Organisation for Economic Cooperation & Development Agriculture and sustainable development in OECD countries: a policy perspective Wilfrid Legg Trade and Agriculture Directorate Integrated Assessment of Agriculture and Sustainable Development Conference, Egmond aan Zee, The Netherlands, March, 2009

OECD Trade & Agriculture Directorate 2 Context

OECD Trade & Agriculture Directorate 3 The Organisation for Economic Cooperation and Development is an inter-governmental organisation financed by its 30 member countries with increasing outreach to other countries Aim is to foster global economic growth, sustainable development and prosperity and act as a hub for globalisation Addresses common policy issues through dialogue among countries, based on analysis and comparative statistics The OECD

OECD Trade & Agriculture Directorate 4 Policy AnalysisPolicy DialoguePolicy Advice OECD work on sustainable agriculture Provides economic analysis and policy advice on the linkages between agriculture and the environment to help governments design and implement effective and efficient domestic and international policies that can contribute to sustainability

OECD Trade & Agriculture Directorate 5 Security or sustainability? Security issues are high on policy agendas:  economic  food  energy  environment Security and sustainability are closely linked and challenge societies to “live within their means” Both involve trade offs and synergies

OECD Trade & Agriculture Directorate 6 Sustainable development and agriculture  1987 Brundtland report on sustainable development set the benchmark  Sustainable development encourages us to think about the linkages between the economic, environmental and social dimensions in various institutional settings  Sustainable agriculture can be viewed at different levels: spatial (farm, country, global), temporal (time horizon) and sectoral (agriculture, agri-food)

OECD Trade & Agriculture Directorate 7 Agri-environmental overview  Agriculture is the largest user of land and water in most OECD countries and has a major impact on biodiversity and landscape  Agriculture generates multiple positive and negative impacts on the environment resulting from polices and other driving forces  Many environmental impacts are either externalities or public goods where markets are absent or poorly functioning  Agri-environmental issues have risen up policy agendas in OECD countries and not only direct agri-environmental policy measures but also agriculture and environment policies matter

OECD Trade & Agriculture Directorate 8 Looking at what’s happened

OECD Trade & Agriculture Directorate 9 Support to farmers (Producer Support Estimates as a percent of gross farm receipts) EU USA China OECD Brazil Australia

OECD Trade & Agriculture Directorate 10 Trends in farm support in OECD Countries Composition of Producer Support Estimate (% share in PSE)

OECD Trade & Agriculture Directorate 11 Changes in ways of delivering producer support EUOECD USA

OECD Trade & Agriculture Directorate 12 Environmental Performance of Agriculture Land used for agriculture and soil loss decreased, but agricultural water and energy use increased Reduction in nutrient surpluses in some countries, but high concentration and water quality is a problem Less pesticide application, but risks are unclear Slow-down in decrease in biodiversity? Some reduction in greenhouse gas emissions Agricultural productivity (yields) has increased

OECD Trade & Agriculture Directorate 13

OECD Trade & Agriculture Directorate 14 A range of policy measures in OECD countries Targets or thresholds for pesticides, water quality, ammonia and greenhouse gas emissions Regulations intended to meet targets are widely used Payments include cost-sharing to meet regulations, compensation for income lost by adopting specific practices, and rewarding farmers for extra environmental services Cross-compliance important in EU, Switzerland, US Use of taxes and charges is very limited Market-based approaches, such as tradable permits, and voluntary, co-operative efforts limited but growing

OECD Trade & Agriculture Directorate 15 But which policy measures are best? Agri-environmental indicators, inventory of agri-environmental policies and classification of policy measures in the PSE data base provide essential data Analysing the effect of different agricultural and agri- environment policy measures on environmental outcomes using the Stylised Agri-environment Policy Impact Model (SAPIM) is nearing completion… …as are guidelines for cost-effective agri-environmental policies Thematic studies on water and climate change and agriculture will add further insights

OECD Trade & Agriculture Directorate 16 Looking forward

OECD Trade & Agriculture Directorate 17 Price hikes in caused byPrice hikes in caused by –Macroeconomic factors –Poor harvests –Biofuels –Policy responses –Expectations, speculation, panic? Price hikes are not newPrice hikes are not new Prices projected above trendPrices projected above trend –Demand in China and India –Real prices lower than peaks –Depends on policy assumptions Markets: developments and projections

OECD Trade & Agriculture Directorate 18 By 2030 global food demand projected to rise by 50% Land for agriculture (currently 40% of total) will have to increase by 10% - not including bioenergy Yields (output/land) will need to grow by 40% Global emissions of greenhouse gases will rise by 2% due to land use changes Greater pressure on water (agriculture uses 70% of global supplies) and energy - and farming will have to adjust to climate chan ge Sustainable agriculture outlook

OECD Trade & Agriculture Directorate 19 Is the concern for food and energy security and climate change an opportunity or an impediment to environmentally and socially sustainable agriculture? Are current biofuels policies detrimental to the long- term sustainability of agriculture? Which structure of incentives and institutions will best ensure global food security, provision of global public goods from agriculture, and tackle climate change? Topical questions

OECD Trade & Agriculture Directorate 20 Drawing conclusions for policy

OECD Trade & Agriculture Directorate 21 OECD policy reform scorecard Progress in decoupling support from production – narrowing of domestic-world commodity price gaps Farmers have more flexibility in what to produce in order to be eligible for support… …but more regulations to meet environment, animal welfare and food safety concerns …and though targeted agri-environmental measures account for only a small share of farm support, this is not the complete indicator of policy priority

OECD Trade & Agriculture Directorate 22 Some results from OECD work  Mixed agri-environmental performance and policy measures  Costs of delivering agri-environmental improvements would be lower with reductions in commodity-linked support but higher if agricultural commodity prices rise in the future  Cost-effective policy mixes to achieve sustainable agriculture will vary by country  Property rights and reference levels (defining who pays or is paid for environmental outcomes not captured by markets) are often poorly established or implemented  Linking economics - science – policy is crucial (for example through the OECD Co-operative Research Project)

OECD Trade & Agriculture Directorate 23 Markets and sustainable agriculture  Markets do not always function efficiently in providing food, fibre and societal needs – policy distortions, externalities, public goods issues  Markets do not necessarily deliver the distribution of food and other goods that society desires  Incomplete information, poor property rights and uncertainty can mean markets give weak signals for the allocation of resources to meet future needs  Markets and trade crucial to ensure efficient provision of commodities, but need to be complemented by policies to provide public goods

OECD Trade & Agriculture Directorate 24  Sustainable agriculture requires actions by private and public sectors - and much diverse expertise:  productivity – harnessing science, technology, structures, and supply chain links  practices – taking environmental outcomes and resource pressures into account  prices – providing the right signals to farmers  policies – coherent approach to complement markets at domestic, regional and global levels Major challenge

OECD Trade & Agriculture Directorate 25 “We can only assess sustainability after the fact – it is a prediction problem more than a definition problem” (Heuting and Reijinders) A final thought

OECD Trade & Agriculture Directorate 26 Trade and Agriculture Directorate The views expressed in this presentation do not necessarily reflect those of the OECD or its Member countries Visit our website – Sustainable Agriculture link: Contact: Agriculture and the Environment

OECD Trade & Agriculture Directorate 27 Reference levels and environmental targets