Rethinking ‘Agriculture, Forestry and Other Land Use’ Incentives – by Danial Sturge

Published: 23 January 2019

Dr Danial Sturge, policy advisor at Energy Systems Catapult, explores the agriculture, forestry and other land use (AFOLU) sector and policies to incentivise lower emissions, following the publication of a new report as part of Energy Systems Catapult’s Rethinking Decarbonisation Incentives project.

Only a few days into 2019, the President of the National Farmers Union (NFU), Minette Batters, called for the agriculture sector to become carbon neutral across greenhouse gas (GHG) inventories by 2040.[1]

This is an ambitious call to action in a sector where GHG emissions represent 10% of the UK’s emissions and have risen slightly since 2010, while overall UK emissions have declined.[2] As we decarbonise electricity and other energy uses, then emissions from agriculture, forestry and other land use (AFOLU) are likely to grow in relative importance.

This makes AFOLU emissions key to reaching Net Zero, as currently being explored by the Committee on Climate Change.[3] However, AFOLU sectors are seldom covered by policies to incentivise lower emissions – so, what would be required to meet the 2040 deadline?

As part of Energy Systems Catapult’s ‘Rethinking Decarbonisation Incentives’ (RDI), co-funded by the Energy Technologies Institute, we are considering this difficult question. We began by developing five stylised policy options to improve decarbonisation incentives across the whole economy, drawing on a series of 11 international case studies of good (and less good) policies.

We then explored the specific policy issues around cutting emissions in the AFOLU sectors, commissioning experts from the Institute for European Environmental Policy (IEEP).

Options to Cut Emissions

In our report, we summarise the potential options to cut emissions from the AFOLU sectors. These vary across arable and livestock farming, sequestrating carbon in the soil or in forests, or considering bioenergy and consumption implications. The report lists all the current options available, but how do we incentivise farmers to employ them and to innovate?

Policy Options

When we exit the European Union, we will also be leaving the Common Agriculture Policy (CAP). CAP has its flaws – it does not promote productive land use, it fails to reward the delivery of key public goods, and it has been poor value for taxpayers. Leaving CAP offers an opportunity to restructure incentives and introduce carbon policy to the AFOLU sectors.

Economic theory suggests an economy-wide carbon tax on emissions, but this is incredibly challenging politically. Measuring, reporting and verification (MRV) of emissions is a significant barrier to including AFOLU activities in the existing Emissions Trading System (ETS). Producing tradeable credits would provide a strong incentive signal and allow a link with the rest of the economy, but if targeted poorly it could risk unwanted impacts, for example, on biodiversity. Voluntary measures have been tried, tested, and failed to deliver targets.

This leaves us with regulation and farm support payments (i.e. payments to farmers/landowners to adopt practices that yield greenhouse gas benefits). As described below, a combination of the two along with improved emissions monitoring and allowing other sectors to contribute to the budget appears a promising approach.