Roles of Agriculture Project International Conference

20-22 October, 2003 Rome, Italy

Environment Module

Roles ofAgricultureProject

Agricultural and Development Economics Division (ESA) Food and Agriculture Organization

of the United Nations

The Roles of Agriculture Project aims to extend current thinking about the social, environmental and economic roles of agriculture in the development process. For more than three years, the project has worked to establish an analytical framework; to identify the social and economic roles for which the market prices of agricultural activities fail to convey sufficient signals to secure an optimal level of those activities; and to carry out eleven country case studies. The case studies include Chile, China, the Dominican Republic, Ethiopia, Ghana, India, Indonesia, Mali, Mexico, Morocco, and South Africa. The ROA International Conference, October 20-22, provides an opportunity to present and discuss research results from the eleven case studies and to draw on the lessons, strengths and experiences learned over the past three years for the design and implementation of future work. The country studies consist of module reports (policy, environment, poverty, food security, buffer, social viability, and culture) and a national summary report. This paper has been prepared for presentation to and discussion by country case study team members participating in the International Conference. It is a working draft. The Roles of Agriculture Project is funded through a Trust Fund from the government of Japan. The project is run by the Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations. For more information on this Project or the Division and its work, see the ESA website at www.fao.org/es/esa.

Environment Module Cross Country Report

Allali Khalil, Magdalena Lizardo, Randy Stringer

Paper prepared for the Roles of Agriculture International Conference 20-22 October, 2003 – Rome, Italy

Agricultural and Development Economics Division (ESA)

Food and Agriculture Organization of the United Nations

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The Roles of Agriculture Project (ROA) aims to extend current thinking about the social, environmental and economic roles of agriculture in the development process. This paper represents the first attempt to draw out lessons, issues, results and experiences provided by the 11 ROA country studies focused on environmental externalities. Each of the 11 country studies present: (i) a national level assessment of agricultural externalities (both positive and negative); and (ii) site specific case studies providing qualitative and/or quantitative assessments either of positive agricultural externalities or examples of a reduction in negative externalities. This paper is prepared for presentation and discussion by the country case study team members participating in the environmental module workshop at the ROA International Conference 20-22, October 2003. What are the objectives of the environmental module case studies? The ROA environmental module includes two types of reports. The first report is an overall national assessment describing the prevalence, pressures and policy responses to agricultural externalities. The national assessment outlines how agricultural externalities impact on soil, water, biodiversity air quality, and rural amenities. The reports consider both positive and negative externalities. The purposes of this national level assessment are: to provide a broad overview of the major agricultural-related environmental issues facing the country; to present a policy landscape describing what policy models and tools are being used to address those environmental issues, and to explain the pressures driving changes in agricultural practices that induce positive or negative externalities. The intent is to understand the underlying causes of sustainable and unsustainable agriculture, ie to what extent are technologies and management practices that promote good environmental outcomes or bad environmental outcomes encouraged by policy failures, market failures or institutional failures. The second country environmental module report is a site specific study. The main purpose of the site specific study is to quantify the value of agricultural externalities, including measuring the non-market values. The existence of an agricultural externality suggests that the agricultural practices or systems are either over producing, or under producing, some goods or services1. The site specific case studies attempt to examine how markets, institutions and policies interact to produce ‘sub-optimal’ social outcomes, and estimate the value of the externality. In the site studies, the emphasis is placed on the economic and environmental impacts at the local, regional, national and global levels. Three theoretical background papers provide the research objectives, guidelines, and motivations of the environmental module (Landry and Mistiaen, 2002, Lopez 2002, and McConnell 2002). Lopez provides an overall conceptual framework for the studies, outlining how environmental impacts of agricultural growth depend on five conditions: (i) property rights; (ii) the sources of agricultural growth; (iii) the types of policies used to stimulate agriculture; (iv) government credibility; and (v) whether or not farmers are subsistence or commercial. One aim of Lopez’s conceptual framework is to allow countries to be classified based on the degree to which they satisfy the five conditions.

Lopez proposes a working hypothesis suggesting that the environmental consequences of agricultural growth depend critically on the prevailing government policies and institutions. Thus, a taxonomy based on these five conditions provides insights into the likelihood that 1 A related explanation is that society is over or under consuming goods or services that agriculture provides

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agricultural growth in a particular country is more likely, or less likely, to promote environmental benefits. The environmental outcome, however, depends on the five prevailing conditions, with the environmental impacts ranging from very positive to massively destructive.

Lopez then postulates that agricultural expansion based on appropriate incentives is likely to induce an environmental dividend if certain minimum institutional conditions are satisfied. Many of these environmental services are externalities, neither taken into consideration by the market, nor assessed by policymakers, nor represented in national accounts. Instead, other sectors may benefit from positive agricultural externalities. However, in other circumstances, agricultural growth based on inadequate incentives and weak institutions is likely to generate massive negative environmental effects. One aim of using a typology based on the five conditions outlined above to identify and correct the market failures, institutional weaknesses and perverse policies to secure and enhance positive environmental outcomes.

