The aim of this paper was estimation of environmental costs of agricultural greenhouse gases emissions in dairy farms. The sample was 85 dairy farms which were selected by simple random sampling method in 2006. The methodology was output distance function to derive estimates of greenhouse gases shadow prices. In this study dairy farm share in environmental costs in Mashhad and Iran was estimated 10688 and 67910300 Million Rials, respectively. Thus, it is recommended that policy makers use some methods like environmental taxes, improving management and carbon sequestration to reduce these kinds of costs. Results can help policy makers to decide more appropriate with considering the externality costs.

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