The R&D cost of climate mitigation in agriculture

Abstract

Agriculture is responsible for 20%–25% of global emissions of greenhouse gases (GHG), which result from production practices and land use conversion. Supply‐side approaches for reducing emissions from agriculture rely on emissions‐saving technological change and environmental protection of carbon‐rich areas. This study investigates how productivity policies, in the form of higher agricultural research and development (R&D) spending, might affect GHG emissions from agriculture, and compares this to environmental policies that restrict agricultural land use or production practices that may cause environmental harm. Using simulations from a global economic model, we project outcomes in 2050 from a set of policy scenarios involving R&D and environmental policies, and combinations of the two. Outcomes of interest are net global GHG emissions, land use, agricultural production, food prices, the prevalence of food insecurity, and policy cost. We find that at the global level, more R&D spending to accelerate productivity growth reduces GHG emissions from land use change, but not as effectively as targeted environmental policies. However, accelerated productivity growth reduces the emissions intensity of agricultural production and, by lowering land rents, also reduces the cost of the environmental policy. Moreover, higher levels of productivity lower agricultural GHG emissions permanently, and by lowering global food prices, generally improve global food security. A policy scenario that is patterned after the EU Green Deal finds that policies that restrict agricultural factor inputs in order to reduce local environmental costs may, at the global level, increase agricultural GHG emissions and worsen food insecurity. These consequences could be avoided with higher EU R&D spending to accelerate agricultural productivity growth that is either factor neutral or biased toward saving production factors associated with negative environmental externalities.

World agricultural baseline scenarios through 2050

“…Fuglie et al (2022) highlight the connection between agricultural productivity growth, the cost of environmental policy, and global food security. Accelerated productivity growth reduces the emissions intensity of agricultural production and lowers food prices relative to baseline scenarios.…”

Market impacts of Farm to Fork: Reducing agricultural input usage

“…In addition, the European Regional Development Fund will invest, through smart specialization, in innovation and collaboration along the food value chains.” Productivity growth is largely achieved through technical change (e.g., adoption of modern inputs driven by R&D) and technical efficiency (i.e., managerial skill from knowledge and experience) (Wang, 2021). Changes in production scale and scope are also a driver of productivity growth (Fuglie et al, 2021).…”

Food security implications for low‐ and middle‐income countries under agricultural input reduction: The case of the European Union's farm to fork and biodiversity strategies

“…In agriculture, striking a balance between utilization of productive farm inputs and GHG mitigation is a major challenge for the 21st century (Fuglie et al, 2022; Wang, 2022). In this balance lies the important aim of improving global food security, maintaining the hard‐won trends of improvement, and fostering resilience in the most vulnerable low‐income regions of the world.…”