Landry and Mistiaen (2002) and McConnell (2002) provide theoretical notes for the ROA case studies that focus on the technical aspects related to choosing site study methodologies and to using specialized economic techniques that measure non-market goods and services. The aim of these two theoretical notes on methodologies, as well as other related background materials, is to highlight the basic measurement principles, assumptions, data requirements, and interpretation of results. The appropriate methodology to use depends on the site study intent and the need to estimate values from observed market behavior or rely on direct questioning of consumers. The site studies reflect a wide range of valuation techniques, including market price methods, replacement costs methods, travel costs methods, hedonic price methods, and contingent valuation methods. What are the pressures driving changes in agricultural externalities? The ROA case study countries are a heterogeneous group of countries with diverse resource endowments, income levels, and agricultural structures. Their agricultural sectors vary widely both among and within countries. Likewise, the prevailing government policies and institutional conditions that shape environmental consequences of agricultural growth vary across and within the countries. However, the module reports suggest that countries do share a number of similar characteristics, trends, and pressures that are influencing agricultural practices and the impact those practices have on environmental externalities. How the five prevailing conditions suggested by Lopez are addressed are fundamental to understanding the environmental outcomes from these pressures. Among these common forces that are interacting with government policies and institutions to produce positive and negative environmental impacts are: expanding globalization and trade; agricultural and sector-wide policy reforms; technological advances; and substantial changes in relative prices leading to more intensive, more specialized, and more concentrated production and distribution systems. Four driving forces are presented here for discussion at the workshop. First, globalization pressures, including international development community pressures to integrate environmental objectives with agricultural objectives is making the agricultural sector policy agenda more complex than ever in the case study countries. International and domestic pressures are forcing policymakers to search for the right combination of

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socio-cultural measures to improve rural areas, promote economic incentives to increase resource efficiency, and environmental regulations to protect soil, water, food and farm workers. During the years following the United Nations Conference on Environment and Development (UNCED), the international community’s guiding principles on sustainable development has increasingly implied that agriculture should widen its focus from expanding production and increasing yields to include sustainable management of ecological processes, environmental services and social goods. While these objectives are not necessarily incompatible, some trade-offs are inevitable. Despite its message of harmony, the concept of agricultural sustainability raises tension between market-driven economic growth strategies, social pressures for a more equitable distribution of economic opportunities and the need to maintain environmental productivity, ecological services and biodiversity to fulfill future economic and social aspirations. Second, most of the countries have signed onto a variety of multilateral environmental agreements (MEAs), including conventions and treaties on desertification, biodiversity, climate change, forestry and fisheries. The ROA case study countries are participating in various international bodies to harmonize criteria and codes of conduct for farming practices. If enacted fully, these commitments in the international arena have important consequences for agricultural production and rural development. Over time, MEAs have become increasingly specific, setting out detailed strategies and procedures, establishing measurable objectives and standards, and setting precise dates by which signatories must comply. Compliance often requires changes in national legislation, state and local regulations, tax policy or regulatory systems. For the ROA countries, concerns over environmental agreements are analogous to concerns over domestic standards and environmental controls that influence production costs, shift relative factor prices, and thereby affect short-term competitiveness, export performance and jobs. A third common pressure influencing environmental outcomes is the regional and global trade initiatives encouraging countries to integrate national level political, economic and environmental institutions with those at supranational and global levels. These initiatives include, for example, a revival of regionally-based arrangements (eg, AFTA, ASEAN, APEC, MERCOSUR, NAFTA), and further economic integration through the WTO. China, Chile, India, Mexico and South Africa represent examples where these trade initiatives have had some positive environmental outcomes in local areas. Two important reasons explaining the positive outcomes are (i) the increased demand for safe and uncontaminated foods and (ii) increased demand for sustainable production practices. The export markets in ROA countries are concerned more and more with the safety, nutritional quality, freshness and diversity of their food exports. As a result, producers and exporters are increasingly occupied with meeting higher standards for health and safety, and levels of pesticides, contaminants, naturally occurring toxicants, as well as chemicals added for ripening and/or storage. The increased demand for sustainable production practices is related to higher incomes (both within the ROA countries and in those countries importing their exports) imply high income elasticities of demand not only for safe foods, but also for environmental goods, such as environmentally-friendly production practices. Consumers are now concerned about whether

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production and distribution processes entail environmental damage, including land and water degradation, biodiversity loss, and packaging waste. As pointed out in the Mexico case study, green certification and ecolabelling programmes represent one important market response to the demand for environmentally-friendly practices and healthy products. Ecolabelling attempts to capitalize on the price premiums consumers are willing to pay for both the private good of safe food and the public good of an improved environment. While producers have marketed the nutritional attributes of their products for some time (such as health benefits of organic produce), only recently have they begun to market sustainable practice attributes. In the ROA countries where food exports are aimed at high income countries, the public and private institutions are building up a range of signaling mechanisms to pass on key information to support producers. These signaling mechanisms include: reliable product information on evolving consumer preferences; easier access to documentation on import requirements by commodity and by country; and research and extension networks that encourage resource conservation practices by commodity. For producers who market a great deal of their food production in designated premium markets (ie, those markets with the highest food safety and environmental standards, namely the EU, Japan, Korea and the US) where import requirements often vary significantly between these countries, food producers are developing procedures to react to changes within and between markets. A fourth factor facing the ROA countries is that, in general, poverty is heavily concentrated in rural areas. Many rural poor live and work in ecologically fragile, economically marginal and environmentally-degraded areas. Protecting environmentally-vulnerable areas and making them more productive requires long-term investments. Poor and subsistence producers in fragile areas lack the capital necessary to invest in natural resource protection; they tend to have high rates of time preference; and, normally, are unable even to avoid the impacts of environmental degradation on their existing production base. This deterioration in the production potential of natural resources is a major concern for ROA countries’ future food security. Poverty often induces food producers to degrade natural resources and environmental services even though they depend heavily on a sustained resource base for survival. At the same time, government programmes and policies aimed at alleviating poverty often contribute to environmental degradation by directly encouraging or unintentionally subsidizing environmental degradation. Further resource degradation contributes to more rural poverty, urban migration and erratic food production. For poor rural communities at the margin of subsistence, resource degradation means greater food production instability as the frequency of poor harvests increases. As poverty reduces and incomes grow, the general tendency is for the demand for environmental quality to increase. Less polluting agricultural techniques become more viable while the political willingness to enact more stringent environmental regulation may increase. The environmental policies that a country could adopt to promote the internalisation of externalities also include incentives to promote those activities that yield positive environmental effects. How environmental outcomes change with rises in per capita income is an important issue, but what is of more fundamental concern for the ROA project is how different policies affect this relationship.

