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Policy Analysis

Why Should We Repurpose Agricultural Support to Nature-Based Infrastructure?

Governments spend billions of dollars every year on agricultural subsidies that can incentivize practices that harm the environment and public health. IISD’s Emma Cutler and Facundo Calvo make the case for repurposing this support toward nature-based infrastructure that promotes more sustainable, more equitable, and more efficient food systems.
By Emma Cutler, Facundo Calvo on June 7, 2022

The clock is ticking. For the environment, for human health, and also for the budgets of governments around the world. Every year, support to agricultural producers accounts for USD 611 billion, according to the Organisation for Economic Co-operation and Development’s (OECD’s) Agricultural and Policy Monitoring and Evaluation 2022. While this support seeks to advance legitimate goals such as increasing food security and securing farmers’ livelihoods, it also incentivizes practices that harm the environment and public health. A significant part of this support was provided through market price support and payments linked to output or the unconstrained use of input—potentially the most distorting instruments.

OECD figure showing agricultural support from 2019-2021
Source: OECD Agricultural Policy Monitoring and Evaluation 2022, with permission.

A 2021 report by the Food and Agriculture Organization of the United Nations, the United Nations Development Programme, and the United Nations Environment Programme argues it is essential to phase out the most distorting and environmentally and socially harmful producer support, such as price incentives and payments linked to output. However, this will not bear fruit if the freed resources are not repurposed toward better uses—for example, toward research and development, productivity-enhancing infrastructure, or to payments not tied to output or that promote the overuse of agricultural inputs (e.g., water, fertilizer). The OECD points out that payments for ecosystem services can generate public goods when they are targeted and tailored to farmers. An example of this is payments for carbon storage that remove carbon dioxide from the atmosphere to store it on land.

By repurposing support to agricultural producers, governments can promote food systems that are healthier, more sustainable, more equitable, and more efficient.

By repurposing support to agricultural producers, governments can promote food systems that are healthier, more sustainable, more equitable, and more efficient. Investments in productivity-enhancing infrastructure, in particular, can strengthen food availability through road networks or port facilities to help farmers connect with international agricultural markets. Investments to improve access to infrastructure, including adequate storage and transport infrastructure, have been found to reduce food losses.

The WTO Agriculture Agreement contemplates the provision of agricultural subsidies to infrastructure, including “roads and other means of transport, market and port facilities, water supply facilities, dams and drainage schemes, and infrastructural works associated with environmental programmes.” Importantly, to qualify as Green Box support (which is not subject to reduction commitments under the WTO Agriculture Agreement and can be provided without limits) these subsidies must meet the fundamental requirement of having “no, or at most minimal, trade-distorting effects or effects on production.”

In addition to repurposing to productivity-enhancing infrastructure, governments may reconsider repurposing agricultural support to nature-based infrastructure.

With that in mind, in addition to repurposing to productivity-enhancing infrastructure, governments may reconsider repurposing agricultural support to nature-based infrastructure. According to a recent report by the IISD Nature-Based Infrastructure Global Resource Centre, it is up to 50% cheaper to use nature-based infrastructure rather than traditional “grey” infrastructure to provide the same infrastructure service. In addition, nature-based infrastructure provides 28% better value for money than grey infrastructure. But first things first: what is nature-based infrastructure and what are its benefits?

A Case for Repurposing Agricultural Support to Nature-Based Infrastructure

Nature-based infrastructure refers to areas or systems that use nature to provide infrastructure services. For example:

  • Wetlands treat wastewater and improve water storage.
  • Mangroves reduce coastal erosion and flooding.
  • Urban green spaces mitigate stormwater runoff and extreme heat.
  • Forests retain water and support groundwater recharge.
  • Dunes protect against rising sea levels and coastal floods.

Furthermore, nature-based infrastructure provides a range of co-benefits, including carbon storage, improved air quality, food security, job creation, and recreation.

Repurposing agricultural subsidies for nature-based infrastructure would provide many benefits for society.

We have used the Sustainable Asset Valuation (SAVi) methodology to assess the societal value of investing in nature. SAVi is a valuation approach based on systems thinking, system dynamics simulation, spatial modelling, and financial analysis, incorporating climate data. SAVi assessments are customized to specific infrastructure projects and are co-created with multiple stakeholders. Results from our valuations suggest that repurposing agricultural subsidies for nature-based infrastructure would provide many benefits for society. Below, we provide a few examples, drawn from our assessments, of these benefits.

Forest Restoration in Indonesia

In the upper reaches of Indonesia’s Brantas River Basin, cropland has encroached on forests. This limits water retention and groundwater recharge, worsening flooding and water scarcity. Losing trees increases erosion, which lowers agricultural productivity, motivating more deforestation.

Downstream, the decrease in groundwater exacerbates seasonal water shortages. In response, the United Nations Industrial Development Organization brought together public and private sector stakeholders to identify water management solutions, including reforesting and conserving the upstream area.

