SEVENTH FRAMEWORK PROGRAMME
THEME 2
FOOD, AGRICULTURE AND FISHERIES, AND BIOTECHNOLOGY
TEAMPEST PROJECT
WP5: ECONOMIC SUSTAINABILITY, BIODIVERSITY LOSS AND SOCIALLY OPTIMAL PESTICIDE USE
TASK 5.1: LITERATURE REVIEW
WP5: ECONOMIC SUSTAINABILITY, BIODIVERSITY LOSS AND SOCIALLY OPTIMAL PESTICIDE USE
TASK 5.1: LITERATURE REVIEW
Theodoros A. Skevas
Prof. Spiro E. Stefanou
Prof. Alfons Oude Lansink
February 2009
Business Economics Group
Wageningen University
The Netherlands
Executive Summary
This report presents an interpretive review of the literature in support of the work package on “Economic Sustainability, Biodiversity Loss and Socially Optimal Pesticide Use.” Particular attention is focused on the interaction between production decisions and biodiversity loss, reduction of environmental quality and impacts of agricultural and environmental policy on pesticides use. This review is organized along the three major themes.
Economic Growth and the Environment
During the last decades, there is a considerable increase in the global level of production of goods and services. This economic growth that was brought about mainly by technological innovations has its impact on the environment. The over-exploitation of natural resources has resulted in environmental degradation but, on the other hand, the development of pollution abatement technologies promises to ease these environmental problems. Sustainable economic growth is of primary importance in sustaining human needs and protecting the natural habitat. This major theme can be partitioned into macro and micro (disaggregated or decision maker level) perspectives.
Pesticides and Biodiversity
With the productivity gains and cost reductions realized by pesticide use, there are several disadvantages that relate to the broader ecosystem, genes and species in a region, which constitutes the region’s biodiversity. Pesticide overuse or use at the crop edges which constitute forage and nesting habitats for farmland fauna can reduce biodiversity. Non-target plant species that benefit farmland fauna can also extinct due to competition for nutrients with target species. Precise use of pesticides can address these problems.
Pesticide Policies
Many international and national policies are trying to regulate pesticide use as consumers are becoming more aware of pesticide externalities and demand pesticide free agricultural products and cleaner and safer natural habitat.
The current level of food production is already causing serious environmental problems. Important efforts towards regulating pollution have been made in industrialized countries in the form of increasingly stringent environmental regulations. Although much of the environmental regulations are directed at industrial production, agriculture is affected as well, especially from pesticide regulations and clean water acts.
European Union is struggling to implement coherent pesticide regulations in an effort to protect public health and the environment. Regulations on the marketing of plant protection products, maximum residue levels and the thematic strategy on the sustainable use of pesticides compose the puzzle of the European pesticide policy.
The imposition of a tax or levy scheme is not a costless procedure and its entire regulatory cost creates uncertainty concerning the optimal time that has to be imposed. In an initial period there is uncertainty about the stage of the world. Environmental externalities have not still fully documented and the external costs have not been quantified precisely. Therefore, policy makers are not sure whether they must introduce a tax now or to wait for further information and introduce it later. Imposing a tax at an early period can prove to be more costly as there are no precise indicators of external costs. This absence of knowledge can lead a policy maker to delay his intervention and to wait to identify the exact external costs and reflect them in the prices of the different commodities by imposing a suitable tax. Therefore, delaying reduces somehow the economic risk of imposing a tax scheme. On the other hand waiting can prove to be costly in cases of irreversible damages.
Organization
With over 220 scientific publications and reports reviewed, several organizational directions are undertaken. Each publication was reviewed along a set of common criteria: a) abstract, b) setting, c) modeling framework, d) data, e) applications, and f) results and policy implications. This review is comprised of three components. The first is the narrative document which follows. In this document the review develops the three major themes and their branches, with a view toward identifying the important results, gaps, overlapping results and policy implications. The second component is a more dynamic organization of this literature in a web-based map where the user can scan through the outline to obtain a brief description of each theme and sub-theme, and follow the branches to view the relevant literature in terms of the six common criteria identified above. The final component of this review is a spreadsheet organizing the literature along these same criteria that can provide a means for rapidly searching for keywords.
