An assessment of the total external costs of
*, C. Brett
, D. Gee
, R.E. Hine
, C.F. Mason
, H. Raven
, M.D. Rayment
, G. van der Bijl
Centre for Environment and Society, University of Essex, Colchester CO4 35Q, UK
Departments of Economics, University of Essex, UK
European Environment Agency, Kongens Nytorv 6, DK-1050, Copenhagen, Denmark
Department of Biological Sciences, University of Essex, UK
Aratornish, Morvern, by Oban, Argyll, PA34 5UZ, UK
Royal Society for the Protection of Birds, The Lodge, Sandy, Beds SG19 2DL, UK
Centre for Agriculture and the Environment (CLM), PO Box 10015, 3505 AA Utrecht, Netherlands
Received 16 February 2000; received in revised form 12 May 2000; accepted 30 June 2000
This trans-disciplinary study assesses total external environmental and health costs of
modern agriculture in the UK. A wide range of datasets have been analysed to assess cost
distribution across sectors. We calculate the annual total external costs of UK agriculture in
1996 to be £2343 m (range for 1990±1996: £1149±3907 m), equivalent to £208/ha of arable and
permanent pasture. Signi®cant costs arise from contamination of drinking water with pesti-
cides (£120 m/year), nitrate (£16 m), Cryptosporidium (£23 m) and phosphate and soil (£55 m),
from damage to wildlife, habitats, hedgerows and drystone walls (£125 m), from emissions of
gases (£1113 m), from soil erosion and organic carbon losses (£106 m), from food poisoning
(£169 m), and from bovine spongiform encephalopathy (BSE) (£607 m). This study has only
estimated those externalities that give rise to ®nancial costs, and so is likely to underestimate
the total negative impacts of modern agriculture. These data help to identify policy priorities,
particularly over the most ecient way to internalise these external costs into prices. This
would imply a redirection of public subsidies towards encouraging those positive externalities
under-provided in the market place, combined with a mix of advisory and institutional
mechanisms, regulatory and legal measures, and economic instruments to correct negative
0308-521X/00/$ - see front matter #2000 Elsevier Science Ltd. All rights reserved.
Agricultural Systems 65 (2000) 113±136
* Corresponding author. Fax: +44-1206-87-34-16.
E-mail address: email@example.com (J.N. Pretty).
externalities. Further work examining the marginal costs and bene®ts of UK agriculture would
help to inform future policy development. #2000 Elsevier Science Ltd. All rights reserved.
Keywords: Externalities; Agriculture; Water pollution; Health; Pesticides; Biodiversity; Food poisoning;
1. De®nition and concept of externalities
Farmers in the UK have been highly successful at increasing food production in
the 20th century. Compared with 1950, per hectare yields of wheat, barley, potatoes
and sugar beet have tripled, while milk yields per cow have more than doubled. But
these remarkable achievements have also brought costly environmental, health and
social problems (Conway and Pretty, 1991; Pretty, 1995, 1998; Mason, 1996; EEA,
1998; Krebs et al., 1999).
Most economic activities aect the environment, either through the use of natural
resources as an input or by using the `clean' environment as a sink for pollution. The
costs of using the environment in this way are called externalities, because they are
side eects of the economic activity and their costs are not part of the prices paid by
producers or consumers. When such externalities are not included in prices, they
distort the market by encouraging activities that are costly to society even if the
private bene®ts are substantial (Baumol and Oates, 1988; Pearce and Turner, 1990;
Lewis, 1996; EEA, 1998; Brouwer, 1999; Pretty et al., 1999).
An externality is any action that aects the welfare of or opportunities available to
an individual or group without direct payment or compensation, and may be posi-
tive or negative. The types of externalities encountered in the agricultural sector
have ®ve features: (1) their costs are often neglected; (2) they often occur with a time
lag; (3) they often damage groups whose interests are not represented; (4) the iden-
tity of the producer of the externality is not always known; and (5) they result in
sub-optimal economic and policy solutions.
2. Costing negative agricultural externalities
Although several attempts have been made to put a cost on some of the pollution
arising from agriculture in the USA and Europe, it has proven dicult to do. First,
it is necessary to know about the value of nature's goods and services, and what
happens when these are lost. The current system of economic calculations grossly
underestimates the current and future value of natural capital (Abramovitz, 1997;
Costanza et al., 1997; Daily, 1997).
Second is the diculty of putting a value on non-market goods. How do we value,
for example, skylarks singing on a summer's day, or a landscape with hedgerows
and trees, or a watershed producing clean water? Environmental economists have
developed methods for assessing people's stated preferences for environmental
goods through hypothetical markets (Willis et al., 1993; Hanley et al., 1998;
114 J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136
Brouwer, 1999). The value of nature's goods and services is represented to an extent
by people's willingness-to-pay (WTP) for them, and this permits estimation of ben-
e®ts foregone, the correct economic welfare measure. However, in view of scienti®c
and economic uncertainties about many agriculturally related problems, we use
®nancial costs to help to overcome uncertainties with valuation. This restricts the
range of impacts we are able to value, though it can help to overcome the problem
of scienti®c uncertainty where expenditure is incurred in relation to a speci®c agri-
cultural issue. This approach does not, therefore, actually value the externality, but
uses as a proxy the expenditure which society incurs in dealing with that externality
(Bailey et al., 1999; Hanley and Oglethorpe, 1999; Hill and Crabtree, 2000).
There have been several studies on the external costs of modern agriculture in
Germany, Netherlands, UK and the USA (Pimentel et al., 1992, 1995; Evans, 1995,
1996; Steiner et al., 1995; Davison et al., 1996; Fleischer and Waibel, 1998; Waibel
and Fleischer, 1998; Bailey et al., 1999; Ribaudo et al., 1999). These suggest that
total external costs are some $81±117/ha of arable and permanent pasture in Ger-
many (only pesticides and gaseous emissions costed) and the USA, rising to $112±
274 for arable land only (Pretty et al., 2000). For several reasons, however, these
data are not wholly comparable in their original form, and methodological concerns
have been raised about some studies (Bowles and Webster, 1995; Crosson, 1995; van
der Bijl and Bleumink, 1997; Pearce and Tinch, 1998)
The need for estimates of externality costs occurs at two levels. The ®rst is the level
at which national and international policy strategies are developed. Here, there is
need for estimates of total costs, both overall and by type of externality. These esti-
mates provide a broad guide for policy emphases. Areas in which costs appear to be
greatest are then obvious candidates for policy emphases and further analyses.
