Famous for its lamb, New Zealand’s agriculture industry was once so well-subsidised that slaughterhouse workers were said to earn more than airline pilots, recalled William Rolleston, a farmer in South Canterbury and leading advocate for the sector.
A few decades ago, huge subsidies meant vast swathes of the country’s marginal land was cleared for grazing, fertiliser was overused, and the country’s sheep population boomed to the point where surplus meat had to be destroyed.
Across New Zealand, the subsidy programmes took a toll on nature, polluting rivers and eroding soils, according to a study by the UN Convention on Biological Diversity (CBD).
Then, in 1984, there was “total upheaval”, Rolleston said.
In a radical shift, the subsidies were removed or phased out. Farming became more efficient while harmful practices decreased: fertiliser use declined by 50 per cent and many farmers’ hillsides were reforested, according to the CBD’s report.
While agriculture remains a major source of the country’s planet-warming greenhouse gas emissions, New Zealand is still held up by biodiversity campaigners as a “poster child” for reforming subsidies that harm nature and the environment.
The issue is expected to feature at the United Nations COP15 summit - which begins in Montreal, Canada, next week - where countries will try to agree a framework to protect biodiversity.
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In the agricultural sector, we can envision a world that’s free of harmful subsidies, but we certainly want a world that has food in it.
Andrew Deutz, director of policy and finance, The Nature Conservancy
The latest draft agreement includes a target to reform at least $500 billion of harmful subsidies annually across sectors including agriculture.
Around the world, government subsidies that harm nature amount to at least $1.8 trillion each year - equivalent to 2 per cent of global GDP - according to a study published in February by the Business for Nature advocacy group.
It said agriculture subsidies - at $520 billion annually - are the largest drivers of ecosystem destruction, along with those for fossil fuels - at $640 billion - which have a more indirect impact on biodiversity, mainly through climate change.
Concerns are growing over the world’s ability to control climate change and halt temperature rise, with a recent World Wildlife Fund (WWF) report showing that nature has absorbed 54 per cent of human-related carbon dioxide emissions over the past decade.
Agricultural subsidies for things like meat production and fertilisers are also considered a threat to long-term food security.
A decrease in fertile soil means 95 per cent of land worldwide could become degraded by 2050, according to the Global Environment Facility, a multilateral fund.
Decision makers are “counting on” subsidy reforms to close the majority of the financing gap for biodiversity protection - estimated at $700 billion each year - said Brian O’Donnell, director of the conservation non-profit Campaign for Nature.
“That is, in my mind, a very risky proposition,” O’Donnell said, adding that it will require global political shifts for these funds to be accessed and repurposed.
“It means that governments have to truly commit to this rapidly.”
The issue has been gaining momentum, including support from the Group of Seven (G7) wealthy nations, reforms to the European Union’s Common Agricultural Policy (CAP) subsidies programme, and a World Trade Organisation deal to prohibit harmful fishery subsidies.
However, O’Donnell said there had been several subsidy agreements in the past - including at UN biodiversity talks in 2010 - but overall progress was “minimal at best”.
“Global intentions to reform subsidies often run into domestic hurdles,” he said. “The question is … will we follow through in country-by-country implementation?”
Domestic politics
One of the attractions of subsidy reform for governments is that it involves repurposing existing funds rather than having to come up with new money at a time when budgets are stretched.
But these subsidies are complex, consisting of various tools such as payments based on agricultural production, minimum price guarantees for goods, and income support for farmers.
The first thing nations must do is assess and understand the full extent of their subsidies and their impacts on nature, said Martina Fleckenstein, head of food policy at WWF International.
“We know where we want to go. The challenge is how does it look at the national level?” she said.
Analysts say a major reason reform can be so difficult is that many powerful interests are beneficiaries of subsidies.
Agricultural subsidies tend to disproportionately favour large farms at the expense of small farmers, according to research by the World Resources Institute (WRI) think tank.
“Most of this is around domestic politics and dealing with strong domestic constituencies,” said Andrew Deutz, director of policy and finance at conservation group The Nature Conservancy.
He said the politics around agriculture should be different to fossil fuels, though, because subsidies need to be repurposed to incentivise positive practices instead of being pulled out of the sector completely.
“In the agricultural sector, we can envision a world that’s free of harmful subsidies, but we certainly want a world that has food in it,” Deutz said.
For example, he said the EU’s CAP regime has started to funnel incentives towards things like protecting habitats and landscapes.
A just transition
Whatever new agricultural initiatives are brought in to preserve nature, experts say such changes do not occur overnight - and that those in the agriculture sector will need support to adapt.
“You need to have coping strategies, it’s not like silver bullets resolve all the problems,” said Helen Ding, a senior economist and subsidies expert at WRI.
Farmers need to be reassured that they can sustain their incomes and support their families while implementing practices which protect nature, she added.
In Costa Rica, for example, she spoke to farmers who were growing organic coffee on a portion of their land alongside conventional production, to insure against fluctuations in yields and the international coffee trade.
In New Zealand, Rolleston said farmers in the 1980s were in favour of the subsidy reforms, but still needed support to adapt their practices.
“For farmers, that was a pretty tough period because it happened very quickly,” said Rolleston, a former president of the Federated Farmers advocacy group.
He said the government provided welfare, particularly for those who went out of business - with around 1 per cent of farmers leaving the sector at that time - but emphasised that support from other institutions like banks was also essential.
As countries prepare to discuss harmful subsidies at COP15, Rolleston said high food prices globally could make it easier for farmers to change their practices without losing out.
“The best time to do these reforms is always yesterday, and the second best time is when prices are high enough to be able to manage that transition,” he said.
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