New paper on market based and voluntary measures to reduce food system GHG emissions

Kasterine A and Vanzetti D (2011). The Effectiveness, Efficiency and Equity of Market-based and Voluntary Measures to Mitigate Greenhouse Gas Emissions from the Agri-food Sector, UNCTAD

Key points from the paper as follows:

• Agriculture accounts for 13% of global GHG emissions. This rises to approximately 30 per cent if land clearance for farming, agrochemical production and trade in agricultural and food products are attributed to the sector.
• Market based mechanisms (carbon tax, cap and trade, payment for environmental services) and voluntary mitigation measures (carbon labelling and food miles) are reviewed for their effectiveness (if they reduce emissions), efficiency (the costs of the measures) and equity (fairness to suppliers).
• Measures to reduce agricultural emissions are limited in their effectiveness and efficiency by the technical difficulty and high costs of measuring, reporting and verification. However, pricing carbon would be effective in internalizing negative externalities in the transport, processing, retail and consumer purchase and preparation of food.
• The GTAP model is used to illustrate that a US$40 carbon tax implemented in the EU would have little negative impact on developing country exporters of agricultural products due to their low carbon intensity.
• Carbon labelling and food miles initiatives are likely to be ineffective, inefficient and unfair to developing country exporters.

Pricing externalities effectively in transport, processing, retail and consumption is feasible, but it has only limited political support. The prospects for reducing emissions in the agricultural sector and its trade are therefore extremely dim, given the following key factors:

• The technical and political challenges in pricing externalities across the sector
• The growing population
• The growing demand for ruminant meat

The paper argues that the most effective, efficient and fair policy for climate change mitigation across the agri-food supply chain is through carbon pricing. Pricing carbon internalizes the environmental cost of production and removes an implicit subsidy for carbon use. Ending fossil fuel subsidies would also remove an explicit subsidy for carbon use, and represents “low hanging fruit” in terms of climate change mitigation.

Pricing carbon upstream would automatically internalize the costs of damage from GHG emissions across the agri-food supply chain, which would provide an incentive for emissions reducing behaviour and for the development of low-carbon technologies throughout the supply chain. Carbon pricing is limited in its effectiveness if it is not applied globally because of the risk of leakage.