Agriculture

Agricultural change can reduce emissions and protect ecosystems

​Department/ policymaker		101 ideas for a sustainable finance policy package
	Provide clarity on green	Tilt investment to green opportunities			Build green investment pipelines
		private finance	public finance	blended finance
Agriculture		100. Green preferential tax policy 101. Subsify reform

 

With farmland constituting more than a third of the world’s land area,[i] agricultural policy is crucial to achieving the low-carbon transition. Unfortunately, current agricultural practices in many parts of the world are carbon intensive and ecologically damaging, which over time undermines   resilience to climate risks.

Naturally occurring soils are major carbon sinks, accounting for the majority of biosphere carbon storage. But agriculture and changes in land use are degrading and eroding soils so that rather than storing carbon, soils have become a source of emissions. Further, as the organic content of soil falls, land is less resilient to flooding, drought and other weather-related risks.  Over time, continued mismanagement of soils is endangering food security, as agricultural land becomes unusable. Adaptation of water systems and increased fertilisers use, to compensate for loss of nutrients, cause knock-on environmental problems elsewhere.[ii] This has a major economic impact, with soil erosion alone estimated to cost the US agricultural sector USD44bn/year.[iii]

Integrating climate and carbon awareness into rural development strategies will ensure resilient land use and enable communities to harness co-benefits of green land use practices. 

 

Reform agricultural subsidies to support green practices 

Agricultural policy will need to show ambition in line with the Transition Principles and should take into consideration the full breadth of the agri-food system, from inputs through to consumption.  Governments should prioritise phaseout of policies that inadvertently support emissions-intensive agriculture, including policies relating to food processors and the procurement strategies of retailers. This can prevent market distortions and support investment in climate-smart agriculture.[iv] Gradual phaseout will prevent food price shocks.

Subsidies can be redirected to fund sustainable land use, conservation and other nature-based solutions. A 2020 study suggested that the reform of subsidies for forestry, fisheries, and especially agriculture is the single biggest way to close the biodiversity funding gap.[v]  Measures should avoid taking highly productive land out of food production.

Costa Rica provides an example of how this can be accomplished. It discontinued cattle subsidies in the 1980s, which saw the number of cattle in the country drop by a third and removed incentives to clear forest – the country’s deforestation rate reduced significantly over the next decade.[vi] Powerful reform is possible: globally, livestock accounts for 83% of all agricultural land, but only produces 18% of calories and 37% of protein.[vii] Cattle also account for 62% of all livestock emissions.[viii] With meat consumption expected to peak globally in 2030 and fall 30% by 2050, farmers can be encouraged to pre-empt a fall in demand and move away from livestock production and focus on other markets, particularly in the Global North. 

Fertilisers and pesticides are carbon-intensive and lead to soil degradation, with run-off polluting water and causing biodiversity loss. Switching to more sustainable, regenerative agricultural methods, including organic farming, can reduce emissions and ecological damage, and governments should re-orient incentives accordingly. Taxation can also be used as a lever, and fertiliser and pesticide taxes have been in place in Norway and Sweden since the 1980s, while in Argentina, organic produce is exempt from export tax. 

Fertiliser production is a hard-to-abate sector, requiring R&D funding and specific subsidies to develop low-carbon fertiliser production. Given that fertiliser use cannot easily be eliminated, taxation schemes that place higher taxes on fossil-based ammonia and fertilisers can encourage investment in low-carbon fertilisers. See Decarbonise industry for more policies to decarbonise this industry.

 

Resilient agriculture can address climate change and safeguard food security

Improved soil management can ensure resilience of agricultural land. Cover cropping (planting to protect soil against rain run-off after harvest) and agroforestry (fruiting trees and/or planting crops below trees) can protect soils as they are less exposed to the erosional power of wind and rain. This also reduces fertiliser use as decomposition of cover crops or tree litter releases nutrients and, in the case of leguminous species, capture nitrogen. Terraced hill farms can reduce erosion from rainwater runoff and enable more water retention.[ix] Government support for improved soil management can include subsidies and education on the benefits and methods of agroforestry, cover cropping, terracing etc. This can help restore degraded land and prevent further erosion.

The TEEBAgriFood Evaluation Framework[x], the True Cost Accounting Agrifood Handbook[xi], and the Valuation Framework for True Price Assessment of Agrifood Products[xii] also offer methods for taking wider impacts into consideration in relevant calculations.

Increasing efficiency of agricultural land use can increase resilience, reducing deforestation pressures of agricultural land. With improved management, current agricultural land could grow enough food to feed more than double today’s global population.[xiii]

Agricultural technology is advancing rapidly, and can help to maximise resource efficiency (e.g., precision agriculture and controlled environments) as well as reduce food loss (e.g., solar powered cold chain facilities). Governments can support technological adoption, through provision of loans or grants or exemption from taxes. Alongside this, governments can strengthen farm advisory services, targeting improved, climate-smart crop technologies and livestock husbandry practices. Government R&D should focus on the development of new technologies, including alternative proteins and innovations to stimulate circular economy.

With farming in developing countries often characterized by smallholders, adoption of green technology can be difficult. Cooperatives and smallholder associations can disseminate information and enable uptake of green technologies. Rural development strategies that maintain traditional risk-averse subsistence farming strategies such as rotational farming, while enabling market access can improve rural livelihoods, without over-exposing farmers to market fluctuations. Tackling resource constraints to adaptation (e.g., providing drought-resistant seed) can enable resilience without disrupting communities.[xiv]