The productivity and environment nexus through farm-level data. The case of carbon footprint applied to Italian FADN farms

The most fundamental challenge faced by European agriculture in the early 21st century is how to increase production in order to respond to the significant growth in global food demand while preserving natural resources and the environment. Thus, the productivity and environment nexus of farms is particularly relevant, also in a policy perspective. The central empirical question addressed by this paper is to assess whether, and by how much, productivity and environmental performance affect each other in the presence of farm heterogeneity. To examine these implications empirically, we have assembled a uniquely detailed dataset of Lombardy FADN farms observed over the period from 2008 to 2013 that merges FADN information on farm structure and economic performance, a productivity index and an environmental indicator, both properly reconstructed at farm level. We firstly calculate a farm-level total factor productivity index and then estimate a farmlevel greenhouse gases (GHG) emissions intensity indicator. The use of micro data to obtain farmspecific parameters is one of the novelty of the approach that can allow better capturing the actual heterogeneity of farms in production and environmental efficiency. We then investigate the nexus of this productivity index with emission intensity on a farm-by-farm basis. Results are not only informative on the nexus between TFP and GHG emissions, but could be also used to gain insights in the direction of obtaining a unique indicator of the joint economic and environmental performances of farms: i.e. an Environmentally-Adjusted TFP.