Assessment of Social Welfare Impacts and Cost–Benefit Analysis for Regulations on Cattle Manure Treatment

Abstract

As cattle are criticized for contributing to environmental problems by emitting pollutants, it is expected that environmental regulations on livestock will be strengthened. This will lead to an increase in the costs and benefits associated with these regulations. This paper develops a model that clearly shows the effects of environmental regulations on the production costs for cattle-breeding farmers and the changes in social welfare, as well as environmental benefits. The benefits associated with the regulation are measured by evaluating reductions in both greenhouse gas (GHG) and ammonia emissions. These benefits are then compared to the reduction in social welfare. According to the analysis, the reduction in social welfare, in terms of consumer and producer surplus, outweighs the environmental benefits. These results suggest that, in designing environmental regulations, policy measures are needed to alleviate producers’ economic burdens and minimize reductions in social welfare through byproduct utilization and technical support. Furthermore, this study contributes to laying the institutional foundation for the sustainable development of the livestock industry and the reduction in management costs associated with manure treatment.

1. Introduction

Over the past five decades, meat production has more than tripled, and global demand for meat is continuing to rise [1]. Particularly between 2000 and 2020, global meat production increased by approximately 104.3 million tons, growing from 232.8 million tons to 337.2 million tons [2,3]. The intensification of livestock production to meet the increased demand for meat products has resulted in a significant imbalance between livestock density and the land’s capacity to manage livestock waste [4]. In this context, ensuring sustainable global food production is the most critical challenge that the world will confront in the coming decades, with meat expected to play a pivotal role in addressing this issue [1].

The livestock industry is one of the leading contributors to pressing environmental concerns. Livestock production releases harmful gases, including ammonia, carbon dioxide, methane, and nitrous oxide, into the Earth’s atmosphere, significantly contributing to the accumulation of greenhouse gases and global warming [5]. Meat, in general, has a considerably larger carbon footprint compared to plant-based foods, with cattle exhibiting notably high carbon emissions due to the release of methane during their digestive processes [3]. Recent evidence indicates that methane (CH₄) emissions from the AFOLU (Agriculture, Forestry and Other Land Use) sector continue to increase, with ruminant enteric fermentation identified as the dominant contributor. Likewise, nitrous oxide (N₂O) emissions associated with AFOLU are rising, mainly attributable to agricultural inputs, including manure management, atmospheric nitrogen deposition, and nitrogen fertilizer application [6].

The impacts of the livestock industry on climate change, biodiversity, public health, and landscape quality are raising concerns about the sustainability of agricultural systems. Consequently, there is a growing need for an imperative transition toward more sustainable livestock production practices [7]. Sustainable livestock production can be defined as a form of production that is economically viable, ecologically responsible, and socially acceptable [7,8,9]. The formulation of national and international policies to bolster sustainable agriculture and livestock production is a challenging but essential endeavor [7,10]. As a result, environmental regulations stemming from these policies are becoming increasingly unavoidable.

There is a growing social and academic interest in sustainable livestock production that can mitigate environmental burdens without reducing production. Kwon and Jeong [11] analyzed the economic effects of reducing nutrient generation or emissions from the livestock sector by constructing a static computable general equilibrium (CGE) model. Their study showed that when an emission regulation was introduced to reduce total phosphorus emissions by 10 %, and the government’s permit revenue was recycled to maintain the welfare level of farm households, non-farm (urban) households experienced a welfare loss equivalent to 0.4 % of their annual expenditure. The finding that environmental regulation in the livestock sector resulted in welfare losses is closely related to our study, as it supports the argument that the evaluation of sustainable livestock production should not be limited to environmental benefits alone but also consider economic effects such as domestic production and consumer prices.

In addition, according to Seong et al. [12], Korean consumers have exhibited a considerably high willingness to pay for sustainable livestock production. In the case of cattle, the estimated annual willingness to pay for sustainable livestock amounts to approximately USD 2.6 billion to USD 3.0 billion. This suggests that consumer demand and social demand for the expansion of sustainable livestock production and its associated multifunctional benefits are very substantial, and it implies that market demand can provide an economic incentive for producers to adopt environmentally friendly practices.

Furthermore, Jeong et al. [13] evaluated CO₂ emissions from beef and pork production and distribution chains in the South Korean meat industry. Their findings highlight that manure waste is the most critical factor affecting the ultimate CO₂ emissions of packaged meats. They also suggested that reducing the storage period, particularly the ripening period of beef, may help lower GHG emissions during the distribution and storage stages. These results further emphasize that both production practices and post-production management are integral to the sustainability of livestock production in Korea.

In response to environmental concerns associated with livestock production, numerous countries, including the United States and European Union (EU) member states, have implemented effective agri-environmental policies and action plans aimed at promoting low-emission livestock production systems since the 1990s [14]. The absence of environmental regulation is likely to lead to a more intensive livestock industry and an allocation of land to livestock production that exceeds the optimal level [5]. In the absence of environmental regulations, the expansion of intensive livestock systems that raise more animals per unit of land is likely to increase feed inputs, energy use, and manure generation, thereby leading to higher total emissions of environmental pollutants. While this may enhance economic efficiency in the short term, in the long run, it is expected to exacerbate environmental burdens due to insufficient management of manure and other emissions. Variations in the stringency of environmental regulations faced by livestock farms have been found to exert a significant influence on production decisions within the pig and dairy sectors [15]. Liu et al. [16] demonstrated, using the case of China’s dairy industry, that environmental regulation can reduce production investment, and that when the compliance costs of regulation exceed the benefits of technological innovation, Green Total Factor Productivity (GTFP) may decline.