We used the SAVi methodology to quantify the benefits of land restoration in the upper Brantas River Basin. We started with a spatial analysis, which quantified ecosystem services, including carbon storage and water, sediment, and nutrient retention. We then monetized the following costs and benefits:

  • Costs to reforest land and construct water absorption wells
  • Value of agroforestry and bamboo production
  • Job creation
  • Value of carbon storage
  • Avoided flood and erosion damages
  • Avoided water pollution

Our results show that the social and environmental benefits of restoration are much larger than the costs and that the project increases climate resilience. For example, we estimate that the avoided flood, erosion, and water quality costs over 20 years are 9–10 times higher than the cost to build and maintain the nature-based infrastructure. Furthermore, reforesting and conserving land is cheaper than building a reservoir with similar water-retention capacity.

We also found that payments for carbon storage could generate USD 32 million, which would more than cover the investment costs.

Urban Forestry in Ethiopia

We used the SAVi methodology to assess tree planting in Addis Ababa. We estimated the impacts of trees on air quality, flooding, urban heat islands, carbon storage, and job creation.

By improving air quality, reducing flooding, and cooling air temperatures, trees increase climate resilience while also storing carbon. We found that the net present value of spending USD 11 million to plant trees and USD 5.5 million a year to maintain them could be as high as USD 17 million over 20 years. Our results show that using traditional built infrastructure to provide the same services would have a negative net present value. Specifically, to reduce air pollution and carbon emissions, trees are financially and technologically more feasible than electric vehicles. Trees also provide more co-benefits than rainwater harvesting, which is an alternative way to mitigate flooding.

We showed that making sure trees survive is important, even if this requires more money for maintenance. For example, we estimated that if 30% of the trees survive, the benefit-to-cost ratio is between 1.17 and 1.2. This means that for each dollar spent, the project creates USD 1.17 to USD 1.20. If doubling the maintenance budget boosts the tree survival rate from 30% to 84%, then the benefit-to-cost ratio increases to 1.34–1.42. This means that even though costs go up, each dollar invested creates an extra USD 17 cents to USD 22 cents.

Repurposed agricultural subsidies could help cover tree maintenance costs. This would increase the value of the nature-based infrastructure investment.

Coastal Protection in the Netherlands

The Netherlands is vulnerable to sea level rise and flooding. This requires frequent maintenance of flood protection infrastructure. When the sea dike between Pettemer and Camperduin in Noord Holland needed to be upgraded, policy-makers faced a decision: raise the existing dike or build an artificial beach and dune landscape? They chose the sandy option, and the Hondsbosche Dunes were completed in 2015.

We used SAVi to assess this nature-based infrastructure compared to the built alternative. Both protect against a 1 in 10,000-year flood. However, we found that the sand dunes provide more value and cost less than a new dike. Specifically, the dunes increase tourism more than the dike would. The increase in visitors to the area creates revenue, which provides value to the local community. Furthermore, even though the dunes are more expensive to maintain (EUR 19 million over 50 years, compared to EUR 7 million for the dike), the dunes cost EUR 35 million less to construct.

We calculated the carbon emissions from both the dunes and the dike. The carbon footprint of dune construction was 127,000 tons of CO2, compared to an estimated 160,000 tons of CO2 for the dike. The dunes will periodically require more sand. We estimate that this maintenance corresponds to 45,000 tons of CO2 emitted over 50 years. Thus, the lifetime carbon footprint of the dunes may be larger than that of the dike, but the flexibility to add sand as needed is critical for climate adaptation. Because sea level rise is hard to predict, it is impossible to know precisely how big future flood defences should be. Unlike a seawall, the size of the dunes can be easily adjusted in response to a changing climate. This means the dunes increase adaptive capacity more than the dike would.

How Much Agricultural Support Must Be Repurposed to Nature-Based Infrastructure?

Agricultural subsidies could be repurposed for infrastructure, and our results show that nature-based infrastructure should be considered. Natural solutions are often cheaper than grey alternatives. They also provide more co-benefits, including greater climate resilience.

Natural solutions are often cheaper than grey alternatives. They also provide more co-benefits, including greater climate resilience.

We estimate that for agricultural infrastructure, an additional USD 125.16 billion is needed every year. This number is based on studies that consider the cost of climate adaptation and money required to improve food security. We estimate that half (USD 62.58 billion a year) could flow toward nature-based infrastructure, including agroforestry, composting, and improved grazing. An additional USD 3.33 billion is needed for irrigation systems, and, of this, 20%, or USD 670 million, could go toward natural solutions that improve water supply (e.g., agroforestry).

Thus, in the agricultural sector alone, USD 63.25 billion could be invested in nature-based infrastructure. This is about 1221,5% of the USD 540 294 billion, the total amount of budgetary support that agricultural producers receive every year (excluding general services)that now goes toward agricultural support every year. This money could instead be used to support practices that improve water availability, crop yields, and soil quality. This nature-based infrastructure would also protect crops from extreme weather, store carbon, and enhance biodiversity.