Innovation, Productivity and Sustainability in Food and Agriculture

Chapter 7. Policy coherence in food and agriculture

Abstract

This chapter analyses policy incoherencies found in country reviews and related analysis, which slow or prevent progress towards improved productivity and sustainability in food and agriculture. It described responses taken by some of the reviewed countries, identifies main knowledge gaps in this area and suggests possible approaches to minimise these policy incoherencies.

• Reviewed countries all display some type of policy incoherence with respect to agriculture innovation, productivity and sustainability, but some are more important than others.

• Incoherence in the strategic policy objectives is more problematic in that it leads to continued divergence of policies.

• Incoherence between agriculture policies and other policies, from lack of policy co-ordination, and the reduced role or exemption of agriculture in other policies, can generate barriers to progress on productivity and sustainability improvements.

• Incoherence among agriculture, innovation or environmental policies, which may result from the lack of co-ordination, insufficient ex ante and ex-post assessments, can impede on their effectiveness and in some cases create additional negative outcomes.

• Incoherence in policy approaches, such as piecemeal policies focused on certain crops or certain regions can also become problematic.

• Some of the reviewed countries have explicitly considered policy incoherencies when revising policies; others rely on evaluations embedded in policy making to avoid major inconsistencies.

• Some of the reviewed countries are also increasingly encouraging the adoption synergistic policies, which incorporate productivity and sustainability objectives

By assessing government policies’ propensity to encourage food and agriculture productivity and sustainability, the reviews identified areas for improvement, but also highlighted a number of policy incoherencies. These incoherencies slow or prevent progress towards the sector’s improved productivity and sustainability. This section explores the findings from the reviews and additional analyses, and suggests possible approaches to cope with these incoherencies.

Policy incoherence slows progress towards agriculture productivity and sustainability

There are different types of policy incoherencies, depending on their scope and the degree of divergence they imply. First, in terms of scope, policy incoherencies may be caused by misaligned general policy goals, divergent policy choices across policy areas (e.g. agriculture and education), inconsistencies within a policy area (e.g. agriculture policies), or incoherent approaches (e.g. direct support favouring a particular crop or farm practice). For instance, a government setting divergent but ambitious agriculture production and environmental goals differs from a case where a government programme encourages certain types of agriculture technologies or practices supporting productivity without accounting for sustainability.

Second, the impact of policy inconsistencies depends on the degree of divergence they imply, from neutralising to counteracting or slowing down progress towards agriculture productivity or sustainability. For example, depending on its design, an environmental regulation may slow down or ban the adoption of productivity-enhancing technologies sought by another government department.

Lastly, general and relatively unambiguous policy inconsistencies differ from those that will vary depending on the context (OECD, 2019a). For instance, a general inconsistency is found in countries that support renewable energy while setting tax concessions for fossil fuels (OECD, 2017b). In contrast, certain agricultural or environmental policies, such as a risk management policy or a policy to conserve biodiversity may counteract against sustainability or productivity improvements (respectively) depending on the specific instrument used and context of application.

The causes of policy incoherencies also vary. They might result from unintended information asymmetries across government bodies or from explicit competing government objectives or priorities. They may also be due to irremediable incompatibility between past policies and new objectives or to changing political cycles with asynchronous policy changes. Governments seeking subsidiarity may induce incoherence across jurisdiction. Finally yet importantly, governments seeking policy coherency across certain objectives may create incoherencies with other objectives.

A close examination of the reviews (Table 7.1) shows that all the reviewed countries exhibit at least one type of policy incoherence with respect to agricultural productivity and sustainability improvements objectives, but that their scope differ. If most examples of inconsistencies fall into a particular policy area (innovation or agricultural policies), other types of inconsistencies are found. The following subsections examine the different types of incoherence found, with the objective of understanding their nature, their cause and their significance.

