greening agricultural policies in oecd countries:what role ... · greening agricultural policies in...

Greening Agricultural Policies in Ttitre OECD Countries:

What Role for Cross Compliance?What Role for Cross Compliance?

Dimitris DiakosavvasOECD Trade and Agriculture DirectorateOECD Trade and Agriculture Directorate

PRIMAFF Seminar, Tokyo, 22 November 2011

OECD: Membership is evolving… OECD: Membership is evolving…

OECD is currently in Accession talks with one country and in Enhanced Engagement partnership with five othersin Enhanced Engagement partnership with five others.

Accession candidate

Members

Australia Hungary Norway Accession candidateRussia

g y y

Austria Iceland Poland

Belgium Ireland Portugal

Enhanced Engagement partnersBrazilChi

Canada Israel Slovak Republic

Chile Italy Slovenia

ChinaIndiaIndonesiaS th Af i

Czech Republic Japan Spain

Denmark Korea Sweden

Estonia Luxembourg Switzerland South AfricaEstonia Luxembourg Switzerland

Finland Mexico Turkey

France Netherlands United Kingdom

Germany New Zealand United States

Greece (Newest members)

OECD Trade and Agriculture Directorate 2

The Commission of the European Union also participates in OECD work

Outline of presentationOutline of presentation

• Context• Context– Greening agricultural policies

Need for green growth– Need for green growth

• Green growth and agricultureg g– Linkages– Policy dimensiony

• Role of cross compliance– Concept– Evidence

I– Issues

• Conclusions


Conclusions

ContextContext


Greening agricultural policies Greening agricultural policies g g pg g p

UNEP : Towards A Green Economy

FAO G i th E ith A i lt (GEA)FAO: Greening the Economy with Agriculture (GEA)

OECD: Green GrowthOECD: Green Growth


What is green growth? What is green growth? g gg g

G h i h i f i hGreen growth is the pursuit of economic growth

and development while preventingand development, while preventing

environmental degradation, biodiversity loss and

unsustainable natural resource use.


What is green growth? What is green growth? g gg g

Key characteristics:

No necessary conflict between growth and

environment in the long runenvironment in the long run

Focus on fostering innovation, investment and g

competition that can give rise to new sources of

economic growth

Coherence of policies Coherence of policies

Tool to achieve sustainable development


p

OECD Green Growth Strategygy

• Requested by OECD Ministers in 2009Requested by OECD Ministers in 2009

• Multi‐disciplinary inter‐governmental process,Multi disciplinary inter governmental process, involving 25 OECD Committees

• Delivered at the 2011 OECD Ministerial :

S th i R t T d G G th• Synthesis Report: Towards Green Growth

• Toolkit: Tools for Delivering on green growth

• Indicators Report: Towards Green Growth: Measuring Progress – OECD IndicatorsMeasuring Progress – OECD Indicators

• Green growth is mainstreamed in OECD


g

Why Green Growth? Why Green Growth?

1 h d f G h1.The need for Growth ….

current sources of economic growth are placing current sources of economic growth are placing unsustainable pressures on the natural resource base economic and social burdens high costsbase economic and social burdens high costs of inaction

2.and it needs to be Green

opportunity of the crisis to replace stranded capital with cleaner alternatives (e.g. green stimuluswith cleaner alternatives (e.g. green stimulus packages) industry, jobs and skills restructuring


The need for green The need for green –– future challengesfuture challenges

2050

World GDP (2005, PPP)USD 300 trillion

2030

USD 150 trillion

Food + 35%

Energy + 37%2010USD 70 trillion

gy

Resources + 70%

1990

Source: OECD


Source: OECD

Risks in not going green: Risks in not going green: shocks to food supplyshocks to food supplyshocks to food supplyshocks to food supply

Biodiversity loss(2000‐2030)

Pressures on natural capital

By 2030, business as usual:

loss to agricultureloss to infrastructureloss to other causes

(2000 2030)

Production +35%

y ,

RoW

Land +9%

Land at risk of erosion BRICLand at risk of erosion + 17%

Water scarcity +30%OECD

Water scarcity +30%

‐10.0‐8.0‐6.0‐4.0‐2.00.0

% mean species abundance lossSource: OECD


Risks in not going green: water scarcityRisks in not going green: water scarcity

Living with risk of water scarcity (millions of people under water stress)

8000

(millions of people under water stress)

