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Environment Module
Agricultural and Development Economics Division (ESA) Food and Agriculture Organization of the United Nations
The Roles of Agriculture Project aims to extend current thinking about the social, environmental and economic roles of agriculture in the development process. For more than three years, the project has worked to establish an analytical framework; to identify the social and economic roles for which the market prices of agricultural activities fail to convey sufficient signals to secure an optimal level of those activities; and to carry out eleven country case studies. The case studies include Chile, China, the Dominican Republic, Ethiopia, Ghana, India, Indonesia, Mali, Mexico, Morocco, and South Africa. The ROA International Conference, October 20-22, provides an opportunity to present and discuss research results from the eleven case studies and to draw on the lessons, strengths and experiences learned over the past three years for the design and implementation of future work. The country studies consist of module reports (policy, environment, poverty, food security, buffer, social viability, and culture) and a national summary report. This paper has been prepared for presentation to and discussion by country case study team members participating in the International Conference. It is a working draft. The Roles of Agriculture Project is funded through a Trust Fund from the government of Japan. The project is run by the Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations. For more information on this Project or the Division and its work, see the ESA website at www.fao.org/es/esa.
Paper prepared for the Roles of Agriculture International Conference 20-22 October, 2003 Rome, Italy Agricultural and Development Economics Division (ESA) Food and Agriculture Organization of the United Nations
A related explanation is that society is over or under consuming goods or services that agriculture provides
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agricultural growth in a particular country is more likely, or less likely, to promote environmental benefits. The environmental outcome, however, depends on the five prevailing conditions, with the environmental impacts ranging from very positive to massively destructive. Lopez then postulates that agricultural expansion based on appropriate incentives is likely to induce an environmental dividend if certain minimum institutional conditions are satisfied. Many of these environmental services are externalities, neither taken into consideration by the market, nor assessed by policymakers, nor represented in national accounts. Instead, other sectors may benefit from positive agricultural externalities. However, in other circumstances, agricultural growth based on inadequate incentives and weak institutions is likely to generate massive negative environmental effects. One aim of using a typology based on the five conditions outlined above to identify and correct the market failures, institutional weaknesses and perverse policies to secure and enhance positive environmental outcomes. Landry and Mistiaen (2002) and McConnell (2002) provide theoretical notes for the ROA case studies that focus on the technical aspects related to choosing site study methodologies and to using specialized economic techniques that measure non-market goods and services. The aim of these two theoretical notes on methodologies, as well as other related background materials, is to highlight the basic measurement principles, assumptions, data requirements, and interpretation of results. The appropriate methodology to use depends on the site study intent and the need to estimate values from observed market behavior or rely on direct questioning of consumers. The site studies reflect a wide range of valuation techniques, including market price methods, replacement costs methods, travel costs methods, hedonic price methods, and contingent valuation methods. What are the pressures driving changes in agricultural externalities? The ROA case study countries are a heterogeneous group of countries with diverse resource endowments, income levels, and agricultural structures. Their agricultural sectors vary widely both among and within countries. Likewise, the prevailing government policies and institutional conditions that shape environmental consequences of agricultural growth vary across and within the countries. However, the module reports suggest that countries do share a number of similar characteristics, trends, and pressures that are influencing agricultural practices and the impact those practices have on environmental externalities. How the five prevailing conditions suggested by Lopez are addressed are fundamental to understanding the environmental outcomes from these pressures. Among these common forces that are interacting with government policies and institutions to produce positive and negative environmental impacts are: expanding globalization and trade; agricultural and sector-wide policy reforms; technological advances; and substantial changes in relative prices leading to more intensive, more specialized, and more concentrated production and distribution systems. Four driving forces are presented here for discussion at the workshop. First, globalization pressures, including international development community pressures to integrate environmental objectives with agricultural objectives is making the agricultural sector policy agenda more complex than ever in the case study countries. International and domestic pressures are forcing policymakers to search for the right combination of 2