Table 7.1. Examples of policy inconsistencies impeding agriculture innovation, productivity and sustainability in reviewed countries

	Among general policy goals	Across policy areas	Within policy areas	Among policy approaches
Argentina		Taxing tobacco for health and using fund to subsidise tobacco producers. Spending on soybean R&D and innovation and taxing their exports	Encouraging market driven agricultural growth without considering environmental effects
Australia		Participants to the Working Holiday Maker Programme do not work where there are labour shortages	Regulatory inconsistencies and particular features of intellectual property protection lowering private investment in R&D	Inconsistent water access, food and chemical regulations across jurisdictions
Brazil	Agricultural growth objectives differ from fundamental societal objectives	Ineffective regulations of credit market and agricultural support to credit	Farm support to non-commercial farms reduces incentive to increase efficiency and impedes on structural adjustment
Canada		Difference between innovation in agriculture and broader innovation objectives		Inconsistent budget procedures for public and private actors to apply for funding
China		Incoherence between environmental and agricultural policies	Largest spending on R&D in GM crops without commercialisation	Support concentrated on some commodities
Colombia		Limited participation to tertiary level agriculture education does not reflect the sectors’ importance	Inconsistencies between current usage and actual suitability of agricultural land create land use conflicts
Estonia	Alignment between innovation and growth strategy over time		Support organic without considering marketing chain development
Japan		Incoherence between environmental and agricultural policies	Export promotion and the payments for non-viable crops such as feed rice	Differences in support level by commodity
Korea		Separated water management for agriculture from other uses Commodity specific support incoherent with productivity social and environmental objectives	Income support payment in the absence of income declaration requirement for cereal farmers	Differences in support level by commodity
Latvia		Regulations facilitate seasonal work, but taxes reduce the incentive for labour participation	Support organic agriculture but not processing: organic milk sold as conventional products	Provides coupled support to specific commodities
Netherlands		Top Sector innovation strategy not fully aligned with EU regional cluster policy	Tax incentive for private research reduces funding for public R&D, including on public goods
Sweden			Mismatched research with needs of the sector	Incoherence in rural development policy programmes nationally
Switzerland			Support for cattle in less favoured areas intensifying environmental pressure from livestock Efforts to reach agri-environmental targets accompanied by increased energy use
Turkey		Incoherent regulations governing land transfers, land consolidation, and land protection	The structure of agricultural producer support constrains long term productivity
United States		Mismatch between efforts on secondary and tertiary agriculture education	Agriculture intensification takes place on land that is not enrolled in agri-environmental programmes	Support focused on “white” commodities deterring on others

Source: Country reviews.

Incoherencies in general policy goals

In some reviewed countries, the government has set multiple strategic documents and plans that hamper overall food and agriculture policy coherence. In Estonia for instance, the agricultural growth strategy has a different timeline than the innovation strategy, but the overlapping area of agricultural innovation is only featuring on the innovation side. Priorities on innovation have changed at a different pace than agricultural policies.

Governments may also promote policy goals that are not always compatible with each other and with the pursuit of improved productivity and sustainability in food and agriculture. Countries like Brazil support the development of agriculture for economic growth but they also support more sustainable land use, two goals that may not always be compatible in the way they are undertaken. The People’s Republic of China’s (hereafter “China”) past self-sufficiency policy objectives, which led to an expansion of grain productions, contributed to the deterioration of natural resources and the environment, triggering the revision of the national food security strategy in 2014. Argentina’s agriculture innovation facilitated the expansion of soybean areas, leading to deforestation to relocate displaced livestock production.

The cause of these incompatibilities may result from the lack of co‑ordination or cohesion across areas of governments when developing plans, lack of strategic planning, and/or from the superposition of different policy strategies over time. While a new government may propose a new strategy for the agriculture sector and beyond, it will need to apply policies that followed past strategies as long as they remain in place.

Incoherencies across policy areas

A benefit of reviewing policies by applying the food and agriculture productivity-sustainability framework is that it allows an assessment of the links between non-agriculture policies and the sector’s productivity and sustainability. Findings from the reviews suggest that there are multiple incoherencies across policies that may affect food and agriculture performance.

