Organisation for Economic Cooperation & Development

Round Table 3: Green Growth and Climate ChangeRound Table 3: Green Growth and Climate Change

Hsin Huang Trade and Agriculture Directorate

EastAgri Annual Meetings 2010 EastAgri Annual Meetings 2010 Istanbul, 13-14 October 2010 Istanbul, 13-14 October 2010

OECD Trade & Agriculture Directorate 2

BACKGROUND:

CLIMATE CHANGE AND AGRICULTURE

OECD Trade & Agriculture Directorate 3

What if we do nothing ?

1. Excluding emissions from Land Use, Land-Use Change and Forestry.

Source: OECD, ENV-Linkages model.

Projected GHG emissions1 by country/region

(2005-2050, Gt CO2 eq)

-

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Gt CO2 eq

ROW

BRIC

Rest of OECD

USA

Western Europe

Developing country share total emissions increasing

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Agriculture is important because….

• accounts for about 1/3 of GHG emissions globally• can be a significant carbon “sink” by building up soil-

organic 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 5

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?

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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”

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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.

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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 9

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 10

Green Growth and InnovationPossible GDP growth pathways

Green growth

Baseline

Years

growth

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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

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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 13

Which policies?

Producers and consumers need to face the right incentives

– Carbon price, explicitly or implicitly (taxes, cap-and-trade…)

– 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 run-off)

– R&D/Innovation, advice and information, training to provide farmers with options

OECD Trade & Agriculture Directorate 14

What do farmers need to do?

Specific to production systems, climate/location –individual farmers know best the economic trade-offs 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 15

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

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“Le mieux est l’ennemi du bien”

Voltaire (1764)

OECD Trade & Agriculture Directorate 17

Trade and Agriculture Directorate

www.oecd.org/agr/envwww.oecd.org/agr/env

Hsin.Huang@oecd.orgThe views expressed in this presentation do not necessarily reflect those of the OECD or its Member countries

Contact:

Agriculture and Climate Change

OECD Trade & Agriculture Directorate 18

Background slides, not for main presentation

OECD Trade & Agriculture Directorate 19

Turkey is near OECD average

0%

10%

20%

30%

40%

50%

60%

70%

80%

1986-88

2007-09

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OECD support mainly commodities

OECD, PSE/CSE database

0%

5%

10%

15%

20%

25%

30%

35%

40%

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

Support based on commodity output

OECD Trade & Agriculture Directorate 21

Turkey support mostly MPS

OECD, PSE/CSE database

0

5

10

15

20

25

30

35

40

Miscellaneous

Non-commodity criteria

Non-current A/An/R/I, production not required

Non-current A/An/R/I, production required

Current A/An/R/I, production required

Input Use

Commodity Output

% of gross farm receipts Support based on: