Day2_Theme4_Martien van Nieuwkoop
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The document discusses the public sector's role in financing climate-smart agriculture. It notes that total public support to agriculture is over $570 billion per year, equivalent to 28% of the agriculture sector's value added. However, some forms of support like coupled subsidies and price support can distort markets and encourage overuse of resources. The document advocates realigning public support to incentivize adoption of climate-smart agriculture options. It provides an example of a $300 million program in Pakistan aimed at market reforms, public investments, and incentives to support agricultural growth, resilience and inclusiveness through climate-smart approaches. The document concludes that sustained political will, reoriented public support, and empowering farmers are key to mobilizing more
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Day2_Theme4_Martien van Nieuwkoop
- 1. The Public Sector’s Role in Financing The Climate Smart Agriculture Transformation Martien van Nieuwkoop Global Director Agriculture & Food, The World Bank October 10th, 2019
- 2. The Global Food Systems’ Cost-benefit Ratio and Return on Public Investment Value added: US$ 8 trillion Costs: US$ 6 trillion Public Support to Producers: >US$ 600 billion
- 3. Total: US$ 570 billion per year Equivalent to 28% of Agriculture Sector Value Added Public Finance: Aligning Incentives for Adoption of CSA Options Production Payments 22% Input Subsidies 10%Public Goods 16% Market Price Support 52% Environmental Purposes 1% Two forms of public support have the most distortive potential: • Coupled subsidies (i.e., tied to inputs or outputs): fertilizer subsidies, in particular have contributed to the overuse of nitrogen fertilizer globally resulting in high GHG emissions and other environmental problems; • Price support, which encourages over- production of certain commodities and inefficient use of limited natural resources, and in some notable cases encourage land use conversion Public Support to Agriculture by Category (2015-17)
- 4. Framework for Agriculture and Rural Transformation The SMART Program For Results (P4R) of US$ 300 Million in Punjab/Pakistan • Region plays key role in agriculture, relies on increasingly scarce groundwater resources • Despite being supported by very high levels of price support, agricultural growth has been minimal in recent years and at times even negative. • Th P4R finances a package of policy reforms, investments and institutional strengthening to support growth, resilience and inclusiveness. Smart Market Reforms Wheat market reform Irrigation reform: Governance and pricing Agriculture and livestock markets and price policies Agriculture inputs and finance: Fertilizer, seed, vaccine and semen production, etc. Smart Public Investments and Incentives Technology and infrastructure (e.g. drip irrigation, silos) for High-Value Agriculture (HVA) Re-focusing of agricultural innovation Competitive agriculture research grants Support to agribusiness (value adding) Skills development Crop insurance Climate-smart agriculture Smart subsidies for fertilizer, seed, finance, drip irrigation, laser land leveling, switching to oil seed crops etc. Program design Supported by PKR 52 bn / year re-directed towards
- 5. What Will it Take from Governments to Get Finance to Flow?? Sustain Political Will Reorient Public Support • Build on global momentum at UNCAS: Just Rural Transition, Policy Action Coalition, Global Commission on Adaptation etc. • Translate momentum to national level in context of NDCs – and support them to reflect global findings in update process • Aim for a decision of the UNFCCCs Koronivia Joint Work Program on Agriculture (KJWA) where governments recognize their responsibilities • Improve investment environment by eliminating distortions and refocusing public support to incentivize climate action • Develop the necessary metrics to capture positive and negative externalities Put Farmers in Driving Seat • Farmers are CSA’s principal agents of change • The international farmer community is increasingly engaging on climate change – eg. WFO’s Climakers campaign • Farmers play key role in Nature Based Solutions agenda – and need to be rewarded for the co-benefits of their stewardship of the land
- 6. Thank you Martien van Nieuwkoop, Director, Agriculture GP MvanNieuwkoop@worldbank.org
Editor's Notes
- The Good News: Steady progress in production growth (approx. 2.3% p.a. total and 0.6% p.a. per capita.) Real price decreases over the past 50 years Chronic hunger cut by 20% since 1990-92 The Bad News: 2 billion people undernourished and malnourished 2 billion people overweight/obese 70% use of freshwater resources 1/3 of earth’s soils have been degraded 1/3 of global agricultural production lost or wasted 25% of global GHG emissions (inclusive of land use changes)
- The first is redirecting public support to Agriculture Support for Public Goods: About $90 billion) and Only 1 % ($4 billion) specifically for environmental benefits (conservation, land retirement, etc.). Input subsidies lead to technical inefficiencies, e.g. overuse of fertilizers causing nitrous oxide emissions and groundwater pollution Production payments could encourage land expansion, resulting in GHG emissions that could have been avoided Market price support lead to allocative inefficiencies; compounding vulnerabilities to climate change
- Package provides for triple-win benefits, this is not only about better environment or climate outcomes. Political economy: package of reforms; each individual reform has winners and losers, overall results can cancel winners and losers. Mitigation benefits associated with the package could provide sound rationale for climate financing, e.g. allowing GCF to go at scale.
- Secondly, a lot of potential lies in the scale-up of public-private partnerships. At WB we do this under the heading of “Maximizing Finance for Development”