The newly established European Scientific Advisory Board on Climate Change (ESABCC) first made its mark when delivering its advice to the Commission in July 2023 on setting the EU’s 2040 mitigation target. It recommended emission reductions of 90–95% by 2040 relative to 1990. The Commission Communication proposing its climate target will be published on 6 February 2024. It is expected to propose a reduction target in net emissions of at least 90% in line with the recommendation of the Advisory Board. This is the target to which the new Climate Commissioner Wopke Hoekstra committed in his appointment hearing before the Parliament’s Environment Committee in October last year.
The ESABCC has now followed up with its first progress report published last week 17 January 2024 containing advice on policy actions that can support the legal target in the European Climate Law of achieving climate neutrality by 2050 at the latest. The report includes both an assessment of progress, based on an analysis of relevant indicators and their comparison with indicative benchmarks, as well as an assessment of the consistency of existing policies with the EU’s climate objectives.
In this blog post, I summarise what the report recommends with respect to agricultural emissions (it also has a chapter on emissions and sinks in the land sector which I do not cover here). The assessment framework is shown in the following figure.
Assessment concludes that reduction in agricultural emissions is nowhere near rapid enough
The assessment of performance starts at the top of the framework with an expected reduction by 30–45% in agricultural emissions in 2050 relative to 2005. There is no legal or policy target for the extent of climate mitigation expected from the agricultural sector, so this mitigation target is based on the reduction in the sector’s non-CO2 emissions in scenarios underpinning the European Commission’s long-term scenario analyses. The ESABCC report notes that, in its previous report on a GHG target for 2040, it has suggested that a more ambitious 23–57 % reduction could be achieved by 2040, depending on the extent of demand-side action, including a shift to sustainable, healthy diets.
The implications of this target are spelled out by the Advisory Board as follows. “In 2005–2022, emissions reduced by on average 1 Mt CO2e per year. This rate would need to accelerate to on average 3.5 Mt CO2e per year to put the sector on track towards reaching modest reductions by 2030 that are in line with the European Commission’s reduction scenarios. After that, the average pace of emission reductions would need to accelerate further (to 4 Mt CO2e per year) to reach the 35 % emission reductions (compared with 2005) presented in the European Commission’s scenarios underpinning the EU climate objectives.” Under the Advisory Board’s recommendation for a 90-95% reduction in net emissions by 2040, even more rapid emissions reductions in agriculture would be required.
The necessary outcomes to achieve these targets include action focused on the intensive margin (reducing the GHG intensity of each product), and action focused on the extensive margin (reducing the production and consumption of GHG-intensive products). The report identifies six levers to achieve these outcomes. In broad terms, they include promoting low-emission livestock production and improved crop nutrient management at the intensive margin, and reducing production of animal products, a consumption shift towards more plant-based diets, a reduction in food loss and waste, and minimising the demand for biofuel crops, at the extensive margin. It assesses performance for each of these levers and broadly finds them wanting. The Advisory Board’s key recommendation (Number 9) is thus to provide stronger incentives for climate action in the agricultural sector and food system, including through the upcoming revision of the CAP.
The assessment of policies concludes with four recommendations: (a) reform the CAP to include standalone emission reduction objectives in addition to obligations to pursue other environmental and sustainability objectives; (b) introduce a system for estimating and pricing agricultural emissions targeting the source, complemented by policies that seek to ensure that more sustainable, healthier food choices are available to consumers at all income levels; (c) encourage and incentivise the sale and marketing of, and access to, healthier, more plant-based foods, the reduction of food waste and a sustainable food culture; and (d) revise future energy policies to limit support for biofuels to areas that cannot be reasonably decarbonised by other means.
Several enablers of these changes are also identified in this report but, apart from the issue of price signals and incentives, are not discussed in detail. Nonetheless, they play an important role in the green transition. Among the enablers identified are access to finance, upgrading skills and capacity-building, greater support for innovation, and the need for regulatory changes around feed and food safety requirements to enable novel, low-GHG-emission food and feed types (e.g. insect-based protein) to enter the market, without compromising public health or animal welfare.
The report recommends that the three agricultural/food policy options (reforming the CAP, emissions pricing, and strengthening measures to encourage healthier, more sustainable diets) should be pursued in parallel and in a coherent manner to avoid conflicting policy signals. It notes this would be consistent with the EU approach for other sectors, where carbon pricing is combined with other policy instruments such as minimum performance standards and subsidies.
