New research conducted by McKinsey & Company has revealed that approximately 50% of the necessary reduction in on-farm agricultural emissions for a 1.5°C pathway can be achieved at no additional cost or even with a positive return on investment. However, the report highlights several significant barriers that need to be addressed in order to support the widespread adoption of sustainable farming practices. These barriers include the need for transition financing, investment to reduce costs, behavior change, and additional incentives such as increased carbon prices.
The report, titled “The agricultural transition: Building a sustainable future,” emphasizes that while many opportunities for sustainable farming exist today, incentives in the form of carbon prices or other financial mechanisms may need to reach $150 per tonne to unlock even more potential. The study also highlights the existing barriers in carbon markets and financing, such as the fact that only 1% of all carbon credits are issued through agriculture. Additionally, private investment in sustainable agricultural technology experienced a significant decline last year. The report also reveals that 50% of farmers in the United States cite low return on investment as a top reason for not participating in carbon programs.
To encourage widespread adoption of sustainable farming practices, the report suggests that the cost of implementing these practices needs to decrease significantly, especially for smallholder farmers who supply 34% of the world’s food. McKinsey’s analysis shows that some of the most effective decarbonization measures, such as feed additives and anaerobic digesters, are also among the most expensive to implement. However, there are also many highly effective measures that are already cost-effective, including direct rice seeding, n-inhibitors, and variable rate fertilization.
The report highlights the importance of investment in training, additional transition financing, and supply chain traceability to enable green premiums as a means to drive behavior change and widespread adoption of sustainable farming practices. McKinsey identifies 28 measures with high potential to drive agricultural decarbonization, but notes that investment in sustainable agriculture innovation has been inconsistent. While public investment in the US has fallen, countries like China and Brazil have seen an increase in public investment. Private investment in agricultural technology, including sustainable agriculture, also declined last year. Financial mechanisms to support sustainable farmers, such as green product premiums and subsidies for low-carbon farming, are still in their early stages.
According to McKinsey’s findings, land conversion for agriculture, methane emissions from livestock, and agricultural energy use collectively account for 74% of all agricultural emissions. However, the report emphasizes that action beyond the farm is also necessary to meet the 1.5°C pathway. This includes addressing land use change, promoting dietary shifts, and reducing food loss and waste. The research suggests that reducing food waste by just 23% could save 0.7 metric gigatonnes of CO2e, shifting diets away from animal proteins could save nearly 640 million hectares of land, and nature-based land use, such as forest restoration, could abate 6.7 GT CO2e by 2050.
Joshua Katz, one of the authors of the report, highlights the importance of addressing the economic and behavioral barriers to sustainable farming. He suggests that novel transition financing incentives, such as California’s FARMER program, green rebates, carbon markets, farmer training, and increased investment in research and development, are key to increasing the adoption of sustainable farming practices, particularly in developing countries and among smallholder producers.