Organisation for Economic Cooperation & Development

Sustainable Management of Water Resources and Quality in Agriculture:

Policy Issues and ChallengesKevin Parris

Trade and Agriculture Directorate, OECD, Paris, France Email: kevin.parris@oecd.org

Presentation to the Agricultural Economics and Social Sciences Seminar Series 2012, Global Challenges to Food Security, Lecture Hall 11, Wednesday 6 June 2012, 12:00 – 13:30,

Universitat Hohenheim, Stuttgart‐Hohenheim, Germany

www.oecd.org/agriculture/water

www.oecd.org/water

OECD AND ITS GLOBAL PARTNERS

Membership has expanded over OECD’s 50 year history to embrace 34 countries and the European Union: AustraliaAustriaBelgiumCanadaChileCzech RepublicDenmark

EstoniaFinlandFranceGermanyGreeceHungaryIceland

IrelandIsraelItalyJapanKoreaLuxembourgMexico

NetherlandsNew Zealand NorwayPolandSloveniaPortugalSlovak Republic

SpainSweden Switzerland TurkeyUnited KingdomUnited States

OECD is currently in accession talks with: Russia

and enhanced engagement with G20 countries, including:

Brazil, China, India, Indonesia, South Africa

OECD VALUE-ADDED

Comparative and consistent data and projections

Objective policy analysis and advice using economic tools

Cross-cutting research, cross several OECD departments, including water, agriculture, and climate change

Bridge between academic research and policy communities

Interactive dialogue and sharing experiences among Member countries and with civil society stakeholders

Engagement of non-OECD countries in OECD activities, increasingly with G20

Public dissemination and communication of results

Resource use: major share of water withdrawals

Quality: major share of nutrient, pesticide, soil sediment pollution

Energy: irrigation pumping and link to bioenergy feedstock

Droughts and floods: damage to agriculture but also ecosystem service

Ecosystems: can have positive and negative impacts

Climate change: vulnerability to change and variability

Agriculture and water linkages

Policies, Markets,

Environment

AgricultureDriving Forces

State of Water Systems

Policies Agricultural

Commodity support, irrigation support

Agri-environmental Payments for manure storage

Environmental Water pricing policies

MarketsCommodity markets,

economy, technology

EnvironmentSoils, weather,

climate change

Farm systems ‘Conventional’, Integrated, Irrigated, Organic Farm practices Nutrients and pesticide application, tillage and irrigation practices

Farm input use Nutrients, water pesticides, energy

Farm outputsCrops, livestock, land use and cover

Streams

Rivers

Lakes

Wells

Aquifers

Estuaries

Coastal waters

Deep seas

5

Linkages between policies, agriculture and water systems

Human health

Social uses Swimming, visual,

Agriculture, fisheries, industry

EnvironmentFreshwater and marine ecosystems

Agricultural impacts on water

systems, with implications for:

Higher average world commodity prices

% change in average real prices 2001-10 to 2011-2020

-10

0

10

20

30

40

50

60

Source: OECD Agricultural Outlook 2011

Rising agricultural and fish production

60

70

80

90

100

110

120

130

140

150

160

2000 2005 2010 2015 2020

N.America L.America W.EuropeE.Europe&C.Asia N.Africa&M.East S.S.Africa

Index 2004-06 Source: OECD Agricultural Outlook 2011

Did Donald Rumsfeld (former US Secretary of Defence )

have something important to say about climate change?

“There are known known's. These are things we know that we know.

There are known unknowns. That is to say, there are things that we know we don't know.

But there are also unknown unknowns. There are things we don't know we don't know.”

Climate change (CC), agriculture and water

Many OECD countries reporting growing incidence, severity and costs of floods and drought for agriculture, with implications for both water resources and quality

In response countries beginning to develop mitigation and adaptation strategies, for example:

improve water use efficiency and water storage;

alter farm practices and systems to adapt to climate change;

change management practices to slow water flows across farmland to protect urban areas

Increased incidence and severity of flooding could mobilise sediments, associated contaminants, and exacerbate agricultural water pollution

More severe droughts likely to increase water stress in areas of scarcity and may reduce pollutant dilution and lead to increasing toxicity problems

Overall task of achieving water policy objectives in agriculture likely to be more difficult under CC, but further research needed

