Biodiversity versus transgenic sugar beet: the one euro question

Abstract

The decision of whether to release transgenic crops in the EU is one subject to flexibility, uncertainty, and irreversibility. We analyse the case of herbicide tolerant sugar beet and reassess whether the 1998 de facto moratorium of the EU on transgenic crops for sugar beet was correct from a cost-benefit perspective using a real option approach. We show that the decision was correct, if households value possible annual irreversible costs of herbicide tolerant sugar beet with about 1 € or more on average. On the other hand, the total net private reversible benefits forgone if the de facto moratorium is not lifted are in the order of 169 Mio € per year.

Irreversible costs and benefits of transgenic crops: what are they?

“…This has been recognized by economists (Wesseler 2002;Demont, Wesseler and Tollens 2004;Laxminarayan 2003) as well as biologists (Gilligan 2003). Uncertainty related to the release of transgenic crops exists with regard to the future benefits of the technology as, in general, future output and input prices in agriculture are not known with certainty due to several factors including the microclimate, agriculture policies and technical change.…”

“…Recently, the approach has been applied in agriculture to, among others, the adoption of soil-conservation measures (Winter-Nelson and Amegbeto 1998;Shively 2000), marketing (Richards and Green 2000), wilderness preservation (Conrad 2000), agricultural labour migration (Richards and Patterson 1998) and investment in irrigation technology (Carey and Zilberman 2002). Applications related to agricultural biotechnology include studies by Demont, Wesseler and Tollens (2004), Knudsen and Scandizzo (2003), Morel et al (2003) and Wesseler (2003). Leitzel and Weisman (1999) apply the real-option approach to the analysis of government reforms and argue that new government policies require investments in the form of training of government officials, hiring of additional workers and purchase of equipment.…”

“…A two-dimensional matrix (or threedimensional one, if benefits and costs are added as an additional dimension) can be designed considering these differentiations for an ex ante analysis of social costs and benefits of transgenic crops as depicted in Figure 2. A complete ex ante analysis of economic benefits and costs of transgenic crops should consider all four quadrants of As an example we use an ex ante assessment of herbicide-tolerant sugar beets (htSB) in Europe as explained in detail in Demont, Wesseler and Tollens (2004). The decision rule to release htSB is formulated as, to release htSB if the net reversible social benefits W, the sum of quadrant 1 and quadrant 2 in Figure 2, are greater than the net irreversible costs, the sum of quadrant 3 and quadrant 4, multiplied by a factor greater than one, the so-called hurdle rate : (10) ) ( R I W .…”

“…If households put a value on the potential irreversible costs of transgenic crops of one Euro or more, than the ex ante net social benefits of htSB are negative and htSB should not be released. Wesseler and Tollens (2004).…”

Guest Editorial: Corporate Social Responsibility in Controversial Industry Sectors

“…Although attitudes to such industry sectors vary by culture (Waller et al 2005), they and their products or services often come under close scrutiny by external actors who view them as morally corrupt (de Colle and York 2008), unethical (Byrne 2010), offensive (Fam and Waller 2003), or exemplary of aberrant behavior (Budden and Griffin 1996)-perhaps regardless of their actual or latent harm to society, the environment, or individuals (Demont et al 2004;Kindt 2006;Pratten 2007). Many such industry sectors affect more vulnerable groups in society and local communities disproportionately (Bristow 2007;Cook et al 2003;Nikiforuk 2008) yet remain legal, provide tax revenues for governments, and meet consumer demands.…”