Valuing the outputs of multifunctional agriculture

Given that agriculture produces a broad array of valuable amenities in addition to commodity outputs, ‘green payments’ might be a tool for maximising welfare from the agricultural enterprise. Here, I argue that getting the ‘green prices’ wrong would entail welfare losses and trade distortions. The valuation task requires making some fine distinctions in terms of amenity type, quality and accessibility to demanders. The environmental valuation community is able in principle to provide good estimates of willingness to pay for agriculturally produced amenities, but the valuation task requires an effort on a larger scale than has yet been attempted; and approaching the welfare optimum while minimising trade distortions requires targeting ‘green prices’ down to the farm level.