Where's the Money?
The food system contributes 1/3 of all greenhouse gas emissions worldwide. Why aren’t we funding solutions?
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In 2015, nearly every country signed the Paris Agreement, which resolved to limit warming to 1.5˚C over preindustrial temperatures. However, even if the world fully stopped burning fossil fuels, emissions from the agrifood system alone would still prevent the world from reaching this goal. In fact, the food system contributes to 1/3 of global anthropogenic greenhouse gas emissions—yet it only receives 3% of the world’s public climate finance. To have any hope of keeping to the 1.5˚ goal, emissions from the food system must be reduced.
There is no single reason why the food system is so drastically underfunded for climate change; a host of factors contribute to this neglect, including economics, political will, consumer behavior, and the broad nature of the global food system. This article looks to unpack the most salient reasons for the food systems climate finance gap, share some of the solutions that could be funded, and analyze some of the strategies which could close the gap.
Food System Emissions
Greenhouse gas emissions in the food system come from three main gasses: carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O). Each of these gasses are emitted throughout the food system value chain, but are most prevalent in different areas. CO2 emissions come largely from deforestation for new farmland and the release of stored organic matter from agricultural soils due to poor soil management. Burning fossil fuels for machinery and the energy-intensive Haber-Bosch process used to create nitrogen (“chemical”) fertilizer also plays a part in the CO2 emissions, and transport of agricultural goods contributes a small fraction to its total emissions profile. Emissions of methane — which is twenty-eight times as potent as CO2 over a 100 year timespan — come primarily from animal agriculture, especially beef and dairy. Lastly, emissions of nitrous oxide — which is nearly 300 times as potent at warming the atmosphere as CO2 — are largely produced by overfertilization of crops, but also from animal manure. The figure below shows the magnitude of each of these types of emissions, converted into CO2 equivalents.
Economics of Food System Climate Solutions
Many farming families must supplement their farm income with off-farm labor to make ends meet, making the adoption of climate-friendly practices a tough sell if they don’t also provide a direct and immediate economic benefit to the farmers.
Agricultural production operates on razor-thin margins, which creates a significant barrier to investment in the food system: It’s just not that profitable. This in part explains why the agrifood system is subsidized at $528 billion annually. But those subsidies often fund practices — such as the industrial production of beef and dairy — which increase emissions and cause harm to the environment. Even with the subsidies, many farming families must supplement their farm income with off-farm labor to make ends meet, making the adoption of climate-friendly practices a tough sell if they don’t also provide a direct and immediate economic benefit to the farmers. Many practices which reduce carbon emissions, such as multi-cropping, composting, and generally improving soil health, unfortunately also increase the time and labor costs for farming a given plot of land, especially in the short term.
We invest only a total of $9.3 billion USD in climate-smart agriculture annually; the investment that would be required to make the global food system sustainable and climate-resilient is almost 40 times that amount — $350 billion USD per year. Unfortunately, that amount is higher than the total investment in all types of climate change mitigation, which was $321 billion in 2020. On the other hand, it is less than the total amount we choose to invest in agriculture overall. But, unlike the $528 billion already invested in food systems each year, this climate-focused investment would yield fewer short-term improvements to food security – the primary justification for public investments in the food system.
Some greenhouse gas mitigation solutions for the food sector are consistent with improving yields and farmer livelihoods; in India, increasing feed quality and health of dairy cows, for example, has been shown to reduce livestock emissions by 38%. Farmers directly benefit from these kinds of investments because each head of livestock becomes more valuable and the labor cost per pound of dairy or meat produced goes down.
The demand for electric vehicles allows investors to be confident that they will receive a return on their investment. But very few agricultural GHG solutions return a profit, so mustering non-mission-driven investment in agricultural climate solutions is a daunting challenge.
Unfortunately, many other climate-smart solutions don’t have these same synergies. For example, preventing deforestation-related emissions requires a significant investment of funds without seeing any direct financial returns, even though the climate and biodiversity benefits are immense. Many non-agriculture climate solutions don’t face this same problem. For example, global investment in electric vehicles and battery manufacturing reached $500 billion USD in 2023, although road transportation only contributes 12% of the world’s total greenhouse gas emissions. While it’s wonderful that decarbonizing transportation is being so heavily invested in, this represents a 150X overvaluation of transportation decarbonization compared to food system decarbonization, if the only motive for investment was reducing emissions. When investing in electric vehicles, however, there is an additional factor: there is a significant profit to be made. The demand for electric vehicles allows investors to be confident that they will receive a return on their investment. But very few agricultural GHG solutions return a profit, so mustering non-mission-driven investment in agricultural climate solutions is a daunting challenge.
