Shadow prices of greenhouse gas emissions: An application to the Czech dairy production

https://doi.org/10.17221/303/2016-AGRICECONCitation:Žáková Kroupová Z., Čechura L., Havlíková M., Hálová P., Malý M. (2018): Shadow prices of greenhouse gas emissions: An application to the Czech dairy production. Agric. Econ. – Czech, 64: 291-300.
download PDF

The paper presents an analysis of the shadow prices of the greenhouse gas emissions in the Czech dairy production industry. There is employed the stochastic frontier multiple output distance function with two market outputs and one non-market (undesirable) output – greenhouse gas emissions – as a representation of a negative public good. The results show that shadow prices differ significantly between producers. Moreover, the price is not stable over time. Significant differences can be seen in shadow prices for the greenhouse gas emissions among the researched group of farmers with respect to the degree of intensification. Most noticeably, the higher the intensification, the higher the shadow price. However, no evidence for a significant relationship between the greenhouse gas prices and technical efficiency was found, and not even the development of the greenhouse gas prices and technical efficiency suggested any common patterns.

References:
Alvarez A., Arias C., Green W. (2004): Accounting for unobservables in production models: management and inefficiency. Economic Working Papers No. 72. Available at http://public.centrodeestudiosandaluces.es/pdfs/E200472.pdf (accessed April 9, 2016).
 
Berre D., Boussemart J.P., Leleu H., Tillard E. (2013): Economic value of greenhouse gases and nitrogen surpluses: society vs farmers‘ valuation? European Journal of Operational Research, 226: 325–331.
 
Bokusheva R., Kumbhakar S.C. (2014): A Distance Function Model with Good and Bad Outputs. Available at http://ageconsearch.umn.edu/bitstream/182765/2/Bokusheva-Distance_function_model_with_good_and_bad_outputs-258_a.pdf (accessed Apr 6, 2016).
 
Brümmer Bernhard, Glauben Thomas, Thijssen Geert (2002): Decomposition of Productivity Growth Using Distance Functions: The Case of Dairy Farms in Three European Countries. American Journal of Agricultural Economics, 84, 628-644  https://doi.org/10.1111/1467-8276.00324
 
Casey J.W., Holden N.M. (2005): Analysis of greenhouse gas emissions from the average Irish milk production system. Agricultural Systems, 86, 97-114  https://doi.org/10.1016/j.agsy.2004.09.006
 
Čechura L., Hockmann H., Malý M., Žáková Kroupová Z. (2015): Comparison of technology and technical efficiency in cereal production among EU countries. Agris on-line Papers in Economics and Informatics, 7: 27–37.
 
Cechura Lukas, Grau Aaron, Hockmann Heinrich, Levkovych Inna, Kroupova Zdenka (2017): Catching Up or Falling Behind in European Agriculture: The Case of Milk Production. Journal of Agricultural Economics, 68, 206-227  https://doi.org/10.1111/1477-9552.12193
 
CECHURA Lukas, HOCKMANN Heinrich, MALA Zdenka, MALY Michal (2014): PRODUCTIVITY AND EFFICIENCY DIFFERENCES BETWEEN CZECH AND SLOVAK MILK PRODUCERS. Review of Agricultural and Applied Economics, 17, 17-21  https://doi.org/10.15414/raae.2014.17.02.17-21
 
Coelli T.J., Rao P.D.S., O’Donnell C.J., Battese G.E. (2005): An Introduction to Efficiency and Productivity Analysis. 2nd Ed. Springer Science, Brisbane.
 
Drèze Jean, Stern Nicholas (1990): Policy reform, shadow prices, and market prices. Journal of Public Economics, 42, 1-45  https://doi.org/10.1016/0047-2727(90)90042-G
 
Fare R., Grosskopf S. (1998): Shadow Pricing of Good and Bad Commodities. American Journal of Agricultural Economics, 80, 584-590  https://doi.org/10.2307/1244563
 
Fried H.O., Lovell C.A.K, Schmidt S.S. (2008): The Measurement of Productive Efficiency and Productivity Growth. 2nd Ed. Oxford University Press, New York.
 
