The economic sustainability of the agri-environmental policies : the application of Reg. (EC) No 1095/2007 in rice sector

1. Introduction and the question addressed The term “multifunctionality” is at the centre of the political and public discussion, particularly in the agricultural context. The increasing interest for environmental themes in agricultural policy leads agricultural economists to search tools responding to a large number of new emerging issues. Farmers manage a large part of soil and natural resources and thus are responsible for changes in land use, as well as in landscape functions; therefore, they are important partners for policy-makers to collaborate with. In particular, the strong interactions between ecological and agricultural systems require to analyze any possible effects caused by the introduction of new agro-environmental policies, with concern on the their application costs. Such analysis can be carried out by using different approaches which ensure to policy-makers tools for better plan their interventions. The Parco Agricolo Sud Milano (PASM) was founded with the aim of protecting the landscape against urbanization and preserving the agricultural vocation of rural lands in the neighborhood of Milan. We focused our analysis on rice producers that will face the introduction of new law which prevents the use of pesticides containing Tricyclazole in rice cultivation (Reg. (EC) No. 1095/2007), which is expected to imply the shift to different cultivars and a loss of income due to lower yields. 2. Concepts, theories and methodology used With the aim of simulating some of the possible scenarios following the application of policies and highlighting those economically not sustainable, we identified the Positive Mathematical Programming (PMP) as the methodology to combine policy constraints with farmers’ needs. PMP is a policy oriented approach particularly useful in contexts where only short-time data are available. Field data collection has been carried out on a representative sample of farms in the Southern neighborhood of Milan (PASM) by means of interviews and specific questionnaires. In particular the data refer to the field areas and to yields intended to be sold or reused in the farm. Moreover we took into consideration the variable production costs, as well as the market prices. Data collected have been implemented within the PMP model, which is developed in three stages. First, we designed a linear program aiming at the determination of the profit maximizing crop mix; secondly we use the resulting dual values to proceed with a non linear program that reproduces the base-year solution without calibration constraints. At last, we simulated cost and yield variations, based on the information collected directly in fields. 3. Results obtained Concerning rice cultivation, we saw that the prevention to use pesticides containing Tricyclazole, cause rice producers to choose different varieties of rice and to adopt alternative fertilization plans, since there are no substitutes for this active principle. This correspond to lower yields and additional costs to be evaluated. We found that prohibition could lead to loss of yield up to 25%, endangering small farms in the short-term and the whole rice sector in the long-time perspective, so we came at the conclusion that either farmers would be able to readdress their activities or would cease their business, which represents a risk for preservation of the PASM. This confirms that the agro-environmental planning has very broad social implications, which policy-makers have to take into account. In this case, applied economics research represents an important supporting tool for the evaluation of a correct compensation to the farmers, as well as for the estimation of the risk of losing agriculture services for landscape protection.