Analyzing Risk Attitudes, Production Decisions, and Environmental Performance of European Farmers Facing Fossil Fuel and Fertilizer Price Shocks

Recent price shocks in fossil fuels and fertilizers threaten the European agricultural sector. They have an impact on farmers’ production decisions and further affect the farm-level economic and environmental performances. To cope with these shocks, farmers can take short-term risk management tools or reduce their long-term dependence on fossil fuels and fertilizers. However, the risk attitudes of farmers affect their production decisions to adopt these tools and therefore impact productive and environmental performance. Additionally, quantifying marginal abatement costs to reduce environmental pollution is crucial for agricultural policy. Therefore, this Ph.D. thesis analyzes the risk attitudes, the production decisions, and the environmental performance of European farmers facing price shocks of fossil fuels and fertilizers. The current Ph.D. thesis addresses this objective by answering four research questions: (i) What are the risk attitudes of European farmers and how stable are their risk attitudes during a price shock of fossil fuels?; (ii) What is the technical inefficiency of European farmers in using fossil fuels and fertilizers under price shocks of fossil fuels?; (iii) What is the productivity growth of European farmers facing price shocks of fossil fuel?; (iv) What are the shadow prices of fertilizers, fossil fuels, and pollutants during energy price shocks? Using farm- and country-level data, this thesis combines linear programming with econometrics. By answering these research questions, the current thesis will provide a holistic view to understand the performance and decisions of farmers, and potential solutions towards price shocks for policymakers and farmers.