1. An Assessment of the Economics of Adopting Stewardship Practices in Livestock Production in Response to Environmental and Societal Concerns Bruce T. Bowman, Chair Expert Committee on Manure Management (ECMM) Canadian Agri-Food Research Council

2. This Presentation draws on findings from a Discussion Paper commissioned by the Expert Committee on Manure Management (ECMM), in partnership with Policy Branch, AAFC. Prepared by the Thomsen Corp., Ottawa August, 2003. Complete Paper available on-line at CARC: http://www.carc-crac.ca/ Background

3. In discussions of our Expert Committee (ECMM), the issue of Who Should Pay for adopting environmentally friendly farm practices was identified as a major concern. Adoption of improved environmental practices often creates Shared Benefits (Public & Farmers) but not Shared Costs. Farmers usually can not recover these costs through increased prices for their produce. Background

4. Discussion Paper is a review of current literature pertaining to measuring the economic value of benefits and costs to Canadian society from livestock production and related activities. Identifies nature and extent of literature, including existing information gaps. Establishes relationships between livestock activities and societal impacts. Makes recommendations as to Next Steps in addressing the issue. Overview

5. Framework of the Discussion Paper 6 major categories of Potential Public Impact (Externality) from livestock production Soil, Air, Water, Biota, Human health, Economic activity An Externality occurs whenever the welfare of one individual is directly impacted by the activity of another individual. 4 groupings of Livestock Production (manure) Livestock Feeding (CAFO/ILO), Manure storage, Manure handling & application, Transformation of livestock by-products

6. > 100 literature citations reviewed (mostly on-line information; some refereed; Few citations with quantitative impacts) Findings 44% - manure handling & application 22% - livestock feeding & confinement 15% - manure storage 19% - general, or had multiple pathways/impacts

7. Organized review of manure handling & application studies using 8 potential pathways for public impacts. Two Pathways relate to gases (odour and greenhouse gas emissions) Six pathways involving minerals. (NH 3 emissions, P pollution, nutrient run-off and leaching, nutrient imbalance and recycling, efficient use of organic/inorganic N & P, and ambient pollution). Findings

8. Findings (excerpt) X = Direct impact; I = Indirect Impact

9. Review of Canadian Valuation Studies - (estimations of value of various natural resources) - Topic areas reviewed: Findings Natural Ecosystems Air quality - odour Water Quantity Water Quality – pathogens (incl. groundwater) Climate Change – ghg production Health Impacts – direct & indirect

10. A limited review of Provincial Regulations impacting on livestock industry, focusing on manure management issues (AB, BC, ON) – Discussion on: Findings Instruments for regulations & their impacts Targets for reducing mineral losses Targets for reducing emissions (NH 3 ) Needed improvements in regulatory policies Threshold policy targets Removal of subsidies for imported feeds

11. Economic assessment of externalities of livestock production in Canada is a somewhat of a rarity. Why? Difficult to quantify odours and then to determine an economic value for reducing them. Models for integrated assessment of externalities lack quantitative/monetary impact estimation. Findings

12. Commission 2 parallel studies (for various regions in Canada) that would assist in development of a proper policy framework for livestock production in Canada. STUDY 1 - focus on quantifying externalities AS WELL AS the impacts on producers. STUDY 2 - review existing policies & regulations that are barriers to adoption of beneficial management practices. Discussion Paper Recommendations

13. Study 1 Comprehensive Valuation of the Impacts of Livestock Production Discussion Paper Recommendations… Six Components, focussing on 3 potential mitigation measures, which are: 1.Composting 2.Biogas Generation (Anaerobic Digestion) 3.Use of Shelterbelts around livestock operations

14. 1.Develop baseline profile for livestock industry and manure handling, storage and application options. - Establish links/relationships between livestock production and water quality, at [sub] watershed scale at selected sites based on StatsCan data (areas of livestock concentration, areas of vulnerability). 2.Identify potential mitigation measures. - Focus on active mitigation measures including composting, anaerobic digestion with associated biogas production, in contrast with more passive measures such as manure storage and crop nutrient management. Discussion Paper Recommendations… Study 1 - Valuation of Impacts

15. 3.Estimate on-farm economics - Conduct surveys of practising farmers to document type of manure handling systems in use, problems faced with their use, their effectiveness on various types and sizes of farms, and farm information needs - Need for a comparable set of costs for various regions in Canada. 4.Measure the physical impact of manure management options on environmental goods - Collect more accurate data on nutrient and organic matter retention rates, surface & groundwater leaching rates, and other impacts on off-farm economics. Discussion Paper Recommendations… Study 1 - Valuation of Impacts

16. 5.Economic valuation of damages (benefits) of environmental goods - Valuation of resource services, particularly as applied to the livestock industry, should build on existing livestock density and geographical identification work such as that done by Statistics Canada. 6.Benefit-cost analysis - Estimation and analysis of the economic and environmental costs and benefits of livestock production needs to be done on a comprehensive and systematic basis for Canada. Discussion Paper Recommendations… Study 1 - Valuation of Impacts

17. 1.Compile various policies and regulations that directly or indirectly affect livestock production. 2.Identify factors affecting producers adoption of management options. (such studies are rare). - provides useful feedback to policy makers on the effectiveness of measures. - indicates impediments to adoption that could be modified either through additional or alternative measures. Discussion Paper Recommendations… Study 2 Review of Public Policy and Regulations