The second level is that of particular policies, programmes, or projects. Here,
estimates of social costs and bene®ts, in the form of cost-bene®t or cost-eectiveness
studies, can help guide decisions, for example, about which agri-environmental
initiatives are best suited to reducing externalities. Hanley et al. (1999)
recently reviewed and summarised a dozen such cost-bene®t studies of UK agri-
environmental schemes. Such studies are extremely useful in helping to judge whe-
ther the costs associated with particular policies or programmes are warranted in
terms of their social bene®ts. However, as Whitby (2000) has recently noted, most
evaluations of UK agri-environmental schemes have not actually been able to value
bene®ts at the margin. In other words, even if a scheme has produced more social
bene®ts than costs in a particular area, it is still unknown how reducing or expand-
ing the scheme would aect bene®ts and costs. Oglethorpe et al. (2000) have recently
Some critiques of earlier studies on externalities have noted that several eects could not be assessed
in monetary terms, whilst others have appeared to be more arbitrary (e.g. the cost of bird deaths in the
USA ($2 billion) is arrived at by multiplying 67 million losses by $30 a bird; Pimentel et al., 1992). The
Davison et al. (1996) study on Netherlands agriculture was even more arbitrary, as it added the costs
farmers would incur to reach stated policy objectives, and these were based on predicted yield reductions
of 10±25% arising from neither cheap nor preferable technologies, which led to a large overestimate of
environmental damage (c.f. van der Bijl and Bleumink, 1997).
J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136 115
demonstrated how a true marginal analysis can be used to aid policy development,
using the example of a case study in Scotland.
This study is focused on information for policies at the ®rst level, where broad
policy strategies are developed. We address the policy implications of this study
brie¯y at the end of the article, and in more depth in a companion article (Pretty et
al., 2000). There is need for better information at both levels, however, to guide
eectively the future rounds of agricultural policy reform in the UK, throughout
Europe, and elsewhere in industrialised countries.
3. Framework for assessing the negative externalities of UK agriculture
In this study, we use a framework of seven cost categories to assess the total
environmental and health costs of UK agriculture. Two types of damage cost have
been estimated: (1) the treatment or prevention costs (those incurred to clean up the
environment and restore human health to comply with legislation or to return these
to an undamaged state); and (2) the administration and monitoring costs (those
incurred by public authorities and agencies for monitoring environmental, food and
health parameters). We have estimated only those externalities which give rise to
This framework includes only external costs, i.e. the costs incurred by the rest of
society for the actions of farmers. Additional private costs borne by farmers them-
selves are not included, such as from increased pest or weed resistance from the
overuse of pesticides, or for training in the use, storage and disposal of pesticides.
However, there remain distributional problems, e.g. insect outbreaks arising from
pesticide overuse can aect all farmers, even those not using pesticides.
We have also not yet measured the positive externalities (the bene®cial side-eects)
created by farming and encouraged by certain policies (OECD, 1997a; Lobley and
Potter, 1998; Hanley and Oglethorpe, 1999; van Huyelenbroek and Whitby, 1999;
Darling and Topp, 2000). These include: landscape and aesthetic value; recreation
and amenity; water accumulation and supply; nutrient recycling and ®xation; soil
formation; wildlife, including agriculturally bene®cial organisms; storm protection
and ¯ood control; and carbon sequestration by trees and soils. These are likely to be
substantial (Daily, 1997; Smith et al., 1998; Hanley and Oglethorpe, 1999).
Table 1 summarises the annual total external environmental and health costs of
UK agriculture. A conservative estimate puts these at £2343 m for 1996 alone (range
for 1990±1996: £1149±3907 m). These agricultural externalities can be expressed in a
variety of ways:
1. externalities comprise 89% of average net farm income (£2.62 billion), and
13% of average gross farm returns (£17.46 billion) for the 1990s;
2. externalities arising from all 11.28 m ha of arable land and permanent grass-
land (but not rough grazings) average £208/ha/year;
3. externalities arising from arable farming alone (£1048 m) result in an average
cost of £229/ha of arable land (4.58 m ha) Ð arable farming costs are taken to
116 J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136
The annual total external costs of UK agriculture, 1996 (range values for 1990±1996)
Cost category UK
1. Damage to natural capital Ð water
1a. Pesticides in sources of drinking water 120 84±129
1b. Nitrate in sources of drinking water 16 8±33
1c. Phosphate and soil in sources of drinking water 55 22±90
1d. Zoonoses (esp. Cryptosporidium) in sources of drinking water 23 15±30
1e. Eutrophication and pollution incidents (fertilisers, animal wastes,
1f. Monitoring and advice on pesticides and nutrients 11 8±11
2. Damage to natural capital Ð air
2a. Emissions of methane 280 248±376
2b. Emissions of ammonia 48 23±72
2c. Emissions of nitrous oxide 738 418±1700
2d. Emissions of carbon dioxide 47 35±85
3. Damage to natural capital Ð soil
3a. O-site damage caused by erosion
3b. Organic matter and carbon dioxide losses from soils 82 59±140
4. Damage to natural capital Ð biodiversity and landscape
4a. Biodiversity/wildlife losses (habitats and species) 25 10±35
4b. Hedgerows and drystone walls 99 73±122
4c. Bee colony losses 2 1±2
4d. Agricultural biodiversity +
5. Damage to human health Ð pesticides
5a. Acute eects 1 0.4±1.6
5b. Chronic eects + +
6. Damage to human health Ð nitrate 00
7. Damage to human health: microorganisms and other disease agents
7a. Bacterial and viral outbreaks in food 169 100±243
7b. Antibiotic resistance + +
and nvCJD 607 33±800
Total 2343 1149±3907
This table does not include private costs borne by farmers themselves.
The ranges for costs do not represent formal standard deviations of the data as this is impossible
given the huge variation in types of data and contexts. The ranges represent best estimates for higher and
lower quartiles for costs incurred annually during the 1990s. The range values for the external costs in
category 2 are calculated from the ranges stated in studies of external costs of each of these gases, rather
than the variation of emissions during the 1990s.
The osite damage caused by erosion in category 3a does not include the costs of removing soils/
sediments from drinking water (these are in cost category 1c).
+, Not yet able to calculate costs.
BSE costs are an average for 1996 and 1997.
J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136 117
be 80% of 1a, 2c; 50% of 1b-c, 1e-f, 2a, 2d, 3a-b, 4a-4d, 5a; and 25% of 7a
(the total costs arising from livestock systems are higher than for arable
largely because of the one-o bovine spongiform encephalopathy [BSE]
4. pesticide externalities alone average £8.6/kg of active ingredient (a.i.) used in
agriculture (22.5 m kg), or £33/ha of land receiving pesticides (on average 3.84
kg a.i./ha) (pesticide externalities are taken to be 100% of 1a, 5; 50% of 1e-f, 4:
which equals £193 m).
Modern farming clearly results in substantial external costs per hectare and per
kilogram of non-renewable input. These per hectare costs are substantially greater
than those estimated in other studies, probably re¯ecting the more comprehensive
nature of the framework and range of impacts measured. Nonetheless, we believe
them to be a conservative estimate of the true costs.
4. Why estimates of externalities are likely to be conservative
This study attempts to estimate the total external costs of UK agriculture.
Given the multifaceted and dynamic nature of agriculture and its impact on envir-
onment and human health, we have had to make many assumptions about the
data. In most cases, these result in conservative estimates of costs, though one
(the BSE crisis) has in¯ated the costs above the long-term annual averages, assum-
ing that the expected eradication of BSE does occur.
