Future challenges for animal agriculture


At the AFI’s fifteenth annual Australian Agriculture Roundtable – Valuing Agriculture’s Natural Capital – delegates were invited to post questions and ideas to an online platform throughout the event. While many of the questions were addressed on the day, many more could not be discussed due to time constraints. For this edition of In my view, a selection of these questions was collated into themes and sent to speakers for their response. (An overview of the Roundtable can be found here.)


         

Dr Manu Saunders

Ecologist, University of New England


Dr Stuart Whitten

Economist, CSIRO Land and Water

 

Dr Francisco Ascui

Soil CRC & Adjunct Associate Professor, UTAS 

 

Prof. Richard Eckard

Director, Primary Industries Climate Challenges Centre 



About the panel

Manu Saunders is an ecologist at UNE and an internationally-recognised science communicator. She has a B Arts in English and Journalism and a B Environmental Science in Ecology, both from the University of Queensland. She earned her PhD in Ecology at Charles Sturt University, researching wild pollinator communities in almond plantations of north-western Victoria. Her current research focuses on the importance of biodiversity and ecosystem services in agricultural landscapes. 

Stuart Whitten is CSIRO L&W’s Principal Research Economist. Stuart is an internationally recognised expert in the design of environmental markets across Australia including biodiversity offsets and reverse auctions for environmental stewardship, nutrients and other services. His recent research explores the links between natural capital and grazing productivity in northern beef and southern sheep production systems. He is a member of the Great Barrier Reef Independent Expert Panel and an OECD Co-operative Research Programme Fellowship recipient.

Francisco Ascui is an internationally recognised expert in environmental accounting and finance, with over 20 years’ experience across business, government and academia. He is currently affiliated with the Tasmanian Institute of Agriculture at the University of Tasmania (UTAS), the University of Edinburgh Business School, and the University of Oxford Smith School of Enterprise and the Environment. In recent years he has pioneered a new approach to evaluating natural capital credit risk in agricultural lending, and he is currently contributing to the work of the Soil CRC in this area.

Richard Eckard is Professor and Director of the Primary Industries Climate Challenges Centre, Faculty of Veterinary and Agricultural Sciences, The University of Melbourne. His research focuses on carbon farming and options for agriculture systems to respond to a changing climate. Richard is a science advisor to the Australian, New Zealand and UK governments, and the UN Food and Agriculture Organization and the European Union, on climate change adaptation, mitigation and policy development in agriculture. He is also a network leader in the Global Research Alliance on Agricultural Greenhouse Gases and a member of the AFI Research Advisory Committee.

Question 1 – Avoiding perverse outcomes: As natural capital is built at a landscape scale, how would a market ensure we aren’t paying for natural capital in one area while it is eroded elsewhere? When setting up new markets, how can we account for some farmers having looked after their land much better than others? Do paid environmental offsets enable bad land management practice to continue?


Dr Manu Saunders

Ideally, markets for natural capital/ecosystem services should focus on on-farm activity, rather than offset systems. Environmental offset programs have many problems and rarely account for like-for-like protection of biodiversity and ecosystem services and may not deliver ecosystem services where they are needed. Incentives should focus on two complementary outcomes: (1) sustainable management practices and integrating biodiversity and ecosystems into farm management; and (2) set aside areas of unmanaged natural vegetation (woodlands, grasslands, wetlands) wherever possible. Accounting for existing good management practices can be done by using evidence-based metrics that measure ecological condition and ecosystem function. 


Dr Stuart Whitten

Markets are dependent on ‘fungibility’ – the ability to measure and exchange equivalent value. A market would reward landholders able to supply the desired ‘fungible’ or measure of natural capital across landscapes. A fully fungible measure would allow each area to be rewarded, a more limited measure may have perverse outcomes where only some are measured as supplying the desired outcomes.

The baseline for the measure determines who is eligible to be paid. A fixed baseline would allow all to be paid above a minimum level. A baseline requiring improvement from current condition only rewards further improvement (sometimes this is called additionality).

Offsets are intended to compensate for damage elsewhere (even if they deliver a small net gain) but not usually considered appropriate for bad land management practice because they are set within an avoid, minimise, mitigate and only then offset framework.

Relevant to all of above is the scale of the market in terms of available payments. A $100 billion market allows most to be paid. A $1 billion market would need to be much more limited in terms of who and how much farmers are paid.


Dr Francisco Ascui

Ideally this is where government has a role to play in regulating to ensure a level playing field with both buyers and sellers of natural capital offsets. An example of this (albeit limited to just one aspect of natural capital, biodiversity) is the NSW Government’s Biodiversity Offsetting Scheme. In the absence of government regulation, voluntary markets can work, but there needs to be a good understanding of the concept of additionality, otherwise there is a risk of the market being flooded with non-additional offset credits, which end up as greenwashing when used to offset real impacts. Government can still have a role to play in upholding standards that enable voluntary markets to work effectively – an example of that would be the ACT, NSW, SA and VIC governments’ GreenPower accreditation scheme for green electricity.


