Systemic Thinking for Policy Making

5. A Concerted Approach to Biodiversity, Water, Food, and Trade

Katia Karousakis

Guillaume Gruère

Jean Chateau

Marcel Adenauer

Santiago Guerrero

Petr Havlik

Ulf Dieckmann

Taher Kahil

David Leclere

Elena Rovenskaya

Hugo Valin

Yoshihide Wada

Abstract

IIASA and OECD’s capacities to analyse the biodiversity, water, food, and trade systems are illustrated. Studies that would benefit from integration of their approaches, data, and tools are suggested. (1) Globally consistent national efforts for biodiversity. IIASA’s statistical and empirical approaches combined with OECD’s policy expertise to build scenarios of policy efforts across countries. (2) Exploring the role of trade in climate risks resilience to identify trade policy strategies combined with robust land use strategies capable of mitigating the most adverse impacts for food security and the environment. (3) National policies for SDG-compatible development pathways compatible with the Paris Agreement. Short-term/medium-term focus (OECD) and long-term modelling capacities (IIASA); ex-post policy assessments (OECD) and foresight and sustainable development pathways (IIASA); and bottom-up approaches with very detailed representation of the supply side of agricultural and forestry sectors together with related environmental impacts (IIASA) plus top-down approaches for economic impact assessment (OECD).

Introduction

Systems analysis and systems-based strategies can examine critical, interlinked, and complex global issues, evaluate implications, and inform policy options and guide decision‑making processes. Systems analysis and systems-based strategies draw on innovative methodologies, models, and tools for research and policy analysis.

The value-added of these approaches is crucial in areas such as biodiversity, water, food, and trade, where comprehensive integrated approaches are needed to evaluate first-order and second-order effects of policies, including on the natural and socioeconomic systems, and their feedback loops. Understanding potential interactions, and the synergies and trade-offs across these, can inform political and policy issues. This is particularly relevant, for example, in the context of the Convention on Biological Diversity (CBD), where the 2011-2020 Strategic Plan for Biodiversity including the Aichi Biodiversity Targets, are due to expire, and a post-2020 framework will be needed. The CBD COP 14 Decision CBD/COP/14/L.30 on Scenarios for the 2050 Vision for Biodiversity “invites the scientific and other relevant communities working on scenarios and related assessments to take into account the following issues which are relevant to the development of the post-2020 global biodiversity framework”, including: the broad range of underlying drivers and systemic and structural issues related to biodiversity loss; combinations of policy approaches at multiple scales and under different scenarios; potential synergies, trade-offs, and limitations to identify effective policies and measures to enable the achievement of the Sustainable Development Goals; and identification of short- and medium-term milestones in pursuit of the long-term goals. The usefulness of such scenario and modelling analysis is also recognised by international initiatives such as the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) (2016).

Policy coherence is also an increasingly prevalent message at the national level. For instance, under an original framework developed in response to agriculture ministries of the G20 countries, the OECD has been asked by agriculture authorities in twelve OECD and non-OECD countries to conduct policy reviews covering all policies affecting agricultural innovation, productivity, and sustainability (from education to taxation and environmental regulations, OECD, 2019c). The Republic of Korea also supported an OECD water policy dialogue that focused on policies covering the land‑water‑food‑energy nexus, to help guide their new water law and water governance in a coherent manner (OECD, 2018).

Illustrations of the benefit of systemic approaches

OECD and IIASA have already applied integrative approaches covering different parts of the biodiversity, water, food, and trade system. In the context of biodiversity and water, systems analysis has been used in the OECD Environmental Outlook (OECD, 2012) by combining ENV-Linkages, the CGE model of the OECD Environment Directorate, with IMAGE, the Integrated Model to Assess the Global Environment modelling framework of the Netherlands Environmental Assessment Agency (PBL). This analysis was undertaken to project business-as-usual scenarios of the state of the world in 2050, and various policy simulations (e.g. increase in terrestrial protected area coverage; climate-change mitigation scenarios with reduced impact on biodiversity). More recently, for the report Land‑Water-Energy Nexus: Biophysical and Economic Consequences (OECD, 2017a), PBL and OECD modelling teams collaborated to deepen the integration of the two models in a way that could be promising for an eventual linking between OECD and IIASA modelling tools. This report dealt with interconnections between scarce resources by highlighting the nexus between land, water, and energy (the LWE nexus). The report also provided projections for the biophysical and economic consequences of nexus bottlenecks until 2060, highlighting that while the LWE nexus is essentially local, there can be significant large-scale repercussions in vulnerable regions, notably on forest cover and in terms of food and water security.

