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\r\nhow to increase production in order to respond to the significant growth in global food demand\r\nwhile preserving natural resources and the environment. Thus, the productivity and environment\r\nnexus of farms is particularly relevant, also in a policy perspective.\r\nThe central empirical question addressed by this paper is to assess whether, and by how\r\nmuch, productivity and environmental performance affect each other in the presence of farm\r\nheterogeneity. To examine these implications empirically, we have assembled a uniquely detailed\r\ndataset of Lombardy FADN farms observed over the period from 2008 to 2013 that merges FADN\r\ninformation on farm structure and economic performance, a productivity index and an\r\nenvironmental indicator, both properly reconstructed at farm level.\r\nWe firstly calculate a farm-level total factor productivity index and then estimate a farmlevel\r\ngreenhouse gases (GHG) emissions intensity indicator. The use of micro data to obtain farmspecific\r\nparameters is one of the novelty of the approach that can allow better capturing the actual\r\nheterogeneity of farms in production and environmental efficiency. We then investigate the nexus\r\nof this productivity index with emission intensity on a farm-by-farm basis.\r\nResults are not only informative on the nexus between TFP and GHG emissions, but could\r\nbe also used to gain insights in the direction of obtaining a unique indicator of the joint economic\r\nand environmental performances of farms: i.e. an Environmentally-Adjusted TFP.