agriculture growth preface

 

The OECD will deliver a Green Growth Strategy Synthesis Report to the 2011 Ministerial Council Meeting which will also provide the basis for an OECD contribution in 2012 to Rio+20, an international conference on sustainable development. The OECD Green Growth Strategy will elaborate tools and recommendations to aid governments in identifying the policies that can help achieve the most efficient shift to environmentally-sound growth. This report on Agriculture and Green Growth explains the significance of greener growth for the agricultural sector, elaborates a policy toolkit for Green Growth in agriculture, and discusses important considerations in addressing specific environmental challenges in agriculture. The emergence of the concept of Green Growth marks a shift in the paradigm for economic progress to an approach which emphasizes environmentally sustainable development (Table 1). Traditional economic models have tended to treat environmental protection as an economic burden which detracts from or slows growth. The Green Growth model recognizes that steps to protect and conserve environmental resources can be a driver for national and global economic progress. Future economic growth will itself be put at risk if the Green Growth paradigm is not put in place. The principle obstacle to Green Growth is not an inherent tension between economic and natural systems, but the political economy of change and the need to address the environmental consequences of current economic development patterns.

The realization of Green Growth depends on policies which spur economic development and job creation which devise value-added from the environment. This requires longer-term policy perspectives rather than the current stress on short and medium-term results as well as adjustment strategies to manage the successful transition to low-carbon, resource-efficient economies. Green Growth also demands policy coherence across economic, environmental and sector interventions. A broad range of government and corporate departments should be involved in implementing Green Growth policies and approaches rather than stand-alone environmental agencies or business units. A primary conceptual change in the Green Growth policy paradigm is the need to transform production and consumption patterns from resource intensive processes to eco-efficient and low-carbon trajectories. Current OECD environmental policies have been relatively successful in addressing pollution, including through end-of-pipe and more integrated processes, and encouraging the adoption of life-cycle perspectives. However, more efforts are needed to alter fundamental patterns of economic activity in order to decouple growth from environmental degradation and to support the expansion of commercial eco-industries and eco-services. In developing countries, realizing significant gains in material living standards without imposing excessive burdens on environmental carrying capacity is the primary goal. Green Growth is a concept that brings together a suite of policies to promote a transformation of consumption behavior, industry structures and technologies. This involves regulatory and fiscal measures to reduce the energy and carbon intensity as well as the land and water intensity of production and consumption in all sectors. Green Growth policies also seek to stimulate investments and steer spending towards clean technologies, renewable energy, water services, green transportation and infrastructure, waste management, and bio-based businesses. In the Green Growth paradigm, traditional economic and environmental measures of progress are replaced by indicators of the linkages between the use of environmental goods and services and economic growth. Green Growth calls for a focus on qualitative growth rather than measuring success based on traditional economic indicators such as gross domestic product (GDP) or economic productivity. Interrelated indicators of economic progress, environmental sustainability and social welfare are needed. In agriculture and other sectors, progress on Green Growth is measured by the ability to contribute to social well-being by providing sufficient goods and services in ways that are economically efficient and environmentally beneficial.

Moving towards greener growth in the agricultural sector will involve both synergies and trade-offs which will change over time. The implications of Green Growth for agriculture and the contributions of agriculture to Green Growth can be reciprocal or incongruent. Table 2 gives a broad view of the possible synergistic and conflicting effects of Green Growth on agriculture across and within the different pillars of sustainability: economic, environmental and social. In the cells on the main diagonal, the two perspectives are mutually reinforcing as indicated in the positive sign. Policy pairs below the main diagonal may work against each other particularly in the short-term (negative sign), while paired interventions above the main diagonal are mutually enhancing (positive sign). In the short-term, Green Growth policies which place a premium on environmental protection may constrain agricultural output, reduce global food security and entail adjustments in the use of human, financial and natural resources. The implications of Green Growth for agriculture in the longer-term are mutually-reinforcing in terms of environmental sustainability, economic growth and social well-being. The complementarities and differences between Green Growth and agriculture are reviewed in more detail below in terms of traditional economic factors (i.e. productivity, farm incomes, employment) and environmental factors (i.e. natural resource use, pollution, biodiversity) as well as broader social factors (i.e. food security, poverty reduction, rural development). While this report discusses Green Growth with a focus on primary agriculture, there is a much longer agro-food supply chain including processing and distribution which has Green Growth implications. The end results will depend on the policy instruments adopted and the structural adjustment measures which are put in place to ease the transition to a greener agricultural sector

