As people become richer and achieve higher living standards they care more about a cleaner natural habitat (Dinda, 2004). Poor people have a little demand for environmental quality, simply because their first priority is how they will obtain the essential goods in order to survive (Figure 11). Roca (2003) states that after a particular level of income, the willingness to pay for environmental quality rises by a greater proportion than income. Higher income consumers tend to spend more money on environmental friendly products, they donate money to environmental organizations and, in general, they create pressure for environmental regulations.
Consumers’ preferences have led to a market-oriented production, as farmers are planning their production according to the market needs and demand. Therefore, households’ and consumers’ preferences play a significant indirect role in transformations in rural areas such as intensification and changes in labor economy. Many of these transformations, like the increased use of chemical inputs and the simplification of the agricultural landscapes are leading to serious environmental problems such as biodiversity loss and water pollution.
Institutions play an important role in the process of economic growth (Rodrik, et al., 2004). Their intervention, regulations, proposals and training services can prove to be beneficial in the race to achieving a sustainable economic growth. Some of the most important services that are provided by institutions are depicted in Figure 12. Institutions have promoted the technological advances that alleviated various problems such as the Green revolution that played a significant role in reducing the rate of world malnourished people. The higher demand for environmental quality can be the driver for the establishment of environmental institutions that will clarify the respective problems and will provide practical solutions (Panayotou, 2003).
High quality institutions can contribute to a more sustainable economic growth and reduce the threat to the environment. For instance, Panayotou (1997) has shown that improvements in the quality of institutions, such as respect and enforcement of contracts, the extent of government corruption and efficiency of bureaucracy, have triggered a reduction of greenhouse gas emissions.
For the agricultural sector, institutions can shape and influence farmers’ practices. Extension services constitute the link between institutions and farmers. Agricultural institutions offer training sessions that inform producers on how to use the different inputs and agricultural machinery, the existence of new technologies and the protection of the environment.
The political environment plays a leading role in the way that different societies deal with the environment. Furthermore, the economic performance of a society is significantly affected by the political system and institutions (North, 1991).
Agricultural policies and regulations can influence input choice and use at the farm level. For instance, the European Union has banned some types of pesticides and has issued rules for the sustainable use of other types of pesticides. Moreover, policy interventions like subsidies can have significant impacts at a regional level. Many times farmers abandon traditional crops that fit more to certain landscapes and climatic conditions simply because a subsidy encourages production of another crop that is promising to increase their profits. This crop switching can have devastating effects on the ecosystem as some new crops can prove to be resource intensive.
On the other hand, policy initiatives like extension services enable farmers to enlarge their knowledge on issues like good agricultural practices and the environment.
Policy Implications, Gaps and Overlaps
Examining the relationship between economic growth and the environment from a macro and micro point of view has led us to a number of useful policy recommendations, gaps and overlaps:
- The early evidence of a relationship between economic performance and environmental pollution suggesting an inverted U-shaped relationship is now being questioned on methodological and other grounds.
- Agricultural sustainability has emerged as a broader concept that includes the notions of resilience (the capacity of systems to endure stress) and persistence (the system’s capacity to continue over long periods).
- Environmental stewardship is now a mainstream attribute of agricultural sustainability, which admits a stronger set of pressure external to the farm decision making environment.
- Trade liberalization and direct investment is being recognized as uncoupling of production and consumption of resource intensive and polluting products, and global trade provides an opportunity to technology transfer of cleaner technologies.
- Democratization can have beneficial effects on environmental quality and economic growth through the introduction of secure property rights and accounting of benefits of public goods.
- The over-reliance of agricultural production on agrochemicals has brought several adverse effects on the environment and human health. Changes in consumers’ behavior towards higher environmental quality like chemical-free products have induced a tendency for a structural change in the agricultural sector.
- Policies aiming to mitigate the negative externalities of agriculture oblige producers to follow “cleaner” agricultural practices.
- Higher income consumers tend to spend more money on environmental friendly products, they donate money to environmental organizations and, in general, they create pressure for environmental regulations.
- In addition to the use attributes of a product, consumers’ preferences are placing a value on how products are made and the environmental impact of product manufacturing. Households’ and consumers’ preferences play a significant indirect role in transformations in rural areas such as intensification and changes in labor economy.
- For the agricultural sector, institutions can shape and influence farmers’ practices. Extension services constitute the link between institutions and farmers.
