Is Bhutan destined for 100% organic? Assessing the economy-wide effects of a large-scale conversion policy

Abstract

Organic agriculture (OA) is considered a strategy to make agriculture more sustainable. Bhutan has embraced the ambitious goal of becoming the world's first 100% organic nation. By analysing recent on-farm data in Bhutan, we found organic crop yields on average to be 24% lower than conventional yields. Based on these yield gaps, we assess the effects of the 100% organic conversion policy by employing an economy-wide computable general equilibrium (CGE) model with detailed representation of Bhutan's agricultural sector incorporating agroecological zones, crop nutrients, and field operations. Despite a low dependency on agrochemicals from the onset of this initiative, we find a considerable reduction in Bhutan's GDP, substantial welfare losses, particularly for non-agricultural households, and adverse impacts on food security. The yield gap is the main driver for a strong decline in domestic agricultural production, which is largely compensated by increased food imports, resulting in a weakening of the country's cereal self-sufficiency. Current organic by default farming practices in Bhutan are still underdeveloped and do not apply the systems approach of organic farming as defined in the IFOAM organic farming standards. This is reflected in the strong decline of nitrogen (N) availability to crops in our simulation and bears potential for increased yields in OA. Improvement of soil-fertility practices, e.g., the adoption of N-fixing crops, improved animal husbandry systems with increased provision of animal manure and access to markets with price premium for organic products could help to lower the economic cost of the large-scale conversion.

Fig 1. Organic-to-conventional yield ratios for 16 crops across agroecological-zones in Bhutan based on data from [10].

The panel on the right-hand side shows the significance level of the Wilcoxon rank-sum test (*** P < 0.001) and the fraction shows the number of organic (numerator) and conventional (denominator) observations.

Fig 2. Percentage changes of macro indicators in real terms after simulating a 100% organic policy.

Fig 3. Percentage changes in crop output, supply, and purchaser prices after simulating a 100% organic policy.

Fig 4. Welfare effects of Bhutan’s 100% organic conversion policy.

Changes in welfare are measured as equivalent variation (EV) as share of base household expenditure on the left-hand side and in USD per capita on the right-hand side.

Fig 5. Sensitivity analysis to check robustness of main indicators for variation in the yield gap.