Growing pains: The influence of climate change on agriculture

27 September 2011
ITC News

As a major source of greenhouse gas emissions, agriculture is both a contributor to climate change and a potential casualty. Resolving the tension between meeting food security needs whilst also reducing emissions presents a major development challenge. Trade plays a part in meeting this challenge.

Agriculture as a casualty of climate change

The world is currently on course for a 4°C average temperature rise by the end of the century. This will result in reduced agricultural yields, thereby having a major impact on the world’s ability to feed itself, particularly given the growing population and higher calorie diets as incomes climb in developing countries.

The change in climate will have a negative impact on food production, increasing food prices, threatening rural jobs and livelihoods. It will increase the number of people at risk of hunger by 10% to 20% by 2050. Developing countries are also least able to adapt to changes because of their lack of resources, particularly among smallholder farmers and pastoralists. Africa and parts of South Asia and Central America are most at risk from climate change.

Increased temperatures, changes in rainfall, more drought and extreme weather events, melting glaciers and a rise in sea levels are all having a negative impact on developing country agriculture and disrupting the stability of food supplies. Agricultural yields will drop most in developing countries as they are located in the lower latitudes, where temperatures are climbing above optimal levels for agriculture. Malnutrition will also increase due to decreased water availability and quality.

Some analysts have argued that continued improvements in technology such as plant breeding and biotech will help maintain agricultural yields in the face of rising temperatures. This may well be a false panacea for two reasons:

1. The Green Revolution (and thus the scope for gains in yield) has slowed down. In the 1960s and 70s, grain yields grew by 2.7%. In the last quarter of the 20th century, this had fallen to 1.7%.

2. Even if there is no further slowdown in yield gains, there is a risk of imbalance between rising food demand and output. The world population is estimated to reach 9 billion by 2050. Incomes are also rising in developing countries, resulting in consumers shifting to higher calorie diets that require more energy to produce. Demand for ruminant meat (beef and lamb) is growing as incomes rapidly rise in developing countries. Eight kilograms of cereals are needed to produce one kilogram of beef, increasing competition for land and raising prices for staples.

To keep up with these changes, experts estimate that the world will need to produce 60%-100% more cereal and livestock. To compound the problem, land has been diverted away from food production to grow biofuels. Other factors are also constraining an increase in supply from agriculture:

•   The supply of new land is scarce. Urbanization is also encroaching on existing farmland.

•   Production is threatened by the damage to resources that have sustained it to date, for example, in the salinization of soils. Water scarcity is becoming acute in much of the developing world, limiting the expansion of irrigation.

•   Public investment in African agriculture has been lacking (4% of GDP in 2004 compared to 10% in Asia) leading to a loss of extension services and infrastructure. Misinvestment is pervasive, for example the provision of input subsidies and transfers that are captured by richer farmers.

The role of trade in adaptation

Trade generates foreign exchange to pay for adaptation (e.g. infrastructure and public health services). More specifically, imports can smooth out local food shortages created by climate change and other factors. However, there is a cost for food-deficit countries if cereal imports increase. Importers’ terms of trade could worsen if they find it necessary to increase their export earnings from other (likely labour-intensive) goods to pay for the extra imports of food. If food-surplus countries repeat export bans they put in place during the 2007-08 price spike, increasing imports will be even more costly.

Agriculture contributes to climate change

Agriculture accounts for 14% of global greenhouse gas (GHG) emissions. This rises to around 30% when land clearance for farming and production of agrichemicals are included. Around 80% of total emissions from agriculture, including deforestation, are from developing countries.

The aggregate emissions from agriculture are increasing as supply increases. The emissions intensity of production (i.e. the amount of GHG emissions per unit of food produced) is also increasing due to increased demand for meat, particularly from developing countries. Beef production, for example, emits 13 times more GHG emissions than vegetable proteins (e.g. lentils or tofu). Reducing meat demand would be most effective in reducing emissions in agriculture. However, farm lobbies have resisted ‘methane taxes’ on livestock. Meat exporting countries that are subject to climate regulations are also concerned with losing competitive advantage to countries that are not applying taxes.

In principle, there is a high technical potential to reduce emissions in agriculture by improving cropping practices and storing carbon in the soil. However, designing policies to provide farmers with incentives to improve these practices is a far more complex task than to regulate industries where polluters are relatively easy to monitor. The main stumbling block in designing policies for climate mitigation in agriculture is to monitor, report and verify (MRV) emissions reductions, something that can be difficult in countries with millions of smallholder farmers as well as weak regulatory authorities. Partly due to the MRV problem, agriculture is not included in any existing agreements to reduce emissions (like the soon-to-expire Kyoto Protocol). There is little financing for mitigation projects in agriculture – the Clean Development Mechanism for example has only 1% of its portfolio related to agriculture. Voluntary carbon credit markets for agriculture remain limited.

The role of trade in mitigation

A priori, it is not always possible to say if the export of food has a positive or negative environmental impact. In terms of scale, as trade increases, so do emissions – the extent of which will depend largely on the mode of transport. For example, seafreight is considerably lower in emissions than airfreight.

Many Western consumers accept the concept of ‘food miles’ yet the empirical evidence shows that trade enables the flow of food produced with low energy inputs (in warm regions) to where they would otherwise involve high energy (in colder regions). Where concerns still remain about emissions from transport, these are best addressed through the inclusion of airfreight and shipping in international pricing of carbon rather than blocking trade.

Developed country retailers are requiring exporters to measure the carbon footprint over the life cycle of food products. However, methodologies are not harmonized, making market access more costly for exporters and confusing for consumers. The cost-effectiveness of driving emissions reductions through measurement and labelling is unproven. Similarly, carbon tariffs in discussion face political challenges, but also the administrative challenge of how to calculate a tariff on millions of different imported products.

Other trade measures have clearer negative environmental outcomes. The export of biofuels from the tropics is restricted by import tariffs. As cane-based ethanol (from the tropics) has superior energy and emissions performance than that produced from corn, liberalization of its trade would result in a more efficient supply globally and improve the energy balance of biofuels (i.e. lower emissions resulting from their production). As with the consequences of export bans, this measure highlights the need for a disciplined trade framework (for example on unfair tariffs and subsidies) so as to build greater confidence in the trading system. Concluding the WTO Doha Development Round is important in this respect.

Trade measures operating in isolation appear, at best, as blunt instruments to address climate change and could worsen food security and even increase net emissions. Concerted efforts to liberalize trade within a disciplined framework would not only help reduce agricultural product emissions but also improve food security by smoothing out regional disparities in access to food.


Note: ITC will publish an Exporter Guide on Product Carbon Footprinting in late 2011.