Michael Taylor -
Tropical farmers will struggle to meet rising food demand unless they sustainably boost yields on the same land, with rising forest protection and carbon prices aimed at fighting climate change expected to hinder agriculture expansion, researchers said.
A report by thinktank Orbitas looked at the financial risks to tropical farmers and agricultural businesses — including palm oil, soybean and beef — if they do not adapt to new climate actions by governments, companies and consumers.
It found that those risks are as significant in agriculture as they are in the energy and transport sectors. If temperature increases are capped at 1.5 degrees Celsius, in line with the lower temperature goal of the Paris climate accord, up to 1.5 billion acres of agricultural land — or more than 10 per cent of agricultural land globally — will need to revert to forests, the report said.
This is party due to an expectation that prices paid for carbon storage in forests could rise above the revenue that could be obtained from using that same land for agriculture, said Mark Kenber, managing director of Orbitas.
“A response to climate change that gets the world anywhere close to net-zero emissions will require farming and agro industry to transform,” Kenber added. “This is an enormous blind spot for investors.”
In 2019, tropical rainforests — whose preservation is considered crucial to limiting planetary heating — disappeared at a rate of one football pitch every six seconds, according to data from online monitoring service Global Forest Watch.
Green groups blame the production of palm oil, the world’s most widely used edible oil, and other agricultural commodities for much of the destruction, as carbon-storing forests are cleared for plantations, ranches and farms. Environmentalists say conserving existing forests and restoring damaged ones reduces the risk of drought and flooding, stores more planet-warming carbon and protects threatened biodiversity.
The Orbitas study focused on tropical farmers and agriculture businesses, many of which have large land banks for future expansion on their balance sheets.
It analysed the consequences for these firms from changing climate change policy — such as government carbon financing and forest protection schemes, corporate zero-deforestation and emissions pledges, and changes in consumer habits. It found that companies whose business strategies rely on expansion into forested territories will confront vastly increased land prices and possibly no access at all.
Those that already hold forest concessions as land banks will face significant asset stranding, although they could benefit from carbon credits if they adapt their businesses and become more sustainable and transparent. “Even under pretty modest policy, deforestation will have to end quite soon — and that’s between 2025-2040 — depending on the carbon price and strength of policy,” London-based Kenber said.
— Thomson Reuters Foundation
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