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<ul><li> 1. Roles of Agriculture ProjectInternational Conference20-22 October, 2003Rome, ItalyEnvironment ModuleRoles ofAgricultureProjectAgricultural and Development Economics Division (ESA)Food and Agriculture Organizationof the United Nations </li> <li> 2. The Roles of Agriculture Project aims to extend current thinking about thesocial, environmental and economic roles of agriculture in the developmentprocess. For more than three years, the project has worked to establish ananalytical framework; to identify the social and economic roles for which themarket prices of agricultural activities fail to convey sufficient signals to securean 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 topresent and discuss research results from the eleven case studies and to drawon the lessons, strengths and experiences learned over the past three years forthe design and implementation of future work. The country studiesconsist of module reports (policy, environment, poverty, food security, buffer,social viability, and culture) and a national summary report. This paper hasbeen prepared for presentation to and discussion by country case study teammembers participating in the International Conference. It is a working draft.The Roles of Agriculture Project is funded through a Trust Fund from thegovernment of Japan. The project is run by the Agricultural and DevelopmentEconomics Division of the Food and Agriculture Organization of the UnitedNations. For more information on this Project or the Division andits work, see the ESA website at www.fao.org/es/esa. </li> <li> 3. Environment Module Cross Country ReportAllali Khalil, Magdalena Lizardo, Randy StringerPaper prepared for the Roles of Agriculture International Conference20-22 October, 2003 Rome, ItalyAgricultural and Development Economics Division (ESA)Food and Agriculture Organizationof the United Nations </li> <li> 4. Cross Country Report1The Roles of Agriculture Project (ROA) aims to extend current thinking about the social,environmental and economic roles of agriculture in the development process. This paperrepresents the first attempt to draw out lessons, issues, results and experiences provided by the11 ROA country studies focused on environmental externalities. Each of the 11 countrystudies present: (i) a national level assessment of agricultural externalities (both positive andnegative); and (ii) site specific case studies providing qualitative and/or quantitativeassessments either of positive agricultural externalities or examples of a reduction in negativeexternalities. This paper is prepared for presentation and discussion by the country case studyteam members participating in the environmental module workshop at the ROA InternationalConference 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 overallnational assessment describing the prevalence, pressures and policy responses to agriculturalexternalities. The national assessment outlines how agricultural externalities impact on soil,water, biodiversity air quality, and rural amenities. The reports consider both positive andnegative externalities. The purposes of this national level assessment are: to provide a broadoverview of the major agricultural-related environmental issues facing the country; to presenta policy landscape describing what policy models and tools are being used to address thoseenvironmental issues, and to explain the pressures driving changes in agricultural practicesthat induce positive or negative externalities. The intent is to understand the underlying causesof sustainable and unsustainable agriculture, ie to what extent are technologies andmanagement practices that promote good environmental outcomes or bad environmentaloutcomes encouraged by policy failures, market failures or institutional failures.The second country environmental module report is a site specific study. The main purpose ofthe site specific study is to quantify the value of agricultural externalities, includingmeasuring the non-market values. The existence of an agricultural externality suggests thatthe agricultural practices or systems are either over producing, or under producing, somegoods or services1. The site specific case studies attempt to examine how markets, institutionsand policies interact to produce sub-optimal social outcomes, and estimate the value of theexternality. In the site studies, the emphasis is placed on the economic and environmentalimpacts at the local, regional, national and global levels.Three theoretical background papers provide the research objectives, guidelines, andmotivations of the environmental module (Landry and Mistiaen, 2002, Lopez 2002, andMcConnell 2002). Lopez provides an overall conceptual framework for the studies, outlininghow environmental impacts of agricultural growth depend on five conditions: (i) propertyrights; (ii) the sources of agricultural growth; (iii) the types of policies used to stimulateagriculture; (iv) government credibility; and (v) whether or not farmers are subsistence orcommercial. One aim of Lopezs conceptual framework is to allow countries to be classifiedbased on the degree to which they satisfy the five conditions.Lopez proposes a working hypothesis suggesting that the environmental consequences ofagricultural growth depend critically on the prevailing government policies and institutions.Thus, a taxonomy based on these five conditions provides insights into the likelihood that1A related explanation is that society is over or under consuming goods or services that agriculture provides </li> <li> 5. Environment2agricultural growth in a particular country is more likely, or less likely, to promoteenvironmental benefits. The environmental outcome, however, depends on the five prevailingconditions, with the environmental impacts ranging from very positive to massivelydestructive.Lopez then postulates that agricultural expansion based on appropriate incentives is likely toinduce an environmental dividend if certain minimum institutional conditions are satisfied.Many of these environmental services are externalities, neither taken into consideration by themarket, nor assessed by policymakers, nor represented in national accounts. Instead, othersectors may benefit from positive agricultural externalities. However, in other circumstances,agricultural growth based on inadequate incentives and weak institutions is likely to generatemassive negative environmental effects. One aim of using a typology based on the fiveconditions outlined above to identify and