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How are the countries managing agricultural externalities? This section presents an initial list of environmental management responses gleaned from the country cases. At the most general level, environmental management include three areas: (i) integrating environmental concerns into policy decision making; (ii) modifying existing policies to reduce negative environmental consequences; (iii) promoting local, national, regional and global initiatives. There may be examples of countries actively promoting an identified positive externality. The most common types of policy interventions tend to be either extension and advisory measures or regulatory measures, eg, bans, standards, or labeling requirements. Economic instruments such as taxes, subsidies or tradable quotas are rare in the cases presented. Chile and Mexico have enacted tradable water rights systems. The extension programmes include promotion of alternative agriculture production systems and integrated pest management. Despite greater the growing understanding and recognition of the importance of environmental policies, few systematic evaluations exist to determine which policy responses are relatively more efficient and which policy choices are relatively more cost effective. So too are studies aimed at quantifying the distributional consequences of alternative policy choices. Several reasons may explain why. First, most environmental programmes and policies aimed at the agriculture are recent. Second, technical difficulties associated with evaluating one particular policy when it forms part of a larger policy package. Third, a lack of data and/or evaluation culture and practice. Fourth, choosing appropriate alternatives with which to compare policy performance. Fifth, the non-point source nature of agricultural pollution. And, sixth, incompatible division of responsibilities among government and donor agencies. What are we learning from the site studies? Table 1 summaries the measurement techniques and environmental issues analyzed in the ROA country case studies. Three groups of studies emerge. The first group includes the use of willingness to pay estimates of positive externalities using contingent valuation, travel cost and hedonic pricing methods. The positive externalities are green house gases (GHGs), agro-tourism, agro-forestry benefits and rural amenities. The second group of studies employ similar non-market measurement methodologies or econometric techniques to quantify the value of reducing negative externalities or the willingness to pay for reduced pollution: GHGs, water pollution, and soil degradation. The third group of studies employs a variety of techniques, including the Delphi technique (Chile) to better understand expert perceptions of agricultural related environmental externalities, or economic and market assessments of how changing agricultural practices impact on the environment. Each ROA case study represents a unique example yet each country could provide and seemingly endless supply of additional site studies and information. The final section of this report provides a brief overview of each reports objectives and conclusions. What may be useful here is to glean some methodological lessons from the studies and draw lessons for future work. This is an important objective of the workshop.

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The following issues are proposed for discussion:

a) The lack of basic information on damage caused by agricultural practices is a rather big issue. More than almost any sub-discipline in economics, environmental economists are dependent on information from ecologist, environmentalist, biologists and other scientists to provide the threshold damage information. This information is often lacking in many of the most data aggressive Industrial countries. It represents a more serious problem for developing counties.

b) The need to capture the entire set of external values form field level, to global level.

For example, reducing land degradation can result in increased productivity at the household level, better flood control and less sedimentation at the regional level, improved food security at the national level and an improved carbon sink and ecosystem at the global level. All these values need measuring.

c) The need to assess net costs and benefits and to examine the opportunity costs of the

sites. In addition, the need to computing shadow prices for natural resource stocks

d) Better understanding of linkages between macroeconomic variables, economy wide variables and the environment (eg Green Gross National Product, sectoral green accounts; indicator-based approaches: wealth and genuine savings, and performance indicators

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Country Summaries

The charming landscape which I saw this morning, is indubitably made up of some twenty or thirty farms. Miller owns this field, Locke that, and Manning the woodland beyond. But none of them own the landscape. There is a property in the horizon which no man has but he whose eye can integrate all the parts, that is, the poet. This is the best part of these men’s farms, yet to this their land deeds them no title.

Ralph Waldo Emerson, Nature (1836)

