Estimation the Shadow Price of Pollution in Iran's Wheat Production and Distribution Chain

Document Type : Research Paper


1 Agricultural Economic Department, Tarbiat Modares University, Tehran, Iran

2 Assistant Professor, Agrie-Peri


Sustainable supply chain emphasizes environmental management of the production, distribution and consumption of goods. On the other hand, energy consumption along the production chain is associated with environmental impacts, such as carbon dioxide emission. Accordingly, the production and distribution of wheat in Iran is accompanied by energy consumption and pollution. The purpose of this study is to estimate the shadow price of carbon dioxide emission in these two parts of the wheat supply chain. For this purpose, using the Input Distance Function, the shadow price of carbon dioxide is estimated in wheat production and distribution sectors. Results show that pollution value account for 16.7 percent of the wheat production cost which reduces the income-to-cost ratio of wheat from 1.55 to 1.33. the value of carbon dioxide shadow price in the distribution sector was higher than the production sector. Therefore, environmental considerations must be taken into account in the production and distribution of wheat.
Keywords: Wheat, Pollution Shadow Price, Input Distance Function, Production and Distribution Chain.

Introduction: The use of energy input in addition to physical inputs cause pollution and greenhouse gas emissions such as carbon dioxide. Therefore, the energy consumption in the process of production of agricultural products will be accompanied by the release of carbon dioxide. Energy consumption at all stages of the supply chain of a product is of utmost importance and its use is associated with externalities. These effects can also occur in the product distribution. Internalizing these external effects involves estimating the environmental damages caused by economic activities, so product prices are more transparent and can also cover social preferences after internalization. On the other hand, the lack of equality between supply and demand of food products in each region and the distance between production areas and consumption areas, trade, and its distribution become inevitable among different regions. Road transport causes side effects that greenhouse gas emissions are one of its varieties.
Wheat as the main product in the Iranians food basket devoted 51.2 percent of the acreage to crops. This acreage in the 2013-2014 crop years produced 10.58 million tons. Although that energy consumption in the transport sector in the period 2000 to 2014 has increased by 1.86 times, carbon dioxide emissions has been at a rate of 2.04 times. Accordingly, emissions increased according to per unit fuel consumption. As a result, taking environmental control policies in this sector become inevitable. The calculation of environmental impacts that arise as a result of wheat movement can play an important role in managing green supply chain.

Methodology: The aim of this study was to estimate the value of the shade of environmental emissions in the production and distribution chain of the wheat in Iran. So, the amount of energy consumed in the production of wheat and distribution in the country is estimated for the years 2000 to 2014. Then, using a distance function based approach to estimate carbon dioxide emissions shadow price of wheat has been manufacturing and distribution sectors. A unique feature of this study was to evaluate and compare the importance of each part of the supply chain on environmental emissions.

Result: Shadow price of emissions should be achieved in order to internalize the externalities. One way to obtain this shade value is to estimate the distance at which communication between desirable and undesirable outputs is determined. According to what was presented in the research method, the carbon dioxide emission in the production process is less than the distribution process. According to research findings, 1.4 tons of carbon dioxide emissions occur for per hectare wheat production in the country, but in exchange for the distribution of this amount of wheat the emissions will reach to 2.03 tons. Total emissions in total production and distribution will be equal to 3.43 tons per hectare. These results can show the more importance of the distribution sector in the environmental damages.
According to the calculations of the current research, the ratio of CO2 shadow price in production sector is 1.4 percent of the cost of production per hectare at average, but this number reaches 15.3 percent in the process of distribution which indicating a much higher importance of the distribution process in CO2 emissions. The control policies in the distribution process of products will be more efficient and more effective in the distribution process. On average in the years 2000 to 2014, it had a value of 852400 Rials. This value in the production sector was equivalent to 76300 Rials. Hence the importance of distribution segment in carbon dioxide emissions is 11.2 times the production of wheat. The shadow value in the distribution sector of the real prices was higher than the value of shadow prices in the production sector. The shadow price of CO2 emission in production and distribution sectors has been ascending, but since 2010 and the release of energy prices, has been an incremental process. Another interesting point is that this increasing process is also shown once again on the implementation of the second phase of the release of energy prices.
As it is known, the production and distribution of wheat is accompanied by social losses imposed on the community. These environmental damages are not included in the economic calculations. The total amount of damages is 16.7 percent of the wheat production cost. The consideration of this damages can change the comparative advantage of wheat production in Iran.

Conclusion: Green supply chain management requires that environmental impacts be taken into account in the production, distribution and consumption of goods. The first step is to calculate the quantity amount of environmental impacts in the supply chain. The carbon dioxide emission, as a result of energy consumption, is one of the major pollutants that are released in the environment. On the other hand, wheat as a strategic commodity plays a major role in in Iran’s food security. Therefore, the purpose of this study is to estimate the shadow price of carbon dioxide emissions in Iran's wheat production and distribution sector by using the Input Distance Function. The shadow value of the CO2 emission can be considered a green tax. The results of the research showed that the shadow price of CO2 emissions in the production sector is much lower than in the distribution sector. Also, the ratio of income to the cost of wheat production in Iran during the study period was 1.55. If the amount of environmental damage is taken into account during this period, this will be reduced to 1.33. Therefore, environmental considerations must be taken into account in the production and distribution of wheat.


Main Subjects