As shown in Table 7.1, multiple types of incoherencies were reported in reviewed countries between agriculture policies and education, finance, labour, competition, innovation, energy, environmental or natural resource policies. Some incoherencies result from mismatch of efforts with policy needs; others result from incompatible objectives, misaligned or counteractive policies.

Incoherencies between agriculture policy and environmental and resource policies are of particular interest, in that they may create a conflict between sustainability and productivity growth objectives. As discussed in Chapter 6, existing literature suggests that environmental regulations have mixed effects on productivity; in some cases, they may enhance productivity.1 Still, as discussed in Chapter 5, the level of agriculture development matters; countries in the process of developing agriculture may place higher emphasis on policies supporting investment in agriculture production while lacking in strength and implementation of their environmental and natural resource policies.

The cause of incoherencies may once again be multiple. In addition to insufficient policy co‑ordination, the relatively limited attention given to agriculture and rural areas in general policy, and the fact that agriculture is set as an exception (or exempted from some policies and regulations) are sources of explanations for these incoherencies in certain countries. Agriculture education or agriculture innovation do not carry much importance when considering priorities for education, taxation, labour or credit policies, especially in countries where the sector’s contribution to the overall economy is minimal. While the cultural and institutional context or the national definitions of food security may explain the exceptional status of agriculture, it might deter agriculture’s productivity and/or sustainability efforts. For instance, exempting co‑operatives from competition policies while giving them the power to distribute support will result in less transparent policy and potentially biased policy results. Similarly, exempting agriculture from GHG emission regulations is questionable especially in countries where the sector accounts for a large share of national emissions.

The impacts of these cross-policy divergences vary. They may be remediated by changing one or more policies. Still, the fact that agriculture is either of limited importance or in some cases given a special status may make those divergences difficult to redress.

Incoherencies within policy areas

The most common policy incoherencies found in the reviews are within agriculture or innovation policies. These incoherencies are primarily the result of incompatible policy objectives, near-sighted policy efforts (focusing on one area not another) or the combination of the two. In particular:

• Several countries were found to have unbalanced innovation policy efforts. For instance, they may support a high quality research, without providing incentives to consider needs and supporting adoption, or they may constrain their research pipelines with complex regulations (China).

• Countries such as Estonia and Latvia support organic production without considering the lack of infrastructure to process such products, losing opportunities to escalate on the value chain.

• Many of the reviewed countries spend much of their efforts to support commodity specific agricultural production, while spending much less on the general services supporting agriculture and on the provisions of agriculture public goods (Chapter 5).

Agriculture policies aiming towards improved sustainability may focus on some issues, neglecting others. For instance, the management of natural resources will often take priority compared to the negative impact of intensive agriculture systems on ecosystems. This is despite the fact that natural resource management can be considered closer to a private good, with market solutions, as farmers will benefit from it directly, while air or water quality is a public good, on which they do not gain any benefits. Reducing visible pollution is also given priority compared to an invisible one; e.g. surface versus groundwater nitrate pollution, or air pollution due to pesticides or fertilisers versus greenhouse gases, without accounting for the different impacts.

More specifically, recent OECD studies have identified policy synergies and trade-offs between climate change adaptation, GHG mitigation and agriculture productivity (Lankoski, Ignaciuk and Jésus, 2018). As part of this work, a review of relevant policies in the Netherlands found that the government prioritised policies supporting agriculture competitiveness and greenhouse gas (GHG) mitigation, leaving farmers responsible for adaptation. It also showed the influence of EU-wide policies in national policy coherence, but that societal demands for animal welfare might in some cases result in trade-offs with competitiveness and GHG emissions (Ignaciuk and Boonstra, 2017). An ex ante farm level simulation with applications in Finland and the Midwest United States found that several policy instruments, such as green set-aside payments or investment subsidies for adaptive capitals, send signals that impede the achievement of at least one of the three objectives (productivity, mitigation and adaptation) (Lankoski et al., 2018). The study also shows that inconsistencies in this area are often context dependent (ibid.).