Models and scenarios are increasingly promoted to support various stages of the policy cycle - from framing (via quantification of explorative scenarios) through intervention design (via target seeking and policy screening scenarios) to evaluation - in particular in the context of biodiversity, water, food, and trade (IPBES, 2016) and across multiple scales (Rosa et al., 2017). In addition to contributions to major IPBES reports on related methodological issues (IPBES, 2016), IIASA recently led two innovative initiatives. First, in the “Bending the curve” initiative (Leclere et al., 2018), IIASA coordinated an international effort to couple four global land use models to ten global biodiversity models but also design and quantify new scenarios exploring how more ambitious targets for biodiversity (reversing the decline in global biodiversity indicators induced by land use change) could be achieved in the 21st century (Leclere et al, submitted). Besides extending the conservation efforts, the role of technological progress in agriculture, international trade liberalisation, human diets, and food waste reduction was considered. This initiative involved multiple IIASA models - the global agricultural and forest sector model, the Global Biosphere Management Model (GLOBIOM), and global terrestrial biodiversity models, INSIGHTs and cSAR - to help prepare the post-2020 biodiversity framework. Second, IIASA developed new modelling tools to look at the Land, Water and Energy (LWE) nexus, to tackle spatially explicit analysis of hotspots of nexus issues (Byers et al., 2018). These modelling tools allow for better targeting of future research and policy intervention, going beyond more traditional analysis that remains on a rather aggregated scale.

Systems analysis was also undertaken in the report “Global Material Resources Outlook to 2060: Economic Drivers and Environmental Consequences” (OECD, 2019b). The analysis presented global projections of materials use and their environmental consequences, including on land use and acidification, eutrophication, and freshwater, and provided a quantitative outlook to 2060 at the global, sectoral, and regional levels for over 60 different materials (biomass resources, fossil fuels, metals, and non-metallic minerals). The report explained how economic structural changes and technological progress help in determining a partial decoupling of economic growth and materials use, and assessed how the projected shifts in economic sectors and regional economic activity explain changes in the use of different materials. The projections included both primary and secondary materials used for metal production, which provided a deeper understanding of what drives the synergies and trade-offs between extraction and recycling.

Recent OECD reports have also used modelling to explore the sector-specific links between agriculture, food, water, climate change, and trade. Simulations using the International Food Policy Research Institute’s (IFPRI) IMPACT model were used to look at scenarios for climate change adaptation options in agriculture (Ignaciuk and Mason-D'Croz, 2014) and to explore the global impacts of water stress in three water risk hotspot regions of Northeast China, Northwest India, and the Southwest United States on national and international agriculture production and prices (OECD, 2017b) with and without climate change.

Ongoing OECD work using a set of different models, including the IIASA GLOBIOM model, is exploring the economic and trade consequences of agriculture engaging in GHG mitigation internationally and in different countries. Additionally, the recent report of the OECD to the G7 highlights the business case for action on biodiversity, which shows some of the direct interconnections between the economic and environmental systems. Specifically, “Business impacts and dependencies on biodiversity translate into risks to business and financial organisations, including ecological risks to operations; liability risks; and regulatory, reputational, market and financial risks.” (OECD, 2019a).

The issue of systemic risk is of particular importance nowadays when global trade networks are becoming more and more interconnected. Countries and regions become exposed to risks of undersupply of food, energy, or other critical resources, which can be caused by disturbances along supply chains happening in other parts of the world. Recent IIASA publications quantified the systemic risk in global trade networks (Gephart et al., 2016; Klimek et al., 2015) and explored whether diversification as a means to reduce risks trades off with long-term turnover growth (Kharrazi et al., 2017).

Systemic analyses may also be useful to conduct micro scale ex-ante assessments of the impacts of specific policies. For instance, recent work has explored the impact of specific types of core agriculture subsidies on agriculture productivity, mitigation, and adaptation in Finland (Lankoski et al., 2018). Farm‑level and partial equilibrium models were used to explore how agricultural policies affect GHG emission, nutrient balance, water quality, and indicators of biodiversity at the farm level (Henderson and Lankoski, 2019).

