A new report by Foundation Earth and Watershed Media entitled Biosphere smart agriculture in a true cost economy calls on the World Bank (and other development banks) to assess the full ecological impact of agricultural development projects before providing loans, in order to account for the true cost of production.

For the report’s authors, a ‘True Cost Economy’ is not so much about placing a financial value on externalities as about creating a holistic economy that operates within the earth’s carrying capacity, especially by recognising and avoiding ecological impacts.

After cataloguing the major negative impacts of current intensive agricultural methods, the authors conclude that we need a major shift away from industrial agriculture towards what they call ‘biosphere smart agriculture’. They point out the high probability that the planet will warm by 4°C this century and emphasise that the high greenhouse gas emissions, soil degradation, species loss, overuse of water and pollution of the air, soil, rivers and oceans associated with food production is clearly not sustainable.

This call for change comes as the World Bank’s Environmental and Social Safeguard Policies and 3-Year Agricultural Action Plan are under review. Climate-Smart Agriculture, a multi-billion dollar programme linked to carbon trading and taken up enthusiastically by the World Bank, only considers a limited range of issues and tends to encourage the development of monocultures – particularly harmful to biodiversity – instead of diverse agroecological systems.

The report shows that foods produced by industrial agriculture are highly damaging to public health. The widespread switch to grains, cereals and oilseed crops that has occurred within the Western diet in recent decades has resulted in a huge increase in high-calorie processed foods rich in salt, fats and sugars.

Such systems are also economically damaging, say the report’s authors, with $500 billion spent on subsidies every year to prop up large intensive systems at the expense of small farmers.

The World Bank, for example, prioritises large-scale infrastructure development such as railways, dams, roads and ports in order to open up rural regions to intensive export-based farming. But these often lead to the introduction of ill-conceived irrigation projects. The authors cite a study from the University of California Irvine, which found that 21 of the world’s 37 largest aquifers are beyond “sustainability tipping points”.

Technology-based solutions such as ‘precision farming’ and genetic modification have been lauded as the best way to feed the world. Yet, as this report claims, “This approach is unlikely to alleviate poverty and will more likely dangerously exacerbate the stresses on planet’s life support boundaries” (p.7). While intensive systems using advanced technology and chemical inputs often increase yields, this is only a short-term gain. Longer term, farmers will find their soil depleted, water polluted, biodiversity (including important pollinators) lost and yields declining again as a result.

Instead, the report suggests that an ecological farming approach, which prioritises small-scale projects and farmers, will most effectively address the issues of adapting to climate change, building soil fertility, growing healthy food and creating jobs and food security. Small landholders can produce more food with fewer resources; in fact most of the food in the so-called developing world is still produced on 500 million smallholdings.

As an example of how the World Bank could increase its impact through re-focusing its funding, the authors cite a study that claims a loan approved to Senegal in 2014 for irrigation infrastructure will lift only 3,000 people out of poverty by 2050. But if the loan were implemented with a focus on low-input agrocecology and extensive farmer training then 80,000 more people would rise out of poverty. The report also suggests that loans be given to cooperatives, making it easier for small farmers to benefit.

This alternative, ‘smart agriculture’ approach requires a holistic way of working. Simply combining the three silos of poverty, agriculture and climate fails to consider much wider planetary life-support systems. These systems include freshwater use, land system change, biological diversity, chemical dispersion, climate change, ocean acidification, biochemical flows, stratospheric ozone depletion, modified organisms and air pollution.

The report claims that multilateral development banks must identify a project’s externalities, such as its impact on water, soil and public health, and ensure that only the most ecologically sensitive and socially positive production methods are financed. There should be a mandatory disclosure of these external impacts within loan risk analysis, and this should be third party certified.

But how would these externalities be identified and valued? Without putting a financial cost on all externalities it may be impossible for financial institutions to calculate the full impact of their lending decisions.

Another challenge is to persuade institutions such as the World Bank to use a comprehensive range of externalities when making assessments. This really needs to include human health as well as social and cultural impacts, aspects not considered in the ‘Biosphere smart agriculture’ report.

Despite such challenges, the move towards a true cost economy is essential for enabling agriculture to become more sustainable and ecologically sound. This report is principally aimed at the World Bank but the basic concept needs applying not only to a wider range of issues but also to a wider range of lending organisations. These can include all international development banks and also those of our high street banks that lend to individual farmers.

Photograph: CIFOR

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