Repurposing Agricultural Support Policies for Sustainable Food Systems -Toolkit

The global agrifood system can no longer deliver the ‘triple wins’ of a healthy planet, healthy people, and healthy economies. The current system is associated with high ‘hidden costs’ and urgently needs transformation to provide better livelihoods, raise farm productivity, and become more sustainable, equitable, resilient, and healthy. Achieving such transformative change requires a systemic shift in how the agrifood system are supported. We need to recognize that hundreds of millions of atomistic and rational economic decision-makers make up the agrifood system. Actors on the farm and along food value chains respond to economic incentives, and a core priority for food system transformation should be ensuring that economic agents receive appropriate incentives to guide meaningful change. Studies show that agrifood system transformation has the potential to bring climate change under control, increase biological diversity, ensure healthier diets, and create new business opportunities worth up to US4.5 dollars trillion a year (FOLU 2019). Building better systems requires tackling multiple distortions, including the complex agriculture-energy nexus. Energy is a key input to the agrifood system as fossil fuels and electricity are used directly in agriculture production to operate machinery, power water pumps, manufacture fertilizers, cool or dry crops and livestock products, and fuel transport. Subsidies for both fossil fuels and energy, which is also generated from fossil fuel in most countries, increase the environmental footprint of the food system as they encourage overuse and waste at the cost of other economic activities. For example, fuel and electricity subsidies in India are reducing the marginal cost of pumping for farmers and incentivizing over pumping and a rapid depletion of groundwater resources. Wasteful overuse of cheap energy in agriculture also has a large opportunity cost in terms of foregone economic activity in other sectors, including the development of downstream processing and value addition activities in agri-food supply chains themselves. Finally, energy subsidies undermine the competitiveness of alternative types of energy (such as renewable energy) and efficient energy technologies such as solar energy, with negative long-term impacts on the environment. Repurposing these distortive agricultural policy support towards policy measures that promote increased efficiency, increased resilience, and enhanced positive environmental impacts offers an opportunity to accelerate the transformation towards environmentally sustainable agrifood systems.