6000

7000 Severe MediumSevere: +986 million

4000

5000 Low or No Total severe = 3.9 billion

2000

3000

Severe: +87 million

0

1000

OECD 2005 OECD 2030 N OECD 2005 N OECD 2030OECD 2005 OECD 2030 Non‐OECD 2005 Non‐OECD 2030

Source: OECD


Business as usual is not an optionBusiness as usual is not an option

0%

OECD Trade and Agriculture Directorate 13-50% -15%

0%+35%+15%2080

… Agricultural challenges … Agricultural challenges

d i• Food security

• Changing pattern of demand driven by increased income

• The growing pressure from bio‐fuelsg g p

• Increasing vulnerability of agriculture to climate g y gchange

• Pre‐harvest and post‐harvest losses


Green growth and agricultureGreen growth and agriculture


Green growth and agricultureGreen growth and agriculture

G th i i lt t• Green growth in agriculture sector means :

providing enough food, feed, fibre and fuel for 9p g g , ,billion people in 2050…

i th t t f t l d t …in the context of greater pressure on land, water,fish stocks and biodiversity resources ‐ and theimpact of climate change…

and the need to limit the harmful and enhance …and the need to limit the harmful and enhancethe beneficial environmental impacts and reduce

t i th f d l h iwaste in the food supply chain


Agriculture and green growthAgriculture and green growth

• Agriculture has a role to play in contributing to thgreen growth

But the relationship between agriculture and• But the relationship between agriculture and green growth is complex

• The context is critical – time dimension

And a lot of green is not priced…


Agriculture green growth: Agriculture green growth: policy dimensionpolicy dimensiong g gg g g p yp y

Policies that mutually reinforce green and growthPolicies that mutually reinforce green and growth

• Policies to encourage R&D and innovation• Measures targeted to economic adaptation of farmers and

farm households (e.g. training)O d d i• Openness to trade and investment

Policies specifically aimed at greening growthp y g g g

• Market‐based instruments

– Agri‐environmental payments, environmental taxes, etc.

• Non‐market instruments

– Regulation, voluntary agreements, technical assistance


Agriculture and green growth: Agriculture and green growth: policy effectspolicy effects

FIRST STAGEFIRST STAGE

FARMERS’ PRODUCTION DECISIONS

TECHNOLOGICAL DEVELOPMENT

OUTPUT QUANTITIES

INPUT INTENSITY

OUTPUT MIX

CROPPEDAREAQ MIX

SECOND STAGE

ENVIRONMENTAL OUTCOMES


ENVIRONMENTAL OUTCOMES

AgriAgri‐‐environmental policyenvironmental policy

•….. and linking economic and ecologicald l i bi h llmodels is a big challenge:

aggregation,

site specificity,

choice of indicator, etc.


Agricultural R&D and productivity: Agricultural R&D and productivity: EvidenceEvidenceg p yg p y

• Shifting patterns of public support for R&Dand productivity in high‐income countries:

Slowdown in spending growth

P d ti it l dProductivity slowdown


Agricultural total factor productivity growthAgricultural total factor productivity growth


Source: Fuglie, K. (2010), Total Factor Productivity in the Global Agricultural Economy: Evidence from FAO Data

Agricultural policies : Agricultural policies : EvidenceEvidenceg pg p

• Agricultural policy in OECD countries has been changing – but still a protected sectorsector.

Some red ction in s pport and shift• Some reduction in support and shift towards public goods (e.g.towards public goods (e.g. environment) and other objectives (e.g.rural development).


Farm support: Producer Support Estimates Farm support: Producer Support Estimates

%PSE

60

70

Japan

% PSE

50

p

30

40EU

OECD

10

20 United States

China

OECD

Australia B il

0

10

6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9

ChinaAustralia Brazil

198

198

198

198

199

199

199

199

199

199

199

199

199

199

200

200

200

200

200

200

200

200

200

200


Farm support with input constraintsFarm support with input constraints


Ranking agricultural support to farmers Ranking agricultural support to farmers by potential environmental impactby potential environmental impactby potential environmental impactby potential environmental impact

Most harmful Intermediate Most beneficial

90

100

70

80

50

60(%)

20

30

40

0

10

20

0

1986‐88 2008‐10 1986‐88 2008‐10

EU US


Evolution of AEPs and Evolution of AEPs and PSEs PSEs ‐‐ EUEU


Evolution of AEPs and Evolution of AEPs and PSEs PSEs ‐‐ USUS

200 1996 = 100

180

190

160

170

150

160 AEP PSE

130

140

120

130

100

110


1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

R l f C C li (CC)Role of Cross Compliance (CC)


Cross compliance: Concept

• Receipt of payment depends on compliance with• Receipt of payment depends on compliance with environmental requirements.

