Assessing the Eco-efficiency of Swedish Crop Farms and the Role of Subsidies: A Directional Distance Function (DDF) Approach

Summary

It has been a worldwide issue that agriculture production is far from being environmentally sustainable. The sector contributes to GHG emissions, especially from the increased use of synthetic fertilizers. This study investigates Swedish crop farms in terms of their farm performance, measured in farm net value-added, and the associated environmental pressures generated from their production (GHG emissions), measured in CO2e, through the concept of eco-efficiency. Eco-efficiency is the term used to define the creation of goods with the efficient use of resources while reducing environmental damage. This study (1) assesses the extent to which Swedish crop farmers can jointly increase farm performance and also reduce GHG emissions at the same time, and (2) investigates the effect of CAP subsidies on eco-efficiency. Panel data from the Farm Accountancy Data Network (FADN) was used with 2197 observations from 2009-2020. Parametric estimation was done through the directional distance function (DDF) approach and stochastic frontier analysis (SFA).

Results suggest that most crop farms in Sweden are eco-efficient with farms having eco-efficiency scores of more than 80%. On average, it suggests that simultaneously increase and decrease FNVA and GHG emissions, respectively, by 10%. In relation to investigating the role of crop and environmental subsidies, results suggest that they do not contribute to eco-efficiency. Meanwhile, the CAP reform implemented in 2015 and the level of crop diversion improves the eco-efficiency of crop farms.