The economic literature underscores that the supplementary expenses incurred due to environmental regulation will impact the profitability, pricing, demand dynamics, innovation, productivity, and investment decisions within the relevant industries. From a cost perspective, if environmental regulations elevate the fixed or variable costs of production inputs, it is likely to lead to reduced availability and productivity of these inputs, potentially resulting in a decline in competitive performance as product prices rise [17]. As environmental regulations inevitably raise production costs for private firms, the assessment of social efficiency should consider the balance between these added costs and the external costs that can be mitigated [18].

Environmental regulatory policies on the livestock industry can yield positive environmental outcomes, but they can also introduce negative impacts through regulatory costs. Prior to the implementation of these policies, it is imperative to conduct more comprehensive studies to understand the intricate relationship between production and pollution, as well as the potential adverse consequences associated with regulatory enforcement [19]. A substantial body of economic literature has examined the effects of environmental regulations on firms and labor markets. Prior studies consistently highlight that the stringency of such regulations can significantly affect firm competitiveness, productivity, innovation, and employment outcomes [20], with evidence ranging from short-term employment adjustments to more complex, non-linear relationships [21,22].

While there is limited research on the causal effects of environmental regulation in the livestock industry, we can refer to some prior studies. For instance, Chen et al. [19] analyzed the economic consequences of the closure of numerous livestock farms due to stringent environmental regulations in China. They found that the regulations resulted in substantial economic costs while delivering relatively modest environmental benefits. These results align with the present study’s findings, indicating that the economic costs of environmental regulations often outweigh their environmental advantages. Cho et al. [23] investigated the impact of a government policy that temporarily prohibited production in the duck industry. This policy led to a significant reduction in supply, resulting in higher duck prices and a decrease in both consumer and producer surplus. Their findings are consistent with our own, demonstrating that regulatory policies related to livestock can diminish overall social welfare.

Njuki et al. [24] evaluated the economic consequences associated with environmental regulatory frameworks addressing hypothetical greenhouse gas (GHG) emissions. They discovered that the regulation of GHG emissions in the dairy industry led to an increase in average technical efficiency by 5%. Similarly, Ji et al. [25] examined the repercussions of escalating livestock production costs on supply, demand, prices, producer welfare, and consumer welfare for livestock products, focusing on the expenses related to livestock manure treatment. Their findings indicated that even when livestock farms bear the cost of reducing environmental pollution, the welfare of these farms improves due to the price increase in livestock products.

Most existing studies have been conducted in the context of the United States, China, and the European Union, leaving a lack of quantitative economic and environmental analyses for other Asian countries, such as Korea. To fill this research gap, the present study extends the literature by evaluating not only the production-side effects but also the broader social welfare implications of manure treatment regulations in the Korean beef cattle industry.

Since 2001, the Korean beef cattle industry has experienced consistent quantitative growth, with the value of Korean beef cattle production rising from $1.32 billion in 2001 to $4.76 billion in 2022 [26]. The population of Korean beef cattle has been steadily increasing since 2016, with an average annual growth rate of 5.2% observed from 2019 to 2022. In 2022, the number of Korean beef cattle being raised reached 3.39 million, marking a 5.7% increase compared to the same period in 2021. Furthermore, the number of cattle per Korean beef cattle farm has consistently risen each year [27].

While the Korean livestock industry boasts positive aspects such as a steady supply of safe livestock products, it also grapples with negative factors such as environmental issues stemming from livestock manure and odors. As the Korean beef cattle industry continues to expand, its influence on both the national economy and the environment becomes increasingly pronounced. With the rise in the number of Korean beef cattle, concerns have arisen regarding the environmental challenges associated with heightened GHG emissions. Consequently, there is a growing emphasis on assessing the environmental impact of the Korean beef cattle industry. As the industry experiences the effects of enhanced productivity and rapid growth, which result in GHG emissions and odor-related issues, social conflicts will inevitably emerge. In this context, the industry contends with conflicting interests and faces the challenge of balancing economic growth with environmental sustainability.

According to the Ministry of Environment [28], in South Korea, agriculture accounted for 23.0 million tons of GHG emissions in 2022, constituting 3.2% of the country’s total emissions. Within the agricultural sector, the livestock sector contributed only 1.8% of these emissions. Despite the relatively modest contribution of agriculture and livestock production to total GHG emissions, the Korean beef cattle industry has received considerable attention due to its comparatively high emissions when compared to other livestock. In livestock production, the primary sources of GHG emissions arise from intestinal fermentation and manure treatment. The livestock breeds that have the greatest impact on GHG emissions within the livestock sector are Korean native beef cattle and dairy cattle [29].

As the gravity of livestock-related environmental issues continues to intensify, the Korean government has been augmenting standards for managing environmental pollutants, such as livestock manure and odor, with the goal of fostering a sustainable livestock industry. These policies encompass livestock environmental regulations, including the reinforcement of compost and liquid manure decomposition standards and the strengthening of effluent quality standards.

In line with these policy efforts, concrete legislative measures have also been taken. To mitigate environmental pollution by enhancing the management of livestock manure composting, the Ministry of the Environment introduced amendments to the Law on the Management and Utilization of Livestock Manure in 2014, thereby reinforcing the criteria for compost and liquid manure decomposition. As outlined in the Enforcement Regulations of the Law on the Management and Utilization of Livestock Manure, which were updated in February 2020, the water quality standards for discharged water following purification have been made more stringent [30]. It appears inevitable that the government’s environmental regulations concerning livestock farms will progressively be tightened. Consequently, this may elicit resistance from livestock farms and create inconsistencies with other livestock policies.

Based on these circumstances, the present study seeks to address two primary research questions: (1) What is the impact of regulating manure treatment costs on the production expenses of Korean beef cattle and the overall Korean beef market? (2) How do the economic costs of regulating manure management compare with the associated environmental benefits? In other words, this study aims to analyze the repercussions of changes in the production costs of Korean beef cattle and social welfare under different scenarios of incurring expenses related to manure treatment. Additionally, this study quantifies the advantages stemming from the reduction in greenhouse gases and livestock odors due to the manure treatment regulations and compares these benefits with the costs.

