In the face of an expanding world population and rapid economic growth, global agriculture has kept apace via incredible growth in scale and intensity. It has provided increasing quantities of crops, livestock and fish every decade, but often at the cost of other, undervalued ecosystem services such as climate regulation, water provision, and biodiversity. As the largest managed ecosystem in the world, agriculture holds the potential to halt, if not reverse, rapid ecosystem degradation through environmentally sound policies. In particular, the possibility of paying farmers for the environmental services they provide has generated growing interest worldwide and has already been implemented in several countries.
Ramping up Agriculture to Feed the World
The direct ecosystem services provided by agriculture, namely food and fiber, have been enhanced significantly over the past century via improved farming techniques and technology. Most notably, the "green revolution" of the 1960s and 1970s grew global grain yields by 60%. As a result, today's per capita food supply is approximately 25% larger than it was in 1961, and the real price of food fell 40% during this period.
Total and Per Capita Agricultural Production, 1961-2005
Source: The State of Food and Agriculture 2007 (FAO, 2007)
Although the world's population is projected to increase by 50% between 2000 and 2050, most experts currently believe that agriculture will be able to grow apace. The UN Food and Agriculture Organization (FAO) predicts that 80% of the needed increase in food production will come from greater input use and improved technology on existing land. The remaining 20% will come from expansion onto new land, predominantly in South America and sub-Saharan Africa.
Degradation of Ecosystem Services
Increasing the extent and intensity of agriculture will place more strain on already stressed ecosystems. Agriculture currently consumes more land and water than any other human activity, with crops and pasture occupying 40% of the world's total land area and accounting for 70% of total water use.
In 2005, the Millennium Ecosystem Assessment appraised the state of 24 key ecosystem services, and found that 15 were being degraded or used unsustainably. Many of these services--such as climate regulation, water provision, and soil protection--are both impacted by and support agricultural production, yet most farmers have little to no financial incentive to protect them. As a consequence, agriculture is a leading driver of soil erosion, water pollution, biodiversity loss, and greenhouse gas emissions from land use change; its contribution to global greenhouse gas emissions is shown in the pie chart below.
How can farmers be encouraged to reduce these negative side-effects, while also meeting the growing demand for food and fiber?
Sources of Global Greenhouse Gas Emissions
*Agriculture is the primary driver of land use change and deforestation
Source: EarthTrends, 2008; using data from the the Climate Analysis Indicators Tool (CAIT)
Paying Farmers for Ecosystem Services
Farmers constitute the largest group of natural resources managers in the world--agriculture accounts for over 40% of global employment. The concept of paying farmers for the ecosystem services they provide, thereby creating a financial incentive for environmental protection, is an approach generating increasing support worldwide. In fact, the FAO's State of Food and Agriculture Report 2007 provides an in-depth analysis of this concept, highlighting its great potential as well as existing challenges.
Farmers can generate enhanced environmental services in three main ways:
- Changing methods of production
- Diverting current agricultural land to other uses
- Avoiding future conversion of new land to agriculture
Examples of Payment Systems around the World
The demand for environmental services has been increasing over recent decades, both due to greater awareness of their value and to their increasing scarcity. Consequently, many industrialized countries have already implemented programs providing farmers with payments for environmental services. In the United States, for example, farmers can elect to receive annual rental payments for retiring farmland from crop production for 10 to 15 years, thereby enhancing soil conservation. Similarly, farmers in the United Kingdom can receive compensation payments for adopting less intensive farming practices.
One of the most notable programs in the developing world was established in Costa Rica in 1996. To enhance forest environmental services (i.e. carbon sequestration, watershed protection and biodiversity protection), land and forest owners receive compensation payments for reforestation, sustainable forest management and forest protection. The program is financed via a fossil fuel sales tax and revenues from hydroelectric companies, among other sources. Similarly, China's "Grain for Green" program pays farmers to plant forests on sloping and degraded lands.
Payment for Environmental Services Programs in the Forest Sector: breakdown by service
Source: EarthTrends, 2008; using data from Landell-Mills and Porras, 2002
Policy Design Issues and Challenges
Environmental payment schemes have great potential but must overcome several implementation challenges. A successful approach must create a mechanism for measuring and valuing a service, identify how and where to enhance services most cost-effectively, and decide which farmers to compensate and how much to pay them. In some situations, it may make sense to use alternative policy approaches, such as reforms to reduce agricultural market distortions or command-and-control regulations. No matter what strategy is adopted, the FAO emphasizes that poverty implications must be kept in mind. Most of the world's poor people live in rural areas and are dependent upon agriculture and their natural resource base for survival--any plan to implement payments for environmental services will have both positive and negative impacts for the poor that must be considered.
Related EarthTrends Links:
Country level data on agriculture and food
Map: Intensive Agricultural Land Use by River Sub-Basin in Southeast Asia
Article: Inexhaustable Appetites - Testing the Limits of Agro-Ecosystems
Article: Domesticating the World - Conversion of Natural Ecosystems
