Assessment of Environment Impact of CAP Reforms on European Agricultural Production Efficiency

Abstract

The studies of performance and production efficiency have ignored additional products of most transformation processes classified as undesirable outputs. Without the inclusion of the undesirable outputs, the efficiency measurement is a purely technical measure, and it does not account for the interaction of the system with the environment and the impact of policy decisions on the system. Moreover, there are technological dependencies between the desirable and the undesirable outputs which have to be included in the analytical tools used to measure efficiency. The relationships between the desirable and the undesirable outputs motivate the exploration of new areas of the measurement of efficiency to incorporate policy decisions and address new issues. This research develops a formulation that uses goal programming in conjunction with Data Envelopment analysis – known as GoDEA approach – to deal with the conflict between the desirable and the undesirable outputs. This approach is used to assess the environment impact of the Agenda 2000 and the 2003 Common Agricultural Policy reform on agricultural production in fifteen European countries. Model results show that the 2003 CAP reform strengthens environmental policies and has a better performance than the Agenda 2000 for some European countries. The North and Central European countries have been dealing better with environmental issues than the Mediterranean countries.