Seeking sustainable efficient global agricultural production with nexus approach

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This study aims to estimate the shadow prices of water and carbon dioxide (CO2) in global agriculture under three scenarios: pursuing economic efficiency, sustainable development goals (SDGs), and environmental protection. It assesses the social cost of environmental impacts compared to actual prices. This study also evaluates substitutability among water, labor, and capital in the three scenarios for developing relevant agricultural policies depending on distinct agricultural conditions. Social costs tend to be underestimated because they are not directly observed. Our society has faced an overproduction of agriculture in terms of CO2 emissions and the exploitation of water. This study employs a method of a directional technology distance function for global agricultural production based on Food and Agriculture Organization data on agricultural inputs and outputs. The following three critical findings were obtained: First, the average shadow price of water under the economic scenario was close to the current actual water prices, and water prices would increase if agricultural production accomplished the three SDGs (Goal 2, 6, and 13). Second, labor is substituted for water under the environmental scenario because water prices increase rapidly. In contrast, water is complementary to labor under the SDGs scenario, implying that labor becomes more important for increasing food production. Third, the current CO2 prices are lower than those in the economic scenario. These values are significantly lower than those under the SDGs and environmental scenarios. Based on these results, we conclude that agricultural products are often undervalued because the appropriate value of water is overlooked in real markets. The contribution to reducing CO2 in agriculture is insufficient, owing to current low carbon taxes.