Accounting for externalities in cross-sectional economic models of climate change impacts

Environmental effects and natural resources depletion associated with agriculture production affect the response to climate change. Traditional cross-sectional models ignore this requirement. This research estimates impact of on European using a continental scale Ricardian analysis. We correct farm income by accounting for (energy, fertilisers, pesticides, water) use intensity calculate sustainable value sample 9497 specialized field crop farms. Compared traditional method, marginal temperature remain positive (but less positive) in Northern countries, while it leads damages Southern countries when net revenue farms' values are used as dependent variables. Accounting environmental capital improves ability method estimate functions long run.