Make better use of CAP subsidies
The report acknowledges that climate action, including both mitigation and adaptation, is one of the ten specific objectives for the CAP 2023-2027 but concludes that its effective contribution to GHG emissions reductions is uncertain at best. Its goal to contribute to mitigation is largely qualitative and forms part of a broader set of agri-environment objectives. It notes that the CAP’s green architecture provides opportunities for Member States to promote sustainable practices, but the emphasis given to climate change mitigation is largely discretionary and difficult to quantify ex ante. It also highlights that the CAP continues to provide financial support to emission-intensive agricultural practices such as livestock production, rather than focusing on the transition to less emission-intensive activities.
The ESABCC recommends (Key Recommendation 9) that: “The CAP should be better aligned with the EU climate objectives. This could include (i) a standalone emissions reduction objective, (ii) moving towards mandatory good practices that support CH4 and N2O reductions and soil carbon increases, and (iii) shifting CAP support away from emission-intensive agricultural practices, like livestock production, and towards lower-emitting products, carbon removals, environmental services, and economic diversification.”
Extend pricing to agricultural emissions
The Advisory Board notes that there is no EU-level price on emissions in agriculture/food, forestry and land use, which suffer from an overall lack of incentives to reduce emissions and increase removals. It recommends that the EU should start preparations now with a view to expanding the pricing regime of EU GHG emissions to all major emitting sectors, including agricultural/food and LULUCF, through a legislative proposal for after 2030. It argues that “Applying a carbon-pricing mechanism to the agriculture and LULUCF sectors would provide a clear financial incentive for farmers and forest managers to reduce emissions and increase removals, and for consumers to reduce the consumption of GHG-intensive agricultural products.” It also foresees other advantages such as reducing the potential for intra-EU leakage of emissions related to agriculture, forestry and other land use, while also addressing the uneven distribution of incentives for biomass use versus carbon removal.
The report does not go into detail on how such a pricing system might be constructed, but promises to return to this issue in future, including in a report on carbon removal that will also cover the land use sector expected to be published in 2024. It refers (Section 10.6) to the conclusions of the Trinomics report on pricing agricultural emissions published at the end of last year, as well as to the ongoing discussions in Denmark and New Zealand. However, it highlights several factors that should be taken into consideration.
- Instruments should reflect the specific characteristics of the agricultural/food and LULUCF sectors. This includes the technical complexity of measuring emissions and removals, attributing them to land management and mitigation actions, differences in the permanence of various natural removals, and the risk of international leakage.
- Policymakers should pay particular attention to whether land-based carbon removal should be rewarded as part of a system for pricing of non-CO2 emissions in agriculture, or whether non-CO2 emissions and carbon removal should be treated separately.
- The impact – in particular on small farms and farms in vulnerable regions – should be assessed ex ante and potentially adverse economic, social and environmental impacts addressed to ensure a just and fair transition. The report proposes that the CAP budget or revenues from such pricing mechanisms could be used to finance redistributive measures and to support climate mitigation and adaptation efforts.
- The introduction of emission pricing would also have to be managed carefully, taking into account the social environment and economic implications for low-income consumers.
Strengthen measures to promote healthy sustainable diets
The Advisory Board underlines that “shifting to sustainable food consumption and production is an essential part of climate policy in food and agriculture”. It notes that the health and environmental benefits of sustainable diets are recognised in the EU Farm to Fork Strategy. However, it argues that EU policies to encourage sustainable diets focus primarily on information provision and voluntary codes of conduct, but that these measures are not sufficient by themselves. Specifically, the Farm to Fork Strategy “remains vague on definitions and lacks quantified objectives for the shift towards sustainable and healthy consumption patterns”. The absence of quantified objectives for its demand-side ambitions (apart from the food waste target) makes it difficult to track progress and hold policymakers accountable for the delivery of the objective.
Although the Farm to Fork Strategy emphasises the role of providing better information to consumers (e.g. through labelling) in the expectation that this will allow them make well-informed choices in favour of healthier and more sustainable diets, the relevant legislative proposal has not yet been announced. The Advisory Board suggests that ‘soft’ policies such as information provision and changing the food environment can support shifts in consumer behaviour but are insufficient on their own to support the required change.