OECD and IIASA are also collaborating on capacity development in the area of water. In 2018, a project to assist policymakers in the EU Eastern Partnership (EaP) countries to develop or update a national water strategy aligned with the EU’s Water Framework Directive and other official documents was implemented. Policy makers from Belarus, Georgia, Moldova, and Ukraine participated in the stakeholder workshop held at IIASA, in which they acquired knowledge and practical experience in using qualitative systems analysis and foresight to develop a comprehensive water strategy, which recognises the systemic and cross cutting nature of the water sector.

There are also several examples of systemic approaches to water-related issues at IIASA. The study “A Continental-Scale Hydro-economic Model for Integrating Water-Energy-Land Nexus Solutions” (Kahil et al., 2018) presents a new bottom-up large-scale hydro‑economic model, the Extended Continental-scale Hydro-economic Optimisation model (ECHO). ECHO works at the sub-basin scale over a continent and integrates a detailed representation of local hydrological and technological constraints with regional and global policies. Results of this framework provide critical assessments of future investment needs in both supply- and demand-side water management options, economic implications of contrasting future socioeconomic and climate change scenarios, and the potential trade-offs among economic and environmental objectives. In another study, “Global assessment of water challenges under uncertainty in water scarcity projections” (Greve et al., 2018), IIASA applied a probabilistic approach to assess global water scarcity projections following feasible combinations of Shared Socioeconomic Pathways (SSPs) and Representative Concentration Pathways (RCPs) for the first half of the twenty-first century. The results showed that median water scarcity and the associated range of uncertainty are generally increasing worldwide, including for many major river basins. On the basis of these results, a general decision-making framework has been developed to enhance policymaking by identifying representative clusters of specific water policy challenges and needs. Finally, the study “Robust management of multipurpose reservoirs under hydro-climatic uncertainty” (Ortiz-Partida et al., 2019) focused on evaluating robust operation of multipurpose reservoirs under uncertain hydro-climatic conditions. A novel two-stage stochastic optimisation model was formulated that maximises regional economic benefits from reservoir deliveries and integrates stochastic inflows into a water allocation system with multiple demands and various physical and institutional constraints. The model derives a robust set of monthly reservoir releases that perform well under a wide range of hydro-climatic conditions. This model has been applied to the Big Bend Reach of the Rio Grande/Bravo, a transboundary river basin of high importance for the United States and Mexico.

Vision for the integrated OECD-IIASA systemic analysis

The previous examples showcase the capacity of IIASA and OECD to carry out systemic analysis independently. However, many other potential studies would benefit from integration of approaches, data, and tools available at the respective institutions. This section elaborates on three of them.

Globally consistent national efforts for biodiversity in the post-2020 framework

Approaches such as the “Bending the curve” initiative provided insights into the formulation of the post-2020 framework for biodiversity, such as what targets might be achievable and what pathways might reach them. However, models and scenarios can be used to support policy decisions on a shorter time scale. While targets based on biodiversity outcomes (e.g., Mace et al., 2018) might be adopted in the post-2020 framework – in an analogy to the +2 Celsius degree limit in the case of climate change – it will most likely be complemented by targets on conservation actions (e.g., targets on the extent of protected areas, or of ‘other effective area based conservation measures’ OECMs) and supply‑side or demand-side measures (e.g., sustainably closing agricultural yield gaps or promoting diet shifts). In the post-2020 framework, IIASA models could be used to estimate the extent to which on-going efforts should contribute to the action targets and to the overarching goals (i.e.  biodiversity outcomes). Such modelling could be used to assess the efforts of various countries (e.g. as was done by Forsell et al., 2016, for land based climate mitigation), but this would best perform when informed by current and likely medium-term efforts. The data that the OECD has accumulated on policy areas relevant to the sustainable use of natural resources, including biodiversity, such as the PINE (Policy Instruments for the Environment) database, could be pivotal in making credible short-term scenarios related to progress towards realising post-2020 global biodiversity objectives. Statistical and empirical approaches can be used in conjunction with OECD expertise on policies to build scenarios of policy efforts across countries in the course of the next two or three decades.