Chile (Ramón López and Gustavo Anríquez) The first Chile case study considers both negative and some positive environmental externalities of Chilean agriculture. The paper presents a case study for an important watershed in Chile, the Aconcagua Valley, and an econometric analysis of input demand by Chilean agriculture. Two positive environmental externalities are identified erosion protection in sloped and vulnerable areas and carbon sequestration services estimated at about $2 million per year, roughly, 3 percent of the value of avocado exports. The paper concludes that agricultural induced water pollution in the in the Vth Region of the Aconcagua watershed, both ground and surface water, is significant but not yet critical. The region is one of the most productive agricultural regions in the country and the contribution of agriculture to water pollution appears to be rather moderate. The most important agriculture contribution to water pollution is pesticide traces found in surface water. Nitrate fertilizers may be one source of the high nitrate content found in ground water. The paper also presents an empirical assessment of the evolution of chemical input demand by the agricultural sector, as a proxy for emissions, using time series to estimate a system of input demands for the Chilean agriculture. One important finding is that nitrate fertilizers are good substitutes for pesticides. The increasing export orientation of agriculture has reduced the pesticide dependence of agriculture. The rapid rise in pesticide demand is mostly due to a reduction in the relative price of pesticides compared to other inputs. The econometric analysis suggests that given the high price responsiveness, a modest tax on pesticides can be very effective in reducing the pesticide/output intensity and in thus diminishing one of the most important negative environmental externality of agriculture. Chile (Raúl O´Ryan, Manuel Díaz, and Cristián Pincheira) This study uses a modified version of the Delphi Method to obtain the perceptions of qualified respondents, in particular the positive environmental externalities and reduction of negative externalities.. This methodology does not require extensive data, usually unavailable in developing contexts. The study includes two areas –the semi-arid IV Region and in the VII Region with a mild Mediterranean climate – to identify common features as well as differences in the development process. The study results show that the drivers of change in both Regions are very similar. Economic drivers that have been critical are economic openness, high exchange rates and the installation of food export businesses and cold storage plants in the Regions have been critical. Also

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important are technological drivers associated with better water management and efficiency, and sectoral policies, specifically better road infrastructure. The main sources of growth can be characterized as neutral in both Regions, since they affect factor productivity across the board. The results show significant regional differences in the perceived externalities. Forty-nine externalities, nineteen positive (or a reduction of a negative) and thirty negative externalities were consulted. In the IV Region 13 positive externalities and only 10 negative ones were perceived by the majority of respondents to have increased. However in the VII Region only 10 positive externalities were perceived to increase whereas 27 of the 30 negative externalities were considered to be present by the majority of the respondents. Some positive and negative externalities appear in both Regions. There is significant agreement that land quality has improved, agro-tourism, eco-tourism and gastronomical tourism are important positive externalities in both Regions. Landscapes improve in both Regions but a greater majority agrees that this is so in the IV Region. On the negative side, three biodiversity implications are considered relevant in both Regions: reduction and transformation of natural habitats and disequilibria in the tropical chain due to clearing of native vegetation and loss of genetic variability due to mono-crops. Air pollution generally is not perceived as a relevant externality in any of the Regions. However, bad odors generated by production and damage to health of workers due to exposure to agrochemicals and pesticides are also present. Some externalities specific to each Region were also identified. Finally, the results support, with some caveats, the proposal by Lopez (2002) that neutral sources of growth coupled with stable property rights and a perception of permanence of the transformations should lead to improved soils and water supply/balance conditions. China (Yao Lu and Dongmei Guo) The China site study examined water-related externalities in a rice-wheat farming system located in the middle and lower reaches of Yangtze River. The study includes a review of biological and physical environmental pollution and a household survey in Zhenjiang City estimating the value of environmental externalities caused by agriculture. The pollution indicators include: (i) total CH4, N2O and CO2 emissions; (ii) the average nitrogen and phosphorous discharged into water systems from non-point sources; and (iii) the total carbon sequestration of water in paddy fields and in dry lands. An economic evaluation is carried out to estimate willingness-to-pay (WTP) on the basis of site-surveys in Zhenjiang including more than 400 respondents. Results suggest that the externality of chemical fertilizers from rice-wheat farming system to drinking water is valued as 255 RMB per household per year, 2% higher than that of average household income. The survey work suggests that, generally speaking, respondents are more sensitive to the negative agricultural externalities than the positive ones. The descriptive statistics of the survey that we have carried out in Zhenjiang, Jiangsu Province testifies it well as followings: a) 66 percent of the respondents think that chemical fertilizer use has negative environmental

impacts, while only 28 percent think that organic manure has negative impacts; b) 88 percent of the respondents think that pesticides may cause environmental damage; c) 56 percent answered that agricultural activities cause soil erosion and sediments in lakes

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and rivers; d) 20 percent of the respondents think that rice farming is favorable to the flood prevention; e) 50 percent of the respondents think that rice farming systems provide amenity services; f) 19 percent of the respondents think that rice farming system provide habit to the wildlife; g) 43 percent of the respondents think the water pollution prevention is the most important

issues among the environmental externalities of agriculture. Dominican Republic (Alejandro Herrera Catalina and Magdalena Lizardo) The Dominican Republic study attempts to analyze the links between agriculture and tourism. The study involves using contingent valuation methods to assesses tourists’ willingness to pay (WTP) for the enjoyment of agro-tourism and for the existence of agriculture’s positive externalities. In addition, the study analyzes the factors that could impinge on tourist’s preferences and valuation in the Dominican Republic (DR). Among the factors influencing tourist’s behavior are income, location of the tourist destination, gender, and nationality. The study highlights an agro-tourist typology’s conceptualization. It also presents an estimation of the potential income from agro-tourism. This estimation considers different WTP scenarios according to different farming systems and the existence of positive externalities, as created by agricultural practices’ efficient use of water, soil, forest, landscape, rural culture, and agro-biodiversity conservation. The paper argues that a thorough development of agro-tourism would represent an effective market mechanism to measure income that the country does not currently perceive, with a value that varies between US$251.0 and US$364.0 million annually. At the same time, agro-tourist activities would contribute to define a new role for agriculture, promoting sustainable practices. Among the studies specific findings and conclusions are: (i) that tourists interested in participating in agro-tourism in the DR are basically motivated by the cultural experience. People who like agro-tourism are also highly motivated to explore local cultures, and to practice eco-tourism and sports tourism;