correct the market failures, institutional weaknessesand perverse policies to secure and enhance positive environmental outcomes.Landry and Mistiaen (2002) and McConnell (2002) provide theoretical notes for the ROAcase studies that focus on the technical aspects related to choosing site study methodologiesand 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 backgroundmaterials, is to highlight the basic measurement principles, assumptions, data requirements,and interpretation of results. The appropriate methodology to use depends on the site studyintent and the need to estimate values from observed market behavior or rely on directquestioning of consumers. The site studies reflect a wide range of valuation techniques,including market price methods, replacement costs methods, travel costs methods, hedonicprice 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 resourceendowments, income levels, and agricultural structures. Their agricultural sectors vary widelyboth among and within countries. Likewise, the prevailing government policies andinstitutional conditions that shape environmental consequences of agricultural growth varyacross and within the countries. However, the module reports suggest that countries do share anumber of similar characteristics, trends, and pressures that are influencing agriculturalpractices and the impact those practices have on environmental externalities.How the five prevailing conditions suggested by Lopez are addressed are fundamental tounderstanding the environmental outcomes from these pressures. Among these commonforces that are interacting with government policies and institutions to produce positive andnegative environmental impacts are: expanding globalization and trade; agricultural andsector-wide policy reforms; technological advances; and substantial changes in relative pricesleading to more intensive, more specialized, and more concentrated production anddistribution systems. Four driving forces are presented here for discussion at the workshop.First, globalization pressures, including international development community pressures tointegrate environmental objectives with agricultural objectives is making the agriculturalsector policy agenda more complex than ever in the case study countries. International anddomestic pressures are forcing policymakers to search for the right combination of </li> <li> 6. Cross Country Report3socio-cultural measures to improve rural areas, promote economic incentives to increaseresource efficiency, and environmental regulations to protect soil, water, food and farmworkers.During the years following the United Nations Conference on Environment and Development(UNCED), the international communitys guiding principles on sustainable development hasincreasingly implied that agriculture should widen its focus from expanding production andincreasing yields to include sustainable management of ecological processes, environmentalservices and social goods. While these objectives are not necessarily incompatible, sometrade-offs are inevitable. Despite its message of harmony, the concept of agriculturalsustainability raises tension between market-driven economic growth strategies, socialpressures for a more equitable distribution of economic opportunities and the need to maintainenvironmental productivity, ecological services and biodiversity to fulfill future economic andsocial aspirations.Second, most of the countries have signed onto a variety of multilateral environmentalagreements (MEAs), including conventions and treaties on desertification, biodiversity,climate change, forestry and fisheries. The ROA case study countries are participating invarious international bodies to harmonize criteria and codes of conduct for farming practices.If enacted fully, these commitments in the international arena have important consequencesfor agricultural production and rural development.Over time, MEAs have become increasingly specific, setting out detailed strategies andprocedures, establishing measurable objectives and standards, and setting precise dates bywhich signatories must comply. Compliance often requires changes in national legislation,state and local regulations, tax policy or regulatory systems. For the ROA countries, concernsover environmental agreements are analogous to concerns over domestic standards andenvironmental controls that influence production costs, shift relative factor prices, and therebyaffect short-term competitiveness, export performance and jobs.A third common pressure influencing environmental outcomes is the regional and global tradeinitiatives encouraging countries to integrate national level political, economic andenvironmental 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 initiativeshave had some positive environmental outcomes in local areas. Two important reasonsexplaining the positive outcomes are (i) the increased demand for safe and uncontaminatedfoods and (ii) increased demand for sustainable production practices. The export markets inROA countries are concerned more and more with the safety, nutritional quality, freshness anddiversity of their food exports. As a result, producers and exporters are increasingly occupiedwith 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 (bothwithin the ROA countries and in those countries importing their exports) imply high incomeelasticities of demand not only for safe foods, but also for environmental goods, such asenvironmentally-friendly production practices. Consumers are now concerned about whether </li> <li> 7. Environment4production and distribution processes entail environmental damage, including land and waterdegradation, biodiversity loss, and packaging waste.As pointed out in the Mexico case study, green certification and ecolabelling programmesrepresent one important market response to the demand for environmentally-friendly practicesand healthy products. Ecolabelling attempts to capitalize on the price premiums consumersare willing to pay for both the private good of safe food and the public good of an improvedenvironment. While producers have marketed the nutritional attributes of their products forsome time (such as health benefits of organic produce), only recently have they begun tomarket sustainable practice attributes.In the ROA countries where food exports are aimed at high income countries, the public andprivate institutions are building up a range of signaling mechanisms to pass on keyinformation to support producers. These signaling mechanisms include: reliable productinformation...</li></ul>