1. Some costs are known to be substantial underestimates (e.g. acute and chronic
pesticide poisoning of humans; monitoring costs; eutrophication of reservoirs;
restoration of all hedgerow losses), to be limited to certain geographic areas of
the UK (water company returns are for England and Wales only), or currently
cannot be calculated (e.g. dredging to maintain navigable water; ¯ood defen-
ces; marine eutrophication; poisoning of domestic pets).
2. We do not generally calculate the costs of returning the environment or human
health to pristine conditions. Pesticides in drinking water, for example, must
not exceed a maximum of 0.5 mg/l for all compounds. Yet BSE represents an
example of the cost of complete eradication of a problem. If all cost categories
were estimated for such restoration, then the total externalities would be sub-
stantially greater than estimated in this study.
3. Treatment and prevention costs may be underestimates of the true costs. This
signi®cantly underestimates the true costs of biodiversity loss, since in most
cases species and habitat plans aim to restore only a small proportion of pre-
vious biodiversity losses. Agriculture's eect on biodiversity is estimated
according to the cost of implementing plans to return species and habitats to
acceptable levels for society (after accounting for non-agricultural impacts on
biodiversity). But this underestimates the non-user values, which may be sub-
stantial. We have not estimated people's WTP for option values (the option of
118 J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136
enjoying something in the future); bequest values (ensuring that descendants
will be able to derive value); and existence values (the value of knowing that
something simply exists). In general, this study accounts for use values, and
underestimates the rest (e.g. archaeological remains many have high existence
value to some people, yet many have been destroyed by cultivation). In addi-
tion, by focusing on costs, this study underestimates how much people might
be willing to pay to see positive externalities created (c.f. Willis et al., 1993;
Darling and Topp, 2000).
4. This study does not account for time lags between the cause of a problem
and its expression as a cost. Some costs incurred in the 1990s may have
arisen from activities or technologies long since stopped (e.g. organochlorine
residues carried into rivers in Cornwall by eroded soil long after banned from
use Ð RCEP, 1996). Others may not yet be expressed (e.g. accurate predic-
tions about the future number of cases of new variant Creutzveldt-Jakob
Disease [nvCJD] are impossible; and the role of pesticides as endocrine
5. We have not included the cost of research in this study, as it is impossible to
disaggregate research budgets on the basis of allocations for addressing the
problems of negative externalities.
6. We do not include the very substantial public subsidy for farming (£3 billion
annually during the 1990s), as there is no accepted relationship between pro-
vision of subsidies and creation of negative externalities. Subsidies are a
transfer from taxpayers to farmers (whether or not external costs are induced).
Some of this support is used to create positive bene®ts, directly through agri-
environmental programmes (approximately £100 m annually in the UK to the
late 1990s, and rising under CAP reforms), and the removal of public support
could, indeed, lead to greater negative externalities, such as via farm amalga-
mation, removal of hedgerows, and increased pesticide use.
7. This study has sought to estimate only those costs arising from the farm. We
have not included the many environmental and social costs associated with
getting food from the farm gate to consumers' plates. Transport externalities
are likely to be signi®cant (Raven and Lang, 1995; ECMT, 1998). We have also
not included an assessment of the costs caused by modern farming on rural
5. Data sources and key assumptions
This study has drawn on 17 datasets collected and maintained by a wide range of
agencies and authorities in the UK and rest of Europe:
1. Oce of the Director General of Water Services (Ofwat, 1992±1998) dataset of
28 water companies in England and Wales;
2. British Crop Protection Association (formerly the British Agrochemicals
Association) data (BAA, 1998);
J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136 119
3. Department of the Environment, Transport and the Regions (DETR, 1998a)
data on water pollution;
4. Environment Agency (EA) data on both eutrophication and pollution inci-
dents (EA, 1998a, b);
5. EA data on monitoring of ground and surface water (EA, 1998c);
6. Ministry of Agriculture, Fisheries and Food (MAFF) monitoring data, Pesti-
cides Safety Directorate (PSD), and Veterinary Medicines Directorate (VMD,
1997, 1998; WPPR, 1997);
7. DETR emissions inventory, National Atmospheric Emissions Inventory, and
the European Environment Agency (EEA) European Community inventory
(DETR, 1998b, c; EEA, 1999);
8. EEA ExternE study for external costs of gases (c.f. Eyre et al., 1997; Holland et
9. DETR National Soils Inventory, and local authority data on accidents and
clean-up costs (Evans, 1995; RCEP, 1996; DETR, 1997a; Smith et al., 1998);
10. EEA data on soil erosion and organic matter losses (EEA, 1998);
11. DETR and Institute of Terrestrial Ecology datasets on species losses (DETR,
1997a, b, 1998a, d; EA, 1998c);
12. UK Biodiversity Steering Group (1995, 1998, 1999) by costings for Biodi-
versity and Habitat Action Plans;
13. DETR data on hedgerow and stonewall losses (DETR, 1997c, 1998d);
14. Rothamsted data on bee colonies and losses since 1940s (Carreck and Wil-
15. Health and Safety Executive (HSE) data on pesticide poisoning (HSE,
16. Public Health Laboratory Service (PHLS) data on food poisoning (Wall et al.,
1996; Evans et al., 1998; PHLS, 1999); and
17. National Audit Oce (NAO) and MAFF data for BSE (NAO, 1998).
5.1. Cost category 1: damage to natural capital Ð water
Pesticides, nutrients (nitrogen and phosphorus), soil, farm wastes and micro-
organisms escape from farms to pollute ground and surface water. Costs are incur-
red by water delivery companies (and passed onto their customers) to comply with
drinking water standards set out in European Union (EU) legislation for pesticides
and nitrates (standards for pesticides are 0.1 mg/l for a single product and 0.5 mg/l
for total pesticides; for nitrates the maximum is to 45 mg nitrate/l or 10 mg nitrate-
N/l), to remove pathogens, particularly Cryptosporidium, to pay for restoring water
courses following pollution incidents and eutrophication, and to remove soil from
water. It is important to note that some costs would be borne whatever type of
agricultural system was in use. The key policy question is, are there types of agri-
culture that could substantially reduce these costs? We also do not assess all external
costs, such as the avoidance costs of water consumers switching to bottled water.
Companies incur both capital and operating expenditure for water quality treat-
ment. These costs are reported annually by each of the 28 water companies in England
120 J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136
and Wales to Ofwat.
We use these, together with various DETR datasets, to esti-
mate external costs at £231 m/year for damage to water. These costs would be much
greater if the policy goal were complete removal of all residues/contaminants.
5.1.1. Pesticides in sources of drinking water (1a)
Annual capital expenditure by water companies on pesticide removal between
1992 and 1997 was £124.9 m/year after depreciation (at 1996 prices). Operating
expenditure by the 28 companies is generally much higher in the east of England,
but is not always reported separately. Based on returns to Ofwat, we estimate
annual operating costs for pesticide removal to be £9.5 m. As 89% of pesticides
(some 22.5 m kg) are applied in farming (BAA, 1998), the total pesticide costs aris-
ing from farming are £119.6 m/year.
