Sustainable investments increase agricultural resilience and help achieve climate goals
The reform of the EU’s common agricultural policy (CAP) came into effect in January 2023. The main goal of its new design is to align CAP with the European Green Deal and the Farm to Fork Strategy to make food systems fairer, healthier and environmentally more sustainable.
Agriculture is a source of mostly non-carbon emissions, but that does not mean their impact is negligible. Just the opposite. Over the timespan of one century, methane and nitrous oxide, the two major agricultural greenhouse gases, have 27 and 273 times the warming potential compared to carbon dioxide. What is worse, their greenhouse effect is much more pronounced in the early years, as they decay in the atmosphere faster than carbon dioxide.
This and the ability to sequester carbon places agriculture among the top segments to focus on and invest in to achieve climate targets. However, the climate impact of agriculture seems to have received less attention than many other sectors (such as industries participating in the EU Emissions Trading System) in recent decades, which has resulted in less climate-related research, development and investment activities.
The Visegrad Group countries – Poland, Czechia, Hungary and Slovakia (V4) – have been no exception. Until recently, national policies addressed the agricultural sector’s climate impacts to a very limited extent. In Poland, for example, the National Energy and Climate Plan (NECP) for 2021-2030, prepared in 2019, anticipated a steady increase in methane and nitrous oxide emissions from agriculture until 2040. Similarly, the Czech national plan has assumed a slight increase in nitrous oxide emissions linked to agricultural activity.
The new CAP and the approved national strategic agricultural plans seem to bring first changes to otherwise calm waters. In the V4 region, this is all the more important, as agriculture belongs among the four most polluting segments in terms of greenhouse gas emissions. And with more than 1.8 million directly employed persons, it is the largest employer among the region’s high-emitting segments.
As discussed in the Sustainable Investment Roadmap (SIR) recently published by International Sustainable Finance Centre (ISFC), support for climate change mitigation should be directed towards both available and developing solutions. While precision farming technologies, machinery with alternative drives, anaerobic digesters for biogas production, direct fertilisation or nitrification inhibitors are available or becoming available, more research and innovation support is needed in other areas, such as enhanced fertilisers, sustainable feed additives or alternative proteins. Investment in research and innovation will pay off in the longer term, creating competitive advantages for agricultural businesses with more sustainable business models and smaller environmental footprints.
If a balance between GHG emissions and removals is to be achieved, the sector would clearly need more climate investments, policy incentives and regulations. The European Commission has already created a proposal setting the goal for emissions from the combined agricultural and forestry sectors to reach net zero by 2035. At the national level, revisions of the National Energy and Climate Plan for 2021-30, whose drafts and final versions should be submitted and approved by June 2023 and June 2024, respectively, represent the first opportunity to reflect updated national climate ambitions that can help signal the direction of travel for businesses and investors.
Given the persistent farming culture in Europe, which combines a spirit of independence and resistance to regulation with a tradition of seeking and receiving government support, the necessary debate must involve and commit farmers, society and governments, if they are to become aligned toward the same objective of low carbon growth. Technical assistance, awareness raising and capacity building to support the sector’s transition would go a long way to help and ensure that the future agriculture sector is resilient and fit for a decarbonising world in which investor and consumer demands have changed.