On dealing with the pollution costs in agriculture: A case study of paddy fields Morteza Yaqubi a, ⁎, Javad Shahraki a , Mahmood Sabouhi Sabouni b a Faculty of Management and Economics, Department of Agricultural Economics, University of Sistan and Baluchestan Zahedan, Iran b Department of Agricultural Economics, Ferdowsi University of Mashhad, Azadi Square, Mashhad, Iran HIGHLIGHTS • To evaluate agricultural pollution costs, a combination of two DNDC and DEA models was introduced. • The shadow values of three main agri- cultural pollutants in paddy fields were evaluated. • In the study area, a high potential for pollution reduction is feasible. • The pollution cost of pesticides are much bigger than nitrogen surplus and greenhouse gases. • From the farmers' viewpoint, a positive shadow value of undesirable outputs al- so is feasible. • To deal with the pollution costs, market- based instruments are preferred to command-and-control regulation. GRAPHICAL ABSTRACT abstract article info Article history: Received 27 December 2015 Received in revised form 27 February 2016 Accepted 27 February 2016 Available online xxxx Editor: D. Barcelo The main purpose of this study is to evaluate marginal abatement cost of the main agricultural pollutants. In this sense, we construct three indices including Net Global Warming Potential (NGWP) and Nitrogen Surplus (NS), simulated by a biogeochemistry model, and also an Environmental Impact Quotient (EQI) for paddy fields. Then, using a Data Envelopment Analysis (DEA) model, we evaluate environmental inefficiencies and shadow values of these indices. The results show that there is still room for improvement at no extra cost just through a better input management. Besides, enormous potential for pollution reduction in the region is feasible. More- over, in paddy cultivation, marginal abatement cost of pesticides and herbicides are much bigger than nitrogen surplus and greenhouse gasses. In addition, in the status quo, the mitigation costs are irrelevant to production de- cisions. Finally, to deal with the private pollution costs, market-based instruments are proved to be better than command-and-control regulation. © 2016 Elsevier B.V. All rights reserved. Keywords: Agriculture Data Envelopment Analysis Directional Distance Functions Environmental efficiency Pollution cost 1. Introduction Investigating the environmental impact of undesirable non- marketable productions, e.g., air and soil pollution has been gaining im- portance in recent years. Although considerable studies have been made on the topic of estimating pollution costs in other sectors Science of the Total Environment 556 (2016) 310–318 ⁎ Corresponding author. E-mail addresses: yaqubi@pgs.usb.ac.ir (M. Yaqubi), j.shahraki@eco.usb.ac.ir (J. Shahraki), sabouhi@ferdowsi.um.ac.ir (M. Sabouhi Sabouni). http://dx.doi.org/10.1016/j.scitotenv.2016.02.193 0048-9697/© 2016 Elsevier B.V. All rights reserved. Contents lists available at ScienceDirect Science of the Total Environment journal homepage: www.elsevier.com/locate/scitotenv