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production and distribution processes entail environmental damage, including land and water degradation, biodiversity loss, and packaging waste. As pointed out in the Mexico case study, green certification and ecolabelling programmes represent one important market response to the demand for environmentally-friendly practices and healthy products. Ecolabelling attempts to capitalize on the price premiums consumers are willing to pay for both the private good of safe food and the public good of an improved environment. While producers have marketed the nutritional attributes of their products for some time (such as health benefits of organic produce), only recently have they begun to market sustainable practice attributes. In the ROA countries where food exports are aimed at high income countries, the public and private institutions are building up a range of signaling mechanisms to pass on key information to support producers. These signaling mechanisms include: reliable product information on evolving consumer preferences; easier access to documentation on import requirements by commodity and by country; and research and extension networks that encourage resource conservation practices by commodity. For producers who market a great deal of their food production in designated premium markets (ie, those markets with the highest food safety and environmental standards, namely the EU, Japan, Korea and the US) where import requirements often vary significantly between these countries, food producers are developing procedures to react to changes within and between markets. A fourth factor facing the ROA countries is that, in general, poverty is heavily concentrated in rural areas. Many rural poor live and work in ecologically fragile, economically marginal and environmentally-degraded areas. Protecting environmentally-vulnerable areas and making them more productive requires long-term investments. Poor and subsistence producers in fragile areas lack the capital necessary to invest in natural resource protection; they tend to have high rates of time preference; and, normally, are unable even to avoid the impacts of environmental degradation on their existing production base. This deterioration in the production potential of natural resources is a major concern for ROA countries future food security. Poverty often induces food producers to degrade natural resources and environmental services even though they depend heavily on a sustained resource base for survival. At the same time, government programmes and policies aimed at alleviating poverty often contribute to environmental degradation by directly encouraging or unintentionally subsidizing environmental degradation. Further resource degradation contributes to more rural poverty, urban migration and erratic food production. For poor rural communities at the margin of subsistence, resource degradation means greater food production instability as the frequency of poor harvests increases. As poverty reduces and incomes grow, the general tendency is for the demand for environmental quality to increase. Less polluting agricultural techniques become more viable while the political willingness to enact more stringent environmental regulation may increase. The environmental policies that a country could adopt to promote the internalisation of externalities also include incentives to promote those activities that yield positive environmental effects. How environmental outcomes change with rises in per capita income is an important issue, but what is of more fundamental concern for the ROA project is how different policies affect this relationship.
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The following issues are proposed for discussion: a) The lack of basic information on damage caused by agricultural practices is a rather big issue. More than almost any sub-discipline in economics, environmental economists are dependent on information from ecologist, environmentalist, biologists and other scientists to provide the threshold damage information. This information is often lacking in many of the most data aggressive Industrial countries. It represents a more serious problem for developing counties. b) The need to capture the entire set of external values form field level, to global level. For example, reducing land degradation can result in increased productivity at the household level, better flood control and less sedimentation at the regional level, improved food security at the national level and an improved carbon sink and ecosystem at the global level. All these values need measuring. c) The need to assess net costs and benefits and to examine the opportunity costs of the sites. In addition, the need to computing shadow prices for natural resource stocks d) Better understanding of linkages between macroeconomic variables, economy wide variables and the environment (eg Green Gross National Product, sectoral green accounts; indicator-based approaches: wealth and genuine savings, and performance indicators