• US was the first to implement CC (1985).

• Switzerland introduced CC in 1999 as part of the Agricultural Policy Reform Programme 1999 2003Agricultural Policy Reform Programme 1999‐2003.

I h EU CC b l i h h 2003 CAP• In the EU, CC became compulsory with the 2003 CAP reform.

• Japan (2007), Norway and Korea.


Producer support subject to CC,Producer support subject to CC, 20082008‐‐1010

45

35

40

30

35

20

25

(%)

15

20

5

10

0

5


EU US Switzerland Japan

… but c… but crossross‐‐compliance approaches differcompliance approaches differp ppp pp

• The scope, coverage, method of control, it i d lti i d lmonitoring and penalties imposed also

differ.differ.

In the EU CC req irements align pre e isting• In the EU CC requirements align pre‐existing environmental legislation, while inenvironmental legislation, while in Switzerland and the US they go beyond legislation.


PEP and other

Cross compliance in SwitzerlandCross compliance in Switzerlandenvironmental and animal welfare requirementsrequirements

Cross compliance

Other environmental requirements

Proof of Ecological Performance (PEP)

Environmental Law

Legal requirements

General direct payments

Oilseed cultivation

Investment credits

Concessionary aid

Environmental and animal welfare

Summer pasturing

payments


Cross compliance Cross compliance –– EU evidenceEU evidence

• CC has expanded the area of land subject tobasic requirements and have been morebasic requirements and have been moreconcrete and specific than reliance on “usualGood Practice”.

• Awareness of environmental requirements hasi d d b t d d thincreased and some members extended thebaseline of environmental standards.


Cross compliance Cross compliance –– EU evidenceEU evidence

• …. but CC not very popular neither with

f i i i hil i lfarming organisations, while environmental

organisations argued that the potential of CCorganisations argued that the potential of CC

mechanism to deliver environmental benefits

h b dhas not been maximised.


Cross compliance Cross compliance –– EU evidence EU evidence

f ( )• European Court of Auditors (2008):

• Objectives are not SMART• Objectives are not SMART.

• Certain issues (irrigation, air pollution) havebeen excluded from without justification.

The distinction bet een CC and agri• The distinction between CC and agri‐environmental measures is not always clear.

• Control and sanction systems are weak

• Data for monitoring often unreliable.


Cross compliance Cross compliance –– US evidenceUS evidence

• CC has reduced soil erosion, but only accounts for 25% of the total observed change.

• CC not effective in addressing some• CC not effective in addressing some environmental issues (nutrient management) because of incomplete coverage.

ff f d bl l h• Cost effectiveness of CC considerably less than targeted agri‐environmental programmes.targeted agri environmental programmes.


Cross compliance Cross compliance –– Swiss evidenceSwiss evidence

• Environmental performance has improved, butEnvironmental performance has improved, but not clear how much is due to CC.

• Transaction costs are lower for CC measures than agri environmental measuresthan agri‐environmental measures.

• In 2009, 43% of total farms inspected; 22% wereIn 2009, 43% of total farms inspected; 22% were not in compliance; payment reductions of CHF 811 f i d Off dCHF 811 per farm imposed. Offences concerned mainly incorrectly maintained records and y ynon‐compliance with animal‐friendly practices.


Cross compliance Cross compliance –– issuesissues

• Limited effectiveness because basic eligibility• Limited effectiveness because basic eligibility and payment levels are determined by non‐

i l bj ienvironmental objectives.

• Lack of environmental targeting reduces cost‐• Lack of environmental targeting reduces cost‐effectiveness.

• When CC is built on statutory requirements that apply to all farmers, CC is redundant if thethat apply to all farmers, CC is redundant if the pre‐existing legislation is not breached.

• Monitoring challenge

• Reluctance to impose penalties


• Reluctance to impose penalties

Cross compliance Cross compliance –– issuesissues

•Medium‐term sustainability of environmentaleffectiveness depends on maintaining level ofeffectiveness depends on maintaining level ofdirect income payments.

