Genetically Engineered Herbicide Tolerant Canola: A Multiple Account Evaluation

This study assesses the affect of genetically engineered herbicide tolerant rapeseed through the use of a multiple account evaluation. In 1995, rapeseed tolerant to the non-selective weed control product Roundup was licensed for use in Canada. Applying Roundup in crop as a weed control method is expected to be far superior to the current herbicide products, including dinitroaniline (trifluralin and Edge), which is used on over 70% of rapeseed acres. The herbicide tolerant rapeseed is expected to reduce the costs of weed control by $10 per acre for the average farmer. In addition, the adoption of this new technology will reduce the need for tillage operations, reducing erosion, and fossil fuel consumption. As well, there will be less chance of herbicide tolerant weeds developing. A partial equilibrium model of the rapeseed industry is constructed to estimate economic value of this new technology. Producer and consumer surplus are estimated using the theory of welfare economics. Regional economic impact is also estimated using multipliers provided through input output analysis. The benefits to the environment are estimated using an integrated economic-environmental model. The study estimates the adoption of herbicide tolerant Canola will produce consumer and producer benefits valued at $187 million during the first five years of licensing. The economic impacts during this same time period are estimated to generate $248 million of additional output, $135 million of additional income, and $83 million of additional value added. The environment also benefits, with 2 million tonnes of soil conserved, valued at $2.5 million dollars. In addition, 12 million fewer litres of diesel fuel are used within the first five years after the adoption of the technology, and 6.8 million ha of land benefit from reduced potential of herbicide tolerant weeds. Sensitivity analysis on the critical factors in the model was performed. It was found that all parameters affecting the area of herbicide tolerant Canola being adopted or the price of Canola, had a significant impact on benefits. This included the acreage devoted to Canola, as well as the adoption pattern of the new technology. In all of these examples, the upper range of the sensitivity analysis produced cost benefits of 22 to 1 while the lower range of the sensitivity analysis produced a cost benefit of 9 to 1. Assuming more elastic demand and supply curves dramatically increased the economic impact of the technology. As well, changes in the demand and supply changed the percent of benefit for the producers and consumers, with increases in the demand elasticity increasing the percentage of the total research benefits to producers to between 83% and 85%. Similarly, adjusting the supply elasticity to a more elastic estimate resulted in between 70% and 80% of the total research benefits accruing to consumers