Does Agricultural Support Help with Climate Change Mitigation Efforts?

Abstract

Total support to the agricultural sector arising from public policies reached a record USD 817 billion per year in 2019–2021 for the 54 countries1 covered in the OECD Agricultural Policy Monitoring and Evaluation 2022 report (Figure 1). However, only a small share of this support was directed at longer-term efforts to combat climate change and other food system challenges. Breakdown of agricultural support, total of 54 countries, 2019–2021 Note: The potentially most distorting forms of support exclude those payments for variable inputs (such as fertiliser) that require constraints to their use (USD 1.7 billion per year). Source: OECD (2022), Producer and Consumer Support Estimates, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en. Of the total support, USD 500 billion per year was paid by taxpayers from public budgets, with the remaining USD 317 billion per year being transferred by consumers through higher prices (market price support). In a small number of countries, policies also suppress prices for some or all commodities, generating a transfer (an implicit tax) of USD 117 billion away from agricultural producers. In total, USD 391 billion per year was transferred to producers in the potentially most distorting forms of support (market price support and payments based on output or the unconstrained use of variable inputs). Along with forestry and other land use, agricultre represents around 22 per cent of anthropogenic GHG emissions; mainly methane and nitrous oxide from livestock, rice cultivation and fertiliser use, and carbon dioxide emissions through land use change, such as deforestation and carbon losses in agricultural soils. Lower GHG emissions can result from increasing productivity and efficiency in input use, adopting production techniques that reduce emissions, increasing soil carbon sequestration, afforestation and restoration of degraded lands, reducing food losses in the field and on the farm, and providing information and incentives to consumers to choose food with lower emissions intensities and reduce food waste. Current policies include subsidies for the use of variable inputs such as fertilisers, feed and fuel, amounting to USD 60 billion per year in 2019–2021 and directly contributing to GHG emissions. Moreover, support tied to specific commodities still accounts for a large share of gross farm receipts in some countries (Figure 2). Support for livestock products, which tend to have high GHG emissions intensities, amounted to USD 111 billion per year across the 54 countries, and exceeded 10 per cent of gross farm receipts in 5 countries. Breakdown of transfers to specific commodities, 2019–2021 Source: OECD (2022), Producer and Consumer Support Estimates, OECD Agriculture statistics (database), https://doi.org/10.1787/agrpcse-data-en. Despite their importance for achieving food security, climate and other food systems goals, investments in these areas have been falling relative to the size of the sector for most of the past two decades. Overall, support to general services accounted for 13 per cent of total support for the sector in 2019–2021, down from 16 per cent in 2000–2002 (Figure 3). There is therefore considerable scope for reforms that support both food systems objectives and ensure that agriculture contributes to ambitious emissions reduction targets. Public investments in general services, 2019–2021 (percentage of total support to agriculture) Note: ‘Other’ includes the marketing and promotion, cost of public stockholding, and miscellaneous categories of the General Services Support Estimate (GSSE). Source: OECD (2022), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en. The opinions expressed and arguments employed herein are those of the authors and do not necessarily reflect the official views of the OECD or of its Member countries.