Exploring environmental - economic performance linkages in EU agriculture: evidence from a panel cointegration framework

Purpose Within an effort of European Union (EU) policy to achieve carbon-neutral agriculture, the present study intends to explore the impact of carbon emissions generated by different sources related to agriculture namely energy used in farming, by enteric fermentation and by fertilizers on agricultural income in 25 countries from EU. Design/methodology/approach In order to evaluate the environmental - economic performance linkage for EU agriculture, we employ a couple of different widely used panel unit root tests explicitly Levin, Li and Chu, Im, Pesaran and Shin, ADF and PP Fisher Chi-square test cointegration test (Pedroni and Kao cointegration tests) and model estimation methodologies namely the FMOLS and DOLS and ARDL - PMG models. Findings All the cointegration techniques employed namely Pedroni, Kao test and Johansen Pesaran cointegration tests validate the existence of long run relationships. The most significant finding is the model estimation based on three different methodologies namely FMOLS, DOLS and ARDL/PMG models. No convergence in the results was found by different estimation models. For the short term coefficients and more specifically for the case of carbon emissions generated by energy the impact on agricultural income seems to be decreasing with a decreasing trend, a result that validates the little effort made by farmers to limit carbon emissions along with the limited efficacy of the implementing policy. The same findings are valid for the first two estimation models while for the case of the third model the reversed relationship is validated. For the carbon emissions generated by enteric fermentation, the inverted-U pattern is validated with DOLS and ARDL/PMG model while for the case of fertilizers only the third model confirms the validity of inverted-U- pattern. Practical implications Based on the obtained empirical results, a list of policy implications is unveiled with multiple impacts on the strategy and practices adopted by farmers in order for the objective of eco efficieny to be achieved. Originality/value The conducted research is focusing on the environmental - economic performance linkages for EU agriculture and examines the role of agri - environmental policy in the evolution of the particular relationship for different sources of environmental pollution in agricultural activity.

Automated summary

This study explores the impact of carbon emissions from different sources related to agriculture on agricultural income in 25 EU countries. The results indicate that the impact of carbon emissions from energy on agricultural income is decreasing over time, suggesting limited efforts by farmers to reduce emissions. For carbon emissions from enteric fermentation and fertilizers, an inverted-U relationship is observed. Based on these findings, policy implications are provided to enhance eco efficiency in agriculture.