The main causes to most these incoherencies are asymmetric information and near-sighted policy setting. Both causes may partially result from the absence or insufficient robustness of ex ante and ex post policy assessments. Policy incoherence that seemingly results from the juxtaposition of past policies with new ones would be avoided with proper ex-ante assessment of new policies. The design of policy evaluation may also be near-sighted and therefore unable to identify the problem. Many policy evaluations focus only on the implementation of intended objectives, rather than on the results, accounting for some specific dimensions and ignoring others.

The value of policy assessment is particularly evident in cases where policies that aim to support productivity and sustainability fail unintentionally. For instance, in the United States, a programme supporting irrigation efficiency, thereby aiming to contribute to sustainability and productivity, was later found to increase groundwater use, due to farmers’ behavioural response (OECD, 2015). Such assessments are also necessary in cases where the effect of one instrument is ambiguous and context dependent, such as when land use restriction is needed to conserve biodiversity but may lead to intensification of agriculture production with other environmental problems (Argentina and Brazil).

Incoherencies in policy approaches

The last type of incoherencies originate from inconsistent policy approaches. These inconsistencies are found in countries where policies are customised to a particular region, subsector, production process, or stakeholder groups, but that interactions or competition among those regions, subsectors, production processes, or groups make these policy differences at least partially problematic with regard to agriculture productivity and sustainability.

• Such incoherency can be seen in cases of federal countries, or countries aiming for subsidiarity. An example in Table 7.1 is the case of Australia’s regulatory heterogeneity for agriculture products and inputs. While this heterogeneity is due to limitations in federal government oversight, it may prevent some states to operate in the level-playing field, constraining agricultural productivity nationally.2

• A number of countries concentrate agricultural support towards certain commodities (Chapter 4), which creates an incentive to keep producing those and not others, which may prevent the development of other productive and income generating activities that could be more sustainable and resilient.

• In countries with process-based regulations, the evolving scope of regulation for new genetique techniques or chemical inputs may create loopholes and slow R&D efforts. Banning the use of a chemical will lead to the development of others potentially as toxic chemicals. Regulating new technique will lead to getting back to older ones, to sometimes arrive at the same result.3

The causes of these inconsistencies may be due to existing legislation (federal countries), or to political choices in response to demand by groups of constituents, from production groups to civil society. In the first case, it may be difficult to change the situation; in the second such incoherencies may be dependent on the political cycles.

Responses to policy incoherence

Several countries have explicitly sought to address policy incoherencies. Starting in 1992, the European Union’s Common Agriculture Policy has expanded in scope from pure agriculture production to support for public goods. This has led to some progress in some areas, but not enough in others. Recent efforts in Canada, the Netherlands or Sweden aimed to develop broader food policies that may cover agriculture, food, but also related energy, environment, natural resource, animal welfare and health issues. It is too early to tell how effective and lasting these efforts will be.

International organisations have also expressed calls and developed plans to improve policy coherence. The development of the OECD Green Growth strategy, which was applied to the case of agriculture, was in part driven by the idea that sustainability and growth could be compatible, and to discuss how this could be feasible (OECD, 2011a and 2011b). The FAO and the CGIAR have encouraged the adoption of climate smart agriculture practice, which combine climate adaptation, mitigation, and production or food security objectives. Recent work at the OECD has looked at synergies and trade-offs at the intersection of productivity, climate adaptation and mitigation (Lankoski, Ignaciuk and Jésus, 2018), and barriers to adoption of climate-friendly agricultural practices (Wreford et al., 2017). Higher-level efforts, such as efforts at the G20 or in the United Nations, particularly with the Sustainable Development Goals, have sought to improve the coherence of a broad set of policy areas.

