Governments in many countries are elevating their environmental goals for the agriculture and food sector. For instance, several major economies have adopted net zero greenhouse gas (GHG) emission or zero biodiversity loss targets, including in the agriculture, forestry and other land use (AFOLU) sectors. In an interconnected world, the unilateral adoption of environmental policies for agriculture can reduce the producers’ competitiveness and induce pollution leakage.

Certain policies could improve agriculture’s environmental performance while maintaining the benefits of global markets. “Direct” environmental policies, such as market-based instruments or regulations, are rapidly effective in limiting environmental impacts but may require additional complementary policies to limit their potential competitiveness and leakage impacts. And alternative policies acting on agricultural supply and demand, or through private sector engagement, could limit competitiveness and leakage impacts but may require time to be environmentally effective.