Global challenges for agriculture & water resourcesKey drivers impacting water resource use by agriculture:

World water withdrawal projections +55% by 2050

World population from current 7 billion to 9 billion by 2050

Global food demand from 2000 baseline by +100% 2050

Dietary habits towards more meat and dairy products

Bioenergy production from agricultural feedstocks

Demand to meet environmental and social needs

Land and water constraints impacted by climate change

Limits and potential to improve water use productivity in agriculture

Major new irrigation infrastructure development difficult, because of financial and physical limits

Potential for agriculture to recycle wastewater, but desalinated water costly

High priority to improve irrigation productivity and water productivity of rain-fed systems

Productivity performance varies, partly reflecting different policy reform paths

Source: OECD Environmental Performance of Agriculture At a Glance 2012 forthcoming

Summary of cost recovery rates for water services to agriculture in OECD countries (c.2009)

 100% recovery of Operation and Maintenance (O&M) and Capital Costs (CC):

Austria; Denmark; Finland; New Zealand; Sweden; United Kingdom

 100% recovery of O&M Costs, but less than 100% recovery of CC:

Australia, Canada, France, Japan, United States  Less than 100% recovery of O&M and CC:

Greece; Hungary; Ireland; Italy; Mexico; Netherlands; Poland; Portugal; Spain; Switzerland; Turkey

 Less than 100% recovery of O&M Costs, with CC fully supported:

Korea

 

Most OECD countries have embarked on water reform programmes by making greater use of water pricing

Great variation in farm water charges within and across countries, but cost recovery rates have been increasing

Recovery of O&M costs common, but recovery rates for capital costs poor, and other policies often used to cover env. costs

Higher water charges and reduced overall farm support has not led to reduced farm output or incomes, e.g. Australia, Israel

Groundwater policies usually rely on licences and other regulatory measures, water pricing rare & illegal pumping occurs

Using water pricing and market incentives to improve water use efficiency in agriculture

Policy messages toward improving the efficiency of water resource use in agriculture

Ensure charges for water supplied to agriculture at least cover full supply costs (operation, maintenance and capital costs) but use social policies to support poorest farmers

Address financing issues related to upgrading and ageing irrigation infrastructures in agriculture

Remove perverse incentives that impede achieving more efficient water use, notably removal of production related agricultural support, but reforms are lowering and changing composition of support

Encourage uptake of technologies (drip irrigation), farm management practices (conservation tillage) and establishing knowledge and information systems, especially to enhance resilience to climate change

Address knowledge and information deficiencies to better guide decision making from farm to national policy scale

Challenges for agriculture and policy makers in addressing water quality issues

Agriculture generates externalities for which there are no markets, both positive (wetland conservation) and negative (water pollution)

Challenge for agriculture is to meet growing demand for food, feed, fibre and fuel, while reducing (encouraging) external impacts of production

Improving water quality a top environmental concern in public surveys, with growing focus on agricultural diffuse and point source water pollution

Designing policies to control diffuse pollution is complex because:

Low pollution concentrations take diffuse pathways into water system

Cumulative effects on water systems from pollution across large areas

Highly variable in space and time and commonly costly to monitor

Frequently require cooperation from sub-national to international scale

Projected agricultural nutrient surpluses to 2050

0

20

40

60

80

100

120

140

160

N Ame

rica Europ

eJap

an and

Korea

Ocean

ia Brazil

Russi

a India

China

Indon

esia

South

ern Af

rica *

Middle

East

Ukrain

e and

Centr

al As

iaRe

st Latin

Americ

aRe

st of S

E Asia

Rest o

f Afric

a

OECD BRIICS RoW

kg of

N / ha

/ year

1970 2000 2030 2050

-10

0

10

20

30

40

50

60

70

80

90

N Ame

rica Europ

eJap

an and

Korea

Ocean

ia Brazil

Russi

a India

China

Indon

esia

South

ern Af

rica *

Middle

East

Ukrain

e and

Ce

ntral

Asia

Rest L

atin Am

erica

Rest o

f SE A

siaRe

st of A

frica

OECD BRIICS RoW

kg of

P / ha

/year

1970 2000 2030 2050

PhosphorusNitrogen

OECD OECDBRIIC BRIICRegions Regions

Source: OECD Environmental Outlook

The costs of agricultural water pollution are high for taxpayers, water utilities and consumers