Acronyms and definitions
AC Active Substance
CBS Statistical Agency of The Netherlands
CMR Cause Cancer and have Mutagenic or Reproductive Effects
CO Carbon Dioxide
CVM Contingent Valuation Method
DPR Department of Pesticide Regulation
EC European Commission
ED Endocrine Disruptors
EFSA European Food Safety Authority
EKC Environmental Kuznets Curve
EPA Environmental Protection Agency
EU European Union
EUROSTAT European Statistical Agency
FQPA Food Quality Protection Act
GM Genetically Modified
IPM Integrated Pest Management
ITP Income Turning Point
IUCN World Conservation Union
LZ Lichtenberg-Zilberman
MJP-G Multi Year Program for Crop Protection
MRL Maximum Residue Level
NAP National Action Plan
PBT Persistent Bioacummulative and Toxic
POP Persistent Organic Pollutant
PPP Plant Protection Product
PREC Pesticide Regulation and Evaluation Committee
RASFF Rapid Alert System for Food and Feed
SP Stated Preferences
UNEP United Nations Environment Program
UK United Kingdom
US United States
VAT Value Added Tax
vPvB very Persistent and very Bioacummulative
WP5 Work Package 5
WRI World Research Institute
€ Euro
$ Dollar
Table of Contents
I. Introduction 7
II. Economic Growth and the Environment 8
A. Macro Perspective 8
i. Environmental Kuznets Curve (EKC) 8
ii. Agricultural Intensification 10
a. Inputs Use 10
b. Environmental Pressure 12
c. Agricultural Sustainability 13
iii. Global Trade 13
iv. Political Environment 15
B. Micro Perspective 15
i. Agricultural Firms 16
ii. Households 18
iii. Institutions 19
iv. Political Environment 19
C. Policy Implications, Gaps and Overlaps 20
III. Pesticides and Biodiversity 21
A. Pesticide Use 21
i. Productivity and Pesticide Use 21
ii. Pesticide Externalities 23
iii. Pesticide Risk Valuation 24
iv. Uncertainty in Agriculture 24
v. Pesticide Sales in European Countries 26
vi. Use of PPPs in EU & Trends over Time 27
vii. Pesticide Demand Elasticity 28
viii. Damage Control Specification 30
ix. IPM 30
B. Biodiversity 31
i. Biodiversity Definitions 31
ii. Valuing Biodiversity 31
iii. Biodiversity & Irreversibility 33
iv. Farmland Biodiversity 33
v. European agri-environmental schemes for conserving and promoting biodiversity 35
C. Biodiversity & Agricultural Productivity 35
D. Policy Implications, Gaps and Overlaps 36
IV. Pesticide Policies 37
A. Competitiveness & Environmental Regulations 37
B. EU Pesticide Policies 38
C. Abatement Policies of EU and non-EU countries 43
D. U.S. Pesticide Policy 47
E. Uncertainty under a policy introduction/investment 49
F. Policy Implications, Gaps and Overlaps 50
V. Concluding Comments 50
References 51
Appendix 63
I. Introduction
This report presents a literature review in support of work package five (WP5) entitled “Economic Sustainability, Biodiversity Loss and Socially Optimal Pesticide Use”. The literature review is organized into three major themes: I) Economic Growth and the Environment, II) Pesticides and Biodiversity, and III) Pesticide Policies. As each sub-theme is introduce, a schematic of related concepts is presented to provide the reader with a perspective on how to organize one’s conceptualization of the issues.
The first theme addresses the relationship between economic growth and the natural habitat, by looking at both the macro and micro levels. At the macro level economic growth has brought changes in global policies, agreements and trade patterns while the micro level focuses on the impact on agricultural producers, consumers and local institutions. These macro and micro level changes have their own characteristic impacts on the environment. The second major theme defines plant protection products and provides an overview of their use, impacts and properties. This theme introduces the concept of biodiversity and reviews its relationship with pesticides and farm productivity. The final theme presents the pesticide regulations of European Union (EU) and the United States, and deals with the uncertainty of introducing a pesticide policy and the impacts of pesticide regulations on the competitiveness of agricultural firms.
Finally, the review document is accompanied by a web-based map (http://www.personal.psu.edu/ttc/econo_pest_1.htm) where the user can scan through the outline of this review to view a brief abstract of each component and a reference list for the terminal modes. The reference list provides the abstract, setting, modeling framework, data and applications, and results and policy implications for each citation.
II. Economic Growth and the Environment
During the last decades, there is a considerable increase in the global level of production of agriculturally related goods and services. This economic growth that was brought about mainly by technological innovations has had its impact on the environment. The over-exploitation of natural resources has resulted in environmental degradation but on the other hand, the development of pollution abatement technologies promises to ease these environmental problems. Sustainable economic growth is of prime importance in supporting human needs and protecting the natural habitat.
A. Macro Perspective
Global economic growth has both positive and negative impacts on the environment. An overview of the environmental Kuznets Curve studies can shed light to this relationship.
