Sustainable agriculture needs a different agricultural policy

In terms of climate policy, the abolition of the agricultural diesel subsidy makes sense in principle. However, abolishing it ’overnight’ was certainly premature. It also remains unclear why this climate-damaging subsidy was abolished and others weren’t, be it the company car privilege or the tax exemption on kerosene.

In my opinion, however, the massive protests by farmers in January were not so much about this specific measure. Rather, they are an expression of a more fundamental dissatisfaction with the agricultural policies of the European Union and the German government in recent years.

To understand this anger, it helps to look at the challenges facing agriculture today. It must become more multifunctional, i.e., it must not only produce food, but also contribute to maintaining an intact environment as a public good. This includes preserving cultural landscapes and protecting biodiversity and ecosystems so that they can continue to provide important services such as climate regulation and flood protection.

This requires government incentives, for example, in the form of minimum standards that all farms must meet, incentive taxes, such as a tax on the use of pesticides or fertilizers, and agri-environmental payments to reward biodiversity-promoting flower strips. These incentives would need to be embedded in an agricultural policy framework for sustainable agriculture. The European Union's Common Agricultural Policy (CAP), as the main instrument of European and German agricultural policy, could play a decisive role here by linking its payments more closely than before to a responsible approach to climate and the environment. Despite selective improvements, however, the CAP falls short of the sustainability standards that Germany and the EU have set themselves. It would also make sense to implement existing proposals from research and practice to improve agri-environmental payments and to test alternative policy instruments more boldly, such as a pesticide tax or investment subsidies.

The latter measure in particular could have great potential, as climate change will force farms to adapt and invest in the medium term. This creates a window of opportunity in which well-chosen incentives can support agriculture in pursuing both climate adaptation and environmental protection. To do this, governments need to promote the right measures and investments. For example, it would be important to reduce the intensity of soil cultivation, which would allow the soil to store more water. Another approach would be to increase the diversity of crops grown.

However, farms have very limited room for maneuver. This is due to the market structure, with few buyers of agricultural products, but also down to consumers, who focus on a few crops, for example, and have little tolerance for deviations from the norm in terms of taste, shape or color. Under these conditions, farms cannot adapt their strategies at will.

New incentives are needed not only for farmers, but also for consumers. The same is true for the food processing and retail sectors, which have considerable market power and influence. A successful agri-environmental policy requires that these stakeholders also move more in the direction of sustainability. I suspect that with a comprehensive and clearly communicated strategy for agricultural policy, most farmers would also accept the removal of climate-damaging subsidies, such as subsidies for agricultural diesel.

This article also appears in the January issue of the newsletter “Helmholtz Monthly”.