Informal Agricultural Council to discuss climate-smart agriculture

During the next two days (14-15 September) the Luxembourg Presidency invites agricultural ministers to an informal Council meeting which had been intended to focus on agriculture and climate change. Because of Commissioner Hogan’s absence through illness from last week’s Council meeting it seems that a good part of the meeting will be devoted to continuing discussions on the EU response to low milk prices. The time available for the discussion on how agriculture can best address the challenges of mitigating climate change will thus be curtailed.

However, the Luxembourg Presidency has prepared a very useful background paper intended to set the scene for discussions between the Ministers in three working groups. This paper, entitled Towards Climate-Smart Agriculture, does a very good job in setting out the context and in describing some of the options open in moving to a climate-smart agriculture.

What the Presidency paper on climate-smart agriculture does not discuss

However, there are a few striking omissions in the Presidency paper. One is the absence of any indication of the scale of the future challenge facing the agriculture sector (and the agriculture ministers). The projections in the Commission’s report Trends to 2050: Reference Scenario 2013 based on the GAINS model (discussed further in this post) suggest that almost no change will occur in agricultural emissions between 2005 and 2030 under a business-as-usual scenario. This compares to the -30% reduction target set by the European Council last October for emissions in all sectors outside the Emissions Trading Scheme (non-ETS sectors) which include agriculture.

Now agriculture accounts for just 17% of EU non-ETS emissions on average (although for some countries, such as Ireland, this share is much higher at 45%). This means that agriculture in many member states could get a ‘get out of jail free’ card provided greater efforts are made in the other non-ETS sectors such as transport, waste disposal and energy use by households, small industries and the commercial sector. Nonetheless, it is interesting that the Presidency paper does not try to quantify the scale of the challenge facing agriculture in contributing to the EU’s mitigation efforts in the period to 2030.

This omission may be due to the fact that parallel negotiations are taking place among climate ministers on how agriculture and the land use sector should be integrated into the EU’s overall climate policy framework for 2030 (see my discussion here). The outcome of these negotiations will determine what agriculture is asked to do in terms of mitigation in the next decade.

The main source of agriculture’s emissions is linked to animal production and specifically ruminants. However, the Presidency paper accepts that it is difficult to reduce GHGs emitted during enteric fermentation. It therefore concludes that “The largest impact that can realistically be achieved to reduce agricultural GHG emissions in the EU is to tackle manure management and manure valorization (26% of the agricultural emissions).” The absence of any discussion of demand-side measures which might seek to influence the composition of what we eat, while not surprising in a forum of agriculture ministers, is a second omission which should be underlined.

A third omission is the very limited discussion of how to design policy incentives and levers to encourage agriculture to become more climate-efficient. The Presidency paper mentions incentives only in the context of promoting rapid coverage of manure storage and small-scale co-digestion biogas plants. However, Working Group 3 at the informal Council, which is to look at how awareness of the impact of agricultural activity on climate change can be translated into action to mitigate climate change, may encourage agricultural ministers to address this question.

Excessive greenhouse gas emissions occur because of a market failure; the cost to society of agricultural emissions and/or sequestration is not reflected through the price mechanism in the cost of agricultural production. How to overcome this market failure in agriculture is highly contested both because of the technical difficulties (how to measure and monitor emissions and sequestration on millions of farms) and political economy issues (should carbon emissions be treated like other pollutants as a cost that farmers and, ultimately, consumers should bear through higher prices, or should farmers be incentivised through subsidies to reduce emissions so that the cost of mitigation is ultimately borne by the taxpayer).

In practice, under present UNFCCC accounting rules, emissions are counted where food is produced and not where it is consumed. Internalising the cost of emissions, for example, through tighter regulations or some form of carbon levy, would raise the cost of production for farmers but without necessarily passing this cost on to consumers unless all competing products including imports are subject to the same rules.

As the Presidency paper notes: “At constant demand levels for agricultural products, a decrease in production in the EU would actually lead to a geographic transfer to non-EU countries of production as well as of GHG emissions, which in turn would lead to a global rise in emissions from agricultural production.” This ‘carbon leakage’ argument is mobilised as a powerful argument against any attempt to introduce dissuasive measures to limit carbon emissions from agriculture, so that only self-financing measures (which lead to increased farm productivity and thus increased carbon efficiency) and subsidies are deemed acceptable mitigation measures.

Fleshing out the policy context in the case of Ireland

In an address to the Irish Agricultural Science Association Annual Conference last week, I tried to tease out some of these issues in the specific context of Irish agriculture which has ambitious targets for growth set out in its latest ten-year strategy Food Wise 2025. Because agricultural emissions in Ireland make up 45% of its non-ETS emissions, a ceiling on non-ETS emissions is a much more binding constraint on agricultural production in Ireland than it is in other EU member states. I suggest it acts as a de facto quota because, to the extent that the ceiling is exceeded, it will require the purchase of credits from other member states or, as a temporary measure, the payment of a fine to the EU Commission.

There are various options to allow agricultural expansion in Ireland while staying within the country’s non-ETS ceiling. First, the ceiling itself has still to be finalised in the Brussels negotiations and in setting the ceiling there is scope for recognising the difficulties in reducing livestock emissions. Second, although agriculture makes up almost half of Irish non-ETS emissions, it shares this ceiling with emissions from transport, the waste sector and energy emissions from households, small industries and the commercial sector. To the extent that emissions from these sectors can be reduced even more quickly, it leaves scope for greater emissions from agriculture, but the converse is also the case.

Third, the agriculture and land use sectors are unique in that they can act as carbon sinks as well as sources. To the extent that agriculture and land use can get credit for increased sequestration through increases in soil carbon, biomass and forestry, this will enlarge the scope the emissions from activities such as livestock rearing and the use of fertilisers.

Fourth, and the focus of the Luxembourg Presidency paper, there is great scope for increasing the carbon efficiency of Irish agriculture by reducing the amount of carbon per unit of output. Many of these measures will help farmers ‘to produce more with less’, and will directly contribute to improving farm productivity and thus farm income.

However, the question remains how to incentivise farmers to make the necessary decisions either to change their land use or to improve carbon efficiency within their existing enterprises. Knowledge transfer and creating an awareness of the opportunities to both increase income and reduce carbon emissions is obviously essential.

But, on its own, greater awareness is unlikely to be adequate to reduce Ireland’s agricultural emissions sufficiently to stay within the country’s overall non-ETS ceiling after 2020. We also need a policy environment which sends the right signals to farmers to incentivise them to make the necessary changes. Policy signals can take the form of targeted subsidies, standards set by private sector buyers (supermarkets, processors) seeking to reduce the carbon footprint of their entire supply chain, or dissuasive instruments such as regulations or a carbon levy.

In my remarks, I discuss some of the challenges to putting such a policy environment in place. Although the context relates specifically to Ireland, the issues have a wider relevance also in other EU member states. I hope in the comments section that readers will be encouraged to submit their own observations on the issues raised.

The extended version of my ASA remarks on the challenge of agricultural expansion in a carbon-constrained world can be downloaded here.

This post was written by Alan Matthews.

Photo credit: Zimbio Drought in Spain

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