Yet higher policy plans do not always trickle down to consistent signals to farmers. Existing legislation is not always easy to change, and are not always accounted for in new plans. Local political constraint may make such change difficult. Improved consistency will also not always pass a cost-benefit ratio; it may prevent actions that would enable significant progress towards one objective with a limited cost on the other objective. In extreme cases, it may result in policy immobility: any new policy may be impossible to design if all have to move together.

A pragmatic approach can still be applied on a case-by-case basis. Acknowledging that not all these incoherencies may be practically managed at every stage of the process, governments should focus on major policy inconsistencies or “bottlenecks” (e.g. OECD, 2017c), that significantly prevent progress towards agriculture productivity and sustainability, and set up mechanisms to avoid introducing more inconsistencies.

This requires first to identify and second possibly gauge the importance of policy inconsistencies. The food and agriculture productivity-sustainability framework is ideally set to find out the key inconsistencies, as evidenced in this chapter. Several types of analytical tools can be used to assess the strength of identified incoherencies, such as farm level simulations (Lankoski et al., 2018), sector level models like the Policy Evaluation Model (Henderson and Lankoski, 2019), computational general equilibrium models (see, e.g. OECD, 2017c in the case of the Land-Water-Energy nexus), or ex post methods like Fuzzy set Qualitative Comparative Analysis (QCA, see OECD, 2019b). Each of these approaches has advantages and drawbacks, and would benefit from complemented evidence from available literature or other analytical studies.

Governments should then seek to remove identified major policy incoherencies and ensure that new ones are not introduced. Removing incoherencies can take time and may require extensive stakeholder consultations, governance and institutional changes and a well-set plan (e.g. Gruère and Le Boëdec, 2019). Avoiding new inconsistencies will involve more co‑ordination, considering agriculture among other objectives at a higher level, ensuring that policy evaluations are well defined, and introducing coherency principles in agriculture policymaking. This may encompass each new programme passing a coherency test.

Main knowledge gaps

Assessing the cost of major policy incoherencies or benefit of policy coherencies would help raise the awareness of policymakers on the issue. This requires comparing the welfare impacts of alternative scenarios with or without incoherencies, but this has not been done yet consistently, at least in the case of agriculture.

Studies on context-dependent policy incoherencies are lacking. For instance analysing how much to apply the subsidiary principle in agriculture policies, or whether to embed or set independent policies on agriculture and environment (or agriculture and innovation) would be useful.

There have been studies on the political economy of reform, particularly in the case of agriculture or environmentally harmful subsidies, but other such studies on how to address other constraints towards increased coherency would be helpful. For instance, studies on how to remove agriculture policy exemptions that are no longer justified.

Recommendations to minimise policy incoherence

Assess and target the main policy incoherencies.

• Review the main policies to ensure to detect significant policy incoherencies, using the set of tools described above, from the food and agriculture productivity-sustainability framework to more quantitative tools, and looking at the different types of policy incoherencies.

• For identified major inconsistencies, introduce a plan to separate and reduce the misaligned signal from the other parts of the policies (decoupling). This may take time and require extensive stakeholder consultations, changes in governance or institutions, and an accepted reform sequencing.

Ensure that no new incoherencies are introduced

• In the case of innovation, agriculture or environmental policies:

  • Introduce a rapid ex ante assessment, with deeper analysis only if needed. An evaluation grid listing the major policy incoherencies could be used at first to detect potential problems, followed by a deeper analysis on a case-by-case basis, using the above-described tools.

  • Review the design of policy evaluations and incorporate the objective of assessing coherence therein. Evaluation should measure the outcome and not just the degree of implementation. The proposed coherence assessment could include a number of elements and ensure that unexpected and unwanted effects on agriculture sustainability or productivity are rapidly mitigated.

• In the case of other relevant policies, encourage lawmakers to open their views on the indirect effects of related policies on agriculture. Ensure that any agriculture exemption does not affect the sector’s long-term productivity and sustainability.