This study’s primary objective is to comprehend the repercussions of environmental regulation within the livestock industry, with a significant focus on analyzing the impact of incurring regulatory costs for livestock manure treatment on both production costs and overall social welfare. In a context where regulations on manure treatment incur associated costs, this study stands out by presenting a comprehensive analysis of the regulatory effects. Unlike the previous literature, this study offers insights into the consequences for producers and industries through an assessment of the changes in production costs and welfare. Furthermore, this study distinguishes itself by quantifying the benefits through an evaluation of GHG and ammonia emissions and subsequently comparing these benefits to the economic costs associated with manure treatment regulation, which ultimately leads to a reduction in social welfare.

2. Theoretical Framework and Methods

2.1. Theoretical Mechanism of Supply Curve Shifts Under Manure Treatment Regulation

The cost associated with manure treatment is anticipated to shift the supply curve upwards, resulting in an escalation of marginal costs for farms. As illustrated in Figure 1, in the absence of any regulation on manure treatment, the supply curve is situated at MC1. However, when the government mandates manure treatment, the marginal cost escalates to MC2. Consequently, this shift causes the market price to rise from P1 to P2 and leads to a reduction in supply from Q1 to Q2.

It is apparent that the regulation of manure treatment yields environmental benefits by diminishing pollutants. However, it also influences the production costs, which will lead to an increase in the market price and diminish consumer surplus. Before delving into empirical analysis, this study examines the mechanism through which the marginal cost of beef production rises due to the inclusion of manure treatment costs. This investigation is carried out using the cost minimization model, as depicted in Equation (1).

$$\begin{array}{c}\mathrm{M}\mathrm{i}\mathrm{n}\left[{\displaystyle \sum _{i=1}^n}{w}_i{X}_i+{\displaystyle \sum _{j=1}^m}{\gamma }_j{K}_j+\theta Q\right]\\ \mathrm{s}.\mathrm{t}. \mathrm{f}\left(X_1,\dots ,X_n,K_1,\dots ,K_m\right)=Q\end{array}$$

(1)

In Equation (1), $X_i$ is a variable input such as feed, labor hours and $K_j$ is a fixed input such as farm facilities (cattle shed) and land. Their prices are $w_i$ and ${\gamma }_j$. $Q$ is the output of beef cattle, and $\mathsf{\theta }$ is the cost of manure treatment per unit of beef cattle. The constraint is the beef cattle production function, $\mathrm{f}\left(X_1,\dots ,X_n,K_1,\dots ,K_m\right)=Q$.

By transforming Equation (1) into a Lagrange problem with consideration of constraints, we can identify the optimal levels of input. Subsequently, by substituting these optimal inputs into the cost component of Equation (1), we can derive a cost function of Equation (2). If the production function is assumed to be Cobb–Douglas form, then the concrete cost function is derived as in Equation (3), for n = 4 and m = 2 case ($\mathrm{A}{X}_1^{a_1}{X}_2^{a_2}{X}_3^{a_3}{X}_4^{a_4}{K}_1^{b_1}{K}_2^{b_2}=Q)$.

$$\begin{array}{cc}\hfill \mathrm{C}\left(w_1,\dots ,w_n, {\gamma }_1,\dots , {\gamma }_m,\theta ,Q\right)& \\ & ={\displaystyle \sum _{i=1}^n}{w}_i{X}_i^{*}\left(w_1,\dots ,w_n, {\gamma }_1,\dots , {\gamma }_m,\theta ,Q\right)\hfill \\ & +{\displaystyle \sum _{j=1}^m}{\gamma }_j{K}_j^{*}\left(w_1,\dots ,w_n, {\gamma }_1,\dots , {\gamma }_m,\theta ,Q\right)+\theta Q\hfill \end{array}$$

(2)

$$\begin{array}{c}\mathrm{C}\left(w_1,\dots ,w_4,{\gamma }_1,{\gamma }_2,\theta ,Q\right)=B{w}_1^{{\displaystyle \frac{a_1}{T}}}{w}_2^{{\displaystyle \frac{a_2}{T}}}{w}_3^{{\displaystyle \frac{a_3}{T}}}{w}_4^{{\displaystyle \frac{a_4}{T}}}{\gamma }_1^{{\displaystyle \frac{b_1}{T}}}{\gamma }_2^{{\displaystyle \frac{b_2}{T}}}{Q}^{{\displaystyle \frac{1}{T}}}+\theta Q\\ \mathrm{w}\mathrm{h}\mathrm{e}\mathrm{r}\mathrm{e} \mathrm{T}=a_1+a_2+a_3+a_4+b_1+b_2 ,\\ {B=A}^{-{\displaystyle \frac{1}{T}}}\left[a_1^{-{\displaystyle \frac{a_1}{T}}}{a}_2^{-{\displaystyle \frac{a_2}{T}}}{a}_3^{-{\displaystyle \frac{a_3}{T}}}{a}_4^{-{\displaystyle \frac{a_4}{T}}}{b}_1^{-{\displaystyle \frac{b_1}{T}}}{b}_2^{-{\displaystyle \frac{b_2}{T}}}(a_1+a_2+a_3+a_4+b_1+b_2)\right]\end{array}$$

(3)

The marginal cost can be derived by differentiating the total cost function of Equation (3), with respect to output ($\mathrm{Q}$), which can be represented as Equation (4).

$$\begin{array}{c}\mathrm{M}\mathrm{C}\left(w_1,\dots ,w_n,{\gamma }_1,{\gamma }_2,\theta ,Q\right)\\ ={\displaystyle \frac{1}{T}}B{w}_1^{{\displaystyle \frac{a_1}{T}}}{w}_2^{{\displaystyle \frac{a_2}{T}}}{w}_3^{{\displaystyle \frac{a_3}{T}}}{w}_4^{{\displaystyle \frac{a_4}{T}}}{\gamma }_1^{{\displaystyle \frac{b_1}{T}}}{\gamma }_2^{{\displaystyle \frac{b_2}{T}}}{Q}^{{\displaystyle \frac{1-T}{T}}}+\theta \end{array}$$

(4)

In Equation (4), is the elasticity of marginal cost with respect to output. ${\displaystyle \frac{a_1}{T}},{\displaystyle \frac{a_2}{T}},{\displaystyle \frac{a_3}{T}},{\displaystyle \frac{a_4}{T}},{\displaystyle \frac{b_1}{T}},{\displaystyle \frac{b_2}{T}}$ are the elasticity of marginal cost with respect to the price of each input.