• In a post‐reform situation where direct incomed ifi i l bj ipayments are targeted to specific social objectives

(minimum income, disaster relief, etc), the( , , ),challenge is to manage policy development so thatcurrent benefit of CC is not lost and reformcurrent benefit of CC is not lost and reformmomentum continues.


ConclusionsConclusions


Main messagesMain messagesgg

• Business as usual is not an option!

• Green growth is desirable and achievable

• Moving towards a greener growth model for agriculture is challenging will involve trade offs as wellagriculture is challenging, will involve trade‐offs as well as synergies and will vary across countries

• A green growth strategy for agriculture needs to:

focus on increasing productivity in s sustainable manner– focus on increasing productivity in s sustainable manner

– ensure that well‐functioning markets provide the right signals

– establish and enforce well defined property rights


establish and enforce well defined property rights

……BUT BUT

Th i i i ’ b• These priorities aren’t new – but governments need to move first to "price the environment" pand business then has an incentive to follow the signalssignals

• It’s often difficult to overcome obstacles toIt s often difficult to overcome obstacles to implementation and the challenge is to provide concrete implementable policy advice, measure progress, and learn from experiences acrossprogress, and learn from experiences across countries and businesses


OECD Follow WorkOECD Follow Work

M it i d l ti Monitoring and evaluating progress

Review country experiencesy p

You can’t manage what you don’t measure

The Way Forward: Identifying policy priorities and cost effective policy instrumentscost‐effective policy instruments


OECD Trade and Agriculture DirectorateOECD Trade and Agriculture Directorate

www.oecd.org/agriculture

E‐mail: [email protected]

Follow OECD Agriculture on Twitter: @OECDagriculture


Green Growth frameworkGreen Growth framework

B l d t t t

Enabling conditions Major environmental issues• Balanced tax structures

• R&D and innovation policy

• Competition

• Infrastructure investment

• Water scarcity

• Climate change

• Health impacts of pollution

• Biodiversity loss• Openness to trade and FDI

• Pricing of pollution and resource use

Key policy tools

y

• Skills and labour market adjustment

Promoting transition

Pricing of pollution and resource use

• Subsidy reform

•Regulatory and policy predictability

• Support to basic research and emerging

•Distributional and competitiveness concerns

• Science and technology cooperation

•Development assistance

M t f l b l bli dtechnologies

•Governance of natural assets

•Management of global public goods

Measurement agenda

•Productivity of resource use

•Physical evolution of the natural asset base

•Environmental quality of life

Measurement agenda

Environmental quality of life

•Opportunities arising from environmental considerations

• Evolution of policy and social responses

•Promoting efforts consistent with international standards


Directions for future workDirections for future work

Timeline Deliverables

2011 MCM Green Growth Strategy Synthesis Report Green Growth Indicators Report

Green growth monitoring work: green growth indicators, further green growth chapters in Economic Surveys and Environmental Performance ReviewsReviews

Green Growth Reports for Emerging Economies Report on Green Growth and Developing Countries A Green Growth Strategy for Food and Agriculture (preliminary report)

2011/2012

gy g (p y p ) Joint IEA/OECD Green Growth Study for Energy Monitoring green investment protectionism concerns Report on Green Innovation 2011/2012 Green Growth and Biodiversity Green Cities Programme Project on Green Financing Green Growth and Water Project on green financing Environmental regulations and growth G fi l


Green fiscal revenue Job potential of a shift towards a low-carbon economy

Framework for green growth indicators

Economic activities (production, consumption, trade)(p , p , )

Consumption

Households

Outputs InputsPolicies,

measures,

Production

HouseholdsGovernments

Investments

measures, opportunities

4

Recycling,re-use,

re-manufacturing, substitution

IncomeGoods& services

Residuals

LabourCapitalResources

TaxesSubsidies,

Regulations

Investments

Multi-factor productivity

Energy & raw materialst l d bi i

Pollutants t

InvestmentsInnovation

TradeEducation &

training

13

Amenities, health & f t t water, land, biomass, airwaste

2

The natural asset baseResource functions

Sink functions

& safety aspects

The socio-economic context and characteristics of growth1: Indicators monitoring environmental and resource productivity2: Indicators monitoring the natural asset base


2: Indicators monitoring the natural asset base3: Indicators monitoring the environmental quality of life4: indicators monitoring economic opportunities and policy responses

greening agricultural policies in oecd countries:what role ... · greening agricultural policies in...

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