It argues that the introduction of price-based policies to encourage healthy and sustainable diets appears to be the main element missing from the EU’s farm to fork policy. The Farm to Fork Strategy acknowledges the role of tax incentives but a 2022 European Environment Agency report found that at the national level there is almost a complete absence of favourable taxation schemes for sustainable food products. The Advisory Board also highlights that an emissions tax would help to drive shifts in consumption patterns from red to white meat and to more plant-based diets provided the price incentives are passed through to the consumer, while recognising that potentially regressive impacts on low-income consumers should be addressed. “If well designed, [price-based policies] could be introduced with a modest regressive effect, or even be a financial benefit to low-income consumers. Therefore, the introduction of more binding measures such as regulations and financial incentives appears necessary but should be combined with further efforts to enhance information provision and education about sustainable and healthy diets as part of a broad policy mix”.
Today, non-CO2 emissions from agriculture account for 11% of net EU GHG emissions. Although agricultural emissions have fallen significantly since 1990, further reductions have almost ceased in recent years. By 2022, emissions were just 5% below 2005 levels. The European Commission’s baseline scenario from 2020 sees agricultural emissions remaining essentially flat up to 2030 (a further –3% fall compared to 2020) (see Annex 9.4.3 in the Fit for 55 package impact assessment). The most recent 2023 EEA projections paint a similar picture, suggesting that agricultural emissions with additional measures (WAM) could fall by 8% by 2030 relative to 2005. This compares to a fall of 12% projected in agricultural non-CO2 emissions in the Commission’s 2021 update of its MIX scenario that is also used by the Advisory Board as its benchmark. Scenarios underpinning the 90–95% recommendation of the Advisory Board for the 2040 target reduce emissions more quickly, by 17% in 2030 compared with 2005 levels.
Longer-term mitigation potential in agriculture is projected to be considerably higher. EU-level pathways examined by the European Commission and by the Advisory Board suggest that a reduction of around 30% below 2005 levels by 2050 could be achieved largely through supply-side measures identified in the literature, and around 60% in the most ambitious pathways featuring additional demand-side action (ESABCC 2024, p. 152).
It is thus no surprise that the Advisory Board’s key recommendation is to provide stronger incentives for climate action in the agricultural sector and food system. It proposes better aligning the CAP with the EU’s climate objectives, preparing to extend a pricing mechanism to the agricultural and land use sectors after 2030, and also using price-based policies to encourage healthy and sustainable diets.
The report notes several implementation and ambition gaps when it comes to the CAP. For example, regarding the GAECs 1 and 2 on grassland and wetland preservation, the requirement to maintain grasslands does not prevent practices (such as reseeding) that can lead to high soil emissions, while most Member States opted to postpone introduction of GAEC 2 on wetlands until 2024 or 2025. Few eco-schemes target reductions in agricultural non-CO2 gases and, even where relevant measures are in place, the quantification refers to the number of animals or hectares enrolled but not any estimate of the emissions reduction. CAP subsidies continue to support the livestock sector, including through coupled support.
CAP measures are by and large an opt-in subsidy for farmers (though the GAEC standards are mandatory for any farmer in receipt of CAP area-based payments). Emission pricing, in addition to its main role to disincentivise emission-intensive production, would also provide an additional incentive to take advantage of mitigation subsidy schemes. The Advisory Board is cautious in its recommendation here, suggesting that preparatory work be started with a view to introducing a pricing scheme after 2030, and recognising the many potential barriers around monitoring and transactions costs and the potential for carbon leakage. The work being done in Denmark and New Zealand on pricing emissions will clearly have useful lessons.
Finally, the Advisory Board recommends proceeding with measures of information provision and changing the food environment (which will require labelling and legislation to enforce regulation) but also complementing these measures by price-based policies, whether by rejigging the VAT system or by ensuring that the consequences of pricing agricultural emissions are reflected in retail prices. To avoid supermarkets and consumers simply switching to cheaper imports if EU agricultural emissions are priced but imports not, the necessary corollary is some form of border carbon adjustment, however difficult it is currently to envisage its operation in the context of international food trade.
This post was written by Alan Matthews.