The R&D cost of climate mitigation in agriculture

Keith Fuglie, Srabashi Ray, Uris Lantz C. Baldos and Thomas Hertel

Applied Economic Perspectives and Policy, 2022, vol. 44, issue 4, 1955-1974

Abstract: Agriculture is responsible for 20%–25% of global emissions of greenhouse gases (GHG), which result from production practices and land use conversion. Supply‐side approaches for reducing emissions from agriculture rely on emissions‐saving technological change and environmental protection of carbon‐rich areas. This study investigates how productivity policies, in the form of higher agricultural research and development (R&D) spending, might affect GHG emissions from agriculture, and compares this to environmental policies that restrict agricultural land use or production practices that may cause environmental harm. Using simulations from a global economic model, we project outcomes in 2050 from a set of policy scenarios involving R&D and environmental policies, and combinations of the two. Outcomes of interest are net global GHG emissions, land use, agricultural production, food prices, the prevalence of food insecurity, and policy cost. We find that at the global level, more R&D spending to accelerate productivity growth reduces GHG emissions from land use change, but not as effectively as targeted environmental policies. However, accelerated productivity growth reduces the emissions intensity of agricultural production and, by lowering land rents, also reduces the cost of the environmental policy. Moreover, higher levels of productivity lower agricultural GHG emissions permanently, and by lowering global food prices, generally improve global food security. A policy scenario that is patterned after the EU Green Deal finds that policies that restrict agricultural factor inputs in order to reduce local environmental costs may, at the global level, increase agricultural GHG emissions and worsen food insecurity. These consequences could be avoided with higher EU R&D spending to accelerate agricultural productivity growth that is either factor neutral or biased toward saving production factors associated with negative environmental externalities.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:wly:apecpp:v:44:y:2022:i:4:p:1955-1974

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