a) a tourist's WTP for agro-tourism in the DR increases as his or her level of income increases, and it is higher among both women and people younger than 40 years. Tourist’s, WTP is lower for tourists traveling with children;

b) systems of sustainable production supply the types of amenities preferred by agro-tourists, fundamentally those relative to lifestyle and rural culture. No single amenities has a particular influence on the determination of WTP. The WTP for amenities linked to a rural setting correspond to the integrated value of all the amenities that define preferences for a rural setting;

c) agro-tourism offers the potential to involve in some way 78 percent of the tourists that visit the DR, who can also be attracted by the existence of positive externalities associated with the adoption of conservationist farming practices;

d) the economic contribution of agro-tourism and the existence of positive externalities associated with conservationist farming practices could exceed US$251 million annually, which would represent 8.4 percent of the tourism income in 2002 and 10% of the farming GDP. The more optimistic scenario indicates that the income generated could be as much as US$364 million, which represents 12% of the tourism income in 2002 and 14.1% of the farming GDP; and

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e) agro-tourism might represent a very useful option to satisfy both immediate and future priorities associated with the goals of sustainable development by linking agriculture and tourism in the DR. An initial strategy to develop agro-tourism in the short-term in the DR should consider the need for better infrastructure and personal security for agro-tourists in the rural areas and an effective negotiation with tours operators with the objective of promoting this new tourist market for the DR.

Ethiopia (Eyasu Elias) The Ethiopian study presents two cases. The first examines on-farm conservation of genetic diversity in the enset-coffee system and its economic value. The second study values the off-farm impacts of soil erosion and siltation on a hydropower dam. The study of on farm conservation of genetic diversity documented and quantified the inter- and intra-species diversity maintained by subsistent farmers in the enset-coffee farming systems in Ethiopia. Where possible, the study attempted to quantify the economic value of environmental services generated by agricultural bio-diversity. The case study provides an example of and evidence for a positive environmental externality of traditional agriculture in Ethiopia. Questionnaires were administered to 100 sample households disaggregated by wealth group – rich, medium and poor. Key informants categorised households into three wealth groups using livestock ownership as local criterion of wealth. The questionnaire captured (a) the social and economic profile of households such as ownership of productive assets and family size that are considered as main factors that encourage or discourage level crop diversification; (b) on-farm agricultural diversity (i.e., inter-and intra-species diversity) at farm level; (c) understanding and documenting the socio-economic and cultural values of traditional on-farm conservation of genetic resources particularly that of traditional crops such as enset; (d) household level variations in the poly-culture system mediated by socio-economic factors mentioned earlier. The case study points out that farming activities in the enset culture contribute to the on-farm conservation of agricultural diversity that provides concrete evidence for positive environmental externalities and public services that benefit the welfare of society. Thus, the enset-coffee farming system was selected as relevant in the national context to empirically analyse the role of traditional agriculture in conserving and managing crop genetic resources and its benefits to the rest society and economy at large. Among the issues the study examined include: food security value at household level with respect to aggregate crop productivity; environmental/ecological services such as soil erosion control, expensive chemical fertilisers use avoided and costs saved by other sectors (outside agriculture); averted production losses and catastrophic effects (e.g., due to disease outbreak); and provision of genetic stock for international crop improvement breeding for the welfare of present and future generations. The second Ethiopian study quantifies the biophysical nature of soil erosion and estimates the off-site costs due to the erosion agricultural lands upstream of the Koka dam. The aim is to understand the economic impact on the reservoir due to silt accumulation. Using secondary data and survey information, the paper illustrates the negative environmental externality of agriculture affecting the welfare of non-agricultural dependent households. A household level survey was carried out to assess the agricultural practices and the rate of soil erosion at farm level in the upstream catchment. A questionnaire focused on agricultural

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land management practices. The questionnaire captured soil and water conservation practices and farmers perception of the extent of soil erosion hazard on their farms and socio-economic variables that mediate decisions on land management. A stratified random sample of 100 households was selected based on wealth status (rich, medium, poor). Livestock ownership particularly that of draught oxen ownership was the major local indicator of wealth used by key informants to stratify households. Physical quantification of sediments accumulation and valuation of its economic cost was achieved using secondary data generated by earlier studies, namely, batyhmetric surveys and runoff measurements gauging stations in the Upper Awash catchment. The study found that the Koka dam has lost about 30 percent of its designed storage volume to siltation, losing power generation capacity and increasing greatly maintenance costs. Ghana (A. Wayo Seini, George Botchie, and Lawrence Damnyag) The Ghana case study analyses the major environmental externalities generated by the semi-deciduous forest and the Sudan savannah farming systems. The major attributes of the semi-deciduous forest zone farming systems comprise permanent tree crops and rotational bush fallow of food crop farming systems. The interior savannah zone is characterized by a mixed farming system, comprising food crops and livestock. The two zones represent distinct farming systems known for major agro-forestry activities. This study examines the externalities produced in these two agro-forestry systems. The studies uses contingent valuation methods and replacement cost methods to estimate the dimensions of the environmental externalities. A CVM questionnaires was structured to capture the maximum amount of money the respondent are willing to pay for the overall benefits provided by: improvement of scenery, prevention of soil erosion, improvement of wild life habitat, supply of fuel wood, preservation of soil fertility, improvement of water retention and increase of soil fertility, arising from a hectare of an agro-forestry farm. The research team also carried out in-depth interviews with selected stakeholders. These in-depth interviews and secondary sources provided us with the information and data required for the recovery cost estimation of environmental functions. The CVM valuation showed that, in the case of the semi-deciduous farming system. The gender of the farmer and the age of the farmer were the most important factors influencing, the willingness to pay for improved scenery, increased soil fertility, improved water retention, and prevention soil erosion.. The age of the farmer is highly significant at the 1 percent level and gender is significant at the 5 percent level. On the other hand, the significant factors determining the maximum willingness to pay in the Sudan Savannah farming system is household income and age with willing to pay for supply of fuel wood and age. The replacement cost valuations suggest that in the long run, it is more expensive to restore environmental attributes through measures that include dam construction and agro-forestry in the Sudan savannah, than simple agro-forestry projects that rely on rainfall conditions (forest system) as well as supplementary irrigation from hand-dug wells (savannah system). India (Vijaylaxmi Pandey) The India report explores the environmental and economic benefits from adopting more environmentally-friendly tillage techniques, including zero tillage (ZT). The study measures

