Project EXTENSITY Environmental and Sustainability Management Systems in Extensive Agriculture Guaranteed Sustainability Label: is it a way of promoting sustainable agriculture? Cristina Marta-Pedroso Gonçalo M. Marques Tiago Domingos Environment and Energy Section, DEM, Instituto Superior Técnico, Lisbon, Portugal

Biodiversity Soil organic matter increase Carbon sequestration Water retention increasing Erosion decreasing Flooding regulation Economic viability increasing Decrease of Greenhouse gas emission Commercial fertilizers use decrease Sown biodiverse permanent pasture rich in leguminous Productivity increase Stocking rate increase Extensity Approach in promoting to Sustainable Extensive Agriculture to Extensive Norm of Guaranteed Sustainability

Project EXTENSITY Environmental and Sustainability Management Systems in Extensive Agriculture Guaranteed Sustainability Label: is it a way of promoting sustainable agriculture? A consumers preferences assessment for sustainability labeled beef Cristina Marta-Pedroso Gonçalo M. Marques Tiago Domingos Environment and Energy Section, DEM, Instituto Superior Técnico, Lisbon, Portugal

Outline  Motivation and Objectives  Method and Experimental design  Results  Conclusions

 The label is expected to convey consumers relevant information for their purchase decisions;  The label aimed to differentiate beef regarding:  Production process (environmentally friendly)  Animal welfare (decrease of the confinement period)  Health and food safety (rastreability)  Independent control of quality  Farmers will adopt the label if it would become a mechanism that effectively facilitates farmers capturing the rewards of their superior performance in relation to the conventional production process. Motivation and Objectives (1)  Voluntary labelling mechanism Compliance with the Guaranteed Sustainability Norm

 There is a general agreement on the increasing of consumers’ preference for green and safety agri-food products Motivation and Objectives (2)  Research on ascertaining the preferences of Portuguese’s consumers for such differentiated products is then needed.  Only a few studies aimed at investigating the Portuguese consumers’ preferences for certified agri- food products have been carried out.  Estimating the maximum WTP for SLB Objectives  Obtaining a demand curve for SLB

Method and Experimental Design (1)  In the recognition of the importance of revealing consumer preferences for such differentiated products a contingent valuation survey was carried out across a sample of Portuguese consumers. The contingent valuation survey  Face to face interviews were used for administering contingent valuation questionnaire;  Visual material was used as interview support.  Interviews were carried out by a survey and opinion studies company at hypermarkets in the metropolitan area of Lisbon.  Only beef consumers were approached;

Are you willing to pay more for Guaranteed Sustainability Labeled Beef than you pay for conventional beef? Yes No Price offer Yes No What is the maximum you would be willing to pay for a kilo of Guaranteed Sustainabilit y labeled beef? €/kg Description of SLB against conventional 1 st Interaction with the good description Visual Support WTP Elicitation Design Method and Experimental Design (3) Share

Conventional Temporary or permanent natural or semi-natural pastures Production systems Guaranteed Sustainability Permanent Sown biodiverse pastures rich in leguminous. More productive Higher stocking rate Fattening (steers after weaned) occurs in confinement (15 months). Diet is based on concentrates. Steers fattening occurs in direct grazing supplemented by hay and silage Environmental Impact Greenhouse Gases: Emissions: 9.1 kgCO 2 eq/kg/meat Sequester: 0 kgCO2eq/kg/meat Greenhouse Gases: Emissions: 9.1 kgCO2eq/kg/meat Sequester: 25.2 kgCO2eq/kg/meat There is a deficit of about 400 kgCO2eq/inhabitant for 2010 in terms of Portuguese compliance with the Kyoto Protocol Soil erosion 12.8 kg solo/kg/meat/year Soil erosion 7.2 kg solo/kg/meat/year Soil formation is a very slowly process (non-renewal resource) Industrial fertilizers 75.3 kgN/kg meat Industrial fertilizers 51.9 kgN/kg meat Decrease of diffuse water pollution Quality control and food safety Independent certification bodies Self control

Conventional Temporary or permanent natural or semi-natural pastures Production systems Guaranteed Sustainability Permanent Sown biodiverse pastures rich in leguminous. More productive Higher stocking rate Fattening (steers after weaned) occurs in confinement (15 months). Diet is based on concentrates. Steers fattening occurs in direct grazing supplemented by hay and silage Environmental Impact Greenhouse Gases: Emissions: 9.1 kgCO 2 eq/kg/meat Sequester: 0 kgCO2eq/kg/meat Greenhouse Gases: Emissions: 9.1 kgCO2eq/kg/meat Sequester: 25.2 kgCO2eq/kg/meat There is a deficit of about 400 kgCO2eq/inhabitant for 2010 in terms of Portuguese compliance with the Kyoto Protocol Soil erosion 12.8 kg solo/kg/meat/year Soil erosion 7.2 kg solo/kg/meat/year Soil formation is a very slowly process (non-renewal resource) Industrial fertilizers 75.3 kgN/kg meat Industrial fertilizers 51.9 kgN/kg meat Decrease of diffuse water pollution Quality control and food safety Independent certification bodies Self control Given as baseline Varied across subjects Bid vector: €

Modelling Framework Experimental Design and methodological approach (4)

Are you willing to pay more for Guaranteed Sustainability Labeled Beef than you pay for conventional beef? Yes No Price offer Yes No What is the maximum you would be willing to pay for a kilo of Guaranteed Sustainability labeled beef? €/kg Logistic Regression Log Linear Regression Anchoring correction Modelling Framework Experimental Design and methodological approach (5)

Results (2) Income = 1, 2, 3, 4, 5 1- [ ] 2- [ ,157.73] 3- [1, ,64] 4- [1, ,929.55] 5- [≥ 1,929.56] μ Variable Predicted Probability Logistic Regression (Probability of WTP=0)

Results (3) Log Linear Regression; Anchoring correction

Income = 1, 2, 3, 4, 5 μ γ Children = 1 / 0 CompImport = 1, 2, 3, 4, 5 Variable Estimated WTP 1-[ ] 2 -[ ,157.73] 3-[1, ,64] 4- [1, ,929.55] 5-[ 1,929.56] Spike adjusted WTP Results (3) Log Linear Regression; Anchoring correction

Demand Curve for sustainability labeled beef Assumptions:  Respondent i total monthly consumption of beef is constant (Q)  Respondent i total expense with beef is constant; substitution takes place Empirical data:  Respondent i total monthly consumption of beef  Consumption pattern of SLB (share,   [0,1]) Results (4)

Demand Curve for sustainability labeled beef Results (5)

In average, monthly household consumption of SLB decreases 0.8 kg per 1 € increment in its price. Demand Curve for sustainability labeled beef Results (6)

Conclusions  In average, household consumption of SLB decreases 0.8 kg per 1 € increment in its price.  Consumers are willing to pay an extra price premium ranging between 3 and 3.5 € per kilo of SLB.  Regarding my initial broad question about whether guaranteed sustainability label beef is a way of promoting sustainable agriculture we concluded that there is demand and that the estimated WTP should be framed in farms financial analysis.