World trade and international policies and agreements play an important role in the process of economic growth. Global policies and world trade can increase agricultural intensification leading to environmental pressure. Conversely, global agreements have proven to be an effective approach toward addressing environmental problems which are often transnational and require a collective response. Global trade can also provide the means for transferring cleaner technologies.
i. Environmental Kuznets Curve (EKC)
The environmental Kuznets curve (EKC) hypothesis proposes that there is an inverted U-shaped relationship between economic performance and environmental pollution, which suggests that an economy is associated with lower levels of pollution after clearing an income threshold. Simon Kuznets’s name was attached to the curve by Grossman and Krueger (1993), who noted its resemblance to Kuznets’s inverted-U shaped relationship between income inequality and development.
A number of empirical studies have examined the EKC for various time periods, regions and pollutants. The early EKC studies are Grossman and Krueger (1993), Shafik and Bandyopadhyay (1992), Selden and Song (1994), Panayotou (1993) and Cropper and Griffiths (1994), which found that the inverted U-shaped relationship is monotonically increasing or decreasing.
Stern (2004) and Dasgupta et al. (2002) have undertaken comprehensive reviews and discussions of these empirical studies have shown that there is no single relationship between environmental degradation and income that concerns all types of pollutants, time periods and regions. Meta-analysis is a statistical approach that models related empirical studies by synthesizing their results in a statistical framework. The EKC meta-analyses of Cavlovic et al. (2000) and Li et al. (2007) indicate that study methods, estimation techniques, data characteristics and pollution categories, all affect the presence or absence of the EKC, its shape and the income turning points (ITPs) (Figure 1). It is important to notice that many studies that had dealt with anthropogenic greenhouse gases (e.g. CO2) did not manage to find ITPs or an improved environment-income relationship.
Figure 1. EKC Meta-analysis features.
Source: Author, 2008
Stern et al. (1994) critiques the EKC on the following grounds (Figure 2): a) the assumption of unidirectional causality from economy to environment; b) the assumption that environmental quality is not affected by changes in trade relationships; c) data problems (data on environmental problems are of poor quality); d) econometric problems (simultaneity); e) asymptotic behavior; f) the mean-median income problem; g) and the isolation of some EKCs from EKCs for other environmental problems.
Figure 2. EKC problems
Source: Author, 2008
Managi (2006) adds to this list of concerns that the empirical EKC studies do not examine carefully the mechanisms of the inverted U-shaped relationship. The use of a time trend is not an efficient tool to fully reflect technological progress and the inclusion of technological variables seems to be of utmost importance in capturing productivity and technological progress factors.
ii. Agricultural Intensification
Agricultural Intensification refers to an increase in the productivity of resources (e.g., land, water) in order to produce more output in a given area (Tiffen et al., 1994). In this respect, attention is given to the way the inputs are used, how this use affects the environment and if a sustainable agricultural intensification is a feasible target.
a. Inputs Use
Agricultural intensification constitutes one of the most important global changes of the twentieth century (Matson et al., 1997). Hazell and Wood (2008) report a significant rise of the intensity of agricultural production during the second half of last century.
Figure 3. Agricultural Intensification and Inputs Use
Source: Author, 2008
It is defined as “increased average input of labor or capital on a smallholding, either cultivated land alone, or on cultivated and grazing land, for the purpose of increasing the value of output per hectare” (Tiffen et al., 1994). Figure 3 depicts the trajectory of inputs use under agricultural intensification and its impacts. The agricultural machinery and the irrigated area have grown by approximately twofold during the last decades (Pretty, 2007). Input use had a tremendous increase with many advantages and disadvantages. The “Green Revolution” of 1960s brought the high yielding seeds that boosted agricultural production. The use of fertilizers has increased substantially during the second half of the last century, but their use declined in recent years (Stoate et al., 2001). Pesticide use also increased during the same period but their great importance in reducing crop damage has led only to a slight decline in the recent years. Sexton et al. 2007 state that despite the existence of alternatives to chemical pesticides (e.g., GM crops, biological control), the pesticide industry sales total $32 billion with the annual pesticide application levels estimated at 5 billion pounds.
b. Environmental Pressure
Figure 4. Environmental impacts of agricultural intensification
Source: Author, 2008
Agricultural intensification has significant impacts on the environment (Figure 4). Among the negative consequences are increased erosion, reduced biodiversity, lower soil fertility, eutrophication and chemical residuals in food. Nitrogen and phosphorus runoff from the use of fertilizers can contaminate freshwater aquifers and other marine ecosystems. Groundwater can also be contaminated from nitrates and pesticides leaching while air pollution can result from the use of pesticides. Modern arable management with increased mechanization and farm size, simplification of crop rotations and loss of non-crop features has led to soil deterioration and decreased biodiversity (Stoate et al., 2001).