Taxpayers across OECD countries pay € billions annually to assist farmers in reducing water pollution

Water treatment utilities and consumers incur costs of € billions annually, to treat water to remove agricultural and other pollutants

Other water users also incur costs from water pollution, such as eutrophication of water bodies imposing costs on:

Fisheries

Recreational uses (e.g. swimming)

Ecosystems

National monetary costs of water pollution (not all due to agriculture)

Country(year of study)

Type of water quality impact

Monetary Cost and % share of Agriculture Gross Value Added

(GVA)

Cost in Euro Million % share of GVA

France(2010)

Water treatment and eutrophication of surface and coastal waters

€610 – €2200 2% – 8%

Germany(2005)

Water degradation costs €370 – €980 2% – 6%

Netherlands(2010)

Total damage from nitrate and phosphorus

€403 – €754 2% – 3%

Sweden(2009)

Eutrophication:• Coastal• Baltic Sea

€860€492 - €1466 } 1% - 3%

United Kingdom(2007)

Total agricultural damage €340 3%

United States(2009)

Freshwater eutrophication €3050 1%

Key OECD policy messages toward sustainable water quality (WQ) management in agriculture - 1

Use a mix of policy instruments to address water pollution: Each policy instrument has strengthens/weaknesses Growing interest in using innovative policy tools and market approaches (e.g.

water quality trading in Canada, US, payments to farmers by Vittel France and South West Water UK

Key focus of many recent initiatives is in changing farmer behaviour, rather than emphasis just on taxes/subsidies

Enforce compliance with existing WQ regulations, by improving on-farm inspection and imposing penalties more effectively, e.g. currently limited sanctions for not implementing EU Nitrates Directive

Remove perverse support in agriculture to improve WQ, with 29% of total EU producer support in 2008-10 providing incentives to produce and/or use inputs, but share was 62% in 1995-97

Take into account the polluter-pays-principle, but can be difficult with diffuse source agriculture water pollution

19

Key OECD policy messages toward sustainable water quality (WQ) management in agriculture - 2

Set realistic WQ targets for agriculture, that can reveal progress for a given programme and are easily measurable and have a clear time frame

Improve the spatial targeting of policies, to areas where water pollution is most acute, but can be difficult if policy measure is voluntary, e.g. EU Nitrates Directive operates uniformly when sub-catchment targeting optimal

Assess the cost effectiveness of different policy options, to enable informed discussion about production/environment trade-offs in achieving water quality benefits

Take a holistic approach to agricultural pollution policies, some policies may lead to environmental conflicts (e.g. ammonia/nitrate) others to co-benefits (e.g. riparian buffers)

Establish information systems, as farmers, water managers and policy makers need more information for a given policy change of the physical impacts, costs, and farmer reactions

Summary of key policy responses to address agricultural water management challenges

Create incentives, to signal value of water & pollution costs-- water pricing, cost recovery, enforcing regulations, water trading --

Ensure coherence of water, energy and agricultural policies-- unravel policy and institutional conflicts, develop stakeholder vision --

Invest, in improved water management and infrastructure -- farm practices and systems, water storage, manure storage --

Enable innovation, by changing agro-food chain behaviour -- stakeholders, education/training, improve knowledge/information --

Strengthen institutions and governance -- secure water property/user rights, rationalise institutional structures --

Build resilience, to address climate change -- develop mitigation/adaptation strategies for climate change --

OECD Work on Agriculture and Water

Policy: Agriculture and Water

Sustainable Management of Water Resources in Agriculture, 2010

Water Quality and Agriculture: Meeting the Policy Challenge, March 2012

Agriculture, Water and Climate Change, Early 2013

Policy: OECD Horizontal Project on Water

Water: Meeting the Reform Challenges, 2012

Outlook for Water to 2050, from OECD Environmental Outlook to 2050, 2012

Policy coherence between water, energy and agriculture, late - 2012

Data

Environmental Performance of Agriculture at a Glance, late 2012

Workshop on Improving Water Information Base, Zaragoza, 2010

Visit the OECD websites:

Agriculture & water: www.oecd.org/agriculture/water

Water general: www.oecd.org/water

Agri-environmental indicators: www.oecd.org/tad/env/indicators

Contact: Kevin.Parris@oecd.org