Policy brief: Agricultural Policy Monitoring and Evaluation 2023

agriculture policy brief

Agricultural Policy Monitoring and Evaluation 2023: Adapting Agriculture to Climate Change

30 October 2023

Rising impacts of climate change underscore the necessity of adaptation and reform of policies that hinder adjustments to agricultural production systems.

otal support to agriculture reached a record high of USD 851 billion per year in 2020-22 T across OECD countries and major emerging economies: USD 518 billion per year comes in the form of budgetary support from taxpayers, with the remaining USD 333 billion per year being transferred by consumers through policies lifting domestic prices above reference prices.

I nvestments in innovation, biosecurity and infrastructure account for only 12.5% of total transfers to the sector, down from 16% two decades earlier. limate change is increasingly impacting global agriculture and food systems through higher C temperatures and an increased frequency of droughts, floods and other natural disasters. Yet agricultural support continues to be largely characterised by market-distorting policies that reinforce existing production systems and limit farmers’ ability to adapt to climate change.

Further actions are urgently needed to advance the implementation of policies to strengthen climate change resilience.

What’s the issue?

Total support to agriculture reached USD 851 billion per year in 2020-22 for the 54 countries covered in the OECD Agricultural Policy Monitoring and Evaluation 2023 report. Despite a small decline in 2022, this average represents a historical high and an almost 2.5-fold increase compared to 2000-02, even if below the 3.6-fold growth in the value of agricultural production (Figure 1).

Support remains highly concentrated in a few large producing economies: The People’s Republic of China (hereafter “China”), now representing 36% of this total, has emerged as the country providing the most support, displacing large OECD economies which have historically held that role. India, the United States and the European

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Union, all large agricultural producers as well, now represent 15%, 14% and 13%, respectively. Overall, China and India together account for 87% of the support provided to agriculture in the covered emerging economies, while the United States and the European Union provide close to two-thirds of support among OECD countries.

Of the total support, USD 518 billion per year was paid from government budgets, while the remaining USD 333 billion per year was provided through policies lifting domestic prices above reference prices. At the same time, policies in several emerging economies suppress domestic prices for some or most commodities, resulting in implicit taxation of producers averaging USD 179 billion per year.

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Agricultural Policy Monitoring and Evaluation 2023: Adapting Agriculture to Climate Change Figure 1. Global support to agriculture remains substantial Budgetary producer support

General Services

Consumer support

Total Support (% of VP)

1,000

30%

800

24%

600

18%

400

12%

200

6%

0

0%

-200

-6%

-400

-12%

Percent of agric. value of produc�on

USD billion

Market price support

Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agrpcse-data-en.

Individual producers were the largest beneficiaries of agricultural support, receiving USD 630 billion per year in 2020-22. On average, transfers to individual producers represented 14% of gross farm receipts (GFR). Support varies substantially across countries, with some OECD countries providing their farmers with levels of support

equivalent to over 40% of GFR, while the negative price support in a few emerging economies corresponded to 4% of GFR. Overall, net producer support across all countries accounted for 10% of GFR, down from 18% two decades earlier (Figure 2).

Figure 2. Producer support by country, 2020-22 and 2000-02

% 80 70 60 50 40 30 20 10 0 -10 -20 -30

Market Price Support Producer Support Estimate 2020-22

Other potentially most distorting support 1 Producer Support Estimate 2000-02

Other support

Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agrpcse-data-en.

Note: The statistical data for Israel are supplied by and under the reponsibility of the revelant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

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Agricultural Policy Monitoring and Evaluation 2023: Adapting Agriculture to Climate Change

Governments have taken significant policy actions to shield producers and consumers from the impacts of the war in Ukraine and to address inflationary pressures more broadly.

The war in Ukraine has had major impacts on international markets and value chains for food, feed, fertilisers and energy, and added to inflationary pressures already present in the markets. Many governments have extended emergency measures or put in place new measures to help producers and consumers cope with the impacts of the war on agricultural markets. These include measures helping Ukraine to continue producing and exporting food, reducing import barriers for food and fertilisers, fostering domestic fertiliser production or increasing the use of organic fertilisers, and providing support to compensate for rising input costs. Several countries also provided additional support to shield agricultural consumers from the rising cost of food.

At the same time, some countries implemented additional export barriers that have added to pressures on international markets, resulting in increased market uncertainty. Others eased or suspended environmental constraints to encourage domestic production and increase global commodity supplies, which may result in environmental degradation.