Prof. Richard Eckard

This is a flaw in the current structure of the carbon offsets market, where clearly a more consequential life cycle assessment is needed to ensure that perverse outcomes are avoided. Any reward or incentive mechanism (a carbon offset protocol as an example) should include a requirement for consideration of perverse outcomes. Unfortunately, current carbon offset protocols only consider carbon accounting rather than natural capital and other environmental services.


Question 2 – Resource squeeze: How do we meet the desired target of 60% increase in food production and at the same time reduce emissions, eliminate chemicals and increase biodiversity? With limited water do we need to ask the hard questions about our genuine production capacity without further degrading the natural resources?


Dr Manu Saunders

Globally, we already produce more than enough food to feed the world and much of it is wasted. The real challenge is to sustainably produce the right types of food (diverse foods for balanced diets) with minimal environmental impacts, and to increase equitable access to food. We already have many evidence-based tools at our disposal to achieve this. 


Dr Stuart Whitten

We already produce ~80% of production (by value) from 20% of our land. Much of the challenge though is about how to produce higher value and less environmentally damaging production rather than more bulk.


Prof. Richard Eckard

I think there is a problem with the target of a 60% increase in food production, in the face of climate change in Australia in particular. Our data would suggest maintaining current food production would be a good outcome in itself. A far more achievable target is to switch Australian agriculture out of a volume (more is better) focus into a more value-added focus (higher quality is better). We have long ago discovered we are not the food bowl of Asia, and even with a doubling of our agricultural production we will not contribute more than 0.1% of the increasing demand by Asia through population growth. Therefore the hard question we have to ask is should we shift from ‘more is better’, to ‘more quality is better’. This is far more aligned with a target of improving the natural resource base and selling the attribute of clean food from clean production systems.


Question 3 – True value: Is nature’s intrinsic value lost if we apply an economic and market-based approach to its protection?


Dr Manu Saunders

No. Intrinsic value and instrumental value (i.e. economic or use values) are not mutually exclusive, they are complementary types of values. Anything can have both types of value simultaneously. If you have ever paid your child pocket money for helping you with household chores, this does not mean you have no intrinsic value for your child. The key point is that economic values are only one type of value that we can apply to something, and are not always the ‘best’ option – identifying the trade-offs and synergies between different types of value systems (economic and non-economic) is essential for any effective incentive scheme.


Dr Stuart Whitten

No. Markets can provide an incentive to act on intrinsic values. The value of goods traded in markets reflects their scarcity value – NOT their intrinsic value. 


Dr Francisco Ascui

Nah... no more so than you lose your own intrinsic value any time you enter into an employment contract or buy life insurance!


Prof. Richard Eckard

The requirement of an economic driver to take care of natural resources demonstrates an obvious failure of our current society and value systems. However, in the current environment it behoves us to place a price on the environment in such a way that we drive this change, until our culture changes to value the natural environment without the need for monetary recompense or penalty (more like our ancestors used to).


Question 4 – Market mechanisms: How do the markets that are proposed differ from government subsidies for provision of ecosystem services? Can targets and pledges set by the private sector on protecting natural capital be trusted and who will hold them to account?


Dr Stuart Whitten

What markets are proposed – this remains an open question? From a recipient perspective there is little difference who pays for the ecosystem service but there are likely to be distributional consequences across society. For example, government subsidies are paid for by Australian taxpayers whereas were markets to source international capital then payments would be drawn from a large pool (no comment on practicality made here).  
Regarding pledges – transparency in measuring outcomes is critical to the success of natural capital markets no matter which form they take. Similarly, transparency in measuring and reporting on pledges is necessary for trust that they are delivered.


Dr Francisco Ascui

Markets mobilise the resources and ingenuity of many individual actors (ideally many on both the supply and the demand side). All of these actors are motivated to reduce costs, and as long as transaction costs (e.g. the cost of participating in the market, buyers finding sellers and vice versa) are low, this should lead to a lower cost solution overall. That assumption about low transaction costs is critical, and economists often tend to assume that this will be the case, whereas it might well not be so in reality. So sometimes it may actually be more efficient for government to simply hand out subsidies for environmental outcomes – it depends on how costly it is to set up all the necessary infrastructure for a market to function. Civil society can often help hold the private sector to account, but government also has a natural role here.


Prof. Richard Eckard

I think we need to look at the current carbon markets as an example of how a system of ecosystem services could operate. The targets and pledges set by the private sector or multinational companies will nearly drive behaviour change for adoption of these market mechanisms.