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input savings for wheat, producer their perception about ZT technology, and the environmental impacts of these technologies. Farmers perceptions are considered as important to understanding how new techniques contribute to reducing negative environment externalities of agriculture and for making them more popular. The specific aims of the study are: (i) to examine the environmental impact of ZT in wheat crop at the farm level; and (ii) to understand the perception of farmers regarding ZT. A survey was carried on in two states; one at an advanced stage of agricultural mechanization and intensification, the other at a lower stage of agricultural development. Haryana state has long benefited from green revolution technologies so represents the developed and irrigated agriculture site. In Bihar state, the spill over effects of the green revolution are percolating gradually, so it represents the lower level of agricultural advancement site. Two districts, Kaithal and Begusarai, respectively from Haryana and Bihar were selected. From the selected districts equal number of both, adopters and non-adopters are surveyed. The total sample size is 400 farmers, with distribution of 200 adopters and 200 non-adopters of ZT. Inverse sampling technique was employed to select the households. The data were collected in collaboration with Rice Wheat consortium for the Indo Gangetic Plains (RWC). The questionnaire was tested and modified after the pilot survey in the field. The information recorded from the farmers include different input use in the field and different farming operations performed. Perceptions about ZT were recorded from both adopters and non-adopters for different set of questions. Net savings were calculated for the wheat crop. The conversion factors were used for physical quantification of the environmental benefits. The results suggest that ZT adopters tend to be younger and their main source of livelihood is agriculture. The data show that both intensive and less-intensive agriculture experience an increase in yield by following ZT or reduced tillage (due to drought in the year 2002), but it is observed to be 3 percent higher for less-intensive agriculture (Bihar) than intensive agriculture (Haryana). The net savings is greater in less-intensive agriculture (Rs 701.14/ha more in Bihar). This demonstrates scope for widespread of ZT and reduced tillage techniques in the coming years in less intensive agricultural areas. From the environmental view point, ZT and reduced tillage saves emission of green house gases. Further, the amount of water used for agriculture is reduced by 20 percent. Indonesia (Fahmuddin Agus and Made Oka A. Manikmas) The Indonesia site study focuses on three sections of the Citarum River, the upstream section located in Bandung District, middle stream in Cianjur District, and down stream area in Karawang District. All three sites are located in Indonesia’s West Java Province. The study estimates different types of non-market values, making use of three measurement methods: the Travel Cost Method (TCM) to measure the value of rural amenities; the Contingent Valuation Method evaluates the willingness to pay for environmentally sound agricultural programs; and the Replacement Cost Method (RCM) is used measure the trade off between economic values of agricultural land use and environmental services. The TCM involved 120 respondents and the CVM involved 180. The RCM relied on secondary data backed up with group interviews to substantiate the information. The travel cost study found the willingness to pay for visits to Jatiluhur Dam is significantly more attractive than Cirata Dam. This reasons include: (i) closer to Jakarta and has better

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facilities; (ii) more alternatives for recreational activities are possible; (iii) Jatiluhur has better promotion to attract visitors; (iv) Jatiluhur is the biggest and the oldest Dam in West Java; and (v) Jatiluhur is more accessible than Cirata. The CVM found that both professional and farmers willingness to pay for environmental programs in the upstream area was highest for reforestation programs, followed by agro-forestry, terracing and alley cropping. In the middle stretch of the river, professionals were willing to pay more for reforestation, but farmers were willing to pay more for alley cropping. From all raised environmentally sound programs, either professional or farmer ready to pay the largest amount for irrigation and drainage system programmes in downstream areas, while supporting reforestation programmes upstream of Citarum. Some 37 percent of the total economic value of agricultural land in the Citarum river basin is provided by marketed products. About 73 percent is contributed by the economic value of land in conserving the environment. Without conservation and this region would experience an estimated economic loss of not less than US $2.65 billion/year. Mali (K. N’Diaye, A. Kouriba, L. Diarra, O. Kergna, Hugo Verkuijl) The objective of the Mali study is to document a number of important irrigation-led changes that have taken place in the delta of the Niger River where the Office du Niger (O.N.) was created in 1932. The major impact of the delta river scheme is the transformation of an arid area into a humid and densely populated ecosystem of primary economic, demographic and social importance. Thanks to the irrigation, a viable habitat with rural development has been created with important contributions to poverty reduction. Household food security and income have increased through direct physical access to food and through the diversification of income sources. The study points out that most impact studies highlight water use efficiency difficulties. The O.N.’s irrigation efficiency (ie, the share of the water diverted from the river that is effectively used by plants) ranges between 40 and 60 percent. Waterlogging is contributing to salinity and related soil problems, reducing productivity. On the other hand, the rise in the water table has significant positive spillovers which this study highlights and quantifies. Among these positive benefits are: (i) the re-use of drainage water for rice and other production with substantial market output; (ii) a number of social and environmental benefits can be observed which are not mediated through markets. One of these is a greatly facilitated access to water for domestic use by the ever growing population which dramatically reduces labour and costs related to domestic water supply; (iii) the rise in the water table makes tree growing and re-forestation possible alongside the irrigation plots, producing wood for the local communities, and has contributed to the viability of orchards plantations and horticulture, which in turn provide enhanced living conditions, a micro-climate, local wood-related businesses, as well as improved nutrition; and (iv) the use of drainage water has led to the creation of a number of villages along major drains where the water is used for cattle, horticultural production, and the abandonment of millet in favour of rice. The study notes that the O.N.’s development causes negative externalities such as malaria incidence increases and impacts on the Niger’s delta water balance and ecosystems downstream the O.N. A major positive externality is the creation of a cultivated eco-system, related to national food supply and to household food security (the latter being enhanced

