Environmental and macroeconomic impact assessment of different development scenarios to organic and low-input farming in Croatia Darko Znaor Jules Pretty James Morrison Sonja Karoglan Todorović November 2005 1 Further information can be obtained from: UNIVERSITY OF ESSEX Centre for Environment and Society Wivenhoe Park Colchester CO 3SQ United Kingdom Tel: 00 44 12 06 87 22 19 Fax: 00 44 12 06 87 34 16 Email: [email protected] ECOLOGICA Vlaška 64 10000 Zagreb Croatia Tel: 00 385 1 46 36 959 Fax: 00 385 1 46 36 956 Email: [email protected] This project has been carried out with support from the FAO 2 CONTENTS CONTENTS ............................................................................................................................ 3 GLOSSARY OF TERMS AND ABBREVIATIONS .................................................................. 7 ACKNOWLEDGEMENT.......................................................................................................... 8 1. BACKGROUND INFORMATION ................................................................................. 11 1.1. FAO’s assistance to Croatian organic and low-input farming .............................................................11 1.2. Croatia on the accession road to the EU............................................................................................11 1.3. Croatian agricultural policy at the crossroads.....................................................................................12 2. RESEARCH METHODOLOGY.................................................................................... 13 2.1. Research questions............................................................................................................................13 2.2. Research objectives...........................................................................................................................13 2.3. Research hypotheses.........................................................................................................................14 2.4. Research relevance ...........................................................................................................................14 2.5. Research steps and methods.............................................................................................................15 2.5.1 Step 1: Baseline scenario....................................................................................................15 2.5.2 Quantification of environmental pollutants............................................................................16 2.5.3 Step 2: Development scenarios............................................................................................19 2.5.4 Step 3: Implications for policy-making ..................................................................................20 2.6. Research boundaries .........................................................................................................................20 2.6.1 Sectoral boundaries..............................................................................................................20 2.6.2 Type of externalities .............................................................................................................20 2.6.3 Impact categories .................................................................................................................21 2.6.4 Geographical boundaries .....................................................................................................21 2.7. Uncertainties, cavities and constraints ...............................................................................................21 3. CROATIAN FARMING SECTOR ................................................................................. 23 3.1. Croatia in a nutshell............................................................................................................................23 3.2. Natural resources...............................................................................................................................23 3.2.1 The climate...........................................................................................................................23 3.2.2 The soil.................................................................................................................................25 3.2.3 Biodiversity ...........................................................................................................................25 3.2.4 Agro-ecological zones ..........................................................................................................28 3.3. Legacies of the past ...........................................................................................................................29 3.3.1 The fall of state-planned agricultural economy .....................................................................30 3.4. Agricultural statistics...........................................................................................................................30 3.4.1 Number and size of farms.....................................................................................................32 3.4.2 Land use and cropping pattern.............................................................................................33 3.4.3 Livestock...............................................................................................................................38 3.5. Agricultural inputs...............................................................................................................................39 3.5.1 Fertiliser consumption ..........................................................................................................40 3 3.5.2 Pesticide consumption..........................................................................................................41 3.5.3 Machinery and irrigation .......................................................................................................42 3.6. Environmental impact of agriculture ...................................................................................................43 3.6.1 Perceptions on environmental impact of agriculture .............................................................43 3.6.2 Biodiversity ...........................................................................................................................46 3.7. Agricultural outputs and employment .................................................................................................47 3.7.1 Production volume and yields...............................................................................................47 3.7.2 Agricultural trade balance.....................................................................................................48 3.7.3 Employment..........................................................................................................................49 3.8. Agricultural policy ...............................................................................................................................50 3.8.1 First pillar: production subsidies ...........................................................................................50 3.8.2 Second pillar: structural policy measures .............................................................................51 3.8.3 Other support schemes ........................................................................................................53 3.8.4 Penalties...............................................................................................................................53 3.9. Organic farming..................................................................................................................................53 3.9.1 Organic subsides..................................................................................................................57 3.9.2 Organic market.....................................................................................................................60 4. GDP OF FARMING AND FULS ................................................................................... 62 4.1. Croatian GDP.....................................................................................................................................62 4.2. Problems with calculation of the value added of Croatian farming .....................................................62 4.3. Methodology.......................................................................................................................................64 4.4. Selection of relevant economic activities............................................................................................64 4.5. Value added from farming sector .......................................................................................................64 4.5.1 Intermediate consumption ....................................................................................................65 4.6. Value added from FULS.....................................................................................................................68 4.7. Results ...............................................................................................................................................72 4.7.1 Economic activities selected according to NCEA .................................................................72 4.7.2