Size, Energy Use and Economies of Scale: Modeling of Policy Instruments to Address Small Farms’ Advantages if Energy Is Scarcer and Ecology Matters?

Abstract

This paper contributes to the discussion on appropriate farm sizes as dependent on energy use and green house gas emission. Normally large farms use more energy than small farms and obtain higher labor productivity which is one of the reasons for their superiority. We presume energy includes a component of negative externality if fossil energy is used and carbon CO2 are counted. Moreover it can be intended to use farming for carbon sequestration. In the paper we will analyze, how a new pathway can be developed, that includes incentives (taxes and subsidies) to save energy and develop coexistence between large and small farms. In favoring small scale farming because of less emission, a contribution to global warming reduction is envisaged. The issue is how can we address farm size, make incentives visible, help to switch technologies and promote farmers who adopt CO2 saving technologies? The paper suggests a framework of linear programming and quadratic expositions of farm behavior to depict policy for optimal farm operation size and farm structures composed of large and small scale farms. A moderate position is taken with respect to sustainable farming and the question of farm size and energy use is given to policy instruments.