5.1.2. Nitrate in sources of drinking water (1b)
Nitrate enters drinking water sources from fertilisers and livestock wastes, from
mineralisation of organic nitrogen in the soil, from atmospheric depositions, and
from human sewage. Capital expenditure by water companies on nitrate removal
between 1992 and 1997 was £18.8 m/year, and operating expenditures £1.7 m (both
are higher in the east). We estimate that 80% of nitrogen is from agricultural sour-
ces, putting annual external costs at £16.4 m/year.
5.1.3. Phosphate and soil in sources of drinking water (1c)
Phosphate also contaminates water, with some 43% in water estimated to come
from agriculture (29% from livestock; 14% from fertilizers), mostly attached to soil
particles from eroded land, the remainder coming from point sources (human waste,
detergents, industry; RCEP, 1996; EA, 1998a; EEA, 1998; Withers and Jarvis, 1998).
Capital expenditure on both phosphate and soil particle removal was £68.8 m
between 1992 and 1997, with a further £4.3 m for operating expenditure. Assuming
The government's Oce of the Director General of Water Services sets industry price levels each ®ve
years, which determine both the maximum levels of water bills and speci®es investments in water quality
treatment. During the 1990s, water industry undertook pesticide and nitrate removal schemes, resulting in
the construction of 120 plants for pesticide removal and 30 for nitrate removal (Ofwat, 1998). Ofwat
estimates that water companies will spend a further £600 m between 2000 and 2005 on capital expenditure
alone due to continuing deterioration of `raw water' quality due to all factors. Ofwat predicts capital
expenditure for pesticides to fall to £88 m/year at the end of the 1990s/early 2000s; and for nitrate to fall
to £8.3 m/year.
Although Ofwat has sought to standardise reporting, individual companies report water treatment costs
in dierent ways. Most do distinguish treatment for pesticides, nitrate, Cryptosporidium, and several
metals (iron, manganese, lead). The remaining treatment costs for phosphorus, soil removal, arsenic and
other metals, appear under a category labelled `other'. Of the 28 water companies in England and Wales,
three report no expenditure on treatment whatsoever; and a further three do not disaggregate treatment
costs, with all appearing under `other'. Twenty companies report expenditure on removal of pesticides, 11
on nitrates, and 10 on Cryptosporidium. It is impossible to tell from the records whether a stated zero
expenditure is actually zero, or whether this has been placed in the `other' category. Using Ofwat and
water companies' returns, we estimate that 50% of expenditure under the `other' category refers to
removal of agriculturally related materials.
J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136 121
half is for soil removal, and 43% of the remaining phosphorus costs are from agri-
culture, then total external costs for both phosphorus and soils are £52.3 m.
5.1.4. Zoonoses in sources of drinking water (particularly Cryptosporidium) (1d)
Water companies must remove some 50 zoonoses derived from livestock, wild
animals and human sewage. The most important agricultural contaminant is Cryp-
tosporidium, a protozoan causing severe diarrhoeal illness. It is resistant to chlor-
ination and can only be removed by ®ltration. Expenditure was low in the early
1990s (£27.6 m for 1992±1997), but by the end of the 1990s had risen to £8 m/year
(DETR, 1998e). Ofwat, however, has indicated that £66 m/year will be required to
meet legal compliances. We take a low±mid range annual ®gure of £25 m.
recently, it was assumed that all Cryptosporidium arose from animals Ð low levels of
infection are common in cattle, and there are no practicable measures for eradica-
tion. But recent research indicates that some strains occur only in humans, and so
we assume that 90% of the treatment costs are agricultural externalities, i.e. £22.5 m
(Kemp et al., 1995; Sturdee et al., 1998). Type 1 strains of Cryptosporidium aect
only humans, whilst Type 2 aect both animals and humans, and may be found in
both livestock wastes and sewage (ENDS, 1999a, b).
5.1.5. Eutrophication and pollution incidents from agriculture (1e)
Farm wastes further disrupt water systems: cattle and pig slurry, silage euent,
dairy wastes that cause eutrophication, and toxic products (such as sheep dips) that
kill aquatic life. In each of 1996±1997, there were 31,000±32,000 reports of water
pollution in England and Wales from all sources, of which about 20,000 were sub-
stantiated (EA, 1998b). Agriculture accounted an average 2600 incidents per year
during the 1990s (of which about 50 are in Category 1, 250 in Category 2, 2300 in
Category 3). Using the costs incurred by the EA for restocking rivers with ®sh to
restore them to their pre-incident condition, we estimate the total cost of these inci-
dents to be £1.14±2.35 m/year.
Expenditure on Cryptosporidium removal is likely to grow: Ofwat assumes that some £1000 m will be
invested on improved ®ltration and for Cryptosporidium treatment over 1998±2013 (dwar®ng previous
requirements for pesticide and nitrate removal); DETR assumes only £120 m, but bases this on only 10 of
28 companies requiring expenditure on Cryptosporidium removal.
Pollution incidents are sorted by the EA into three categories. Category 1 incidents are the most ser-
ious and may involve one or more of the following: the closure of a source of water abstraction; an
extensive ®sh kill; a potential or actual persistent eect on water quality or aquatic life; a major eect on
the amenity value of the receiving water; or the subsequent need for extensive remedial measures to be
taken. Category 2 incidents are signi®cant but less severe, and may involve the necessity to notify down-
stream abstractors; result in a signi®cant ®sh kill; render water un®t for livestock; have a measurable eect
on animal life in the water; contaminate the bed of the river or canal; or reduce the amenity value of the
water to their owners or to the general public. Category 3 incidents are relatively minor and have no sig-
ni®cant or lasting eect on the receiving water. The EA buys ®sh at a cost of £500±1000 for 1000 1-year
old ®sh, and £900±1900 for 1000 2-year olds. We estimate the 50 Category 1 incidents kill 4000±5000 ®sh
per incident; the 250 Category 2 incidents each to kill 25±50% of this total; and the 2300 Category 3
incidents to kill 5±10%. These costs, however, include only the restocking of the ®sh that were lost and do
not account for the losses of invertebrates and other aquatic life. The cost of river aeration and labour are
also not included.
122 J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136
Eutrophication aects water supply (algae can block ®lters, stimulate bacterial
growth, and give drinking water an unpleasant taste), irrigation, ®sheries, naviga-
tion, water sports and angling (Mason, 1996; EA, 1998a; Withers and Jarvis, 1998).
Between 1989 and 1997, some 3000 freshwater bodies have been aected by algal
blooms, some of which have caused human health problems, the deaths of sheep and
dogs, and the closure of water bodies for recreation. Most reservoirs in eastern
England suer periodically from an inability to treat water owing to a high con-
centration of plankton, leading to costly closure of treatment works for periods of
up to 2±6 months (EA). There are no national data on the costs of eutrophication,
though the remedial costs in reservoirs alone have been estimated to be £4 m/year
(RCEP, 1996). Marine eutrophication, comprising algal blooms, red tides and
anoxia in deep waters, is also increasingly common, but costs are not estimated in
5.1.6. Monitoring and advice on pesticides and nutrients (1f)
Costs are incurred by the PSD, VMD, and the EA for monitoring of pesticide
residues and nutrients in food and the environment, and for administration of
schemes and grants to reduce pollution and for advisory services. The costs are
£5.4 m for pesticide monitoring in food and livestock, and £4.75 m for monitoring
pesticides at 2500 surface and groundwater sites.