Based on Equation (4), it becomes evident that the marginal cost curve (i.e., the supply curve) will shift upward when the cost of manure treatment per unit ($\mathsf{\theta }$) is incurred. This leads to the situation depicted in Figure 1. For the empirical analysis, $\mathsf{\theta }$ is obtained from the Livestock Production Cost Survey for 2008 to 2021, which is obtained from Statistics Korea [31].

According to Bolotova [32], who employed an analytical approach similar to the research method used in this study, the implementation of production cuts by broiler and pork processors coincided with a sharp increase in feed prices, which represents a major variable cost component for these processors. The increase in feed prices results in an upward parallel shift in the marginal cost curve, thereby forming a new marginal cost curve. Assuming that the output price–quantity relationship (demand) remains unchanged, an increase in marginal cost requires processors to reduce output in order to maintain the profitability level of the original perfectly competitive industry scenario. Processors must decrease production to pass the increased costs on to buyers, which consequently raises the output price. As a result, output decreases while the output price increases.

2.2. Change in Price and Quantity of Beef Due to Environmental Regulation

This study compares the market equilibrium based on marginal costs $\left({MC}_1\right)$ without taking into account the costs of cattle manure treatment under the assumption that there are no regulations on cattle manure treatment (Scenario I), and the market equilibrium based on marginal costs $\left({MC}_2\right)$ with cattle manure treatment (Scenario II), as shown in

Table 1. Scenarios for analyzing the changes in production costs.

Scenarios	Contents
Scenario I	Marginal costs that do not reflect the cost of manure treatment for Korean beef cattle, assuming no regulation of livestock manure treatment $\left({MC}_1\right)$
Scenario II	Marginal cost reflecting the cost of manure treatment for Korean beef cattle, assuming that there is a regulation on manure treatment $\left({MC}_2\right)$

.

Equations (5) and (7) provided below are utilized to deduce the solution for the simultaneous equations, facilitating the computation of the percentage change in supply (demand) and the percentage change in price for each given scenario. Equation (5) is derived from the inverse supply of beef, Equation (6) is derived from the demand for beef, and Equation (7) is derived from the market equilibrium condition. In these system equations, once the information of ${\eta }_{\theta }\%\Delta \theta$ are given, solutions of the endogenous variables $\%\Delta \mathrm{P}$ and $\%\Delta \mathrm{Q}$ can be obtained. In the equations, $\eta$ is the price elasticity of supply, $\mathsf{\epsilon }$ is the price elasticity of demand, and ${\eta }_{\theta }$ is the elasticity of the marginal cost of production with respect to the cost of manure treatment.

$$\%\Delta \mathrm{P}={\displaystyle \frac{1}{\eta }}\%\Delta Q_S+{\eta }_{\theta }\%\Delta \theta$$

(5)

$$\%\Delta Q_D=\mathsf{\epsilon }\times \%\Delta P$$

(6)

$$\%\Delta Q_D=\%\Delta Q_S$$

(7)

For the empirical analysis, we first derive the elasticity of ${\eta }_{\theta }$. Since the elasticity $\left({\eta }_{\theta }\right)$ is shown in Equation (8) and $\mathrm{M}\mathrm{C}=\mathrm{P}$ in a perfectly competitive market, Equation (8) can be transformed into Equation (9).

$${\eta }_{\theta }={\displaystyle \frac{\%\Delta MC}{\%\Delta \theta }}={\displaystyle \frac{\partial MC}{\partial \theta }}{\displaystyle \frac{\theta }{MC}}$$

(8)

$${\eta }_{\theta }={\displaystyle \frac{m\times \theta }{P}}$$

(9)

where $m$ is the total breeding period of Korean beef cattle, $\mathsf{\theta }$ is the cost of manure treatment per head of cattle per year, and $\mathrm{P}$ is the average farm price of a mature beef cattle (600 kg). Since it takes up to three years to ship matured beef cattle to the slaughterhouse, we calculate the elasticity $\left({\eta }_{\theta }\right)$ of the marginal cost of production with respect to the cost of manure treatment by multiplying the annual cost $\left(\mathsf{\theta }\right)$ of manure treatment per head of cattle by three, and dividing by the price $\left(\mathrm{P}\right)$.

In the analyses, the price $\left(\mathrm{P}\right)$ is calculated to be USD 4126, which is the average value of the farm price of beef cattle (600 kg) from 2008 to 2021, obtained from the Korea NACF (National Agricultural Cooperative Federation) Livestock Information Center [33]. Manure treatment costs $\left(\mathsf{\theta }\right)$ are calculated using the average value (9.2 dollars) of manure treatment costs per head of cattle per year, sourced from the Livestock Production Cost Survey of Statistics Korea [31]. The value of the elasticity obtained in this way is 0.007.

As shown in

Table 2. Price elasticities of demand and supply for Korean beef cattle.