Exploring the role of trade in climate risks resilience

Climate change is expected to impact countries’ relative comparative advantage in agriculture, potentially altering global production patterns and trade flows, giving rise to new hotspots of agri-environmental pressures and posing sustainability challenges. However, although climate change impacts on agriculture and the food system have started to be reported in many places, the magnitude of future impacts and their location are still not precisely known, due to uncertainties related to future temperature and precipitation patterns; to the way the environmental system will respond; and the extent to which farmers will be able to adapt. International co-operation through intensified and diversified trade relations could facilitate adaptation and help to increase the resilience of global food markets. At the same time, intensified trade could increase the exposure of countries and regions to risk triggered by production shortages in distant localities through new independencies. For this reason, it is necessary to identify effective trade policy strategies combined with robust land use strategies capable of mitigating the most adverse impacts on food security and the environment of future climate and extreme events.

A modelling framework could be developed to address this problem, taking advantage of IIASA’s experience in integrated assessment modelling and OECD’s research and policy insights. IIASA has developed tools to support decisions and derive scenarios on land use change, including under climate change, notably GLOBIOM, representing the agricultural (crops, livestock) and forestry sectors, including a representation of water availability for irrigation using the ECHO hydro‑economic model. Such tools represent agricultural markets with bilateral trade and explicitly account for trade barriers, and would more precisely characterise the most resilient trade policy approaches in the face of climate change, using different metrics, such as economic welfare, food security, GHG emissions, water stress, and indicators related to the SDGs. Policy insights from OECD work on the role of market integration on growth and employment, the impacts of climate change on international trade, the quantification of non-tariff measures, climate change adaptation in agriculture, the environmental impacts of agricultural policies and agri-environmental indicators would better inform the model and increase its relevance and capacity for policy design.

IIASA has experience in expanding GLOBIOM to stochastic analysis to explicitly account for uncertainty in its inputs (precipitation, temperature regimes, etc.) and examine risks of extreme events. Such an approach could be expanded using the quintile risk measures, co-dependent risks, and risk evolution over time approaches. Advanced statistical methods including those based on machine learning are relevant for this purpose and would allow trade policy options robust to different future possible climatic conditions to be identified, and emphasise no-regret pathways. Trade policy options to be tested would include both tariff and non-tariff measures (NTMs). NTMs, which include regulatory frameworks and standards - including sanitary and phytosanitary standards (SPS) - are much more difficult to estimate and reduce, although they play a big role in defining trade flows. The OECD has developed a methodology to estimate the trade impacts of NTMs that can be used in combination with more standard methods to incorporate trade barriers and assess both. Thus, the proposed modelling framework should be able to use reliable estimates of tariff and non-tariff measures, as well as realistic country and regions development paths. Eventually, by conducting an extensive analysis of possible combinations of trade policies in different parts of the world, this modelling exercise would be able to reveal an “optimal” level of economic/trade connectivity, which would ensure highest level of food security globally; elucidate trade‑offs in terms of food security between regions; and minimise the environmental impacts.

National policies for SDG-compatible development pathways compatible with the Paris Agreement

Climate change stabilisation “well below 2 degrees” as stipulated in the Paris Agreement represents an unprecedented challenge for humanity. According to the IPCC Special Report on 1.5 degrees (2018), global emissions would need to be reduced by 45% by 2030 and carbon neutrality would need to be achieved by 2050. This cannot be left as a project for isolated country participation, but rather all OECD countries should contribute to maintain chances of success. This challenge would uniquely combine some of the complementarities between OECD and IIASA such as short-term/medium-term focus (OECD) and long-term modelling capacities (IIASA); ex-post policy assessments (OECD) and foresight and sustainable development pathways (IIASA); and a bottom-up approach with very detailed representation of the supply side of agricultural and forestry sectors together with related environmental impacts (IIASA) and a top-down approach for economic impact assessment (OECD).

OECD and IIASA have started collaborating on GHG mitigation in the agricultural sector around the AGLINK-COSIMO and GLOBIOM models. Furthermore, SDG 12 (Responsible consumption and production) is being increasingly recognised as one of the major prerequisites to achieve ambitious sustainability targets for the land, water, and energy nexus (Obersteiner et al., 2016; van Vuuren et al., 2015). However, the broad economic aspects of such transitions (such as distributional impacts across regions and sub‑sectors of the value chain within the food system, or employment effects) are not well captured. IIASA and OECD have large and complementary experience in modelling future trajectories and impact of policies with respect to LWE nexus issues.

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