III. Pesticides and Biodiversity Pesticides are used widely in agricultural production. Productivity gains and cost minimization are some of the advantages of pesticide use but there are several disadvantages. Overuse or use at the crop edges that constitute forage and nesting habitats for farmland fauna can reduce biodiversity. Non-target plant species that benefit farmland fauna can also lead to extinct due to competition for nutrients with target species. Precise use of pesticides can address the pre-mentioned problems.
Plant protection products constitute one of the most important agricultural inputs. Being a damage- and risk-reducing input, these products are widely used and their demand is inelastic. Their stochastic nature (productivity and climatic conditions, pest arrival) is related to uncertainty on the timing and the way of applying them. Additionally, pesticide application is related to various externalities that call for an immediate orthological use of these chemical substances. Pesticide risk valuation studies in conjunction with Integrated Pest management (IPM) strategies are providing the means of alleviating the above mentioned externalities.
Productivity and Pesticide Use
Pesticides are active substances that enable farmers to control different pests or weeds, constituting one of the most important inputs in agricultural production (Commission of the European Communities, 2006). There is a large range of positive outcomes from the use of different pesticides related to agricultural productivity (Figure 13).
Figure 13. Impacts of pesticide use on agricultural productivity
Source: Author, 2008
The potential benefits are particularly important in developing countries where crop losses contribute to hunger and malnutrition (Anon, 2004). Therefore pesticides can help in securing crop yields and thus they can combat hunger in these countries and improve the populations’ health and nutrition. Additionally, improving crop yields and quality of the obtained products results in increased farm and agribusiness revenues. As weeds are the major constraint reducing yields in many crops, herbicides are the most widely used type of pesticides. Anon (2003), reports a US $ 13.3 billion loss in farm income in the United States in 2003 if herbicides were not used. Cooper and Dobson (2007) are referring to a number of benefits due to pesticide use. Among them are the improved shelf life of the produce, reduced drudgery of weeding that frees labor for other tasks, reduced fuel use for weeding, invasive species control, increased livestock yields and quality and garden plants protection. However, the benefits of pesticide use should always be evaluated in comparison with the benefits and costs of other pest control methods (Edwards-Jones, 2008). Pesticide use may have clear advantages in some occasions like ease of use and speed of control. But the use of other pest control methods such as biocontrol agents or mechanical means may be more preferable in specific cases and farmers and society may select the most appropriate by considering its benefits and costs.
Figure 14. Pesticide Externalities
Source: Author, 2008
Starting with the publication of Rachel Carson’s Silent Spring in 1962 which highlighted the risks of pesticide use, continuous use of chemical inputs such as pesticides produces significant negative externalities that have been broadly documented in the scientific literature (Pimentel et. al., 1992; Pimentel and Greiner, 1997). Figure 14 distinguishes pesticide externalities into two categories; health and environmental externalities Pesticides are not used only in agriculture, but they are applied for landscaping, on sporting fields, road and railway side weed control, public building maintenance and other activities. These substances can be dangerous for human health when the degree of exposure exceeds the safety levels. This exposure can be direct, such as the exposure of farm workers applying pesticides to various crops and indirect by consumers consuming agricultural products containing chemical traces or even bystanders near application areas. Exposure to pesticides is responsible for various short- and long-run ailments and even deaths (Wilson & Tisdell 2001). This fact is supported from the data of Food and Agriculture Organization (2008) that show that tens of thousands of farmers each year are affected by exposure of pesticides. The largest number of poisonings and deaths is recorded in developing countries as most of the times the farmers do not use the appropriate protective equipment. In developed countries farmers use pesticides from a close environment such as tractors and aircrafts. While in developing countries, many of the farmers are small scale operators lacking protective equipment and are coming in direct contact with pesticides as they use hand sprayers.
Additionally, the excessive and uncontrolled use of pesticides can pose serious and irreversible environmental risks and costs. Fauna and flora have been adversely affected while the decline of the number of beneficial pest predators has led to the proliferation of different pests and diseases (Pimentel and Greiner, 1997). Certain pesticides applied to crops eventually end up in ground and surface water. In surface water like streams and lakes, pesticides can contribute to fishery losses in several ways (Pimentel et al., 1992). High chemical concentrations can kill fish directly or indirectly by killing the insects that serve as fish food source. Moreover, the extensive use of pesticides has often resulted in the development of pesticide resistant weeds and pests. This can trigger an increased pesticide application in order to reduce the respective damage that results in high economic costs that the respective farmers must shoulder. Pimentel et al. (1992) mention many adverse consequences from the overuse of pesticides such as animal poisoning, contaminated products, destruction of beneficial natural predators and parasites, bee poisoning and reduced pollination, crop and biodiversity losses.
