Managing Potential Pollutants from Livestock Farms: An Economics Perspective

1. Managing Potential Pollutants from Livestock Farms: An Economics Perspective Kelly Zering North Carolina State University

2. How Much is Too Much? If it was possible to achieve zero emissions at no additional cost, then the standard would be zero emissions by consensus. However, since emission reduction is costly, we must continue to address the questions: at what cost and to achieve what value of benefits?

3. Managing Potential Pollutants from Livestock Farms: Outline The Broad Social Context How Much is Too Much? Emissions across Media, Place, and Time Information Needs for Decision Making Research Needs and Priorities Implications

4. The Broad Social Context How do we allocate scarce resources (land, labor, knowledge, capital,…) to various products to maximize the welfare of people? In this case, how much livestock do we produce? How? Where? How is the welfare of various people affected including consumers, producers, nearby communities, and those affected by emissions?

5. The Broad Social Context A general criterion for achieving gains in social welfare by adopting a change is: The change must make at least one person better off than before and make no one worse off. Note that this principle may require those receiving benefits to compensate those incurring costs.

6. How Much is Too Much? • There are no markets and hence no prices for most emissions. • Ideally, emissions are restricted to the level where: value of the environmental effects of the last unit of emissions = the cost of achieving that reduction

7. Emissions acrossMedia, Place, and Time • Ideally, by the first order conditions of an optimum, the value of environmental benefits created by the last unit of emission reduction is EQUAL across various types of emissions via various media in various places at various times. • In practice, only selected emissions are regulated and often regulated for a single medium in a single place.

8. Emissions acrossMedia, Place, and Time • The EPA CAFO rule included VSEPS which ignore cost and allow producers to propose systems that reduce emissions in other places and media as an alternative to the current standard. • Even from this simple standard for improvement, a cornucopia of information needs and researchable questions arise.

9. Information Needs for Decision Making • Valuing changes in environmental attributes and health includes: • evaluating changes in emissions of a wide range of potential pollutants and pathogens,* • evaluating the fate and transport of those emissions,* • evaluating the resulting change in environmental attributes and health, • and attaching a value to those changes. • * National Center or S-1000 topics

10. Information Needs for Decision Making • Valuing changes in income, employment, investment, wealth, and resource requirements includes: • evaluating farm level changes and market level changes in each of these variables,* • ensuring that changes in mass balances are fully accounted at the farm and regional level,* • and evaluating secondary effects on each of these variables at the regional and national level.

11. Research Needs and Priorities Needs in Device and Technique Evaluation: - mass balance monitoring across media - inflow, outflow, and emissions monitoring of compounds of concern - monitoring of flow rates and capacity - monitoring of external conditions - monitoring of device type and model, initial installation cost, expected life, and operating costs and input quantities - estimation of functions representing performance relationships y = f(x). - evaluation of risk related performance attributes

12. Research Needs and Priorities Needs in Farm Systems Evaluation: - SAME AS DEVICE and TECHNIQUE NEEDS - evaluation of additional variable and risk related performance attributes including: effect on emissions and capacity to handle variations in flow and concentration of manure stream with time of day, with age of livestock, with flushing schedule, with season, et cetera - requirements of land, labor, equipment, management, professional services, et cetera for management of ALL by-product streams - effect of local conditions (climate, crops, …)

13. Research Needs and Priorities Needs in Regional Systems Evaluation: - SAME AS DEVICE and TECHNIQUE NEEDS and Farm Systems Needs - evaluation of transportation quantities and costs - requirements of land, labor, equipment, management, professional services, et cetera for management of ALL by-product streams - effect of local conditions (climate, crops, …)

14. Research Needs and Priorities Needs in Byproduct Market Evaluation: - estimate current demand for the by-product in the form it will be produced (wholesale v. retail, bulk v. packaged). - specify price and quantity demanded as a function of product attributes (quality) - specify costs of assembling, processing, and distributing the product including land, labor, equipment, management, professional services, et cetera for management of ALL processing and handling steps - specify price and quantity demanded as a function of local market characteristics (population, income distribution, crop nutrient demand, , …)

15. Research Needs and Priorities Priority in Systems Evaluation for Policy Analysis and Setting of Standards: - *Develop widely accepted, easily accessible systems models that can be used to organize data and identify gaps. The models are transparent and include physical data and functions as well as financial data and functions. Conduct evaluations.

16. Research Needs and Priorities Priority in Systems Evaluation for Policy Analysis and Setting of Standards: - *Conduct market demand estimation and develop fully specified regional and national market models for by-products processing and transportation. Analyze policy options, subsidies and incentives, and synthetic market possibilities in conjunction with environmental benefits analysis. multi-source)

17. Research Needs and Priorities Priority in Systems Evaluation for Policy Analysis and Setting of Standards: - *Continue integrated farming systems analysis including feeding systems for livestock and refeeding standards for minerals and other nutrients. Develop land applications standards and systems for forests including mass balance based emissions analysis.

18. Research Needs and Priorities Priority in Systems Evaluation for Policy Analysis and Setting of Standards: - Develop location dependent value index functions for emissions. Continue to develop flexible policy options with incentives (VSEPS).

19. Implications • Establish an ongoing economic systems modeling program. … regional centers, USDA, EPA, DOE, land grant universities, and industry.

20. Implications • Use prior economic analysis and complete system analysis to identify research priorities. Which components, techniques, systems, … are most likely to produce benefits valued more than their costs?

21. Implications • Formalize, generalize, and expand the emerging bio-based human systems paradigm including broadening the scope of agriculture and silviculture to produce energy, nutrients, and other compounds as well as to recycle energy, water, minerals and nutrients wasted by other human activities so as to enhance environmental attributes and health.

22. Questions?

23. The Broad Social Context Current technology, existing resource allocation and property rights (including regulation), and markets for livestock products and for inputs such as feed, land, labor, and capital are the dominant determinants of how much, how, and where. Pressure to change regulations arises from changes in production methods and location, changes in technology, changes in wealth, and changes in people’s preferences, etc. (e.g. ERS).

24. How Much is Too Much? • In the absence of complete information, incremental changes in standards may be made such that: value of the environmental effects of the last unit of emissions > the cost of achieving that reduction. In practice, rules are applied such as best available technology, economically feasible.