Chile (Ramn Lpez and Gustavo Anrquez) The first Chile case study considers both negative and some positive environmental externalities of Chilean agriculture. The paper presents a case study for an important watershed in Chile, the Aconcagua Valley, and an econometric analysis of input demand by Chilean agriculture. Two positive environmental externalities are identified erosion protection in sloped and vulnerable areas and carbon sequestration services estimated at about $2 million per year, roughly, 3 percent of the value of avocado exports. The paper concludes that agricultural induced water pollution in the in the Vth Region of the Aconcagua watershed, both ground and surface water, is significant but not yet critical. The region is one of the most productive agricultural regions in the country and the contribution of agriculture to water pollution appears to be rather moderate. The most important agriculture contribution to water pollution is pesticide traces found in surface water. Nitrate fertilizers may be one source of the high nitrate content found in ground water. The paper also presents an empirical assessment of the evolution of chemical input demand by the agricultural sector, as a proxy for emissions, using time series to estimate a system of input demands for the Chilean agriculture. One important finding is that nitrate fertilizers are good substitutes for pesticides. The increasing export orientation of agriculture has reduced the pesticide dependence of agriculture. The rapid rise in pesticide demand is mostly due to a reduction in the relative price of pesticides compared to other inputs. The econometric analysis suggests that given the high price responsiveness, a modest tax on pesticides can be very effective in reducing the pesticide/output intensity and in thus diminishing one of the most important negative environmental externality of agriculture. Chile (Ral ORyan, Manuel Daz, and Cristin Pincheira) This study uses a modified version of the Delphi Method to obtain the perceptions of qualified respondents, in particular the positive environmental externalities and reduction of negative externalities.. This methodology does not require extensive data, usually unavailable in developing contexts. The study includes two areas the semi-arid IV Region and in the VII Region with a mild Mediterranean climate to identify common features as well as differences in the development process. The study results show that the drivers of change in both Regions are very similar. Economic drivers that have been critical are economic openness, high exchange rates and the installation of food export businesses and cold storage plants in the Regions have been critical. Also 7
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important are technological drivers associated with better water management and efficiency, and sectoral policies, specifically better road infrastructure. The main sources of growth can be characterized as neutral in both Regions, since they affect factor productivity across the board. The results show significant regional differences in the perceived externalities. Forty-nine externalities, nineteen positive (or a reduction of a negative) and thirty negative externalities were consulted. In the IV Region 13 positive externalities and only 10 negative ones were perceived by the majority of respondents to have increased. However in the VII Region only 10 positive externalities were perceived to increase whereas 27 of the 30 negative externalities were considered to be present by the majority of the respondents. Some positive and negative externalities appear in both Regions. There is significant agreement that land quality has improved, agro-tourism, eco-tourism and gastronomical tourism are important positive externalities in both Regions. Landscapes improve in both Regions but a greater majority agrees that this is so in the IV Region. On the negative side, three biodiversity implications are considered relevant in both Regions: reduction and transformation of natural habitats and disequilibria in the tropical chain due to clearing of native vegetation and loss of genetic variability due to mono-crops. Air pollution generally is not perceived as a relevant externality in any of the Regions. However, bad odors generated by production and damage to health of workers due to exposure to agrochemicals and pesticides are also present. Some externalities specific to each Region were also identified. Finally, the results support, with some caveats, the proposal by Lopez (2002) that neutral sources of growth coupled with stable property rights and a perception of permanence of the transformations should lead to improved soils and water supply/balance conditions. China (Yao Lu and Dongmei Guo) The China site study examined water-related externalities in a rice-wheat farming system located in the middle and lower reaches of Yangtze River. The study includes a review of biological and physical environmental pollution and a household survey in Zhenjiang City estimating the value of environmental externalities caused by agriculture. The pollution indicators include: (i) total CH4, N2O and CO2 emissions; (ii) the average nitrogen and phosphorous discharged into water systems from non-point sources; and (iii) the total carbon sequestration of water in paddy fields and in dry lands. An economic evaluation is carried out to estimate willingness-to-pay (WTP) on the basis of site-surveys in Zhenjiang including more than 400 respondents. Results suggest that the externality of chemical fertilizers from rice-wheat farming system to drinking water is valued as 255 RMB per household per year, 2% higher than that of average household income. The survey work suggests that, generally speaking, respondents are more sensitive to the negative agricultural externalities than the positive ones. The descriptive statistics of the survey that we have carried out in Zhenjiang, Jiangsu Province testifies it well as followings: a) 66 percent of the respondents think that chemical fertilizer use has negative environmental impacts, while only 28 percent think that organic manure has negative impacts; b) 88 percent of the respondents think that pesticides may cause environmental damage; c) 56 percent answered that agricultural activities cause soil erosion and sediments in lakes
