Economic value of greenhouse gases and nitrogen surpluses: Society vs farmers’ valuation

Livestock supply must challenge the growth of final demand in the developing countries. This challenge has to take into account its ecological effects since the dairy and livestock sectors are clearly pointed out as human activities which contribute significantly to environmental deterioration. Therefore, livestock activity models have to include desirable and undesirable outputs simultaneously. Using this perspective, we implement a Data Envelopment Analysis model to evaluate shadow prices of outputs under contradictory objectives between the society and the farmers. We show that farmers are able to reduce pollution significantly if society accepts to balance farmers’ opportunity cost. Finally, we observe that initial levels of the CO2 tax implemented in European countries are in line with farmers’ valuation while the current level of the CO2 tax tends to reach the value of pollution targeted by the society.

► We implement both Data Envelopment Analysis and Life Cycle Assessment in this research. ► We explore the dual formulation of DEA models with undesirable outputs. ► We implement a directional distance function to distinguish different valuations of pollution. ► We show economic value of greenhouse gases and nitrogen surpluses in tropical livestock. ► The various valuations of greenhouse gases by government are similar to our results.