The Economic Aspects of Environmental Co‐operatives for Farmers

Nature and landscape and the quality of soil, water and air are indicated as the environment. On the basis of exclusiveness and rivalry the environment is a public good. Modern mechanized and intensified agriculture has reduced qualities of this environment. These consequences are negative external effects of contemporary agriculture,and in this sense a typical example of market failure. Government intervention is, because of x‐inefficiency and allocation inefficiency,not without problems. An alternative would be to apply a decentralized decision‐making process. The “club” theory offers a theoretical basis from which it can be deduced that co‐operation by farmers in the shape of an environmental co‐operative is a Pareto efficient alternative to Government interventions. For legitimacy, effectiveness and efficiency it is important that covenants, transferable pollution rights or permits and management agreements are a coherent part of the instruments of an environmental co‐operative.