Dominican Republic (Alejandro Herrera Catalina and Magdalena Lizardo) The Dominican Republic study attempts to analyze the links between agriculture and tourism. The study involves using contingent valuation methods to assesses tourists willingness to pay (WTP) for the enjoyment of agro-tourism and for the existence of agricultures positive externalities. In addition, the study analyzes the factors that could impinge on tourists preferences and valuation in the Dominican Republic (DR). Among the factors influencing tourists behavior are income, location of the tourist destination, gender, and nationality. The study highlights an agro-tourist typologys conceptualization. It also presents an estimation of the potential income from agro-tourism. This estimation considers different WTP scenarios according to different farming systems and the existence of positive externalities, as created by agricultural practices efficient use of water, soil, forest, landscape, rural culture, and agro-biodiversity conservation. The paper argues that a thorough development of agro-tourism would represent an effective market mechanism to measure income that the country does not currently perceive, with a value that varies between US$251.0 and US$364.0 million annually. At the same time, agro-tourist activities would contribute to define a new role for agriculture, promoting sustainable practices. Among the studies specific findings and conclusions are: (i) that tourists interested in participating in agro-tourism in the DR are basically motivated by the cultural experience. People who like agro-tourism are also highly motivated to explore local cultures, and to practice eco-tourism and sports tourism; a) a tourist's WTP for agro-tourism in the DR increases as his or her level of income increases, and it is higher among both women and people younger than 40 years. Tourists, WTP is lower for tourists traveling with children; b) systems of sustainable production supply the types of amenities preferred by agrotourists, fundamentally those relative to lifestyle and rural culture. No single amenities has a particular influence on the determination of WTP. The WTP for amenities linked to a rural setting correspond to the integrated value of all the amenities that define preferences for a rural setting; c) agro-tourism offers the potential to involve in some way 78 percent of the tourists that visit the DR, who can also be attracted by the existence of positive externalities associated with the adoption of conservationist farming practices; d) the economic contribution of agro-tourism and the existence of positive externalities associated with conservationist farming practices could exceed US$251 million annually, which would represent 8.4 percent of the tourism income in 2002 and 10% of the farming GDP. The more optimistic scenario indicates that the income generated could be as much as US$364 million, which represents 12% of the tourism income in 2002 and 14.1% of the farming GDP; and
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e) agro-tourism might represent a very useful option to satisfy both immediate and future priorities associated with the goals of sustainable development by linking agriculture and tourism in the DR. An initial strategy to develop agro-tourism in the short-term in the DR should consider the need for better infrastructure and personal security for agro-tourists in the rural areas and an effective negotiation with tours operators with the objective of promoting this new tourist market for the DR. Ethiopia (Eyasu Elias) The Ethiopian study presents two cases. The first examines on-farm conservation of genetic diversity in the enset-coffee system and its economic value. The second study values the offfarm impacts of soil erosion and siltation on a hydropower dam. The study of on farm conservation of genetic diversity documented and quantified the inter- and intra-species diversity maintained by subsistent farmers in the enset-coffee farming systems in Ethiopia. Where possible, the study attempted to quantify the economic value of environmental services generated by agricultural bio-diversity. The case study provides an example of and evidence for a positive environmental externality of traditional agriculture in Ethiopia. Questionnaires were administered to 100 sample households disaggregated by wealth group rich, medium and poor. Key informants categorised households into three wealth groups using livestock ownership as local criterion of wealth. The questionnaire captured (a) the social and economic profile of households such as ownership of productive assets and family size that are considered as main factors that encourage or discourage level crop diversification; (b) on-farm agricultural diversity (i.e., inter-and intra-species diversity) at farm level; (c) understanding and documenting the socio-economic and cultural values of traditional on-farm conservation of genetic resources particularly that of traditional crops such