Climate change is increasingly affecting agricultural production worldwide, through increased variability of temperatures and rainfall, disruptions to ecosystem services, and declining productivity growth. Agriculture faces an increasing frequency of extreme weather events, including droughts, floods, heatwaves and storms. While some regions may benefit from longer growing periods, production in most parts of the world urgently needs to adapt to less favourable and more variable growing conditions.

Governments are scaling up their efforts to help agriculture adapt to climate change. The 54 countries covered in this report have adopted close to 600 measures for climate change adaptation in agriculture. Among these, social, economic, and institutional measures, such as adaptation planning, investments in capacity building, the provision of climate services, and the creation of financial and insurance mechanisms, are most prominent. Together, they jointly account for 61% of all adaptation measures. Other activities, such as various ecosystem-based approaches, infrastructure and technical solutions, account for the remaining 39% of the total. These measures are more targeted at finding solutions for farmers and farming systems.

Figure 3. Agricultural adaptation actions and programmes Social, economic and institutional (SEI)

Behavioural and cultural (BHC)

Infrastructure and technological (INT)

Ecosystem-based (ECO)

Irrigation and drainage 5.2%

Capacity building 18.0% Other financial mechanisms 5.3%

Planning 20.7%

Climate services 11.4%

Insurance 4.3%

Agroecology 7.0%

Soil health 5.5%

Diversification 3.8%

Water quality 2.3%

Breeding or breed selection 3.3%

Livestock mgmt 2.3%

Crop or livestock tech 4.0% Regional water 2.2% Pest mgmt 2.2%

Note: Size of rectangle is proportional to the share of the total number of adaptation actions and programmes identified by the OECD Secretariat, based on information provided by capitals.

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Crop mgmt 1.5%

Agricultural Policy Monitoring and Evaluation 2023: Adapting Agriculture to Climate Change However, effective adaptation of agriculture to climate change requires further actions. Governments should move beyond planning and urgently advance the implementation, monitoring and assessment of adaptation measures. Policies to strengthen climate change resilience should balance support for short-term recovery from climate-related shocks with medium-term incremental adjustments to changing conditions, as well as long-term transformative actions when existing systems become untenable. At the same time, countries are under pressure to enhance their efforts to reduce agricultural greenhouse-gas (GHG) emissions. While several countries have updated their economy-wide mitigation targets, today only 19 of the 54 countries covered have put in place some form of mitigation target for their agricultural sector.

Most current agricultural support reinforces existing production systems and hinders climate change adaptation. Market price support and other commodity-

specific transfers distort production signals, discourage changes in production systems, and create distortions in international markets, which remain a key mechanism to smoothen the impacts of shortfalls or bumper harvests and strengthen the resilience of agriculture and food systems. In parallel, mitigation efforts in agriculture are essential to meet the 1.5-degree target stipulated in the Paris Agreement.

Expenditures on R&D, biosecurity, infrastructure and other general services benefiting the sector overall continue to represent a small and declining share of agricultural support. These investments amounted to USD 106 billion in 2020-22, or 12.5% of total positive support, down from 16% two decades earlier. Less than a quarter goes to R&D, extension services and knowledge transfer, which are known to be highly efficient investments with high pay-offs for sustainable productivity and resilience, even if the returns may only materialise over the long run.

What should policy makers do?

At the OECD Meeting of Agricultural Ministers in November 2022, Ministers and representatives of 42 OECD member countries and emerging economies as well as the European Union jointly committed to “support the transformation of agriculture and food systems towards more sustainability and resilience”.1 In line with the ministers’ declaration, the following actions for governments are identified for improving agriculture and food systems’ resilience to successive shocks, including related to climate change, and to foster sustainable productivity growth (More details on each of these points are provided in the report):

1.

Phase out measures that hinder adjustments to production.

2.

Prioritise government engagement in agriculture’s risk management on information, facilitation, and catastrophic risks.

3. Invest in targeted interventions supporting climatechange adaptation and the sector’s transition to more sustainable and resilient agriculture and food systems.

4. Favour no-regret measures that support resilience in a wide range of circumstances.

5. Enhance the agricultural knowledge and innovation system and its focus on sustainable productivity growth.

6. Incentivise the supply of public goods.

Further reading • OECD (2023), Agricultural Policy Monitoring and Evaluation 2023: Adapting Agriculture to Climate Change, OECD Publishing, Paris, https://doi.org/10.1787/b14de474-en.

• Compare Your Country, https://www.compareyourcountry.org/support-for-agriculture.

1

OECD (2022), Declaration on Transformative Solutions for Sustainable Agriculture and Food Systems, OECD/LEGAL/0483, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0483.

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