An estimation of environmental impacts of dairy farming : a cost benefit analysis of dairy farming in Sweden

Abstract: The production of dairy products has both negative and positive external effects on the environment. Positive and negative external effects can be monetized and defined as environmental benefits and costs. Balancing environmental costs and benefits is crucial to prevent market failures. The aim of this paper was to investigate the balance between the environmental benefits and the environmental costs associated with dairy production in Sweden using cost-benefit analysis (CBA). Five dairy farms were used as case studies to conduct the analysis. Both an economic and a financial CBA was conducted for each farm. The results of the CBAs show that there are generally higher environmental costs than benefits. Three out of five farms have positive net present values in the economic CBAs, implying that these farms should go on with their production. The primary objective of the paper was to investigate whether or not there were differences in the results when analysing organic and conventional production systems and across different farm sizes. It is not possible to claim there are differences between conventional and organic production from the results in this CBA.