use system at farm and regional levels as well as the surrounding natural processes at sufficient detail for biodiversity assessments.Integrated farm land use modeling, biodiversity indicators, agri-environmental policy, landscape elements, Agricultural and Food Policy, Crop Production/Industries, Environmental Economics and Policy, Farm Management, Food Security and Poverty, Land Economics/Use, Production Economics,

Testing for the Efficiency of a Policy Intended to Meet Objectives: General Model and Application

This study presents a general model demonstrating how to measure the (in)efficiency of a policy intended to meet objectives. If it is assumed that the government has available only those policy instruments it actually utilizes, our method is a test as to whether the government combines these instruments efficiently. In addition, one could also include other policy instruments, which are not actually used, but are available to the government. Our general model is applied to bread grain policy in Austria. The primary result is that the policy was quite inefficient in meeting the two main objectives of farm income support and self-sufficiency. The stochastic nature of our efficiency measures is acknowledged by taking into account the inherent uncertainty of model parameters. A response surface function is used to identify those parameters which contribute most to model output uncertainty.agricultural policy, policy efficiency, statistical policy analysis, Agricultural and Food Policy,

OPTIONS OF FINANCING THE CAP – CONSEQUENCES FOR THE DISTRIBUTION OF FARM PAYMENTS

The introduction of decoupled direct payments in the EU was a substantial change of the Common Agricultural Policy (CAP) in 2003. After decoupling direct payments from production, it has become evident, that distributional objectives are the major justification of farm payments. There are three facets: the distribution of payments among farmers within member states, the distribution of payments among member states, and the distribution of household incomes within member states. All of them will be affected if the volume and allocation of funds for the CAP will be changed in the new financial framework of the EU. The paper addresses the first distributional aspects. We provide an overview of the development of past and present research and findings on the distributional aspects of direct payments. We use the theory of federal fiscal relations to identify the policy agendas that should be handled at the EU level, at national levels, and at sub-national levels. We analyse how measures of concentration are affected if the criteria of direct payments are changed (e.g. a modified modulation scheme). This allows us to identify potential consequences after changing the way direct payments are distributed within EU member states. The summary of the paper discusses the distributional consequences of scenarios of the coming financial framework as far as agriculture is concerned.Direct Payments, Distribution, Common Agricultural Policy., Agricultural and Food Policy, Political Economy, Q18,

Nitrate Contamination of Groundwater: Determinants and Indicators

Nitrogen is an important input to agricultural production but also detrimentally affects the environmental quality of air, soil and water. Identifying the determinants of nitrate pollution and in turn defining sensible performance indicators to design, enforce and monitor regulatory policies is therefore of utmost importance. Using data on more than 1000 Austrian municipalities, we provide a detailed econometric analysis of (1) the determinants of nitrate concentration in groundwater, and (2) the predictive abilities of one of the most commonly used agri-environmental indicators, the Nitrogen Balance. We find that the proportion of cropland exerts a positive effect on the nitrate content in groundwater. Additionally, environmental factors such as temperature and precipitation are found to be important. Higher average temperature leads to lower nitrate pollution of groundwater possibly due to increased evapotranspiration. Equally, higher average precipitation dilutes nitrate content in the soil, reducing nitrate concentration in groundwater. To assess the Nitrogen Balance, we link observed pollution levels to the theoretical indicator and evaluate its ability to measure nitrate pollution effects. Indeed, the indicator proves to be a good predictor for nitrate pollution. We also show that its predictive power can be improved if average precipitation of a region is taken into account. If average precipitation is higher, the Nitrogen Balance predicts nitrate levels in groundwater more precisely.nitrate concentration, groundwater, Nitrogen Balance, agriculture, regression analysis., Agricultural and Food Policy, Crop Production/Industries, Environmental Economics and Policy, Farm Management, Land Economics/Use, Production Economics,

TESTING FOR EFFICIENCY: A POLICY ANALYSIS WITH PROBABILITY DISTRIBUTIONS

The study evaluates the efficiency of government intervention using a vertical structured model including imperfectly competitive agricultural input markets, the bread grain market, and the imperfectly competitive food industry. To test for policy efficiency the actually observed bread grain policy is compared to a hypothetical efficient policy. To account for the sensitivity of the results in regard to the model parameter values computer-intensive simulation procedures and surface response functions are utilized.agricultural policy, efficient combination of policy instruments, statistical policy analysis, Productivity Analysis,

Was the Austrian agricultural policy least cost efficient?

The study evaluates the efficiency of government intervention using a vertical structured model including imperfectly competitive agricultural input markets, the bread grain market, and the imperfectly competitive food industry. To test for policy efficiency the actually observed bread grain policy is compared to a hypothetical efficient policy. To account for the sensitivity of the results in regard to the model parameter values computer-intensive simulation procedures and surface response functions are utilized.agricultural policy; efficient combination of policy instruments; statistical welfare analysis

Agricultural adaptation to climate policies under technical change

This study uses a partial equilibrium model of the US agricultural sector to examine how technical progress and carbon price levels affect land management adaptation. We find that the climate policy range, over which a more extensive agriculture is preferred, decreases as crop yields increase. Second, technical progress with traditional crops offers less mitigation benefits than progress with mitigation options themselves. Third, while agricultural producers benefit from technical progress on energy crops, they fare worse if technical progress improves traditional crops and low carbon prices.Technical Change, Producer Adaptation, Agricultural Sector Model, Carbon Sequestration, Mathematical Programming, Climate Policy Simulation