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through direct physical access to home grown food). Poverty trends at the national level are positively affected by the revitalisation of the O.N. Mexico (María Eugenia Ibarrarán, Enrique Guillomen, José Iván Rodríguez) The Mexico study analyses the rise or organic coffee production to assess agricultural contribution to positive environmental externalities and sustainable agriculture, The study compares organic coffee production practices with the conventional methods. The objective is to distinguish positive environmental externalities that emerge from organic agriculture in this particular case. Mexico is a leader in organic agriculture, exporting to Canada, Europe, Japan and the US. Mexico is the world’s fifth largest coffee producer, after Brazil, Colombia, Indonesia and Vietnam, but the world’s largest producer of organic coffee, and one of the first to produce "gourmet" coffee. Coffee is produced on a total of 690,000 hectares in 12 states in the central-south part of the country. It is grown in the shade with care being taken to protect the ecosystem. Mexican coffee growers, therefore, produce positive environmental externalities through soil, water, and ecosystem protection. The study examines a commercial firm, Ecole-Café, involved in the production of organic coffee. The main environmental benefits derived from this project are a reduction in the use of chemicals and fossil fuels, and substitution of these for renewable resources and natural fertilizers. In addition, Ecole-Café increases carbon sequestration and provides natural settings for migratory birds to stay during their journey during the winter. It provides a clear example of how business and environmental protection can go together. An important message emerging from this case study is that organic agriculture promotes the rational use of natural resources. While initially, organic coffee production was sustained through making use of traditional practices, it has evolved quickly to incorporate more scientific knowledge involving complex practices. Although limited, this case study shows how these integration techniques can be attained. Sustainability implies satisfying necessities in the present without compromising the well being of future generations. This study suggests that extending organic agriculture techniques to produce food and other agricultural products based on protecting natural resources makes economic and ecological sense. The study further concludes that more research should be directed at appropriate technologic option to attain sustainable development through organic production, aimed at lowering the costs of production practices and international certification requirements. Morocco (Allali Khalil) The Morocco environmental module examines two separate cases. The first use contingent valuation techniques to measure rural amenity associated with agriculture. The second uses hedonic pricing techniques to estimate the value of agro-tourism. These studies are being translated into English from French and will be discussed at the Conference workshop.

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South Africa (T.E. Kleynhans) The South Africa study analyses the causal links between agricultural practices and environmental outcomes in several locations around the country. The study focuses on how institutional factors influence agricultural practices and the resulting environmental impacts. The study concludes that the South African government, together with semi-governmental agency influences on agricultural education, research and extension have all contributed to enhancing a culture of environmental and sustainable production awareness and promoting appropriate technologies that to implement sustainable production. These investments in human capital, soil and veld conservation programmes, and conservation legislation have resulted in measurable improvements both in various environmental health indicators, including biodiversity and soil quality. This institutional influence has had a far greater effect on agricultural practices in the commercial farming areas than in the communal farming areas. A fact reflected clearly in the findings of the national study on soil and veld degradation. A second major influence in environmental outcomes has been the retail food chains selling fruit in the northern hemisphere. These food retailers have exerted their dominant bargaining power upwards along the supply chains to export oriented deciduous, citrus and subtropical fruit farms, encouraging environmentally beneficial changes in production practices along the way. The study suggest that these positive changes have the intensive perennial crop production areas of South Africa have been much faster with the commercial retail good exporters chains than what is attained via government legislation. The most effected agricultural practices during the past ten to fifteen years have been: (i) the adoption of less tillage and the use of tooth implements; (ii) more careful fertilization of cropland based on soil sample analyses and fertigation of perennial crops; (iii) more careful crop protection by using less toxic and less quantities of insecticides and fungicides, reducing greatly the active ingredients per hectare. Other innovations include narrower plant spacing, better seed and fruit cultivars, virus free plant material and better livestock breeding stock. The national overview shows either a slow down in the rate of soil and veld degradation, or an actual improvement of soil and veld and thus biodiversity conditions in commercial farming areas. The groundwater quantity, rather than quality, appears to be more of an issues in the drier areas. In the wetter areas, where more intensive agriculture is found and thus more fertilization takes place, various factors - such as the number and distribution of measuring points - complicate efforts to identify agriculture as the major cause of deteriorating ground water and surface water quality. Agricultural impacts on air quality in South Africa is not a critical issue. The influence of agriculture on rural amenities in South Africa is unclear.

