Natural Capital Impacts in Agriculture SUPPORTING BETTER BUSINESS DECISION-MAKING Natural Capital Impacts in Agriculture SUPPORTING BETTER BUSINESS DECISION-MAKING The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations (FAO) concerning the legal or development status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. The mention of specific companies or products of manufacturers, whether or not these have been patented, does not imply that these have been endorsed or recommended by FAO in preference to others of a similar nature that are not mentioned. The views expressed in this information product are those of the author(s) and do not necessarily reflect the views of FAO. All rights reserved. FAO encourages the reproduction and dissemination of material in this information product. Non-commercial uses will be authorized free of charge, upon request. Reproduction for resale or other commercial purposes, including educational purposes, may incur fees. Applications for permission to reproduce or disseminate FAO copyright materials, and all queries concerning rights and licenses, should be addressed by e-mail to [email protected] or to the Chief, Publishing Policy and Support Branch, Office of Knowledge Exchange, Research and Extension, FAO, Viale delle Terme di Caracalla, 00153 Rome, Italy. © FAO, June 2015 About this document This project is led by Nadia El-Hage Scialabba, Climate, Energy and Tenure Division, with the generous financial support of the Federal Republic of Germany. It builds on knowledge gained through the Food Wastage Footprint: Full-Cost Accounting (FAO, 2014). With this study, FAO aims to establish the basis for the development of the Food and Beverage Sector Guide of the Natural Capital Protocol currently in preparation. Acknowledgements FAO wishes to thank Trucost staff Christopher Baldock, Elisabeth Burks and Richie Hardwicke for the modelling work, as well as FAO colleagues Francesco Tubiello and Jippe Hoojeveen for their expert contributions. This project products are available at: http://www.fao.org/nr/sustainability/natural-capital 2 Natural Capital Impacts in Agriculture SUPPORTING BETTER BUSINESS DECISION-MAKING CONTENTS Exective Summary ........................................................................................................................................ 5 Key Terms ..................................................................................................................................................... 9 Background ................................................................................................................................................. 10 Natural Capital Protocol ......................................................................................................................... 11 What is the NCP? ................................................................................................................................ 11 What are the Sector Guides?.............................................................................................................. 11 Business Engagement ......................................................................................................................... 13 Natural Capital Impacts in Agriculture ................................................................................................... 13 Phase 1: Materiality Assessment ........................................................................................................ 13 Phase 2: Trade-offs of Different Farming Systems ............................................................................. 15 PHASE 1: Materiality Assessment ............................................................................................................... 16 Methodology .......................................................................................................................................... 16 Scope .................................................................................................................................................. 16 Approach ............................................................................................................................................ 17 Quantification ................................................................................................................................. 17 Valuation......................................................................................................................................... 18 Key Findings ............................................................................................................................................ 21 Total Natural Capital Costs ................................................................................................................. 21 Crops ............................................................................................................................................... 21 Livestock ......................................................................................................................................... 30 Natural Capital Intensities .................................................................................................................. 41 Crops ............................................................................................................................................... 41 Livestock ......................................................................................................................................... 43 Regional Natural Capital Intensities ............................................................................................... 45 PHASE 2: Trade-offs of Different Farming Systems .................................................................................... 52 Value Drivers .................................................................................................................................. 52 Production costs ............................................................................................................................. 52 Overview ......................................................................................................................................... 53 Cattle Farming - Brazil ................................................................................................................................ 54 Rice Farming - India .................................................................................................................................... 59 3 Natural Capital Impacts in Agriculture SUPPORTING BETTER BUSINESS DECISION-MAKING Soybean Farming - United States of America ............................................................................................. 64 Wheat Farming - Germany ......................................................................................................................... 70 References .................................................................................................................................................. 76 Appendix I: Natural Capital Protocol .......................................................................................................... 87 Appendix II: Natural Capital Intensities per Million USD Revenue ............................................................. 88 Appendix III: Trucost’s Environmentally Extended Input-Output (EEIO) Model ........................................ 93 Appendix IV: Key Concepts Related to Natural Capital Valuations ............................................................ 97 Appendix V: Greenhouse Gas Emissions Valuation Overview ................................................................. 100 Appendix VI: Air Pollutant Valuation Overview ........................................................................................ 103 Appendix VII: Eutrophication Valuation Overview ................................................................................... 106 Appendix VIII: Ecosystem and Human Toxicity from Pesticides overview ............................................... 109 Appendix IX: Water Consumption Valuation Overview ........................................................................... 112 Appendix X: Land Use Change Valuation Overview ................................................................................. 114 Appendix XI: Greenhouse Gas Emissions from Land Clearing Overview ................................................. 117 4 Natural Capital Impacts in Agriculture SUPPORTING BETTER BUSINESS DECISION-MAKING EXECUTIVE SUMMARY Global food production faces a challenging landscape of rising input costs, climate change, health concerns, social inequality, resource competition and ecosystem degradation. With a global population set to reach 9 billion by 2050, do we fully understand the true costs and benefits associated with crop and livestock production, their different management practices, or the options for increasing productivity? In many countries, there is a worrying disconnect between the retail price of food and the true cost of its production. As a consequence, food produced at great environmental cost in the form of greenhouse gas emissions, water pollution,