No data are available on residue
monitoring carried out by supermarkets and food processors. The UK government
also incur £0.55 m costs in providing advice to farmers to encourage the adoption of
more sustainable nutrient and catchment management. Although we include these
costs in the analysis, it could be argued that an alternative, more sustainable agri-
culture, would still incur such monitoring costs.
5.2. Cost category 2: damage to natural capital Ð air
Agriculture contributes to atmospheric pollution through the emissions of four
gases: methane from livestock, nitrous oxide from fertilisers, ammonia from live-
stock wastes and some fertilisers, and carbon dioxide from energy/fossil fuel con-
sumption and loss of soil carbon. According to the National Atmospheric Emissions
Inventory and the EEA inventory (DETR, 1999b, c; EEA, 1999), UK agriculture
annually emits 1.064 m tonnes of methane, 0.098 m tonnes of N
O, 0.278 m tonnes
of ammonia, and 0.75 m tonnes of CO
-C (these data do not include a factor for soil
carbon loss). These in turn contribute to atmospheric warming (CH
The PSD pesticide residues monitoring programme took 3000 samples in 1997 (down from 4000 in
1996) from retail outlets, which were subjected to 80,000 analyses, at a cost of £1.7 m (£2 m in 1996;
WPPR, 1997). The VMD tested 39,152 samples of domestic and imported livestock foodstus for residues
through a statutory programme to implement EU legislation, with annual costs of £2.7 m, and in a non-
statutory programme funded by MAFF conducted 16,767 analyses on 2547 samples at a cost of £1 m
(VMD, 1997, 1998; MAFF, 1998). The EA subjects water to 200,000 pesticide analyses; at 8% of sites,
Environmental Quality Standards were exceeded by at least one pesticide (EA, 1998c). The cost is not
recorded by the EA, but assuming similar unit costs as for the PSD, we put the annual cost at £4.75 m.
J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136 123
), ozone loss in the stratosphere (N
O), acidi®cation of soils and water (NH
and eutrophication (NH
; DETR, 1998b, c; EEA, 1999).
Extensive research is underway on the external costs of these gases (Pearce et al.,
1996; Eyre et al., 1997; Holland et al., 1999). The ExternE study on the external
eects of climate change gases includes analysis of impacts on climate change,
health, parasitic and vector borne diseases, sea-level rise, water availability, biodi-
versity, and storm, ¯ood and drought incidence (Eyre et al.). It puts the marginal
costs of methane at £263/tonne (range £239±353); of nitrous oxide at £7530/tonne
(range £4267±17,333); and of carbon dioxide (as C) at £63/tonne (range £47±113).
The external costs of ammonia have been calculated by identi®cation of emissions,
changes in exposure/impacts, quanti®cation of impacts, and valuation based on
WTP, using the more conservative VOLY (value of a life year) concept, rather than
the VOSL (value of a statistical life), and indicating an external cost of £171/tonne
(range £83±259) (Holland et al.). These studies indicate that annual external costs of
these gases arising from UK agriculture are £280 m for CH
, £738 m for N
O, £47 m
, and £48 m for NH
5.3. Cost category 3: damage to natural capital Ð soil
5.3.1. O-site damage caused by soil erosion (3a)
A healthy soil is vital for agriculture, but modern farming has accelerated ero-
sion, primarily through the cultivation of winter cereals, the conversion of pasture
to arable, the removal of ®eld boundaries and hedgerows, and overgrazing of ani-
mals on grasslands (Evans, 1995, 1996; RCEP, 1996; DETR, 1997a; EEA, 1998).
Soil erosion causes both on- and o-farm problems.
We do not include internal
costs, even though loss of soil fertility represents a loss of public good in the long-
run. O-site costs arise when soil carried o farms by water or wind blocks
ditches and roads, damages property, induces trac accidents, increases the risk of
¯oods, and pollutes water through sediments and associated nitrate, phosphate and
pesticides. Evans, using data from local authorities, estimates that the national
external costs to property and roads alone to be £13.77 m (£4 m for damage to
roads and property; £0.1 m for trac accidents; £1.19 m for footpath loss; £8.47 for
channel degradation), but not counting water company costs (see category 1) or
losses to ®sheries.
The data in the Open Framework and FUND models take account of dierences in discount rate, are
weighted according to wealth dierences in aected countries, and take account of `social contingency'
(the capacity of regions/countries to adapt to change). This means that uncertainty is still very large (c.f.
Eyre et al., 1997). We adopt a conservative ®gure for damage costs based on a quarter of the dierence
between the lowest and highest estimates contained in the Open and FUND models, and according to two
dierent discount rates (1 and 3%).
Costs incurred by farmers themselves from soil erosion arise from: (1) loss of organic matter leading
to decreased water holding capacity of soils and increased run-o; (2) loss of organic matter-rich soils
reduces yields as crops are slower to germinate; and (3) loss of nutrients and crops themselves in water and
wind erosion. Evans (1995, 1996) estimates the annual on-farm costs of soil erosion to be £10±11 m (1996
124 J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136
5.3.2. Organic matter (OM) and carbon dioxide losses (3b)
Soils in England, Wales and Scotland contain some 21.78 billion tonnes of carbon
(Howard et al., 1995; DETR, 1997a; Smith et al., 1998). Arable soils contain on
average 162 tonnes C/ha, permanent pasture 207 tonnes C/ha, and soils under semi-
natural vegetation 350 tonnes C/ha. Most carbon in the UK is in Scottish peats
(16.4 billion tonnes alone). Carbon accumulates in soil when arable land is
converted to grassland or forest, and when sustainable farm practices lead to
OM incorporation, but it is rapidly lost when pastures are ploughed or when agri-
cultural land is intensively cultivated (Ka
Ètterer and Andre
Ân, 1999). The OM content
in UK soils has declined in recent years (DETR; EEA, 1998; but see Skinner and
Todd, 1998, for another view). Soils lose CO
when OM is lost, and using estimates
of soil OM loss, we calculate that 20% of arable soils (0.92 m ha) have lost 1.7% or
more of OM since 1980, amounting to 1.42 tonnes C/ha/year.
Given an external
cost for CO
of £63/tonne (range £47±113), this puts the annual cost at £82.3 m
5.4. Cost category 4: damage to natural capital Ð biodiversity and landscape
5.4.1. Biodiversity and wildlife (habitats and species) (4a)
Modern farming has had a severe impact on wildlife: 170 native species have
become extinct this century, including 7% of dragon¯ies, 5% of butter¯ies and 2%
of ®sh and mammals. In addition, 95% of wild¯ower-rich meadows have been lost
since 1945; 30±50% of ancient lowland woods; 50% of heathland; 50% of lowland
fens, valley and basin mires; and 40% of hedgerows (DETR, 1998d; Pretty, 1998).
