Agriculture: risks and opportunities for our climate

After forestry, agriculture is the second sector in European taxonomy. Personally, I enjoy spending time on the farm near our house. However, I am hugely concerned when I think about the harm that intensive agriculture does to nature and billions of animals.

In Europe, agriculture is responsible for ten percent of CO2 emissions. Globally, it is the greatest cause of deforestation. Yet agriculture is also one of the sectors that can make a substantial contribution to reducing CO2 emissions and therefore has a place in European taxonomy. During the development of the EU taxonomy for sustainable finance, I realised that my love-hate relationship with agriculture very much relates to the role of this sector in climate change. It is a double role. Although agriculture produces CO2, it also plays an important role in its storage. Some activities cause deforestation and others contribute to promoting biodiversity or play a role in resisting climate changes. Furthermore, large parts of the sector are extremely sensitive to change in the climate.

This complexity means that there are no 'one size fits all' criteria for agriculture. In the European taxonomy, the technical criteria for this sector therefore consist of general inclusive criteria rather than specific demands and quantitative performance requirements. In this way, the usability of the criteria is maximised for as many agricultural activities as possible.

The criteria can be applied to three different agricultural activities:

1. growing of 'non-perennials';
2. growing of perennials;
3. animal production.

As in other sectors, a business may also engage in a combination of activities, where it is considered which percentage is in line with the criteria of the taxonomy. To classify as ‘green’, an activity must fulfil three criteria:

• 20 percent reduction of CO2 emissions in 2030 and 40 percent up to 2050.
• Increased CO2 storage.
• Agricultural activities that take place on land that previously ‘stored high CO2 stocks’ (for example woodland or peatland) is excluded from classification.

Due to lack of data and benchmarks in combination with the heterogenous character of agriculture, we chose to measure the company’s performance in relation to the baseline measurement. Where CO2 reduction or storage cannot be measured, there is also the option to classify an activity as sustainable if there is consistent implementation of the 'essential management practices'.

This is a combination of concrete measures that, based on scientific research, result in substantial emission reductions. In both options, a three-yearly audit is compulsory and using existing standards and certifications is recommended.

The taxonomy shows that we must focus on agriculture that – as a sector – has the potential for more CO2 storage than emissions. On both sides, there are theoretical opportunities for investors. Due to the complexity, however, it is difficult for investors to invest in sustainable agriculture. Improving data is a first step in this. But for real change, we must look for solutions that focus on the positive potential. Solutions based on love for nature, animals and people.