Pesticide Risk Valuation
There are many difficulties in calculating the economic value of reducing pesticide risk. Over the last two decades, many attempts have been made in order to value pesticide risks. The meta-analysis of Florax et al. (2005) and Travisi et al. (2006) provide a good overview of the literature on pesticide risk valuation. These analyses have shown that the literature is very diverse as it provides willingness to pay (WTP) estimates not only for various human health risks, but also for environmental risks. However, the majority of studies estimate WTP for the negative externalities on human health. Furthermore, there is a great variation in the WTP estimates as some studies have found higher WTP for human safety than environmental quality (Foster and Mourato, 2000), while others have shown higher WTP for environmental quality than for food safety and human health (Balcombe et al., 2007). This mixed evidence is attributed to the use of different valuation techniques and to differences among the available biomedical and ecotoxicological data. Foster and Mourato (2000) provide a conjoint analysis of pesticide risks by estimating the marginal value of risk reduction for human health and bird biodiversity. Additionally, Schou et al. (2006) and Travisi and Nijkamp (2008) used a choice experiment approach to estimate the economic value of reduced risks from pesticide use. The latter approach was also used by Chalak et al. (2008) that found high WTP for reduced pesticide use for both environmental quality and consumer health. Moreover, this study indicates the presence of heterogeneity in people’s preferences for pesticide reduction in relation to environmental quality and food safety.
As pest arrival is an uncertain event and pesticide productivity varies across time and space, there is an uncertainty about farmers’ profits (Figure 15). This uncertainty can lead to overuse of pesticides relative to the private or social optimum.
In an effort to avoid crop loses, risk averse farmers apply pesticides at an early stage when the pest population may not be at its pick. This action can induce extra costs as additional pesticide doses are applied. On the other hand, waiting and monitoring the pest population and applying when full information are available may cost extra money from the crop loses of the monitoring stages. Norgaard (1976) states that the major motivation for pesticide application is the provision of some “insurance” against damage. Therefore, uncertainty in the pest-pesticide system leads to a higher and more frequent use of pesticides.
Figure 15. Uncertainty and pesticide use.
Source: Author, 2008
Moreover, there is uncertainty regarding the effectiveness of pesticides. Many times, farmers lack full knowledge of the relation between pesticides and pest mortality (Feder, 1979). The effectiveness of pesticides can be influenced by fluctuations of temperature, wind and humidity conditions. Therefore, the uncertainty is high not only due to the fact that the pest population can vary with changes in climatic conditions but also these changes can alter the effect of pesticides as every chemical product has different durability. Feder (1979) shows that an increase of the degree of uncertainty due to pest damage will cause an increase in the volume of pesticide use. Horowitz and Lichtenberg (1994) consider three scenarios of uncertainty: a) uncertainty about crop growth conditions only; b) uncertainty about pest damage only; and c) uncertainty about both growth conditions and pest damage. Their findings support the conventional view that when there is uncertainty due to pest damage, pesticides are likely to be risk reducing inputs. However, the literature reports mixed findings on the role of risk aversion. When both pest populations are high and growth conditions are favorable, pesticides will be risk increasing as they increase the variability of harvests (increase output under good growth conditions). Gotsch and Regev’s (1996) study for Switzerland shows that fungicides for wheat producers have a risk-increasing effect on farm revenues. Horowitz and Lichtenberg (1993) have shown that pesticides may be risk increasing inputs even if a federal government provides crop insurances that act as a substitute for additional pesticide applications.
Saha et al. (1997) report the importance of considering the stochastic nature of both the damage control and the production function, in order to avoid overestimation of the marginal productivity of damage control inputs. Furthermore, pesticide productivity is affected by the level of the developed resistance. The more resistant is the pest population the higher is the use of the damage control agents (pesticides) until resistance is sufficiently pervasive and alternative damage control measures are more cost effective.
Pesticide Sales in European Countries
Table 1. Total Sales of Pesticides in European Countries (t of active ingredient).