Why agricultural subsidies must be reformed to enable a regenerative food system

Today’s agricultural production systems are a primary source of environmental degradation. They put the Earth beyond its planetary boundaries and exacerbate biodiversity loss, accelerate climate change and increase pollution.

As stated in the Intergovernmental Panel on Climate Change (IPCC) report, agriculture accounts for 70% of global fresh water use and one-third of global greenhouse gas emissions. It is also associated with 80% of global deforestation, according to the United Nations Food and Agriculture Organization (UNFAO).

Global agricultural production systems are subsidised by approximately $700 billion annually. Based on the recently published State of Finance for Nature report, nature-negative expenditures exceed investments in nature-based solutions. According to the report, government expenditures on environmentally harmful subsidies to fisheries, agriculture and fossil fuels are three to seven times greater than public and private investments in nature-based solutions. This allocation of funds drives the destruction of ecosystems and species extinction and also undermines efforts to implement nature-positive actions – many of which can be found through alternative agricultural practices.

Agricultural systems hold vast potential for reducing global greenhouse gas emissions, preventing land degradation, protecting terrestrial biodiversity and improving the livelihoods of farming communities.

Regenerative agriculture is a nature-based solution that aims to transition agriculture from being degenerative to a primary source of regeneration for modified ecosystems.

When properly implemented, regenerative agricultural practices can protect and enhance biodiversity at and around farms, improve or preserve carbon and water retention in the soil and enhance the resilience of crops and nature – all while decreasing pesticide and fertiliser use and supporting the livelihoods of farming communities. These practices, as well as crop diversification, provide multiple complementary benefits and help decrease food insecurity.

A meta-review conducted by CGIAR in 2021 concluded that Regenerative Agriculture practices can generate additional critical ecosystem services by maintaining biodiversity in agricultural lands. Plus, they have the potential to globally sequester 4.3-6.9 Gt CO2e/year, create 12-17 M km² habitat for biodiversity and increase connectivity for biodiversity.

Leading businesses, such as Unilever, have taken ambitious public commitments to shift their sourcing to regenerative agriculture principles. They are collaborating across value chains via the One Planet Business for Biodiversity (OP2B) coalition and other partnerships to drive transformational change and catalyse action that will protect and restore cultivated and natural biodiversity and reverse nature loss by 2030.

Moving from conventional to regenerative agricultural practices requires a significant revision of the related business models and significant upfront investments, while ensuring that farmers benefit.

Enabling farmers to transition to regenerative practices requires two types of funding stages. The first focuses on short-term financing solutions and incentives that support farmers in the first few years of transitioning to regenerative practices. The second focuses on creating an economic system that is viable for farmers long term. While some leading companies have already started to invest in regenerative agriculture, transitioning at scale and speed is impossible without the support of governments and financial actors.

In the first type of funding stage, farmers need support in financing capital expenditures, crop insurance and upskilling via training and farmer collectives. Action-based incentives encourage otherwise hesitant farmers to explore implementing regenerative practices.

The second stage of funding focuses on enabling a long-term, incentivised economic model. This includes support for ecosystem services; insurance that supports resilient systems; shifting in contracts to support the transition; and, development of demand for rotational (cover) crops to enable another source of income. Positive nature-based outcomes and impacts also need to be rewarded and incentivised.

Farmers, agronomists and academics are defining regenerative agriculture to the point where it can be taken into consideration by policymakers as a credible way to reduce food agriculture’s environmental impact and act as a carbon sink. It is necessary to act on this momentum and alignment by developing an enabling policy environment that supports this transition.

Governments can support the transition to regenerative agriculture by reforming harmful agricultural subsidies and creating opportunities for an equitable, nature-positive and Net-Zero economy. In the agricultural sector, this will boost the resilience of farmers and agricultural systems, while significantly reducing the negative environmental impacts the sector is responsible for. To do so, governments must engage and collaborate with all stakeholders in shaping and designing policies. From producers to consumers, all actors must focus on and commit to developing a nature-positive agricultural system.

The Global Biodiversity Framework, which states that governments need to “Identify by 2025, and eliminate, phase out or reform incentives, including subsidies, harmful for biodiversity, in a proportionate, just, fair, effective and equitable way,” is a positive and shows movement in a productive direction.