Price Elasticity of Demand	Price Elasticity of Supply	Explanation	Reference
−1.6974	-	Elasticity of demand for beef	Kim et al. [34]
		(domestic and imported)
−0.6629	-	Elasticity of demand for beef	Oh et al. [35]
		(domestic and imported)
−1.0569	-	Elasticity of demand for domestic beef	Jeong et al. [36]
−0.9	0.49	Demand and supply elasticity	Kim [37]
		for domestic beef
−1.0	0.5	Demand and supply elasticity	Lee [38]
		for domestic beef
-	0.4993	Supply elasticity of domestic beef	Jeong et al. [39]
−1.06	0.5	Demand elasticity (average), supply elasticity (average) for Korean beef cattle

, the price elasticity of demand is −1.06, which was derived by averaging the estimates of Kim et al. [34], Oh et al. [35], Jeong et al. [36], Kim [37], and Lee [38], while the price elasticity of supply is 0.5, calculated as the average of the estimates provided by Kim [37], Lee [38], and Jeong et al. [39].

We compute the rate of change in equilibrium quantity and price for Korean beef cattle contingent on whether the cost of manure treatment is factored in or not. The comparison of scenarios I and II can be conducted by assigning a concrete value for ${\eta }_{\theta }\%\Delta \theta$ (i.e., 0.007). According to the results of this comparison, the percentage of changes in equilibrium price and quantity is calculated to be $\%\Delta \mathrm{P}=0.002,\%\Delta \mathrm{Q}=-0.002$. In other words, if manure treatment regulations are introduced as part of the cost for Korean beef cattle production, the price of beef cattle is expected to rise by 0.002%, while the supply (demand) for beef cattle is projected to decrease by 0.002%.

The exchange rate applied in this study is based on the average won–dollar exchange rate of KRW/USD 1138.02 for the period 2008–2022, which corresponds to the closing rate of interbank transactions in the Seoul Foreign Exchange Market as published by the Bank of Korea [40]. This long-term average was chosen to minimize potential bias caused by short-term fluctuations in exchange rates.

3. Analysis Result

3.1. Analysis of the Impact of Changes in Social Welfare

3.1.1. Change in Consumer Surplus

Currently, manure treatment regulation has been implemented; therefore, in the empirical setting, the price $P_2$ and quantity $Q_2$ under scenario II should be considered to be the market situation, whereas the price $P_1$ and quantity $Q_1$ should be simulated using the derived $\%\Delta \mathrm{P}$ and $\%\Delta \mathrm{Q}$ above. For the price $P_2$ and quantity $Q_2$, first, we use the average value (USD 4268 per head) of the annual farm price of matured beef cattle (600 kg) in Korea from 2008 to 2021, and the average annual number of slaughtered cattle (759,892) from 2008 to 2021 [33,41]. The consumer surplus, based on the quantity and price in scenario I, is simulated to be $1.53 billion. However, if manure treatment costs are incurred due to the regulation (scenario II), consumer surplus is simulated to be reduced by about $69,225 compared to the case of no regulation (scenario I).

We evaluate the consumer surplus calculated based on the consumer level as well. To do this, the price per head of Korean beef cattle at the slaughter stage has to be converted into the consumer price. However, since there is no exact information regarding this conversion rate, we apply several conversion rates of 300%, 400%, and 500%, respectively. The converted selling price of beef is then used to calculate the reduction in consumer surplus. According to

Table 3. Calculation results for the reduction in consumer surplus due to manure treatment regulation.

Conversion Rates	Beef Price at Consumer Level (per Head Basis)	Reduction in Consumer Surplus
No conversion	Same as the producer price	69,225
300%	12,804	0.21 million
350%	14,938	0.24 million
400%	17,072	0.28 million
450%	19,206	0.31 million
500%	21,340	0.35 million

, when applying a conversion rate of 300%, the beef price at the consumer level under scenario II is calculated to be $12,804, and the resulting reduction in consumer surplus is estimated at $0.21 million. Furthermore, when the conversion rate is 400%, the reduction in consumer surplus amounts to $0.28 million, and when the conversion rate is 500%, it is estimated at $0.35 million.

As in

Table 4. Changes in consumer surplus due to the different levels of the cost of manure treatment.

Base Price	Changes in Manure Treatment Costs	Consumer Surplus Reduction
No conversion: producer price ($4268 per head) is applied	1 time	69,225
	1.5 times	0.10 million
	2 times	0.14 million
	2.5 times	0.17 million
	3 times	0.21 million
With a 300% conversion rate from producer to consumer prices (consumer price of $12,804 per head is applied)	1 time	0.21 million
	1.5 times	0.31 million
	2 times	0.42 million
	2.5 times	0.52 million
	3 times	0.62 million
With a 400% conversion rate from producer to consumer prices (consumer price of $17,072 per head is applied)	1 time	0.28 million
	1.5 times	0.42 million
	2 times	0.55 million
	2.5 times	0.69 million
	3 times	0.83 million
With a 500% conversion rate from producer to consumer prices (consumer price of $21,340 per head applied)	1 time	0.35 million
	1.5 times	0.52 million
	2 times	0.69 million
	2.5 times	0.87 million
	3 times	1.04 million

Unit: US$.

, we also assess the impact on consumer surplus when the cost of manure treatment increased by 1.5 times and 2 times. The results indicate that in each of these scenarios, consumer surplus is decreased by $0.10 million and $0.14 million based on the base farm price due to the regulation. When manure treatment costs increase by 2.5 times and 3 times, the reduction in consumer surplus is calculated to be $0.17 million and $0.21 million, based on the farm price.

For the conversion rate of 300%, when the cost of manure treatment is augmented by 1.5 and 2 times, consumer surplus is simulated to be reduced by $0.31 million and $0.42 million based on the base consumer price, respectively. The 2.5 and 3 times increase in manure treatment costs is expected to lead to a decline in consumer surplus by $0.52 million and $0.62 million, respectively.