18. 3.Evaluate the policies and regulations that act as a dis-incentive for the adoption of better manure handling systems. e.g. Regulations that selectively define manure nutrients as pollutants discourage development of their use and a market value. Producers will steer away from using manure when commercial fertilizers are not treated the same fashion …. also defined as pollutants. 4.Develop more livestock production and environment-friendly policies and regulations for regions of Canada. e.g. Activities that recycle nutrients. Such measures would create a real market value to livestock manure and its products by creating a demand for them. Discussion Paper Recommendations… Study 2 Review of Public Policy and Regulations

19. We are clearly lacking reliable, quantitative information on economic valuation of impacts of livestock production, and how to share costs and benefits between the public and farmers. Proposed studies seem appropriate, BUT will be costly, difficult to acquire good data and take years + considerable commitment to complete; ….. In the shorter term… which priorities? Building on Outcomes from Discussion Paper

20. For remainder of this presentation, I will : Provide some complimentary viewpoints, challenges and opportunities based on key issues identified in the Discussion Paper. Recycling of livestock nutrients Composting and anaerobic digestion practices Try to narrow focus on selected issues that can start to be addressed in the near term. Building on Outcomes from Discussion Paper…

21. Large-scale recycling of livestock nutrients Most livestock operations import more nutrients than they export. (US studies - NE, WA, PA) Nutrient accumulations in both livestock and human food chains… not sustainable. Can not continue with nutrient imbalances and maintain current nitrate water quality standards. Doubled global N fixation rate in 20 th century. In many parts of world, P is considered a non- renewable resource – limited sources (quality). A Fundamental Issue

22. Must focus on policies that promote livestock nutrient recycling Make recycled livestock nutrients competitive with, & complimentary to mineral fertilizers. Bring consistent standards to producing value- added manure products. Basic Requirements – odour & pathogen-free, dried, able to be bulk-blended with mineral fertilizers. Zeroing in on the Priorities… New Environmental Technology Assessment in Agriculture (ETAA) Initiative under the APF. Value-added manure products – tech. & economic assessment.

23. First Step - An assessment to answer the question: "What needs to be changed to make manure processing profitable (or more affordable) for confined livestock operations? Zeroing in on the Priorities… Manure Processing – treating the ENTIRE manure volume to reduce / eliminate odours and pathogens. What key policy & regulatory barriers exist that impede this process? What will it take to remove these barriers to increase and stabilize market value of recycled livestock nutrients?

24. Large confined livestock operations should set a voluntary goal of: "Making manure processing a Standard Practice (odour & pathogen reduction; optional – dewatering). Processing and dewatering entire manure volume gives livestock producers increased flexibility for safely and economically managing & exporting excess nutrients. To export nutrients, manure should be effectively odour & pathogen-free and dewatered. (2 practices composting, anaerobic digestion – from Discussion paper ). Zeroing in on the Priorities…

25. When manure processing becomes profitable, nutrient management regulations will become a safety net or performance baseline. Farmers will exceed regulations and manage their nutrients for economic benefit (process driven by economics rather than by regulation). Two primary sources of revenue for manure processing: biogas / green electricity generation, and value added manure products, …. + possible ghg emission trading credits. Zeroing in on the Priorities…

26. Yield / Productivity Environmental Protection Societal Issues Balancing Issues in a Sustainable Agriculture System 1. Yield/Productivity 2. Environment Issues Both are science-based 3. Societal Issues Perception-based, emotional Can quickly over-ride other 2 factors. Hard to reverse once initiated Traditional Since 1970s In 1990s

27. Benefits of Manure Processing Two positive outcomes resulting from minimizing odours & pathogens: 1.Greatly reduce societal concerns, which are voiced through municipal bylaws & provincial regulations. 2.Give farmers increased flexibility for exporting excess nutrients from farm – promote large scale nutrient recycling back to crop production & reduce dependence on mineral fertilizers. (whole-farm nutrient balances)

28. Enabling Policies for Manure Processing 1.Cost-sharing bonuses for renewable energy production (increase consumer costs < 0.1 ¢/kwh); Provide easier access to electrical grids. Encourage farm-based renewable energy 2.Incentives for large-scale livestock nutrient recycling/re-distribution (reduce on-farm nutrient excesses & dependence on mineral fertilizers). Increase market value of recycled nutrients.

29. 3.Providing environmental loan guarantees (collateral) for large capital-intensive projects – help farmers manage risk when adopting new technologies – minimal public cost. 4.Incentives for reducing greenhouse gas emissions; emission trading credit system. Enabling Policies for Manure Processing…

30. Identifies livestock nutrient recycling as important policy issue. Identifies composting and anaerobic digestion as mitigating practices to focus on. TO SUMMARIZE Discussion Paper Findings:

31. TO SUMMARIZE Identifies that quantitative information on the economic assessment of externalities is lacking. Recommends a comprehensive set of studies to address the issue….. Will require considerable resources, commitment and time to achieve. A longer-term, comprehensive approach. Discussion Paper Findings:

32. Need to determine what it takes to make manure processing profitable. The Final Word! Key Priorities: Enact enabling policies to encourage adoption. Need to develop policies which promote large- scale livestock nutrient recycling.

33. http://res2.agr.gc.ca/initiatives/manurenet/ For Additional Resources