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Economic analysis that excludes the value of productivity changes of natural resources or externalities will overstate the value of resource-degrading practices and understate the value of resource-conserving practices.
Resource-conserving production practices can be economically and financially superior to, or competitive with, conventional practices.
Failure to account for the degradation and depletion of natural resources can mask their true economic value, thus justifying policies that diminish sustainability and result in significant economic and fiscal losses.
A Sectoral Study of Agriculture
WRI completed a major national economic analysis of agricultural sustainability in the United States in 1995. This study applied an NRA framework to analyze the economic and environmental impacts of alternative policies and production systems (Faeth, 1995). After compiling agronomic data from experiments, field trials, and producer records for alternative production systems in 10 regions of the United States, WRI evaluated these alternative systems, as well as the predominant systems for a given region, using a biophysical soil and crop model to determine soil erosion rates, long-term crop yields, nutrient loss, potential groundwater contamination from nitrates, and soil carbon sequestration. This information, together with financial and energy analysis and economic valuation of environmental impacts, makes the database supporting this project the single most complete collection of information yet available on "sustainable" production systems.
The economic model that resulted from the WRI study is the most comprehensive and empirically based policy tool yet developed for analysis of agricultural sustainability in the United States. To date, no national economic model has used such extensive information on alternative production systems, the environmental impact of predominant and alternative farming systems, or the economic value of natural resource impacts.
The research plan involved four steps:
collecting and organizing existing agronomic data on predominant and alternative3 production systems,
calculating crop budgets and simulating the environmental characteristics for each predominant and alternative production system,
reprogramming an existing economic policy model to incorporate alternative production systems and physical and economic accounts for natural resource impacts of both predominant and alternative systems and establishing an economic baseline for the adapted model, and
using the adapted model to test alternative policy scenarios and undertake sensitivity analysis.