Agriculture and the environment

agriculture policy brief

Agriculture and the environment

February 2019

he agriculture sector impacts the environment as a major user of land and water, by using T fertilisers and pesticides, and through livestock operations. y contrast, agricultural land can help mitigate global warming, provide habitats for plants, B birds and insects, and protection from floods and soil erosion. hile OECD countries have made progress reducing the environmental impact of the sector by W reducing water use and nutrient excess, challenges remain.

I mproving the targeting of agricultural policies and replacing distortionary subsidies by more effective and less costly forms of support can promote the sustainability of the agricultural sector.

What’s the issue?

The production of agricultural commodities frequently involves the combined use of land, water, pesticides, fertilisers, livestock and energy, among other factors. By occupying the nearly 40% of the terrestrial area of the planet and using 70% of globally consumed freshwater, agriculture has affected soil resources, forested lands, biodiversity and contributed to the depletion of water resources. The use of pesticides, fertilisers and energy

in agriculture can lead to environmental impacts such as water contamination from pesticides and nutrient excess; global warming from the emissions of greenhouse gas emissions; air contamination from fertiliser and pesticide application. Livestock farms and operations also contribute to climate change generating greenhouse gas emissions from animal digestion and manure, as well as to water contamination.

Agricultural productivity and environmental pressures Total Factor Productivity

Gross production value

Agricultural land use

Phosphorous balances p. ha.

Nitrogen balances p. ha.

EU farmland bird index

150

GHG p. ha.

Total Factor Productivity

130 Index 1991 = 100

Gross production value 110 GHG p. ha.

Agricultural land use EU farmland bird index

90

Nitrogen balances p. ha.

70 50

Phosphorous balances p. ha.

30

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tad.contact@oecd.org

@OECDagriculture

Agriculture and the environment At the same time, agricultural land can also provide a variety of environmental benefits – such as habitats for plants, birds and insects, attenuation of global warming by sequestering carbon, protection from floods and soil erosion, and a variety of landscapes and features with aesthetic and touristic value.

According to the annual OECD-FAO Agricultural Outlook, the appetite for agricultural products will likely continue to increase in the coming decades, mainly due to population and income growth. To keep up with increased demand, agricultural production will need to keep growing, while at the same time minimizing the environmental impacts associated to such expansion. In addition, climate change will likely negatively affect agricultural production and, in the absence of adaptation, economic losses in the sector can be substantial.

Recent trends in OECD countries show mixed results in the environmental performance of agriculture (Figure).

Since 2000, agricultural production has expanded and certain environmental pressures associated to agriculture such as nutrient balances, a leading cause of water contamination in OECD countries, and water abstraction for agricultural use have decreased. On the contrary, agricultural greenhouse gas emissions and biodiversity losses have increased.

Improved farm practices, well design policies and the removal of distortive subsidies, can all contribute to improving the environmental performance of farms, potentiate the provision of environmental benefits of the sector and, facilitate adaptation to a changing climate and, in certain cases, even boost yields and productivity. Farm practices such as conservation tillage, cover crops, crop nutrient management, integrated pesticide management, conservation water management, as well as landscape features in farmland such as buffer strips, conservation land and extensive grasslands, can all contribute to improve soil and water conditions and mitigate global warming.

Technologies, such as satellite imagery, sensors and precision agriculture have the potential for improving the application of fertilisers and pesticides, as well as detecting water stress, pests and soil properties.

Technological innovations in this field are happening at a rather rapid pace and farmers are already profiting from this process. These technologies not only have the potential to improve the environmental performance of agriculture but can also improve the effectiveness of agricultural policies with environmental goals and the monitoring of environmental outcomes.

What should policy makers do?

To address the environmental impacts of agricultural activities, policy makers can:

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•

Improve the targeting of agricultural policies with environmental goals. Many OECD countries have already taking steps in the right direction by adopting and implementing different policies to reduce the environmental impacts of agriculture: from direct regulations to payment schemes. To increase their effectiveness, these policies can benefit from improving the selection of regulated farmers and the instrument base. For example, regulations should target those farmers whose activities have the largest environmental impacts and farmers could be paid for the environmental outcomes of their farms.

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Replace distortionary subsidies with more effective and less costly forms of support. OECD countries have a large set of policies to support farming activities and the agricultural sector. Some of those forms of support, such as market price support or payments based on output, are not only costly to the society as a whole and inefficient but could also lead to higher greenhouse gas emissions, nutrient loads to water bodies, overexploitation of water resources, soil degradation and biodiversity losses. According to the annual OECD Agricultural Policy Monitoring and Evaluation report, in the OECD area, distortionary forms of support represent half of total support to farmers. Policy makers can reform policies and replace distortionary subsidies by other forms of support, such as payments based on area or redirecting them to support research, innovation and training; by doing so cost to society and environmental damages can be substantially reduced.

Further reading • OECD (forthcoming 2019), Evaluating the Environmental Impact of Agricultural Policies, OECD Food, Agriculture and Fisheries Papers, OECD Publishing, Paris.

• OECD (forthcoming 2019), “Agri-environmental indicators: nutrient balances”.

• Lankoski, J. (2016), “Alternative Payment Approaches for Biodiversity Conservation in Agriculture”, OECD Food, Agriculture and Fisheries Papers, No. 93, OECD Publishing, Paris. http:// dx.doi.org/10.1787/5jm22p4ptg33-en.

• OECD (2016), Farm Management Practices to Foster Green Growth, OECD Green Growth Studies, OECD Publishing, Paris, https://doi. org/10.1787/9789264238657-en.

• OECD (2010), Guidelines for Cost-effective Agrienvironmental Policy Measures, OECD Publishing, Paris, https://doi.org/10.1787/9789264086845-en.

@OECDagriculture