as enset; (d) household level variations in the poly-culture system mediated by socio-economic factors mentioned earlier. The case study points out that farming activities in the enset culture contribute to the on-farm conservation of agricultural diversity that provides concrete evidence for positive environmental externalities and public services that benefit the welfare of society. Thus, the enset-coffee farming system was selected as relevant in the national context to empirically analyse the role of traditional agriculture in conserving and managing crop genetic resources and its benefits to the rest society and economy at large. Among the issues the study examined include: food security value at household level with respect to aggregate crop productivity; environmental/ecological services such as soil erosion control, expensive chemical fertilisers use avoided and costs saved by other sectors (outside agriculture); averted production losses and catastrophic effects (e.g., due to disease outbreak); and provision of genetic stock for international crop improvement breeding for the welfare of present and future generations. The second Ethiopian study quantifies the biophysical nature of soil erosion and estimates the off-site costs due to the erosion agricultural lands upstream of the Koka dam. The aim is to understand the economic impact on the reservoir due to silt accumulation. Using secondary data and survey information, the paper illustrates the negative environmental externality of agriculture affecting the welfare of non-agricultural dependent households. A household level survey was carried out to assess the agricultural practices and the rate of soil erosion at farm level in the upstream catchment. A questionnaire focused on agricultural
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input savings for wheat, producer their perception about ZT technology, and the environmental impacts of these technologies. Farmers perceptions are considered as important to understanding how new techniques contribute to reducing negative environment externalities of agriculture and for making them more popular. The specific aims of the study are: (i) to examine the environmental impact of ZT in wheat crop at the farm level; and (ii) to understand the perception of farmers regarding ZT. A survey was carried on in two states; one at an advanced stage of agricultural mechanization and intensification, the other at a lower stage of agricultural development. Haryana state has long benefited from green revolution technologies so represents the developed and irrigated agriculture site. In Bihar state, the spill over effects of the green revolution are percolating gradually, so it represents the lower level of agricultural advancement site. Two districts, Kaithal and Begusarai, respectively from Haryana and Bihar were selected. From the selected districts equal number of both, adopters and non-adopters are surveyed. The total sample size is 400 farmers, with distribution of 200 adopters and 200 non-adopters of ZT. Inverse sampling technique was employed to select the households. The data were collected in collaboration with Rice Wheat consortium for the Indo Gangetic Plains (RWC). The questionnaire was tested and modified after the pilot survey in the field. The information recorded from the farmers include different input use in the field and different farming operations performed. Perceptions about ZT were recorded from both adopters and nonadopters for different set of questions. Net savings were calculated for the wheat crop. The conversion factors were used for physical quantification of the environmental benefits. The results suggest that ZT adopters tend to be younger and their main source of livelihood is agriculture. The data show that both intensive and less-intensive agriculture experience an increase in yield by following ZT or reduced tillage (due to drought in the year 2002), but it is observed to be 3 percent higher for less-intensive agriculture (Bihar) than intensive agriculture (Haryana). The net savings is greater in less-intensive agriculture (Rs 701.14/ha more in Bihar). This demonstrates scope for widespread of ZT and reduced tillage techniques in the coming years in less intensive agricultural areas. From the environmental view point, ZT and reduced tillage saves emission of green house gases. Further, the amount of water used for agriculture is reduced by 20 percent. Indonesia (Fahmuddin Agus and Made Oka A. Manikmas) The Indonesia site study focuses on three sections of the Citarum River, the upstream section located in Bandung District, middle stream in Cianjur District, and down stream area in Karawang District. All three sites are located in Indonesias West Java Province. The study estimates different types of non-market values, making use of three measurement methods: the Travel Cost Method (TCM) to measure the value of rural amenities; the Contingent Valuation Method evaluates the willingness to pay for environmentally sound agricultural programs; and the Replacement Cost Method (RCM) is used measure the trade off between economic values of agricultural land use and environmental services. The TCM involved 120 respondents and the CVM involved 180. The RCM relied on secondary data backed up with group interviews to substantiate the information. The travel cost study found the willingness to pay for visits to Jatiluhur Dam is significantly more attractive than Cirata Dam. This reasons include: (i) closer to Jakarta and has better
