Tuesday, December 5, 2023

Major barriers to clear to reach GHG targets

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Good news is roughly half of on-farm reduction will cost little or nothing, McKinsey and Co report says.
The cost of sustainable farming practices may need to fall considerably to spur widespread adoption, says a new McKinsey report.
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About half of the reduction in on-farm agricultural emissions needed to meet a 1.5degC pathway are cost neutral or ROI-positive but major barriers will need to be overcome if the target is to be reached, a new report by global consultants McKinsey and Co says.

The report also warns that achieving a 1.5degC pathway will require support from throughout the value chain – not just from farmers. 

Significant barriers to reaching the target include transition financing, investment to reduce costs, and behaviour change. The report says additional incentives such as increased carbon prices will be needed to support adoption.

The report, The Agricultural Transition: Building a sustainable future, says that while many opportunities are viable today, incentives, likely in the form of carbon prices or other financing, may need to reach $150/tonne to unlock many more. 

Barriers in carbon markets and financing remain for those that are viable.  Only 1% of all carbon credits are issued through agriculture, and private investment in sustainable agricultural technology fell significantly last year. Fifty percent of United States farmers cite low return on investment as a top reason for not participating in carbon programmes.

The report warns that the entire value chain will need to be on board for the target to be reached.

“Sustainable farming is necessary for decarbonisation. But to get the world to net zero, the agriculture sector must take action along the entire value chain,” the report said.

Key will be  reducing food loss and waste, adopting dietary shifts, and adapting how arable land is used, all of which are critical to decarbonisation and will help the industry meet global food needs while maintaining the livelihoods of farmers. 

About 30% of the world’s food is lost or wasted every year and contributes an estimated 8-10% of global anthropogenic emissions while also driving food insecurity and overproduction, the latter of which contributes in turn to nature degradation.

Reducing food waste by just 23% could save 0.7 metric gigatonnes of CO2e, shifting diets away from animal proteins could save nearly 640 million hectares of land, and nature-based land use such as forest restoration may abate 6.7 gigatonnes of CO2e by 2050.

The report says the cost of sustainable farming practices may need to fall considerably to spur widespread adoption, especially among smallholder farmers who supply 34% of the world’s food. 

Many of the most effective decarbonisation measures, from feed additives to anaerobic digestors, are also among the most expensive to implement at $99 and $311/ton of CO2e respectively. 

However, many highly effective measures, including direct rice seeding, N-inhibitors, and variable rate fertilisation are ROI-positive today. 

Investment in training, additional transition financing, and supply chain traceability to enable green premiums could spur behaviour change and adoption of the practices.

McKinsey and Co partner Joshua Katz said the company’s analysis pinpoints 28 sustainable farming measures that could drive agricultural decarbonisation and together save 2.2 gigatonnes of CO2 a year and provide a clear path to 1.5degC on the farm. 

“Yet economics and behavior remain the key barriers to at-scale adoption of sustainable farming, particularly across developing countries and smallholder producers.”  

The analysis notes that investment in sustainable agriculture innovation has been inconsistent, with inflation-adjusted public investment falling in the US but rising in countries such as China and Brazil. 

Private investment in agricultural technology, including sustainable agriculture, also fell last year. And financial mechanisms to support sustainable farmers such as green product premiums and subsidies for low-carbon farming are still in their infancy. 

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