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References Agus, Fahmuddin and Made Oka A. Manikmas, (2003), Indonesia Environment Report, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Allali, K., (2003a), Externalités Pécuniaires Positives de l’Agriculture sur le Tourisme de Montagne au Maroc: Application de la Méthode des Prix Hédonistes au Marché des Gîtes Familiaux du Haut Atlas Occidental Marocain, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Allali, K., (2003b), Valeur Sociale de la Conservation du Paysage Agricole au Maroc: Application de la Méthode d’Evaluation Contingente au Paysage Agricole de la Chaouia, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Diarra, L., O. Doumbia, A.O. Kergna, A. Kouriba, M. KN’diaye and H. Verkuijl, (2003), Analyse des Externalités Environnementales des Deux Systèmes de Productions Ciblés, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Elias, E., (2003a), On-Farm Conservation of Genetic Diversity in the Enset-Coffee System and its Economic Value (An Example of Positive Environmental Externality of Agriculture), Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Elias, E., (2003b), Off-Farm Impacts of Soil Erosion: Siltation in the Hydropower Dam (An Example of Negative Environmental Externality of Agriculture), Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Ibarrarán, M.E., E. Guillomen and J.I. Rodríguez, (2003), Environmental Roles of Agriculture in Mexico: Case Study of Organic Coffee Production in Mexico, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Khalil, A., (2003a), Externalités Pécuniaires Positives de l’Agriculture sur le Tourisme de Montagne au Maroc: Application de la Méthode des Prix Hédonistes au Marché des Gîtes Familiaux du Haut Atlas Occidental Marocain, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Khalil, A., (2003b), Valeur Sociale de la Conservation du Paysage Agricole au Maroc: Application de la Méthode d’Evaluation Contingente au Paysage Agricole de la Chaouia, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Kleynhans, T.E., (2003), Environmental Roles of Agriculture in South Africa, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. López, R. and G. Anríquez, (2003), Environmental Externalities of Agriculture: Chile 1980-2000, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy.

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O´Ryan, R., M. Díaz and C. Pincheira, (2003), Perceptions of the Environmental Role of Chilean Agriculture, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Landry Craig E. and Johan A. Mistiaen, (2002), Non-market Valuation of the Environmental Roles of Agriculture in Developing Countries, Rome: FAO. Lopez, R. (2002), A Note on the Environmental Effects of Agricultural Expansion, Rome: FAO. McConnell, Kenneth E., (2002), Issues in Valuing Agricultural Externalities, Rome: FAO. Catalina, A.H. and M. Lizardo, (2003), Case Study of Agriculture’s Environmental Externalities Valuation: Agro-Tourism in the Dominican Republic, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. López, R. and G. Anríquez, (2003), Environmental Externalities of Agriculture: Chile 1980-2000, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. N’Diaye, K., A. Kouriba, L. Diarra, O. Kergna and Hugo Verkuijl, (2003), The Hidden Benefits of the Office du Niger Irrigation Scheme, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. O´Ryan, R., M. Díaz and C. Pincheira, (2003), Perceptions of the Environmental Role of Chilean Agriculture, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Pandey, V., (2003), Environmental Impact of Improved Technology-Farm Level Survey and Farmers’ Perception, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Seini, A.W., G. Botchie and L. Damnyag, (2003), Analysis of the Environmental Services Provided by Selected Farming Systems in Ghana, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Yao, L. and G. Dongmei, (2003), Evaluation of Environmental Roles in Physical Dimension and Economic Value: Case Study of Farming System in Middle and Lower Reaches of Yangtze River, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy.

Table 1: Summary Table of ROA Environmental Site Studies

Country Authors Positive Externality Reduction in Negative Externality

Methodology

Chile Ramón López, Gustavo Anríquez

Soil protection and GHGs Water Pollution Econometric

Chile Raúl O´Ryan, Manuel Díaz

Expert Perceptions Perceptions Delphi

China Yao Lu, Dongmei Guo

GHGs Water Pollution Contingent Valuation

Dominican Republic Alejandro Herrera Catalino Magdalena Lizardo

Agro-tourism Contingent Valuation

Ethiopia Eyasu Elias Genetic diversity Market Value

Ethiopia Eyasu Elias Soil erosion and siltation Market Value

Ghana A. Wayo Seini , George Botchie,

Lawrence Damnyag

Benefits of Agro-forestry Contingent Valuation and Replacement Cost

India Vijaylaxmi Pandey Soil erosion, water savings and GHGs

Market Values

Indonesia Fahmuddin Agus Made Oka A. Manikmas

Rural amenities Agriculture production vs

environmental services

Less damaging agricultural practices

Travel Cost, Contingent Valuation and Replacement

Cost Mali K. N’Diaye, A. Kouriba,

L. Diarra, O. Kergna, Hugo Verkuijl

Irrigation infrastructure Economic Assessment

Mexico María Eugenia Ibarrarán, Enrique Guillomen, José

Iván Rodríguez

Organic Coffee Economic Assessment

Morocco Allali Khalil Rural Amenities Contingent Valuation

Morocco Allali Khalil Agro-tourism Hedonic

South Africa T.E. Kleynhans Land, soil, water and chemical use

Economic Assessment