Investing in Agriculture’s future: The role of natural capital in enhancing productivity
Baker & McKenzie partner Martijn Wilder was a guest speaker at the IV Global Access Partners National Economic Review: Australia’s Annual Growth Summit on Friday 20 September 2013. He reviewed the economic importance of healthy agricultural landscapes.
Summary
- Agricultural productivity depends on the sustainability of natural resource management to ensure a healthy agricultural landscapes.
- More variable and extreme weather due to climate change will increase the risk of capital investment in agriculture
- Public and private finance need widely agreed and consistent metrics across industries to direct investment toward farmers who are minimising natural capital risks and enhancing their productivity.
- Farmers need to be supported to prepare for weather variability, reduce financial risks and ensure more reliable income. New sources of revenue – such as carbon farming or energy crops- may present opportunities to strengthen the resilience of Australian agriculture.
Background
This session looks at the economic importance of healthy agricultural landscapes. Ultimately policies are required to ensure that Australian farmers and graziers are in a position to benefit from higher long-term food prices, and to meet the challenges of land degradation, climate change and rising fuel and fertiliser prices.
- Australia is ranked amongst the top 5 exporters of commodities like wheat, beef, dairy, mutton and lamb. Recent projections suggest that we could double food-based agricultural exports by 2050.
- Global food demand could rise 60 per cent by 2050. Winners of the food boom will be countries with less fossil-fuel intensive agriculture, more reliable production, and access to healthy land and soils.
- To maintain a competitive edge in the global food market, Australia will need to develop and adopt more productive, sustainable and input-efficient farming practices.
Key observations
- The Agricultural sector is conservative by nature and while it has always managed and understood the challenges of a changing weather pattern there is often resistance to any link to climate change. In addition, the willingness to change well established farming practices towards a more sustainable approach take time.
- While there is an understanding of the need to keep landscapes healthy modern farming practices and inputs often run counter to sustainability
- Improving soil health could increase agricultural production by up to $2.1 billion per year. Acting to preserve healthy soils improves the efficiency of water use, and minimises dependence on fuel and fertilizers.
- Agricultural productivity growth has slowed due to a combination of adverse weather and declining growth in innovation funding.
- Loss of natural capital, such as soil in good condition, limits agricultural production in some areas e.g. soil acidity in our main wheat exporting region, south-west WA, reduces production by $0.5 billion a year.
- Australia is vulnerable to rising fuel and fertilizer costs. Australia depends on imports for half the oil we consume. Around one-third of farm input costs are energy and energy dependent inputs.
- Without action to adapt to climate change, by 2050 Australia could lose $6.5 billion per year in wheat, beef, mutton, lamb and dairy production due to more variable and extreme weather.
- Many Australian farmers have increased input-efficiency and production by improving the condition of their soil. Further innovation is needed to match production to variable soil and climate conditions.
- Investment in natural capital is essential to maintain resilient and productive agricultural landscapes in the face of climate change and other pressures. Early action is needed to avoid irreversible damage.
- While there has been significant focus on carbon farming it remains relatively new and political uncertainty coupled with the scale required means it has limited short term ability to drive significant change.
- Opportunity for new energy crops to supplement current activities that can drive new industries such as Sustainable Aviation Biofuels.
- Australia has made some good progress by putting in place policies that support farmers as active stewards of our land and soils. However, there are some key areas where further policy change is needed: Increase investment in knowledge and education; Provide more stable funding for natural resource management; Enable accountable community governance of land and soil management.; Align financial incentives with the long-term needs of sustainable farming communities; provide similar excise relief for sustainable fuels.
Martijn Wilder is head of Baker & McKenzie’s Global Environmental Markets practice. He focuses on climate law and finance, federal and international environmental law, environmental and clean energy infrastructure projects and agribusiness. He is regarded as a legal pioneer in the development of legal mechanisms and regulations underpinning the emergence of international carbon and broader environmental markets. Martijn is chairman of Low Carbon Australia, a board member of the Clean Energy Finance Corporation, chair of the NSW Climate Change Council, on the governing board of the Renewable Energy and Energy Efficiency Partnership, and a director and governor of WWF. He is also a committee member of the Australian Initiative for Sustainable Aviation Fuels. Martijn is a professor of climate change law at the Australian National University and an affiliate, Cambridge Centre for Climate Change Mitigation Research Department of Land Economy University of Cambridge.
Graham Rand
September 24, 2013 at 12:18 am
Investing in Australia’s Agricultural Future
The agricultural industry most definitely needs a comprehensive and coherent policy framework, created and administered in a consultative and cooperative framework. Our politicians of course are unable to see beyond the next election and our bureaucrat’s too often think that a policy is the same thing as an action. It is always difficult to achieve rational and workable policy solutions in this context.
One thing I was surprised not to see in an otherwise thorough observation is the role of water as a critical form of natural capital for this industry. There are of course a variety of bodies across the country responsible for this and it is in it’s own right a policy sore point. For the driest continent on Earth there can be nothing more critical than a coherent national policy on water.
Often the water debate is about who gets to use it and how much they get to use. Not enough debate is about how much of this particular capital asset exists within the system and how we can increase it. In a true capitalist system, we create more capital, we do not draw it down. It is time to restore our continental wetlands, and in so doing; provide greater opportunity for our aquifers to be recharged and more arable land to be created.
onlinecentric1
September 24, 2013 at 1:40 pm
Scientiffic Approach Implementation
In agriculture field should be employ.
Promote sprinkle irrigation technique to irrigate crops to fulfill the lack of natural rain.
DelorasHenrich
April 24, 2014 at 1:31 am
Agriculture industry rapidly
Agriculture industry rapidly grows and has progress. Investing in agriculture is not so hard as long as you know the steps on how to make it. Being productive is the value you must possess whenever in any type of ventures you plan.
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