Paying Farmers to Protect the Environment?
15/11/07

Carefully targeted payments to farmers could serve as an approach to protect the environment and to address growing concerns about climate change, biodiversity loss and water supply, FAO said today in its annual publication The State of Food and Agriculture.

The report however cautions that payments for environmental services are not the best solution in all situations, and that significant implementation challenges remain.

“Agriculture employs more people and uses more land and water than any other human activity,” said FAO Director-General Jacques Diouf in his foreword to the report. “It has the potential to degrade the Earth’s land, water, atmosphere and biological resources – or to enhance them – depending on the decisions made by the more than two billion people whose livelihoods depend directly on crops, livestock, fisheries or forests. Ensuring appropriate incentives for these people is essential.”

Population growth, rapid economic development, increasing demand for biofuels and climate change are putting environmental resources under pressure throughout the world. For instance, agriculture is expected to feed a world population that will increase from six to nine billion by 2050.

One of the important reasons for environmental degradation is the perception that many of nature’s services are free – no one owns them or is rewarded for them and farmers have little incentive to protect them. In addition, subsidies that encourage the production of marketed goods at the expense of other ecosystem services can aggravate their degradation.

Incentives

Current incentives tend to favour the production of food, fibre, and increasingly, biofuels, but they typically under-value other beneficial services that farmers can provide, such as carbon storage, flood control, clean water provision or biodiversity conservation.

Farmers can provide better environmental outcomes, but they need incentives to do so. Payments for environmental services represent one way of increasing incentives to adopt improved agricultural practices—and even to offset pollution generated in other sectors.

However, “payments may also have adverse impacts on poverty and food security in some cases, should they result in a reduction in demand for agricultural employment or increases in food prices,” noted Dr Diouf.

Carbon sink

Farmers will need to play an important role in mitigating the effects of climate change, the FAO report said.

Agriculture plays an important role as a carbon “sink” through sequestering and storing greenhouse gases, especially as carbon in soils, plants and trees. Less deforestation, planting of trees, tillage reduction, soil cover increase and improved grassland management could, for example, lead to the storage of more than two billion tonnes of carbon in around 50 countries between 2003 and 2012.

“Well-designed payments for environmental services are one way to help farmers to change land-use practices and make farming more environmentally friendly,” said Leslie Lipper, Senior Environmental Economist. “These are payments for real services farmers can provide, much like farmers are paid for the rice or coffee they produce.”

Payment programmes

The report says payments can take a variety of forms as voluntary transactions involving farmers, communities, taxpayers, consumers, corporations and governments. They could be direct payments by governments to producers or indirect transfers, such as consumers paying extra for a cup of shade-grown coffee beans.

Hundreds of payment programmes for environmental services are currently being implemented around the world, mainly as part of forest conservation initiatives. “But relatively few programmes for environmental services have targeted farmers and agricultural lands in developing countries,” the report said.

“If properly designed, payment programmes for environmental services might also benefit many of the more than one billion poor people in developing countries that live in fragile ecosystems,” Lipper said. This requires careful targeting as well as measures to monitor delivery of environmental services.

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