Using the consumer price of beef ($21,340), which incorporates a 500% conversion rate, reductions in consumer surplus are expected to be $0.52 million and $0.69 million, respectively, for the case of an increase in manure treatment cost by 1.5 and 2 times. Furthermore, scenarios in which manure treatment costs increased by 2.5 and 3 times resulted in a decrease in consumer surplus by $0.87 million and $1.04 million, respectively.

3.1.2. Change in the Value of Production

We then calculate the change in the value of production due to manure treatment regulation. The regulatory costs associated with regulation are composed of the cost of manure treatment itself and the cost of installing manure treatment facilities. The analyses are performed, assuming several scenarios for the changes in each cost. For empirical implementations, the value of production is calculated by Equation (10).

$$TV=P_F\times N_S$$

(10)

where TV is the total value of production for Korean beef cattle, $P_F$ is the average farm price of mature cows (600 kg) in Korea, and $N_S$ is the number of Korean beef cattle slaughtered per year. Equation (10) is applied for each year from 2008 to 2021 in the empirical analyses. Equation (11) is used to calculate the total cost of manure treatment, and Equation (12) is used to calculate installing manure treatment facilities.

$${{TC}_S}^m={AC}^m\times N_S$$

(11)

$${{TC}_S}^f=C^f\times N_S$$

(12)

where ${{TC}_S}^m$ is the total cost of manure treatment, ${AC}^m$ is the average cost of manure treatment per cattle, $N_S$ is the number of beef cattle slaughtered each year, ${{TC}_S}^f$ is the total cost of installing manure treatment facilities, and $C^f$ is the cost of constructing manure treatment facilities per cattle.

To calculate the cost of constructing manure treatment facilities (compost depots) per cattle, the minimum construction standard (building area: 131.04 m², and maximum number of heads to breed: 243) according to the design guideline of the facilities for converting livestock manure into resources (compost depot) and the information on the cost of constructing compost depots ($615 per 3.3 m²) are used [42,43]. The cost of constructing a 131.04 m² composting facility with a capacity of up to 243 head of cattle is $24,425, which translates to a manure treatment facility cost of $100.5 per head of Korean beef cattle (From 2008 to 2021, the annual average of cattle slaughtered is 759,892 head).

Manure cost, excluding value of production (i.e., subtraction of cost for manure treatment from value of production, hereafter MCE-VOP), is approximately calculated to be $3.221 billion on average (the average annual value of production for Korean beef cattle from 2008 to 2021 is $3.228 billion, and the annual average of manure treatment cost is $6.62 million).

To examine how the changes in manure-related costs affect the analysis results, we conduct scenario analyses by dividing them into two. In the first scenario, considering the number of Korean beef cattle slaughtered, we explore various cases where total manure treatment costs increase by 1.5, 2, 2.5, and 3 times. When the total cost of manure treatment is augmented by 1.5 times, MCE-VOP is estimated to be approximately $3.218 billion, reflecting a decrease of $9.92 million. In the remaining scenarios, the value of production is shown to decrease by approximately $13.23 million for a 2 times increase in the total cost of manure treatment, $16.54 million for a 2.5 times increase, and $19.85 million for a 3 times increase.

Also taking into account the number of Korean beef cattle slaughtered, the cost of installing a manure treatment facility for Korean beef cattle is calculated to be $76.38 million. Excluding this cost, the average annual MCE-VOP of Korean beef cattle is calculated to be $3.151 billion. Based on this information, we analyze the second scenario by allowing the increase in the cost of the manure treatment facility. In the scenario where the cost of installing a manure treatment facility for Korean beef cattle increased by 1.5 times, the resulting loss in the value of production is $114.57 million. When the cost of installation is increased by 2 times, the value of production loss escalates to $152.76 million. Furthermore, if the cost of installing manure treatment facilities increases by 2.5 times, the value of production loss reaches $190.95 million. In the case of a 3 times increase, the value of production loss amounts to $229.14 million. Additionally, we conduct the same sets of analyses for the changes in the value of production for the number of beef cattle raised, instead of the number of slaughtered cattle. As indicated in

Table 5. Scenario analysis of the change in the value of production due to the regulatory cost of livestock manure treatment.

Scenarios		Based on the Total Number of Slaughtered Cattle		Based on the Total Number of Raised Cattle
		Decrease in the Value of Production	Reduction Ratio	Decrease in the Value of Production	Reduction Ratio
Manure treatment costs is increased by:	1 time	6.62	−0.2	24.21	−0.75
	1.5 times	9.92	−0.31	36.31	−1.12
	2 times	13.23	−0.41	48.42	−1.5
	2.5 times	16.54	−0.51	60.52	−1.87
	3 times	19.85	−0.61	72.63	−2.25
Cost of manure treatment facilities is increased by:	1 time	76.38	−2.37	281.86	−8.73
	1.5 times	114.57	−3.55	422.79	−13.1
	2 times	152.76	−4.73	563.72	−17.46
	2.5 times	190.95	−5.92	704.65	−21.83
	3 times	229.14	−7.1	845.58	−26.2

Unit: million US$, %.

, the losses in value of production increase are relative to the results based on the number of cattle slaughtered.

3.1.3. Changes in the Consumer Surplus as Well as the Value of Production

We calculate the change in consumer surplus together with the value of production due to the regulation. Among several scenarios, we pick out a 400% conversion rate from producer to consumer prices. As shown in

Table 6. Changes in social welfare due to regulatory costs of livestock manure treatment.

Cost Variation for Korean Beef Cattle		Decrease in the Social Welfare
		Based on the Total Number of Slaughtered Cattle	Based on the Total Number of Raised Cattle
Cost of manure treatment and cost of installing manure treatment facilities	1 time	83.27	306.35
	1.5 times	124.91	459.52
	2 times	166.55	612.69
	2.5 times	208.18	765.87
	3 times	249.82	919.04

Unit: million US$.