Agricultural contributions to Green Growth Economic contributions -- Green Growth will be at risk if the agricultural sector fails to provide sufficient food, feed and fiber for the increasing global population. Although agriculture accounts for less than 2% of GDP and less than 6% of employment in OECD countries, it is essential to supplying domestic and foreign food demand. In many developing countries, agriculture plays a central economic role in accounting for 30% of GDP and two-thirds of employment. Since it is forecast that global food production will need to be increased by 70% to feed the expected world population in 2050, greater economic efficiency and productivity in agriculture is essential. Green Growth depends on investments in the agricultural sector and the viability of farms in OECD and non-OECD countries to ensure future food production. A 50% increase in private investment in primary agriculture and downstream services is needed to raise output in developing countries as well as public investments required in roads, irrigation, electricity and education. Advances in agricultural technology should yield productivity increases in most countries, but new technologies must be affordable, adaptable to alternative farming systems and geared to environmental protection. Environmental contributions -- Agriculture provides a range of environmental and ecosystem services which are essential to Green Growth, including mitigation of greenhouse gases through carbon sequestration. Although direct greenhouse gas emissions from agriculture account for about 10%-12% of the total, the agricultural sector has the potential to offset emissions from other sectors. It is estimated that increasing the removal of atmospheric CO2 through carbon sequestration in soil and vegetation sinks in agriculture has the potential to offset up to 20% of global fossil fuel emissions. However, this depends on enhanced soil management and cultivation as carbon sequestered in soils can be released back to the atmosphere through inappropriate farming practices. Because agriculture accounts for 37% of total land use (68% if the use of land for forests is included), the sector plays a key role in the preservation of ecosystems which provide the basis for Green Growth. Agriculture affects the natural environment in providing for management of land and water resources, habitat protection, flood control, biodiversity maintenance, and shaping and protecting landscapes. Agricultural land management has been a positive force for the development of plant varieties, animal habitats, woodlands and wetlands. Attempts to place a monetary value on the environmental services provided by agriculture underline its rising importance in ecological and economic terms. Social contributions -- Green Growth cannot be realized without global food security in terms of adequate supplies of food and agricultural commodities to nourish growing populations. World population is expected to grow by 2.3 billion people between 2010 and 2050 mostly in developing countries. While the incidence of undernourishment is projected to fall from 17% of the population of developing countries at present to 11% in 2015 in line with poverty reduction, progress in reducing the total number of undernourished people is far slower and depends on improved agricultural productivity and more equal access to food supplies. Agriculture also provides the basis for the well-being of rural populations in OECD countries and poverty reduction in developing countries. About 75% of the world’s poor live in rural areas and are dependent 7 on the agricultural sector for their livelihoods. Agricultural growth, through its leverage effects on the rest of the economy, can enable poor countries, poor regions and poor households to raise employment and incomes. In narrowing the rural-urban income gap and reducing rural poverty, agriculture can connect rural populations to broader economic development by providing a key link to Green Growth. Green Growth contributions to agriculture Economic contributions -- Green growth approaches which improve the internalization of environmental externalities in agricultural production can increase economic returns to farmers through more efficient input use and enhanced resource management. Although environmental measures may slow agricultural output in the short-term, eco-efficiency gains should yield long-term economic benefits. Green tools and techniques can reduce overconsumption and save expenditures on energy, water and agrochemicals. Ecologically-sound land management improves soil quality, nutrient content and moisture holding capacity. Agricultural outcomes are also enhanced through reducing losses from pesticide resistance, soil erosion and water pollution. For example, efforts to increase carbon sequestration in soil organic matter have yielded substantial benefits in many areas in terms of agricultural output and farm productivity. Investing in the environment can lead to new sources of economic growth in agriculture based on environmental goods (e.g. organic products, renewable energy) and services (e.g. eco-tourism, resource conservation) which contribute to green jobs and farm incomes. Certification and eco-labeling of products based on organic and ecological production processes can add substantially to marketing premiums from environmental and health conscious consumers. Organic price premiums are estimated at 20%-40% in OECD markets depending on the food product. Agricultural biodiversity generates significant option values in conserving genetic resources that can be the basis for the development of new crop varieties and animal breeds. Eco-tourism on farms and in rural areas is a profitable emerging industry in many OECD countries, while production of biomass energy is raising farm incomes and revitalizing rural communities. Environmental contributions -- The long-term performance of the agricultural sector is inextricably linked to the sound management of its natural resource base. Overall agricultural indicators have improved in recent years across the OECD due to environmental investments by farmers and agrobusinesses. Agricultural nutrient balances have recovered and soil erosion has stabilized since the early 1990s. Better water management – involving irrigation water conservation, rainfall retention and waste water reuse – has yielded payoffs to public and private investments in agriculture. Agricultural yields have been raised through integrated pest management techniques which exploit natural biological processes. Conserving agricultural biodiversity also increases productivity through improved soil nutritional levels, crop pollination and hydrological functions. Less pressure on scarce environmental resources from Green Growth also reduces environmental risks and expenditures. Risk management in agriculture has shifted from a focus on market volatility to managing environmental risks, including from diseases, weather conditions and climate change. OECD governments have largely stabilized price and market risks, but farmers face considerable production 8 risks from the unpredictable nature of the weather and the uncertain performance of crops and livestock. Reinforcing the ecology-agriculture link through Green Growth enhances stability in managing these risks. Losses to stock, crops and other assets can be limited by more environmental management of pests and land, soil and water resources. The need for drought risk insurance has been reduced through better irrigation techniques, water saving and improved pasture management. Steps to adapt agriculture to potential climate change risks through seed selection and altered cropping also acts to lower crop and farm insurance premiums. Social contributions -- Sound management of agricultural resources based on Green Growth will increase the viability of rural economies and enhance social welfare for farm families.

 Reform of government supports to agriculture, which have traditionally been based on output levels and input use, is rectifying inequities in farm income distribution while relieving environmental stress. In the past, farm support measures failed to improve equity in farm incomes as they tended to benefit larger—and often more prosperous—operations. As farm payments are decoupled from production and targeted more on the basis of farm revenue, they will help meet the needs of poorer farm households. Environmental measures contribute to poverty reduction in rural areas through enhanced provision of essential services such as food and water supply and sanitation. The increasing production of farmbased environmental goods and services is creating green jobs and contributing to rural diversification and development. Organic farming and the production of biomass for energy and related industries now underlies growth in farm employment and incomes in the OECD. Small and medium-scale farms, which make up a large share of commercial farming operations, depend on off-farm income to supplement their livelihoods. Ecotourism, which is growing at three times the rate of the overall tourism sector, is a promising avenue for farmers and local communities.