Project EXTENSITY

1. 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 Project EXTENSITY Environmental and Sustainability Management Systems in Extensive Agriculture www.extensity.ist.utl.pt

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

3. 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 Project EXTENSITY Environmental and Sustainability Management Systems in Extensive Agriculture www.extensity.ist.utl.pt

4. Outline • Motivation and Objectives • Method and Experimental design • Results • Conclusions

5. Motivation and Objectives (1) • 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 • Voluntary labelling mechanism Compliance with the Guaranteed Sustainability Norm • 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.

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

7. 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; • Only beef consumers were approached; • Interviews were carried out by a survey and opinion studies company at hypermarkets in the metropolitan area of Lisbon. • Visual material was used as interview support.

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

9. Production systems Guaranteed Sustainability Permanent Sown biodiverse pastures rich in leguminous. More productive Higher stocking rate Conventional Temporary or permanent natural or semi-natural pastures 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 kgCO2eq/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 7.2 kg solo/kg/meat/year Soil erosion 12.8 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 Self control Independent certification bodies

10. Production systems Guaranteed Sustainability Permanent Sown biodiverse pastures rich in leguminous. More productive Higher stocking rate Conventional Temporary or permanent natural or semi-natural pastures 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 kgCO2eq/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 7.2 kg solo/kg/meat/year Soil erosion 12.8 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 Bid vector: 11-25 € Quality control and food safety Self control Independent certification bodies Given as baseline Varied across subjects 10 12

11. Experimental Design and methodological approach (4) Modelling Framework

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

13. Results (2) Logistic Regression (Probability of WTP=0) Income = 1, 2, 3, 4, 5 μ -1.055 - 0.801 Predicted Probability Variable 0.258 1- [385.91 - 771.82] 0.167 2- [771.83 - 1,157.73] 3- [1,157.74 - 1.543,64] 0.126 0.103 4- [1,583.65 - 1,929.55] 5- [≥ 1,929.56] 0.088

14. Results (3) Log Linear Regression; Anchoring correction

15. Spike adjusted WTP Variable Estimated WTP 12.879 12.135 1 - [385.91 - 771.82] 13.048 13.657 - [771.83 1,157.73] 2 - 13.594 3 - [1,157.74 - 1.543,64] 14.113 13.979 - [1,583.65 1,929.55] 14.436 4 - 14.276 1,929.56] 5 - [ 14.686 Results (3) Log Linear Regression; Anchoring correction Income = 1, 2, 3, 4, 5 Children = 1 / 0 CompImport = 1, 2, 3, 4, 5 μ 11.983 γ 0.371 1.123 - 0.676 0.224

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

17. Results (5) Demand Curve for sustainability labeled beef

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

19. Conclusions • Consumers are willing to pay an extra price premium ranging between 3 and 3.5 € per kilo of SLB. • In average, household consumption of SLB decreases 0.8 kg per 1 € increment in its price. • 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.