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Much attention this summer has focused on the amount of
subsidies paid to U.S. farmers in the form of commodity and
conservation payments as part of the 2002 Farm Bill. But
none of the figures include another cost seldom tabulated as
part of the total agricultural price tag: the cost of
externalities.
Externalities are costs that are external to a system or
market. In agriculture, an external cost would be the cost
to clean up a stream contaminated by a leak in a livestock
manure lagoon or treatment to remove nitrate from drinking
water. Agricultural practices also can create erosion and
soil loss, which lead to problems with flood control and
navigation, lost capacity in reservoirs and irrigation
channels, and problems related to loss of water quality.
In 2002 and 2003, Leopold Center scholar Erin Tegtmeier and
(then) associate director Mike Duffy conducted a study to
calculate the external costs of agriculture. They used an
approach similar to one used by British ecologist Jules
Pretty in 2000 to arrive at an aggregate, national figure
for specific costs of agriculture. Pretty used existing
databases and studies and estimated the negative impacts of
agriculture in the United Kingdom at about 208 pounds per
hectare (approximately $349 per acre at the January 2000
exchange rate).
Study looked at crops, livestock
The Tegtmeier-Duffy study recently was published in the
International Journal of Agricultural Sustainability. In the
peer-reviewed article, they estimate the negative impacts of
crop and livestock agriculture in the United States may cost
society anywhere from $5.7 to $16.9 billion each year. They
estimate that U.S. crop production alone has external costs
ranging from $11.92 to $38.74 per acre. The study calls for
a restructuring of agricultural policy that shifts
production toward methods that lessen external impacts.
Tegtmeier and Duffy looked at six general categories: damage
to water sources ($419.4 million), damage to soil resources
($2.2 to $13.4 billion), damage caused by greenhouse gas
emissions from cropland and livestock ($450.5 million),
damage to wildlife and ecosystem biodiversity ($1.1
billion), and damage to human health from pathogens and
pesticides ($416 million, and $1 billion, respectively).
They classified cost estimates according to production type
(crop or livestock) and area-based external cost figures for
crop production also were calculated. They reviewed more
than 50 studies that assigned values to specific impacts of
agriculture in the United States, then revised and updated
the values to reflect changes in conditions. They also
deflated some of the estimates to address changes in
technology and a subsequent decrease in soil erosion.
The study is based on 417 million cropland acres in the
United States reported by the U.S. Department of Agriculture
in 2000. The figures did not include approximately 37.8
million acres that were idled that year.
Soil resources hit hardest
The highest estimates were in the category of damage to soil
resources, primarily from soil erosion, of which agriculture
is the single largest contributor. Their figures included
cost to the water industry for additional treatment, lost
capacity of reservoirs, cost to water conveyance systems,
flood damage, cost to recreational activities, navigation,
commercial fisheries, and municipal and industrial users.
They reasoned that a great deal of research exists on soil
erosion from agriculture and that the direct effects may be
simpler to track and analyze than in other categories.
Impacts on water resources were gauged by the costs of
treatment necessary to control major pollutants associated
with agricultural production including microbial pathogens,
nitrate and pesticides.
Among the damages to wildlife and ecosystem biodiversity
they included the cost of honeybees and pollination losses
($409.8 million), loss of beneficial predators from
pesticide use ($666.8 million), fish kills from pesticides
and manure spills (an average of $48.4 million), and bird
kills due to pesticides ($34.5 million).
Economic losses could be higher
According to the authors, the study illustrates that current
agricultural practice results in very real economic, social
and environmental impacts, which would significantly affect
the perceived economic efficiency of agriculture if they
were paid by the industry itself. They report that while
U.S. farmers spent $8.2 billion on pesticides in 2002, this
is less than 80 percent of the actual cost of pesticide use
considering the $2.2 billion in damages to water resources,
wildlife and ecosystem biodiversity and human health that
they calculated.
The study concludes by stating that the figures identified
may be on the conservative side, partially due to a need for
more data and partially because the full consequences of
agriculture may not yet be known. It also calls for
valuation studies into the potential positive externalities
of sustainable agricultural practices, such as providing
carbon sequestration or wildlife habitats. Such
acknowledgment of the true costs and benefits of various
methods, technologies and practices available to farmers may
help to influence a shift in agricultural practices and the
policies that promote them.
They also acknowledge that placing exact monetary figures on
factors such as the value of a bird’s or a human being’s
life is extremely difficult and that further work is called
for, but insist that such studies can aid in influencing the
future of agricultural practice: “A monetary metric provides
a base for comparisons to aid in policy decisions.”
In the article, Tegtmeier and Duffy conclude that “the
partial estimate of damage costs promotes responsible,
creative policy actions to acknowledge and internalize the
externalities of production practices that are generally
accepted and widespread.”
For a copy of the article, contact the Leopold Center, or go
to the Center’s web site at:
www.leopold.iastate.edu/
pubs/staff/files/externalcosts_IJAS2004.pdf.
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