Species diversity is also declining in the farmed habitat itself. Draining and fertilizers
have replaced ¯oristically rich meadows with grass monocultures, overgrazing of
uplands has reduced species diversity, and herbicides have cut diversity in arable
®elds. Farmland birds have particularly suered: the populations of nine species fell
by more than a half between 1970 and 1995 (Campbell and Cooke, 1997; Pain and
Pienkowski, 1997; Mason, 1998).
In this study, we use the costs of restoring species and habitats under the Biodi-
versity Action Plans (BAPs) as a proxy of the costs of wildlife and habitat losses.
These plans contain costed targets and action plans for 406 priority species and 38
According to the National Soils Inventory (DETR, 1997a), there was an increase between 1980 and
1995 in the proportion of arable topsoils found to have OM concentrations of <3.6% (from 32 to 41% of
samples) and a corresponding decrease in the number of topsoils with >7% OM (from 22 to 11%)
with 11% of samples showing OM declines from 7 to 5.3% (mid-range) and a further 11% showing OM
decline from 5.3 to <3%, this gives a value of 20% of soils (assuming these losses occur mainly in arable
soils, and that rough and permanent pastures are largely carbon neutral, this suggests losses on 0.92 m ha)
showing OM declines of 1.7% or more since 1980. We therefore assume a loss of soil OM of 1.7% in a 20
cm depth; given a typical dry bulk density of 1.25 g/cm
(range 1.1±1.6); and given that approximately
50% of soil OM is carbon (20±75% range), this suggests losses of 21.3 tonnes C/ha over 15 years, or 1.42
Under deliberate management for soil OM and carbon accumulation, such as zero tillage and cover
cropping, it is possible for soils to accumulate some 22.8 tonnes C/ha/year Ð a bene®t of £1596/ha/year
(Smith et al., 1998).
J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136 125
key habitats (UK Biodiversity Steering Group, 1995, 1998, 1999; DETR, 1997a,
For those species and habitats for which agriculture is identi®ed as one of the
factors causing problems, we have used details in each of the BAPs to estimate that
half of the costs of actions to protect and restore them can be attributed to agri-
culture. These plans aim to restore only a proportion of past species and habitat
declines, so they underestimate the cost of biodiversity loss.
The total costs of plans for species aected by farming practices and partly
dependent on farmland is £1.69 m/year (10 vertebrate species £1.25 m; 16 inverte-
brates £0.27 m; and 20 plant species £0.22 m). The average annual cost of a habitat
plan is £2.37 m, which puts the total cost for farmland habitats and habitats aected
by farming practices to be £22.39 m/year. This gives an annual total for both species
and habitats aected by agriculture of £24.6 m.
5.5. Hedgerows and drystone walls (4b)
Hedgerows and stonewalls are important for landscape, wildlife and cultural value,
as well as being valuable for soil conservation and stock control, and as habitats for
bene®cial insects and birds. We use the amount that farmers receive for replacing
hedgerows and drystone walls under agri-environment schemes as a proxy for cost.
Net hedgerow stock declined from 563,000 to 377,500 km between 1984 and 1993, an
average loss of 18,560 km (DETR, 1997c, 1998d). But taking into account hedgerow
restoration (5700 km/year), the total annual losses are some 24,260 km (only 15% is
due to outright removal, the remainder becoming derelict due to poor management).
Farmers receive £2±4/m to restore hedgerows, putting the cost to restore just one
year's total loss of 24,260 km to be £72.8 m (range of £48.5±97.0 m).
Over the past 40 years, 7000 km of drystone walls have been lost from upland
landscapes; 50% of the remaining 112,000 km have become derelict and no longer
stockproof, and a further 46% are in need of some restoration. Assuming a cost of
£16/m for lost stonewalls, £12/m for derelict walls, and £4/m for restoration
(restoration grants of £12±16/m are available under the Countryside Stewardship
Scheme), then the annual cost is £24.8 m.
5.5.1. Bee colony losses (4c)
Honey and bumble bees are the most important insect pollinators in the UK,
pollinating some 70 crops. There are 200,000 honey bee colonies in the UK, owned
The BAPs contain some farmland species (e.g. skylark) and habitats (e.g. cereal ®eld margins), for
which the costs relate primarily to agriculture. Other species (e.g. song thrush) and habitats (e.g. salt-
marsh) are partly dependent on farming, or have declined partly as a result of agricultural practices (e.g.
great crested newt, fens; UK Biodiversity Group, 1995, 1998, 1999). The cost per habitat has been calcu-
lated by taking the mean of 1997 and 2000 costings. The habitat plans cover only public expenditure; are
additional to existing ®nancial commitments; include the costs of managing public sector land, and the
costs of land management scheme payments (including administration); take account of revenue from
land management (e.g. reeds and grazing); include land purchase costs, both the costs of public sector
acquisition and grants for private sector purchase; and exclude the costs of research, monitoring, advice to
managers, site safeguard and designations and publicity. For this study, only habitat management,
restoration and creation costs are included.
126 J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136
by 35,000 beekeepers (of whom only 300 are commercial). Carreck and Williams
(1998) put the total annual value of bees at £153.6 m (90% for pollination; 10% for
honey and beeswax) Ð roughly £770/colony (1996 prices). Although bees are
damaged by modern agriculture through exposure to pesticides and the loss of
habitat (e.g. loss of ¯ower-rich meadows), there are no estimates of the costs of bee
. However, a 1943 study indicated that there were 429,000 colonies (Butler,
1943), suggesting a loss over 53 years of some 4320 colonies per year. It is impossible
to say how much of this decline is directly due to modern agriculture (the parasitic
mite, Varroa jacobsoni, has killed many colonies, and demand for domestic honey
has changed). But as bee keepers are unable to meet the demand for pollination
services (indicating a shortage of bees), we assume that half of the losses are due to
modern agriculture Ð some 2160 colonies/year, putting the cost at some £1.73 m.
5.5.2. Agricultural biodiversity (4d)
In addition to the loss of wild biodiversity, agricultural biodiversity has been
declining sharply during the course of this century (Fowler and Mooney, 1990;
Heywood, 1995; RAFI, 1997). It is currently not possible to put a cost on these
losses of genetic diversity, particularly where whole species or varieties are
5.6. Cost category 5: damage to human health Ð pesticides
Pesticides can aect workers engaged in their manufacture, transport and dis-
posal; operators who apply them in the ®eld; and the general public. Estimates for
the external health costs of pesticides are almost certainly considerable under-
estimates, owing to diering risks per product, poor understanding of chronic eects
(e.g. in cancer causation), weak monitoring systems, and misdiagnoses by doctors
(Repetto and Baliga, 1996; HSE, 1998a, b; Pearce and Tinch, 1998; Pretty, 1998):
5.6.1. Pesticides Ð acute eects (5a)
It is very dicult to say exactly how many people are aected by pesticides each
year. According to voluntary reporting to the HSE, some 100±200 incidents occur
each year, of which few are substantiated.
