As we approach a critical phase in the negotiations regarding climate change, and continue to grope for a way forward in the Doha Round negotiations, it seems to me to be worth emphasizing the multi-faceted linkages between a liberalized trade regime and climate change. Some of these linkages have received fairly extensive attention. For example, it is widely recognized that trade barriers to movement of low-carbon technology need to be kept low, and this is being addressed (although some might think inadequately) under the rubric “trade in environmental services” in the Doha Round negotiations. But other connections have received, IMHO, a level of attention that grossly undervalues their potential to contribute to objectives on either the trade side or the climate change side, or both. This is especially true in the realm of agriculture.
Consider the state of play in the agricultural negotiations. One major sticking point for developing countries is the huge volume of subsidies given to farmers in the high-income economies. In the EU and Japan, much of this support is given in the form of high barriers against imports; in the US in the form of budgetary support through various farm programs. Over time, more of this budgetary support has been provided in a “de-coupled” form, that is, through mechanisms such that a farmer’s level of payments does not depend directly on his/ her production or price. Decoupled payments are clearly less trade distorting than are “coupled” payments, and so they are classified as “Green Box” in the WTO’s system. Yet developing countries rightfully argue that even if these payments do not encourage trade-distorting production of specific crops, their nature and their huge volume keep a lot of farmers in business who otherwise could not compete in the global market with a level playing field. Therefore, they have a significant effect on the aggregate agricultural production of rich countries. So, developing countries refuse to commit to the kinds of market-opening policies that rich country politicians say they need in order to make progress in the negotiations. In the rich countries, agricultural constituencies are strong, and while a lot of progress has been made in changing the support mechanisms, significant reduction of the aggregate level is politically very tough.
So, what does this have to do with climate change? It is widely hoped (expected?) that rich countries will soon agree to adopt binding goals to reduce their GHG emissions. There are a number of ways to reduce aggregate emissions through changes in agricultural practices. Reforesting land to sequester carbon, changing cultivation practices to reduce carbon and nitrogen emissions from soil, and changing livestock raising practices to reduce methane generation are among the general categories of practices through which farmers could contribute to these efforts. But under current technologies and with no value ascribed to the social good of reduced GHGs, the economic incentives just aren’t there. However, if rich country governments could devote part of the budgets of their huge farm programs to subsidizing practices that have value in mitigating climate change, it could be win-win-win. Since these low-carbon subsidies would not increase production – and some would clearly reduce it – developing country farmers should not resent them. So, farmers would keep making money, reduction of trade distorting subsidies would grease the skids in the Doha negotiations, and the emissions reductions would help meet the rich countries’ mitigation obligations.
A similar strategy is relevant for low- and middle- income countries that currently have farm support programs involving either budgetary payments or trade barriers. This kind of support could be phased out in favor of PES-type programs, financed through carbon markets. But many of these opportunities involve a large number of small sources of emissions, raising transactions and monitoring costs to prohibitively high levels for the CDM. This is one reason why it is critical that the carbon market mechanisms move beyond the individual project based approach to incorporate programmatic and policy-based mechanisms. Other obstacles to realizing mitigation opportunities in the agricultural sector include issues of permanence of GHG reductions (particularly for carbon sinks), slow response of natural systems and varying time profile of emissions.
But if these obstacles can be overcome, the potential reductions are not trivial.1 The global technical mitigation potential from agriculture by 2030 has been estimated at around 5,500-6,000 million t CO2 eq. per year for all greenhouse gases. About 70 percent of this potential reflects mitigation opportunities in developing countries, and a further 10 percent in countries with economies in transition, with particularly high mitigation potential in the South America, China, and parts of South Asia. But North America and Western Europe also have significant potential. The mitigation opportunities fall into three broad categories: (i) reducing emissions through better management of fluxes of carbon dioxide, methane, nitrogen dioxide and other greenhouse gas emissions through agronomy and improved livestock management; (ii) removing emissions through enhancing carbon storage in soils or vegetative cover through such measures as conservation tillage and restoration of degraded lands; and (iii) displacing emissions through bioenergy feedstocks and the avoided cultivation of new lands under forest and other vegetative cover. It appears that the full technical potential would only be realized with exceptionally high prices for CO2-equivalents. But it is estimated that lower prices of 0-20, 0-50, and 0-100 US$ per ton of CO2-eq. could deliver 35, 43 and 56 percent of agriculture’s total mitigation potential by 2030. Even the lower figure would be a significant contribution.
In future blogs, I’d like to discuss some other linkages among agricultural trade, global warming, and development.
1 Much of the following discussion relies on “Climate Change Mitigation in LAC: No Regrets and Beyond” by Todd Johnson and Irina Klytchnikova, chapter 6 in Low Carbon Development: Latin American Responses to Climate Change, Augusto de la Torre, Pablo Fajnzylber, and John Nash eds., World Bank Latin American and Caribbean Studies, in press. This in turn draws on several articles by Pete Smith and a host of co-authors. These include “Greenhouse Gas Mitigation in Agriculture”, in Philosophical Transactions of the Royal Society B 363 (2008): 789-813 (downloadable from rstb.royalsocietypublishing.org), and “Policy and Technological Constraints to Implementation of Greenhouse Gas Mitigation Options in Agriculture”, in Agriculture, Ecosystems and Environment 118 (2007): 6-28, downloadable at sciencedirect.com.