Environmental sustainable value in agriculture revisited: How does Common Agricultural Policy contribute to eco-efficiency?

The conflict between capital-intensive agriculture, often called industrial agriculture, and sustainable farming is ongoing, and not because of Western European countries, where intensification is increasingly sustainable. It is caused by several million small farms in Central and Eastern Europe that must choose a long-term development path. This is also a dilemma for agricultural policy: Are small farms so environmentally friendly that they should play the role of 'landscape guardians' at the expense of public support and economic vegetation, or should they strive to improve productivity through investments? This study offers a methodological contribution to the value-based sustainability approach by computing indicators of environmental sustainable value (ESV). The authors have attempted to combine the value-oriented approach with frontier benchmarking. They then tested how the European Union Common Agricultural Policy (CAP) schemes contribute to ESV using a long-term panel of regionally representative farms from Farm Accountancy Data Network (FADN) with regard to factor endowments, for the years 2004-2017. The seminal within-between specification was employed to control the time variant and time invariant space heterogeneity of European regions. The main finding is that higher investment support is beneficial to ESV. Regarding factor endowment influence, there was a positive impact of the capital-labour ratio. Except the cross-sectional impact of environmental subsidies, the payments exert a negative effect on ESV.

Automated summary

This study examines the conflict between capital-intensive agriculture and sustainable farming, focusing on the dilemma faced by small farms in Central and Eastern Europe. By calculating indicators of environmental sustainable value (ESV), the authors find that higher investment support is beneficial to ESV.