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through direct physical access to home grown food). Poverty trends at the national level are positively affected by the revitalisation of the O.N. Mexico (Mara Eugenia Ibarrarn, Enrique Guillomen, Jos Ivn Rodrguez) The Mexico study analyses the rise or organic coffee production to assess agricultural contribution to positive environmental externalities and sustainable agriculture, The study compares organic coffee production practices with the conventional methods. The objective is to distinguish positive environmental externalities that emerge from organic agriculture in this particular case. Mexico is a leader in organic agriculture, exporting to Canada, Europe, Japan and the US. Mexico is the worlds fifth largest coffee producer, after Brazil, Colombia, Indonesia and Vietnam, but the worlds largest producer of organic coffee, and one of the first to produce "gourmet" coffee. Coffee is produced on a total of 690,000 hectares in 12 states in the centralsouth part of the country. It is grown in the shade with care being taken to protect the ecosystem. Mexican coffee growers, therefore, produce positive environmental externalities through soil, water, and ecosystem protection. The study examines a commercial firm, Ecole-Caf, involved in the production of organic coffee. The main environmental benefits derived from this project are a reduction in the use of chemicals and fossil fuels, and substitution of these for renewable resources and natural fertilizers. In addition, Ecole-Caf increases carbon sequestration and provides natural settings for migratory birds to stay during their journey during the winter. It provides a clear example of how business and environmental protection can go together. An important message emerging from this case study is that organic agriculture promotes the rational use of natural resources. While initially, organic coffee production was sustained through making use of traditional practices, it has evolved quickly to incorporate more scientific knowledge involving complex practices. Although limited, this case study shows how these integration techniques can be attained. Sustainability implies satisfying necessities in the present without compromising the well being of future generations. This study suggests that extending organic agriculture techniques to produce food and other agricultural products based on protecting natural resources makes economic and ecological sense. The study further concludes that more research should be directed at appropriate technologic option to attain sustainable development through organic production, aimed at lowering the costs of production practices and international certification requirements. Morocco (Allali Khalil) The Morocco environmental module examines two separate cases. The first use contingent valuation techniques to measure rural amenity associated with agriculture. The second uses hedonic pricing techniques to estimate the value of agro-tourism. These studies are being translated into English from French and will be discussed at the Conference workshop.
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References Agus, Fahmuddin and Made Oka A. Manikmas, (2003), Indonesia Environment Report, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Allali, K., (2003a), Externalits Pcuniaires Positives de lAgriculture sur le Tourisme de Montagne au Maroc: Application de la Mthode des Prix Hdonistes au March des Gtes Familiaux du Haut Atlas Occidental Marocain, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Allali, K., (2003b), Valeur Sociale de la Conservation du Paysage Agricole au Maroc: Application de la Mthode dEvaluation Contingente au Paysage Agricole de la Chaouia, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Diarra, L., O. Doumbia, A.O. Kergna, A. Kouriba, M. KNdiaye and H. Verkuijl, (2003), Analyse des Externalits Environnementales des Deux Systmes de Productions Cibls, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Elias, E., (2003a), On-Farm Conservation of Genetic Diversity in the Enset-Coffee System and its Economic Value (An Example of Positive Environmental Externality of Agriculture), Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Elias, E., (2003b), Off-Farm Impacts of Soil Erosion: Siltation in the Hydropower Dam (An Example of Negative Environmental Externality of Agriculture), Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Ibarrarn, M.E., E. Guillomen and J.I. Rodrguez, (2003), Environmental Roles of Agriculture in Mexico: Case Study of Organic Coffee Production in Mexico, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Khalil, A., (2003a), Externalits Pcuniaires Positives de lAgriculture sur le Tourisme de Montagne au Maroc: Application de la Mthode des Prix Hdonistes au March des Gtes Familiaux du Haut Atlas Occidental Marocain, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Khalil, A., (2003b), Valeur Sociale de la Conservation du Paysage Agricole au Maroc: Application de la Mthode dEvaluation Contingente au Paysage Agricole de la Chaouia, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Kleynhans, T.E., (2003), Environmental Roles of Agriculture in South Africa, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy. Lpez, R. and G. Anrquez, (2003), Environmental Externalities of Agriculture: Chile 19802000, Paper prepared for the Roles of Agriculture International Conference, 20-22 October 2003, Rome, Italy.
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