Encourage synergistic policy plans, build policy bridges and support win-win policy solutions

• Consider cohesion in high-level policy plans whereby agriculture is not left-out nor special.

• When reviewing agriculture policy and institutional governance, consider bridging out to non-agriculture objectives, including rural development, resource and environment, nutrition goals and encompassing the entire supply chain and not just production.

• Seek solutions that can contribute to productivity and sustainability objectives. In particular, orient the agriculture innovation system towards synergistic solutions for the sector.

References

Gruère, G. and H. Le Boëdec (2019), “Navigating pathways to reform water policies in agriculture”, OECD Food, Agriculture and Fisheries Papers, No. 128, OECD Publishing, Paris, https://doi.org/10.1787/906cea2b-en.

Henderson, B. and J. Lankoski (2019), “Evaluating the environmental impact of agricultural policies”, OECD Food, Agriculture and Fisheries Papers, No. 130, OECD Publishing, Paris, https://doi.org/10.1787/add0f27c-en.

Ignaciuk, A. and C. Boonstra (2017), “Synergies and trade-offs between agricultural productivity and climate change mitigation and adaptation: Netherlands case study” (brochure), OECD, Paris, www.oecd.org/tad/sustainable-agriculture/NE-case-study-final.pdf.

Lankoski, J., A. Ignaciuk and F. Jésus (2018), “Synergies and trade-offs between adaptation, mitigation and agricultural productivity: A synthesis report”, OECD Food, Agriculture and Fisheries Papers, No. 110, OECD Publishing, Paris, https://doi.org/10.1787/07dcb05c-en.

Lankoski, J., et al. (2018), “Modelling policy coherence between adaptation, mitigation and agricultural productivity”, OECD Food, Agriculture and Fisheries Papers, No. 111, OECD Publishing, Paris, https://doi.org/10.1787/ee62a5ae-en.

OECD (2019a), Land use, climate, ecosystems and food: Aligning policies in the land-use sector, OECD Publishing, Paris (forthcoming).

OECD (2019b), “Exploring the Linkages between Policies, Productivity and Environmental Sustainability”, OECD Publishing, Paris (forthcoming).

OECD (2017a), OECD Environmental Performance Reviews: New Zealand 2017, OECD Environmental Performance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9789264268203-en.

OECD (2017b), Improving Energy Efficiency in the Agro-food Chain, OECD Green Growth Studies, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264278530-en.

OECD (2017c), The Land-Water-Energy Nexus: Biophysical and Economic Consequences, OECD Publishing, Paris, https://doi.org/10.1787/9789264279360-en.

OECD (2015), Drying Wells, Rising Stakes: Towards Sustainable Agricultural Groundwater Use, OECD Studies on Water, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264238701-en.

OECD (2011a), OECD Green Growth Studies: Food and Agriculture, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264107250-en.

OECD (2011b), Towards Green Growth, OECD Green Growth Studies, OECD Publishing, Paris, https://doi.org/10.1787/9789264111318-en.

Wreford, A., A. Ignaciuk and G. Gruère (2017), “Overcoming barriers to the adoption of climate-friendly practices in agriculture”, OECD Food, Agriculture and Fisheries Papers, No. 101, OECD Publishing, Paris, http://dx.doi.org/10.1787/97767de8-en.

Notes

← 1.  OECD (2019b) finds that the use of cross-compliance mechanisms, which aim to link the two types of regulation, do not appear to have a significant negative impact on productivity in Europe.

← 2.  Policy customisation is certainly beneficial especially when considering issues that vary widely from one region to the other. However, this heterogeneity may become problematic when it affects the overall productivity and sustainability of agriculture.

← 3.  Genetically modified herbicide resistant varieties are regulated in Europe, while conventionally bred herbicide resistant varieties, which can lead to similar outcomes, are not subject to similar scrutiny. They are regulated but not under the same regulation.