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Organisation for Economic Cooperation & Development Round Table 3: Green Growth and Climate Change Hsin Huang Trade and Agriculture Directorate EastAgri Annual Meetings 2010 Istanbul, 13-14 October 2010 BACKGROUND: CLIMATE CHANGE AND AGRICULTURE OECD Trade & Agriculture Directorate 2 What if we do nothing ? Projected GHG emissions1 by country/region (2005-2050, Gt CO2 eq) Gt CO2 eq 75 Developing country share total emissions increasing 70 65 60 55 ROW BRIC 50 45 40 Rest of OECD 35 30 25 USA 20 15 10 Western Europe 5 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 1. Excluding emissions from Land Use, Land-Use Change and Forestry. Source: OECD, ENV-Linkages model. OECD Trade & Agriculture Directorate 3 Agriculture is important because…. • accounts for about 1/3 of GHG emissions globally • can be a significant carbon “sink” by building up soilorganic matter • is a major user of rural land and water resources and linked to forestry via land use • food is a necessity (food security concerns) and • many of the world’s poor are farmers (development goals) OECD Trade & Agriculture Directorate 4 Agriculture is unique because … Climate change has significant but diverse impacts on farming: location, location, location • Adaptation is uncertain and economic appraisal difficult • Mitigation, a range of actions technically possible and economically feasible Food security goals • Policies to encourage a “low carbon” agriculture may impede the goal of producing more food in the short run, BUT • Is the real problem the ability to obtain food or the availability of food – and is this a short or long term issue? OECD Trade & Agriculture Directorate 5 Challenges • Provide enough food given pressure on natural resources • Encourage farm management practices that reduce GHGs, sequester carbon, adapt to climate change – and provide environmental co-benefits • Take into account externalities through policy incentives to move agriculture and food consumption to a “low carbon” path and contribute to “green growth” OECD Trade & Agriculture Directorate 6 Policy approaches Climate Change • Mitigation: policies to incentivise farmers to reduce agriculture’s emissions of greenhouse gases and enhance carbon capture (sequestration) • Adaptation: policies to incentivise farmers to manage adaptation to climate change Green Growth • a holistic approach that includes climate change and more general sustainability criteria … • ecosystem degradation, pollution and nutrient run-off, water availability, etc. OECD Trade & Agriculture Directorate 7 Green Growth Policies • Policies to incentivise the agricultural sector to provide enough food and generate environmental co-benefits (including reduction of greenhouse gases) – Address market failures (impacts that are not priced in the market, e.g. CO2, pollution) – Reform/remove environmentally harmful subsidies (e.g. fossil fuel) – Target policies to achieve environmental objectives more effectively (biofuels costs $ 960-1700 ton CO2 avoided) – Facilitate green technologies, innovation, information dissemination OECD Trade & Agriculture Directorate 8 Green GROWTH? Panacea to address financial crisis? – The need to provide sufficient government stimulus to boost weak demand (“shovel ready projects”) – More jobs, more growth, less carbon Cure worse than disease – Increase costs on weak economy – Will not increase employment, give up some growth Both are right and both are wrong OECD Trade & Agriculture Directorate 9 Green Growth and Innovation Possible GDP growth pathways Green growth g r o w t h Baseline Years OECD Trade & Agriculture Directorate 10 Green Growth and subsidies • Agriculture (in OECD) is highly subsidized – Support to farmers in 2006-08 23% of gross farm receipts (265 B usd) – Varies widely by country (Nor, Jpn, Kor vs Aus and Nzl) – However only a fraction (~25%) is actually retained by farmers (higher input costs, land/production quotas) • Subsidies and green growth – Production linked support dominates (more than ¾) – Higher production may lead to higher input use with environmental effects (water, soil, biodiv, ghg) – e.g. Nitrogen efficiency about 55% (30-80) in OECD … wastefully applied overwhelming the nitrogen cycle OECD Trade & Agriculture Directorate 11 What is the role of government? • Ensure a policy environment that sends clear signals that align the goals of individual farmers and society • Build capacity to better understand and measure agriculture’s contribution to sustainable development • Implement or reform existing policies and insurance systems to facilitate adaptation by increasing producer resilience to climate change while compensating those most vulnerable • Facilitate research to better inform, design and implement policy – at the domestic and global levels … OECD Trade & Agriculture Directorate 12 Which policies? Producers and consumers need to face the right incentives – Carbon price, explicitly or implicitly (taxes, cap-andtrade…) – Policy reform: decoupling of agricultural support from production, removal of fuel tax subsidies, etc. – Targeted payments for public goods (e.g. biodiversity, carbon sequestration) – Regulations for public bads (e.g. pollution, nutrient runoff) – R&D/Innovation, advice and information, training to provide farmers with options OECD Trade & Agriculture Directorate 13 What do farmers need to do? Specific to production systems, climate/location – individual farmers know best the economic tradeoffs given the right policy environment – Adapt to (inevitable) climate change impacts – Reduce GHG emissions per unit of production, whist respecting environment ”sustainable intensification” – Increase carbon sequestration – Maximise synergies with other environmental outcomes (biodiversity, water quality, soil erosion…) OECD Trade & Agriculture Directorate 14 Main messages • Ensuring a highly efficient, productive and resilient agriculture is the key to our future, response to climate change should be part of an overall effort to achieve environmental sustainability • Environmental pressures need immediate attention, “sustainable intensification” -addressing climate change is an investment in the future • The costs and benefits of alternative future scenarios have not been sufficiently analysed • Uncertainty about the impact of climate change is a reason to act OECD Trade & Agriculture Directorate 15 “Le mieux est l’ennemi du bien” Voltaire (1764) OECD Trade & Agriculture Directorate 16 Agriculture and Climate Change Trade and Agriculture Directorate www.oecd.org/agr/env Contact: [email protected] The views expressed in this presentation do not necessarily reflect those of the OECD or its Member countries OECD Trade & Agriculture Directorate 17 Background slides, not for main presentation OECD Trade & Agriculture Directorate 18 Turkey is near OECD average 80% 70% 1986-88 60% 2007-09 50% 40% 30% 20% 10% 0% OECD Trade & Agriculture Directorate 19 OECD support mainly commodities 40% 35% 30% 25% 20% 15% 10% Support based on commodity output 5% 0% Payments based on non-commodity criteria Payments based on non-current A/An/R/I, production not required Payments based on non-current A/An/R/I, production required Payments based on current A/An/R/I, production required Payments based on input use Payments based on commodity output OECD, PSE/CSE database OECD Trade & Agriculture Directorate 20 Turkey support mostly MPS Support based on: % of gross farm receipts 40 35 Miscellaneous 30 Non-commodity criteria 25 Non-current A/An/R/I, production not required 20 Non-current A/An/R/I, production required 15 Current A/An/R/I, production required 10 Input Use 5 Commodity Output 0 OECD, PSE/CSE database OECD Trade & Agriculture Directorate 21