, social welfare decreased by $83.27 million to $306.35 million based on the producer price, due to the regulation. When the costs are increased by 1.5 and 2 times, social welfare is decreased by $124.91 million to $166.55 million. On the other hand, social welfare is reduced by $208.18 million to $249.82 million when the cost of manure treatment and the cost of installing manure treatment facilities are increased by 2.5 and 3 times, respectively.

Based on the selling price of beef ($17,072), the change in consumer surplus under the increased cost of livestock manure treatment for Korean beef cattle scenario, and the change in the monetary amount of production based on the number of Korean beef cattle being raised were combined to calculate the change in social welfare. Livestock manure treatment regulations resulted in a $306.35 million reduction in social welfare due to the cost of livestock manure treatment and the cost of installing livestock manure treatment facilities. In addition, the analysis of scenarios where these costs increased by factors of 1.5 and 2 resulted in decreases in social welfare of $459.52 million and $612.69 million, respectively. When analyzing scenarios where the costs increased by factors of 2.5 and 3, social welfare decreased by $765.87 million and $919.04 million, respectively.

3.2. Cost–Benefit Comparison of the Livestock Manure Treatment Regulations

Manure treatment regulation is expected to reduce GHG and other air pollutants; therefore, these effects can be regarded as benefits of the policy. Whereas the social welfare loss in terms of consumer surplus and value of production can be attributed to the cost of implementing this policy.

In evaluating the GHG reduction effect for manure treatment regulation, we refer to previous studies. The National Agriculture and Food Research Organization (NARO) presented data evaluating the performance of GHG reduction [44]. This study investigated the effect of reducing GHG emissions in manure through balanced ration feeding, reducing nitrous oxide ($N_{2}O$) in composting by spreading fully mature compost, shortening the fattening period and improving weight gain, and improving MCF (methane (${CH}_4$) conversion efficiency) through breed improvement. This study estimated that GHG reduction would be 16% if all of these GHG abatement technologies were implemented. On the other hand, according to Lee [45], technologies in dairy production are estimated to reduce GHS by approximately 20% by reducing nitrogen emissions in manure through balanced ration feeding, suppressing methane production through breed improvement, using manure on feed grain fields (e.g., grassland), introducing biogas plants, and sealing slurry tanks.

Based on these findings, we set the scenarios that 10%, 15%, and 20% GHG emissions are reduced due to manure treatment regulations introduced by the Korean government. In addition, the reduction in odorous emissions (ammonia) is also assumed to be reduced by 10%, 15%, and 20% due to the regulations. The announced GHG emissions by the Greenhouse Gas Inventory & Research Center of Korea in 2019 are 5.209 million tons ${CO}_2 eq./year$ [46]. Therefore, applying the assumed reduction rates, the GHG emissions in

Table 7. Greenhouse gas (GHG) emissions and environmental benefits.

Percentage Change in GHG Emissions	GHG Emissions in the Absence of Manure Treatment Regulations (Million Tonnes CO2eq/Year)	GHG Emissions when Manure Treatment is Regulated (Million Tonnes CO2eq/Year)	Benefits of the Manure Treatment Regulations
			Amount of Reduced GHS (Million Tonnes CO2eq/year)	Value of Reduced GHS (Million US$/Year)
Scenario 1: 10%	5.788	5.209	0.579	14.12
Scenario 2: 15%	6.128	5.209	0.919	22.42
Scenario 3: 20%	6.511	5.209	1.302	31.76

are simulated in the absence of the manure treatment regulations. Multiplying Certified Emission Reductions (CERs) ($24.39/ton in 2019), the benefits of GHS reduction are evaluated to be $13.12 million to $31.76 million.

We also assess the benefits of the reduction in livestock odor (ammonia) emissions by applying the scenarios of reduction rates of 10%, 15%, and 20%, respectively. The National Air Emission Inventory and Research Center in Korea reported ammonia emission from beef cattle is 46,432 tons [47]. We use this value as the base for the effect of manure treatment regulation. Since there is no empirical study assessing the costs caused by ammonia emissions, we adopt an indirect approach by examining how consumers value its reduction. According to Jeong et al. [30], Korean households are estimated to be willing to pay between $537.86 million and $632.70 million per year for improvements in livestock odor. Applying the share of ammonia emissions from Korean beef cattle (19.9%) among all livestock to these estimates, the cost associated with odor (ammonia) from beef cattle is evaluated to be at a minimum of $106.89 million per year. By applying the assumed reduction rates, the ammonia emissions in

Table 8. Ammonia emissions and environmental benefits of Korean beef cattle by scenario.

Percentage Change in Ammonia Emissions	Ammonia Emissions in the Absence of Manure Treatment Regulations (Tonne)	Ammonia Emissions when Manure Treatment Is Regulated (Tonne)	Benefits of the Manure Treatment Regulations
			Amount of Reduced Ammonia (Tonne)	Value of Reduced Ammonia (Million US$/Year)
Scenario 1: 10%	51,591	46,432	5159	11.88
Scenario 2: 15%	54,626	46,432	8194	18.87
Scenario 3: 20%	58,040	46,432	11,608	26.72

are derived in the absence of the manure treatment regulations. As shown, the benefits of ammonia reduction are evaluated to be $11.18 million to $26.72 million.

Table 9. Benefits and costs of manure treatment regulations.