However, recent HSE research indicates
signi®cant under-reporting (HSE, 1998a, b). One survey of 2000 pesticide users
found that 5% reported at least one symptom in the past year and about which they
The National Bee Unit con®rmed only 82 colonies aected in 1998 out of 200,000. In the USA, the
number of honey bee colonies has declined from 5.9 million in 1987 to 2.8 million in 1994. Each year,
some 15,000 colonies are aected by pesticides (Ho and Willett, 1995; Nabhan and Buchmann, 1997).
Fatalities from pesticides at work in Europe and North America are rare Ð one a decade in the UK,
and eight a decade in California. In the UK, a variety of institutions collect mortality and morbidity data,
but in California, where there is the most comprehensive system of reporting in the world, ocial records
show that some 1200±2000 farmers, farmworkers and the general public are poisoned each year (CDFA,
1972±current passim; Pretty, 1998). There appears to be greater risk from pesticides in the home and
garden where children are most likely to suer. In Britain, 600±1000 people need hospital treatment each
year from home poisoning.
J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136 127
had consulted a doctor. A further 10% had been aected (mostly by headaches), but
had not consulted a doctor. As some 105,000 farmers hold pesticide certi®cates in
Britain, this suggests that at least 5250 farmers suer sucient symptoms to consult
a General Practitioner (GP) each year, and a further 10,500 are adversely aected
to a lesser degree. This suggests the annual costs borne by farmers and the health
system are £1.05 m.
Strictly, though, these are mostly private costs borne by
farmers (except for GP consultations and eects on hired workers).
5.6.2. Pesticides Ð chronic eects (5b)
Chronic health hazards associated with pesticides are even more dicult to assess.
The most controversial issue is whether or not some products are carcinogenic.
Pesticides are ingested via food and water, and these represent some risk to the
public. With current scienti®c knowledge, it is impossible to state categorically
whether or not certain pesticides play a role in cancer causation. In this study,
therefore, we do not include the external costs associated with chronic health eects.
5.7. Cost category 6: damage to human health Ð nitrate
Nitrate is not toxic to humans, though it can be reduced by bacteria in the gut or
mouth to nitrite, which is a well-established cause of methaemoglobinaemia (blue
baby syndrome), which lessens the capacity of the blood to carry oxygen. Acquired
methaemoglobinaemia is most likely to occur in infants in the ®rst few months of
life, though there have been no cases since the 1950s in Britain. The link between
nitrate and cancers of the stomach, bladder and oesophagus through the formation
of nitrosamines was long suspected to be a health risk, but epidemiological and
other studies have not yet proven causation. For this study, we assume that nitrate
causes no direct external health costs in the UK (nitrate does have to be removed
from drinking water to meet legal standards Ð see cost category 1b).
5.8. Cost category 7: damage to human health Ð micro-organisms and other disease
5.8.1. Bacterial and viral outbreaks in food (7a)
In the UK, the main food poisoning threats arise from Bacillus,Campylobacter,
Cryptosporidium,Clostridium,Escherichia coli,Listeria,Salmonella and Small
Round Structured Virus. According to the PHLS, food poisoning incidents have
Assuming the value of a symptom-day for farmers and farmworkers is £75, and that 5250 farmers
are o work for one day, the 10,500 for half a day, and GP consultations cost some £50 each (assuming
each ill person does go to a GP, and that the cost of illnes is a good measure of WTP).
The use of organophosphates (OPs) by sheep farmers represents a special case. OPs react with acetyl
cholinesterase, an enzyme playing a key role in terminating the transmission of nerve impulses. As OPs
inhibit this enzyme, they can cause continuous nerve stimulation, leading to headaches, giddiness, nausea,
blurred vision and rapid heart action. Once again, though, it is farmers and farmworkers who are aected.
It is now thought that 6000 out of 90,000 sheep farmers are suering ill-health from exposure to sheep dip
chemicals (MAFF, 1998), putting the private cost of this poisoning at £3.47 m/year.
128 J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136
risen sharply in recent years to 94,000/year in 1997 (average of 9000 in the 1950s;
6000 in the 1960s; 8000 in the 1970s; 17,165 in the 1980s; and 72,078 in the
1990s; Wall et al., 1996; Evans et al., 1998; PHLS, 1999). However, it is also known
that noti®ed cases represent only about 3% of total morbidity (one in 30 cases
noti®ed) Ð people may suer mild infection, become ill but not seek medical atten-
tion, or be seen by a doctor who fails to notify (Wall et al.).
We use reported PHLS data for 1992±1996 on modes of transmission to allocate
costs for food poisoning (Cowden et al., 1995; Djuretic et al., 1996; Evans et al.,
1998). We assume that the 88,000 noti®ed cases (average for 1996±1997) represent
the tip of 2.64 m cases (at a 30:1 ratio), with 3% noti®ed, 22% consulting a GP, 30%
ill but not seeking medical attention, and 45% with mild symptoms (Wall et al.,
1996). The total costs of all food poisoning (lost wages, consultations with doctors,
hospital beds) are estimated to be £677 m/year.
We conservatively assume that
only 25% of these cases of food poisoning arise directly from UK farming Ð some
arise from food processing, from domestic and commercial preparation (such as
from infected food handlers), from consumption of contaminated imported foods,
and from non-farmed foods such as shell®sh. This puts the annual costs at £169 m
(range £100±243 m).
5.8.2. Antibiotic resistance (7b)
Some 1225 tonnes of antibiotics are used in the UK each year Ð 40% for humans;
30% for farm animals; and 30% for domestic pets and horses. Antibiotics and other
antimicrobials are used in modern agriculture for: (1) therapeutic treatment of clin-
ical diseases (20%); and (2) prophylactic use and growth promotion (80% of total),
though they are not used in certi®ed organic farming. Concern is growing that
overuse of antibiotics may render some human drugs ineective and/or make some
strains of bacteria untreatable. The World Health Organisation has documented
direct evidence that antimicrobial use in farm livestock has resulted in the emergence
of resistant Salmonella,Campylobacter,Enterococci, and E. coli types (WHO, 1997).
Some 20±50% of antibiotics used by humans and 40±80% of those used in farming
are thought to be unnecessary (Harrison and Lederberg, 1998; Wise et al., 1998).
Evidence shows that some emerging resistance problems, such as vancomycin-
resistant Enterococci, are linked to the overuse of antibiotics both in hospitals and
on farms (House of Lords Select Committee on Science and Technology, 1998).
However, it is currently impossible to estimate the external costs of antibiotic overuse.
We estimate the costs in the following way: 88,000 noti®ed cases with 1 week o work (at £375 and
cost of lost business of £200), of which half are hospitalised see consultants, plus the costs of laboratory
tests on samples, giving £158.4 m. The 580,000 cases that see a GP are o work for 3 days (£225 plus
£120), plus GP consultation costs (£50), giving a total of £200 m. The 792,000 cases that are ill but seek no
medical advice are o work for 2 days (£150 plus £80), giving a total of £182 m. And the 1.19 million with
mild symptoms miss 1 day (at £75 plus £40), giving a cost of £137 m. The total is £677 m/year.
