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European Review of Agricultural Economics 2008 35(2):193-217; doi:10.1093/erae/jbn025
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© Oxford University Press and Foundation for the European Review of Agricultural Economics 2008; all rights reserved. For permissions, please email journals.permissions@oxfordjournals.org

Stringency of environmental targets in animal agriculture: shedding light on policy with shadow prices

Anni Huhtala

Agrifood Research Finland (MTT), Helsinki, Finland

Per-Olov Marklund

Umea University, Sweden

Corresponding author: Anni Huhtala, MTT, Luutnantintie 13, FI-00410 Helsinki, Finland. Telephone: +358-9-56086205. Fax: +358-9-5631164. E-mail: anni.huhtala{at}mtt.fi

Received December 2006; final version received May 2008

We present a framework for deriving shadow prices for regulations on manure-spreading in animal agriculture and demonstrate that these prices can be used as indicators of the stringency of environmental regulation. We illustrate our approach with the case of water protection measures implemented in Finland to restrict the use of phosphorus on livestock farms. The estimated shadow price of the nutrient limit lies in the range {euro}60–125 per kilogram of bioavailable phosphorus in manure, assuming that output reduction is the only option for decreasing the amount of manure in manure-dense areas. However, instead of cutting output, farms may be able to avoid these high abatement costs by more efficient input use or alternative abatement methods.

Keywords: environmental regulation, technology choices, phosphorous surplus, manure, Finland

JEL classification: Q12, Q21, H23


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