Benefits of Livestock Manure Treatment Regulations			Costs of Livestock Manure Treatment Regulations
Scenarios for Greenhouse Gas and Livestock Odor	Greenhouse Gas (GHG)	Livestock Odor	Scenarios of Increased Manure Treatment Costs and Installation	Social Welfare (Based on the Total Number of Slaughtered Cattle)	Social Welfare (Based on the Total Number of Raised Cattle)
Reduction		(Ammonia)	Expenses for Treatment Facilities
−10%	14.12	11.88	1 time	−81.27	−298.97
−15%	22.42	18.87	2 times	−162.54	−597.94
−20%	31.76	26.72	3 times	−243.83	−896.91

Unit: million US$.

reports the summary of the comparisons between costs and benefits for manure treatment regulations. Reductions in social welfare loss are treated as costs, and environmental benefits from the reduction in GHG and ammonia are regarded as benefits for the regulations. As indicated, the environmental benefits from a 10% reduction in greenhouse gases and ammonia are calculated to be $25.99 million, while a 15% reduction amounts to $41.28 million, and a 20% reduction results in $58.49 million. On the other hand, due to the regulations of manure treatment, social welfare decreased by $81.27 to $298.97 million.

As the regulations on livestock manure treatment became stricter, it is expected that social welfare decreased by $162.54 to $597.94 million when the manure treatment costs and the installation expenses for manure treatment facilities doubled, and by $243.83 to $896.91 million when they were tripled.

4. Discussion

Neighboring countries such as China and Japan, similar to Korea, are also exerting normative pressure on livestock manure management; however, livestock farmers are facing a considerable economic burden associated with manure treatment costs. In China, medium- and large-scale livestock farms recognize the environmental benefits of adopting manure treatment technologies and are under social pressure to improve manure management and invest in such technologies. Nevertheless, the adoption of these technologies remains limited due to the heavy financial burden caused by high operating costs and low subsidy rates [48]. Recently, the utilization of livestock manure resources has attracted increasing attention in China, and region-specific models for manure resource utilization are gradually emerging. Still, the high production costs continue to undermine farmers’ acceptance [49]. In Japan, under the Livestock Manure Act, manure management is a mandatory practice for livestock farmers. However, the labor burden is substantial, and even when manure is composted, it is difficult to generate sufficient economic returns [50].

In order to assess the sustainability of livestock production, it is essential to quantitatively evaluate the environmental impacts of livestock farming while also considering its economic feasibility [51]. According to research conducted in Japan, unless the total environmental load per livestock unit decreases, the marginal abatement cost (MAC) always remains positive, indicating a trade-off between reducing environmental burdens and maintaining economic efficiency at the individual animal level. These findings suggest that when livestock farmers adopt manure management technologies aimed at reducing environmental impacts, additional costs are incurred, thereby reducing economic benefits and potentially resulting in financial losses for farmers [52]. This aligns with the conclusion of the present study that strengthening manure management regulations to improve the livestock environment could lead to economic costs outweighing the environmental benefits, thereby challenging the sustainability of the livestock sector.

A case study in China argues that measures to reduce pollutant emissions, such as manure treatment systems, are costly due to the substantial investments required in technology and infrastructure, thereby necessitating policy support such as subsidies for manure treatment facilities [53]. As revealed in the findings of this study, the reduction in social welfare resulting from manure treatment costs and facility installation expenses was found to exceed the environmental benefits gained from manure treatment regulations. Therefore, when implementing regulatory measures on livestock manure management, it is essential to establish countermeasures that address social welfare losses by taking into account both producer and consumer perspectives.

5. Conclusions

This study develops a simulation model for analyzing how the incidence of manure treatment costs due to regulations would change production costs and social welfare. The environmental benefits are calculated by evaluating the reduction in GHG and ammonia emissions, and these are compared with the economic costs of the reduction in social welfare.

To achieve sustainable livestock production, the Korean government has strengthened standards for the management of environmental pollutants such as livestock manure and odors. In this study, these management standards are included in the livestock manure treatment regulations, and the costs of manure treatment and the installation of manure treatment facilities are reflected in the scenario analysis. When the cost of manure treatment is incurred due to the livestock manure treatment regulation, the marginal cost of farms increases, the supply curve shifts upward, and total social welfare decreases in terms of producer and consumer surplus. These results suggest that when implementing regulatory policies for livestock manure treatment, information that considers both the producer and consumer sides is important, and elaborate standards need to be applied to the policies. Furthermore, it is essential to take into account measures aimed at mitigating the reduction in social welfare resulting from the implementation of livestock manure treatment regulations.

When analyzing the regulatory benefits of livestock manure treatment by considering scenarios of changes in GHG and livestock odor (ammonia) emissions, it became evident that the reduction in social welfare, which is the cost associated with manure treatment and the installation of manure treatment facilities, outweighs the environmental benefits of regulating manure treatment. These findings underscore the significance of comprehending the interplay between regulatory costs and benefits when implementing policies for livestock manure treatment. It is also essential to thoroughly review studies that predict adverse consequences resulting from regulatory implementation. In practice, Korean beef cattle farms that lack manure treatment facilities outsource livestock manure to local public treatment facilities or joint resource facilities, thereby incurring outsourcing costs. However, this study has a limitation in that such circumstances are not reflected in the research content. In addition, the potential revenues from by-products are also not included in the cost–benefit calculations, which constitutes another limitation of this study.

According to the study conducted by Chen et al. [19], environmental regulations succeeded in reducing only one of the four water pollutants associated with livestock farming. However, these regulations led to a significant reduction in the number of livestock farms, livestock production, and inventories. Furthermore, the economic costs of livestock environmental regulations surpass the environmental benefits due to the loss of production value resulting from decreased production. It can be confirmed that the research findings of this paper align with a similar direction to those of previous studies.

To support sustainable livestock production, it is imperative to develop and implement livestock environmental policies within the industry, which may subsequently lead to the imposition of environmental regulations. The analysis in this paper reveals that while environmental benefits from regulating livestock manure treatment are indeed realized, the economic costs, which encompass the adverse effects on both consumer and producer welfare, outweigh these environmental gains. In essence, if manure treatment regulations are tightened to enhance the livestock environment and ensure the sustainability of livestock farming, the economic costs are projected to surpass the environmental benefits. The findings and implications of this study are anticipated to provide a valuable reference for shaping the course of both domestic and international livestock policies in the future.