Normally, large farms use more energy than small farms and obtain higher labour productivity, which is one of the reasons for their superiority. In this paper, we will analyse how to model the effects of economies of scale and technology choices and how a new pathway can be developed, that includes incentives to save energy and develop coexistence of large and small farms. The issue is how we can address farm size and energy use by taxing and subsidization to reduce carbon emission of agriculture? The paper suggests a framework of linear programming and quadratic expositions of farm behaviour to identify optimal farm operation with different concerns of small and large-scale segments for labour productivity, energy productivity and recycling. Based on energy use, it will be shown how optimization and farm structures differ. The research is targeted at Eastern European countries which face challenges of structural change and are keen to seek subsidies for sustainable agriculture within the EU.

Keywords: energy use, farm size, technologies and agricultural policies