FAO (2010): Greenhouse Gas Emissions from the Dairy Sector. Food and Agricultural Organization. Available at http://www.fao.org/docrep/012/k7930e/k7930e00.pdf (accessed May 23, 2016).
 
Forman L., Čurda L. (2001): Význam základních a doplňkových znaků kvality mléka pro jakost mlékárenských výrobků a pro ekonomiku mlékaření. Available at http://www.agris.cz/zemedelstvi?id_a=108668 (accessed April 27, 2016).
 
Hadley D. (1998): Estimation of Shadow Prices for Undesirable Outputs an Application to UK Dairy Farms. Available at http://ageconsearch.umn.edu/bitstream/20977/1/sphadl01.pdf (accessed May 2, 2016).
 
Jondrow James, Knox Lovell C.A., Materov Ivan S., Schmidt Peter (1982): On the estimation of technical inefficiency in the stochastic frontier production function model. Journal of Econometrics, 19, 233-238  https://doi.org/10.1016/0304-4076(82)90004-5
 
Robert Kiefer Lukas, Menzel Friederike, Bahrs Enno (2015): Integration of ecosystem services into the carbon footprint of milk of South German dairy farms. Journal of Environmental Management, 152, 11-18  https://doi.org/10.1016/j.jenvman.2015.01.017
 
Kristensen Troels, Aaes Ole, Weisbjerg Martin Riis (2015): Production and environmental impact of dairy cattle production in Denmark 1900–2010. Livestock Science, 178, 306-312  https://doi.org/10.1016/j.livsci.2015.06.012
 
Lee Sang-choon, Oh Dong-hyun, Lee Jeong-dong (2014): A new approach to measuring shadow price: Reconciling engineering and economic perspectives. Energy Economics, 46, 66-77  https://doi.org/10.1016/j.eneco.2014.07.019
 
Ross Stephen A., Chagunda Mizeck G.G., Topp Cairistiona F.E., Ennos Richard (2014): Effect of cattle genotype and feeding regime on greenhouse gas emissions intensity in high producing dairy cows. Livestock Science, 170, 158-171  https://doi.org/10.1016/j.livsci.2014.09.011
 
Shephard R.W. (1970): Theory of Cost and Production. 1st Ed. Princeton University Press, Princeton.
 
Shortall O.K., Barnes A.P. (2013): Greenhouse gas emissions and the technical efficiency of dairy farmers. Ecological Indicators, 29, 478-488  https://doi.org/10.1016/j.ecolind.2013.01.022
 
Squier L., Van der Tak H.G. (1995): Economic Analysis of Projects. 8th Ed. The John Hopking University Press, Baltimore.
 
Toma L., March M., Stott A.W., Roberts D.J. (2013): Environmental efficiency of alternative dairy systems: A productive efficiency approach. Journal of Dairy Science, 96, 7014-7031  https://doi.org/10.3168/jds.2013-6911
 
Tsionas Efthymios G. (2002): Stochastic frontier models with random coefficients. Journal of Applied Econometrics, 17, 127-147  https://doi.org/10.1002/jae.637
 
Weiske A., Vabitsch A., Olesen J.E., Schelde K., Michel J., Friedrich R., Kaltschmitt M. (2006): Mitigation of greenhouse gas emissions in European conventional and organic dairy farming. Agriculture, Ecosystems & Environment, 112, 221-232  https://doi.org/10.1016/j.agee.2005.08.023
 
Zhang Ning, Choi Yongrok (2014): A note on the evolution of directional distance function and its development in energy and environmental studies 1997–2013. Renewable and Sustainable Energy Reviews, 33, 50-59  https://doi.org/10.1016/j.rser.2014.01.064
 
Zhou P., Zhou X., Fan L.W. (2014): On estimating shadow prices of undesirable outputs with efficiency models: A literature review. Applied Energy, 130, 799-806  https://doi.org/10.1016/j.apenergy.2014.02.049
 
download PDF

© 2019 Czech Academy of Agricultural Sciences