Land-use transition - Sustainable agricultural systems

Where does the agricultural sector stand?

Roughly half of Germany’s land area consists of arable land, pastures and meadows. Farming therefore has a major impact on soil, water, air and species diversity. Its impact is further heightened by the intensity of agricultural land use. Moreover, strong cost pressures in the food industry and food retail sector have a far-reaching impact on the farming sector. As a result, farms are getting larger and more specialised in terms of their various enterprises. In addition, arable fields have been getting larger for years, structural elements such as hedgerows and field margins have been decreasing, and crop rotations are becoming narrower. These factors, in conjunction with the use of synthetic crop pesticides, are major drivers of species loss.

Livestock farming is an important economic factor in Germany. It is now mainly concentrated in the north-west and in the foothills of the Alps. The animals are kept in ever larger units and livestock husbandry requires a great deal of land: five million hectares of arable land are used to grow livestock feed, while 4.2 million hectares are used to grow crop plants for humans. In addition, there are roughly four million hectares of grassland, which is mainly used for livestock forage. The livestock industry also requires additional imported feedstuff.

In addition to the high land requirements for feed, livestock husbandry generates air pollutants and discharges nutrients into water and soil. Most greenhouse gas emissions from agriculture and land use − 83 percent of them − are attributable to livestock farming. They are caused by fodder cultivation, ruminant digestion and animal faeces. Another major source of greenhouse gases is drained peatland, which is now largely used as grassland to feed dairy cows and cattle.

Intact ecosystems are the basis of agricultural production. Climate, resource and species protection are therefore essential for the farming sector. However, when it comes to nitrogen and phosphorus cycles, biodiversity and the climate, the carrying capacity of the global ecosystem is already considered to have been exceeded. Various environmental policy goals now take this situation into account. For example, the share of agricultural land under organic management is to be expanded to 25 to 30 percent and the proportion of biodiversity areas in the agricultural landscape is to be increased to ten percent. There are also reduction targets for pesticide use and nitrogen emissions.

The long-term climate mitigation objectives for the farming sector beyond 2030, however, are still largely unclear: energy-related emissions can be reduced through the use of renewable sources and greater energy efficiency. But emissions from land use and livestock farming cannot so easily be reduced. Technical options are limited and there is a high degree of uncertainty as to their long-term potential to deliver results.

Either way, since there will always be residual emissions, increased carbon storage in forests, peatlands or soils will be needed to make up for these. But one thing is certain: without further reductions, the remaining emissions will be too high to achieve carbon neutrality by 2045.

Solutions for ecologically compatible and climate-resilient agriculture

Farmers are already struggling with the impacts of climate change and need to adapt. Droughts have become more frequent; storms are jeopardising and destroying harvests. In our view, the solution lies in sustainable, ecologically compatible and climate-resilient farming systems. Diversification makes agriculture more resilient to the risks of climate change: carbon can be sequestered on the land by building up soil organic matter and adding small woody landscape features to farmland. Other useful practices include the establishment of diverse arable crops, the temporary shading of lands by means of agroforestry systems, and cautious water use to increase climate resilience and improve groundwater recharge on agricultural land. There should also be a focus on efficient nitrogen use and its optimum uptake. However, this will also entail a smaller land base and often lower yields being available for current uses. We need to scrutinise our consumption habits. Inefficient bioenergy crops of annual arable plants should largely be abandoned.

In addition, livestock husbandry needs to be restructured and also take animal welfare into account: In peatland regions and in areas with high livestock densities it would be prudent to reduce livestock numbers, and animal welfare should be improved throughout. The animals need more space, more exercise, more light and more behavioural enrichment. Moreover, their diet should be more grassland-based and include more crop residues. Closed nutrient cycles, such as those created through obligatory linkage between livestock production and forage area, are also valuable.

So what does that actually mean? The instruments

Evidently there is a great need for transformation in agriculture. To this end, policymakers must establish a reliable framework, for example by implementing a stringent and long-term funding policy and setting tangible, long-term targets that reliably guide farmers in their investments. This concerns trends in livestock numbers, climate-friendly dietary recommendations and possible residual emissions from agriculture in a carbon-neutral Germany.

The key to all of this is consumer behaviour. After all, we only produce what is being demanded. Moreover, if there is ongoing demand for what is no longer produced in this country, it will be imported, thus shifting environmental impacts abroad.

A crucial step will be to adapt the EU's Common Agricultural Policy (CAP), the central European agricultural policy steering instrument, which has enormous resources at its disposal and could therefore effectively foster circular agriculture. From an environmental perspective, the CAP has been criticised for flat-rate, area-based direct payments to agricultural holdings and a lack of ambition when it comes to “greening”. Subsidies that are harmful to the climate must be reduced and services provided to the public good must be comprehensively rewarded. This needs to include more direct remuneration of farmers for services rendered.

At the same time, additional funds should be made available to finance the restructuring of the farming sector. This could be achieved, for example, through national subsidies or a surcharge/levy system modelled on the German Renewable Energy Sources Act (EEG). Another important instrument is the obligatory linkage of livestock enterprises to an agricultural land base and of ruminant enterprises to a grassland base as well as adjustments to the legislation on fertiliser use. For example, Germany’s Ordinance on Substance Flow Analysis (Stoffstrombilanz­verordnung, StoffBilV) needs to be tightened with regard to maximum levels for nitrogen surpluses.

The German Competence Network for Livestock Farming (Kompetenznetzwerk Nutztierhaltung) and the Commission on the Future of Agriculture (Zukunfts­kommission Landwirtschaft, ZKL) already presented tangible recommendations for measures to improve livestock farming in 2020 and 2021 respectively. Livestock farming systems oriented towards animal welfare are costly; they call not only for investment aid for housing conversion but also for premia to compensate for higher operating costs, as farmers employing ethologically sound husbandry practices face ongoing higher costs.

New financing instruments are needed to cover these costs. One option would be, for example, an increase in VAT on meat products from the current 7 percent to 19 percent. This could also reduce meat consumption by around 11 percent. This increase would need to be part of a consistent “green” financial and tax reform, as a disproportionate price rise for livestock-based foods from certified organic livestock husbandry should be avoided. The aim of such a reform must be to reduce environmentally harmful subsidies and to reward services to the public good, such as soil-conserving soil management or cultivation systems that promote biodiversity. If the VAT on other livestock-based products was also to be increased, milk consumption for example could drop by 9.4 percent. The abolition or reduction of VAT on plant-based foods could offset the higher costs for consumers, who on balance would even be better off.

Another option for financing better livestock farming would be an animal welfare levy. The German Competence Network for Livestock Farming proposed a rate of 40 cents per kilogramme of meat and processed meat products, two cents per kilogramme of milk, fresh dairy products and eggs and 15 cents per kilogramme of cheese, butter and milk powder. This would yield €3.6 billion in additional revenue. Just like a higher VAT, this levy would have to come with socio-political safeguards. Such levy revenue must be ring-fenced for the intended purpose rather than subsumed into general tax revenue, an approach considered by many to be more reliable. What is particularly important with both options is reliable long-term funding to compensate for the higher costs incurred by farmers for welfare-friendly livestock production.