Political Will: Funding Food System Climate Solutions Isn’t Always Popular
Given that the free market likely won’t be the primary source of additional food systems climate funding due to its slim margins, investments from the government must be a major source of financing. And remember, the world’s governments already invest more in agriculture annually than would be necessary to fully fund the transition to climate-smart agriculture.
The US invests $38B per year to subsidize the industrial meat and dairy industries, yet meat alone contributes to 14.5% of the world’s carbon emissions, more than all emissions from road transportation combined.
Unfortunately, there’s a long way to go from current investments in destructive practices to investing in regenerative ones. The US invests $38B per year to subsidize the industrial meat and dairy industries, yet meat alone contributes to 14.5% of the world’s carbon emissions, more than all emissions from road transportation combined. A simple and cost-effective agrifood climate solution would be to reduce this subsidy to zero dollars. Yet suggesting that would be politically unwise: In 2019, Joe Biden was accused of planning to reduce the amount of meat that Americans could consume — and Kamala Harris was accused of the same in July of 2024. While these allegations proved to be untrue, they were immediately met with backlash and outrage. Reducing the subsidies for animal agriculture, and thereby increasing the cost of meat and dairy to consumers, would be politically infeasible in many countries, including the United States. Even beyond consumer preferences, lobbyists for the meat and dairy industry ensure that the industries continue to have economically favorable yet environmentally damaging regulations.
Successes in Agricultural Climate Finance
Despite these limitations and challenges, there are still climate-focused food systems solutions being funded, and some effective ways to secure that funding. Forest conversion, especially for cattle and palm oil, contributes to nearly 20% of all agricultural emissions, which translates to 6% of the world’s total carbon emissions. Funding farmers in developing countries to improve yields on existing lands, as opposed to expanding into new ones, falls in the investment sweet spot of being feasible, easily adopted by farmers, providing biodiversity benefits, and greatly reducing carbon emissions. REDD+ (Reducing Emissions from Deforestation and forest degradation in Developing countries) is an initiative which does exactly that. In Ghana, REDD+ was able to improve agricultural production by up to 50% while reducing carbon emissions at the Megaton scale for less than $5 USD invested per metric ton of CO2 emissions reduced. Farmers were directly paid to reduce their emissions, which means that the investors won’t see a financial return on their investments; instead, the value that they create lies in both improving the livelihoods of the farmers and reducing greenhouse gas emissions.
Increasing the amount of funding for proven solutions such as REDD+ can reduce carbon emissions and improve biodiversity at a fraction of the cost of other solutions, even electric vehicle financing. But initiatives like REDD+ aren’t without challenges: REDD+ operates in the global south, where food and land sovereignty are already sensitive issues. Many countries in the global south have been exploited by colonialist rules and doctrines; any new agricultural financing and incentives in this space must be culturally relevant and equitable to ensure more harm isn’t done in the name of reducing carbon emissions. Although the majority of REDD+ projects have been conducted equitably, there have been examples of local and indigenous people not being consulted about their preferred forms of forest use and management before regulations from external governing bodies were put into place.
How Can We Fund More Solutions to Agricultural GHG Emissions?
Mobilizing funding requires political will, creative solutions, an emphasis on long-term returns and a commitment to internalizing externalities. None of these factors alone are enough to increase climate funding for the agrifood system to the magnitude it needs to be. Luckily, each of these factors have promising developments which can help leverage more financing opportunities. Grassroots movements such as Food Not Bombs seek to equitably provide free low carbon meals, while inspiring its members to be politically active. New high-tech solutions such as Perfect Day’s animal-free dairy products garner investments from venture capital to reduce emissions while providing an economically competitive product. Mad Agriculture is a company whose main directive is to provide financing for sustainable agriculture. Climate science becoming more mainstream has helped policymakers understand that long-term investment in soil health both reduces agricultural carbon emissions and improves farmland yields and longevity. Meanwhile, farmers have begun to notice the already-present effects of climate change on their crops, and look to invest in climate change adaptation solutions of their own volition.
Sustainable food solutions outcompete unsustainable farming practices in the long run, providing hope that we may see a marked transition to lower carbon and lower impact agriculture as we work to meet our global climate goals.
As promising as these developments are, we still need to increase food systems climate finance at a much quicker rate. Individual citizens can vote — both with their ballots and with their wallets — for sustainable agrifood system solutions. But individual action isn’t enough to convince governments and financial markets to invest in a sustainable food system. Collective action, such as mobilizing for climate marches, is one way to show governments that they will have political backing if they work to create legislation that benefits the planet. Even mobilizing to get corporate interest lobbies out of politics is an effective way to help increase climate investments in the food systems. The magnitude of emissions created by the food system is now better known to investors and policymakers, as are a host of solutions that could reduce those emissions if given requisite funding. These sustainable food solutions outcompete unsustainable farming practices in the long run, providing hope that we may see a marked transition to lower carbon and lower impact agriculture as we work to meet our global climate goals.