Vancomycin-resistance is now suspected of being linked to farm use of avoparcin, which was banned
by the EU in 1997. According to the PHLS, one strain of Salmonella,S. typhimurium DT104, is resistant
to at least four antibiotics: it ®rst appeared in the UK in 1990 and now accounts for 15% of all Salmonella
J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136 129
If antibiotic use in farms was to lead to the loss of ecacy of a single human drug
per year, then the cost of its replacement would be substantial. The cost would
be very much higher if overuse of antibiotics meant a complete return to a pre-
5.8.3. BSE and nvCJD (7c)
When BSE was ®rst identi®ed in late 1986, research con®rmed that it was a
member of a group of transmissible diseases occurring in animals and humans. It
appeared simultaneously in several places in the UK, and has since occurred in
native-born cattle in other countries. By May 1998, 171,598 cases had been con-
®rmed in the UK, the epidemic having reached a peak in 1992 (37,000 cases in 1992,
falling to 2040 in 1998; NAO, 1998). The link between BSE and nvCJD in humans
was con®rmed in 1996, and 35 deaths from nvCJD were recorded between 1996 and
early 1999. There are still major uncertainties over the possible spread of CJD. Some
still contest whether BSE is indeed a causative factor in CJD. It is also not known:
(1) how much BSE-contaminated beef entered the food system and was consumed;
(2) the incubation period in humans; (3) the extent of the species barrier between
humans and animals; and (4) how the genetic code of individuals makes them more
or less likely to contract the disease. The external costs of BSE have been sub-
stantial, averaging some £607 m for each of 1996 and 1997 (some 49% of the total
costs caused by BSE
; Table 2).
6. Implications for policy
This study has shown that the total external costs of agriculture in the UK are
substantial, comprising £2343 m, or 89% of average net farm income for 1996. This
aggregate is equivalent to £208/ha/year averaged across all 11.28 m ha of arable land
and permanent grassland (but not rough grazings). Pesticide externalities are £8.60/
kg of a.i. used in agriculture, and £33/ha of land receiving pesticides. The problems
associated with valuing non-market impacts mean that our estimates are con-
servative. The costs incurred in correcting externalities are only a proportion of the
total externalities themselves. In this assessment, some costs also appear low, such as
the eects of pesticides on human health, as their complex behaviour is poorly
understood and so not yet costed.
food poisoning cases. Other pathogenic bacteria becoming more resistant to antibiotics include E. coli
0157, responsible for the deaths of 20 people in Scotland in 1997. The UK House of Lords Select Com-
mittee on Science and Technology (1998) reported on antibiotic resistance, and concluded that the use of
antibiotics in feed for growth promotion should be banned.
It could be argued that compensation payments are also a measure of the external costs of BSE Ð
they are a cost to the taxpayer as a result of problems caused by farming. As they aim to cover income
losses as a result of BSE, they could arguably be used as a measure of the net costs BSE has imposed on
society (not just a transfer payment). They are an external cost in as much as society as a whole is required
to bear the burden of the costs which the BSE crisis has caused to the farming industry (they have become
externalised through public policy). However, for this study, we still leave this outside the framework.
130 J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136
This study raises several important policy questions. First, how best can ecient
policies be developed to lessen these externalities? Second, which farmed hectares
contribute the most to externalities, and how can policy eciently target these over
farms that are not signi®cant sources of externalities? Third, what are the aggregate
positive externalities provided by agriculture Ð given that these may exceed negative
externalities in some farm systems? As yet, the data is too aggregated precisely to
answer these questions. And fourth, what are the best approaches to ensure that
harmed parties are adequately compensated?
As this paper has focused on the total external costs of UK agriculture, it indicates
the broad policy priorities for reducing total externalities. It highlights the need for
policy reform, and the relative scale of the various external costs associated with
modern agricultural practice. Further analysis of the marginal external costs of
agriculture presents signi®cant methodological challenges, but would help to inform
more detailed policy development.
In the meantime, a more fair and ecient use of these public resources would be
achieved if policy sought more explicitly to internalise these external costs. This would
imply a redirection of public aid from polluting activities to sustainable practices,
with subsidies used to encourage those positive externalities under-provided in the
market place, combined with a mix of advisory and institutional mechanisms, reg-
ulatory and legal measures, and economic instruments to correct negative external-
ities. In practice, eective pollution control and explicit supply of desired public
The costs of BSE in the UK
Cost category Average cost for each of 1996
and 1997 (£ million)
Compensation payments to farmers
New schemes Ð market support measures, selective
cull, cattle traceability, beef assurance, over 30
months scheme (OTMS), certi®ed herd scheme
Extensions of old schemes Ð Beef Special and Suckler
Herd top-ups, Hill Livestock Compensatory Allowances
Payments to abattoirs and renderers for storage,
transport, disposal and incineration under OTMS, Calf
Processing Aid Scheme, and emergency aid to slaughter,
rendering and hide industry
Additional purchases into intervention due to BSE crisis 175
Administration and stang
CJD in humans
Source: NAO (1998).
An extra 930 sta were employed by Intervention Board and MAFF in 1996±1997.
CJD deaths Ð assuming 11 deaths per year at a VOSL of $1 million.
J.N. Pretty et al. / Agricultural Systems 65 (2000) 113±136 131
goods requires a mix of all three approaches, and considerable integration across
sectors (c.f. Lewis, 1996; OECD, 1997b; Rayment et al., 1998; Ribaudo et al., 1999;
Pretty et al., 2000). The result would be more ecient policy solutions and a sig-
ni®cant contribution to the sustained viability of UK farming.
We are very grateful to many people for their insights and critical comments on
material contained in this paper and for identi®cation of various datasets, including
in particular an anonymous referee and Thomas Dobbs of South Dakota State
University, together with: Andrew Ball (University of Essex); Nigel Black (Health
and Safety Executive); Roy Brouwer (University of East Anglia); Mark Borchardt
(Marsh®eld Medical Research Foundation, USA); David Bun (Pesticides Trust);
Bob Evans (National Farmers Union); Karen Gray (NPTC); Julie Griths (Ofwat);
David Harley (formerly Royal Society for the Protection of Birds, now Confedera-
tion of Passenger Transport); Mike Holland (AEA Technology); Tim Lang (Thames
Valley University); Peter Loveland (Silsoe Soil and Land Research Centre); Mike
Roberts (DETR); Elizabeth Sigmund (Organophosphates Information Network);
Peter Smith (Institute of Arable Crops Research); Mike Suing (Ardleigh Reser-
voir); Henry Thille (University of Winnipeg); Daniel Thomas (CDSC Wales); Helen
Thompson (National Bee Unit); Rowena Tye (Ofwat); So®a Vaz (EEA); and Chris
Wise (National Farmers Union). The European Environment Agency (EEA) pro-
vided partial support for this study through a grant to analyse the externalities of
agriculture in the whole of Europe.
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