The Environmental Performance Measurement of Agricultural Production Using Stochastic Frontier Analysis

There is growing concern world-wide about protection of the environment and its sustainability. This has implications for the agriculture sector, as agriculture has significant effects on global economic projections and on the environment. Conventional agriculture is criticized for harming the ecological balance through heavy use of chemical and technological inputs. On the other hand, agriculture plays a role in producing renewable energy, preserving landscapes and biodiversity and ensuring food security and safety. While supporting these positive effects of agriculture, it is necessary to direct agricultural production towards efficient and sustainable practices that can reduce the adverse effects generated by agriculture (Koiry and Huang, 2023).

In this docent lecture, first I will briefly discuss the economic and environmental efficiency of fossil-based inputs use of agricultural production in the fossil-free transition time. Second, I will first present how greenhouse gas (GHG) emission is accounted in production performance measurement in agriculture. Finally, I will present how ecological protection approach affect the production performance.

I. Transition to a fossil free society is underway in Sweden. Swedish agriculture has made significant progress in transition, but current agricultural production in Sweden is still highly dependent on fossil-based production inputs. As a way to adapt to the fossil-free transition before fully achieving fossil-free production, farms should increase the use efficiency of fossil-based inputs. We therefore investigate the current combined economic efficiency and environmental efficiency in use of fossil-based production inputs, and analyze characteristics of farms that succeeds in combining high economic efficiency with low use of fossil-based production input in the current system (Huang, 2023). 

II. There is widespread recognition of the global environmental impact of GHG emissions from agricultural production. In the studies, we treat agricultural GHG emissions as an undesirable output and apply the directional distance function to measure environmentally-adjusted technical efficiency, which was defined as environmental efficiency in agricultural production. The estimated relative shadow price of agricultural emissions is smaller than -1, implying that the ‘cost’ of removing agricultural emissions is higher than the value of producing one unit of good output. These findings suggest there is a trade-off between agriculture emissions and production, which should be considered in efforts to enhance the sustainability of agricultural production (Huang, Liu and Abu Hatab, 2023).

III. The concept of ecologization reflects the growing significance of environmental concerns in agriculture and rural policies and practices. In response to criticism of conventional farming practices, ecologization has been widely adopted over the past decade as a way to address the negative effects of conventional farming practices on the environment. The effect of ecologisation on crop production performance in Sweden, measured as technical efficiency, was investigated by incorporating ecologisation into the production function and technical inefficiency determinant model. The results showed that ecologisation affected the technical efficiency of crop production (Huang, Manevska-Tasevska and Hansson, 2024). We also examined the effect of ecological protection approaches on total factor productivity change using stochastic frontier analysis-based Malmquist total factor productivity index. The empirical results demonstrated that ecological protection approaches such as organic farming, mixed cropping or integrated farming could hamper total factor productivity growth (Koiry and Huang, 2023).