copy the linklink copied!5. Policy instruments relevant to sustainable land use

Clearly-defined land tenure is an important cross-cutting prerequisite for effective policy

An important underlying prerequisite for effective policies for nexus issues, is clear and secure land tenure. Land tenure is defined by Robinson et al. (2013[6]) as the set of property rights associated with land and the institutions that uphold these rights and the security of land tenure as the assurance that land-based property rights will be upheld by society. Land tenure has a variety of forms in the case-study countries, varying from more common forms, such as public or private ownership, to communal forms of tenure such as Eijdos and Comunidades in Mexico, Quilombos in Brazil and Hutan Desa (village forest) in Indonesia. Whether or not tenure systems indicate ownership or simply the rights to manage a certain area of land is also highly variable, but in general communal forms of ownership are more common in tropical countries, particularly in forested areas (Robinson, Holland and Naughton-Treves, 2013[6]).

If the tenure of a given area is not clear, it is difficult to identify the land manager, posing challenges for incentivising environmentally-sustainable activities. Correspondingly, in unclear tenure situations, identifying whether or not a particular activity is legal is challenging. When land tenure is not secure, this can incentivise activities that maximise value in the short term and activities to increase the security of tenure, which in many tropical forest areas leads to land clearing. These challenges are highlighted by the situation in Indonesia where overlapping land claims (Gaveau et al., 2017[7]) and highly fragmented land use institutions (discussed in chapter 4 and (Sahide and Giessen, 2015[8])), have resulted in widespread illegal logging, illegal mining and illegal agriculture. Historically, up to 80% of Indonesian timber exports originated from illegally-sourced wood (Observatory of Public Sector Innovation (OECD-OSPI), 2013[9]), and 2.3 million hectares of deforestation over 1991-2014 and USD 6.5 – 9 billion lost tax revenues over 2003-2014 have been attributed to illegal logging (Chitra and Cetera, 2018[10]; Corruption Eradication Comission (KPK), 2015[11]). While illegal logging may have declined in recent years, it remains a non-negligible factor in Indonesian land use change trends. Not only due to exports of illegally-logged wood products, but also because illegal logging is often a prelude to the establishment of (largely export-oriented) oil palm or timber plantations (OECD, 2019[12]).

Similar to the Indonesian case, illegal logging is also an issue in Mexico and Brazil. In Brazil, unclear land tenure exacerbated the issue of illegal logging in the Amazon as the easiest way to obtain land rights was through conversion (OECD, 2015[13]). While more recent efforts to clarify the situation have resulted in reduced deforestation, a lack of enforcement (Azevedo et al., 2017[14]) and weakening environmental governance (Rochedo et al., 2018[15]), mean the problem is still ongoing. In Mexico, illegal deforestation and forest degradation as a response to increasing demand for agricultural products, such as avocados (Hansen, 2018[16]), is an ongoing issue, which threatens ecosystem service provision (such as carbon sequestration) and critical habitat for the monarch butterfly (Leverkus et al., 2017[17]). Up to 70% of domestically consumed timber is estimated to be harvested illegally (Chapela y Mendoza, 2018[18]), and important quantities of Mexican wood imports originate from illegal logging activities in third countries like Peru (Urrunaga, Johnson and Orbegozo Sánchez, 2018[19]).

Illegal land-use activity is of critical importance to the nexus as it can cause widespread environmental degradation and significant GHG emissions, undermining a country’s ability to achieve national and international targets. Furthermore, illegal activity is by definition not regulated by policy instruments aimed at incentivising environmentally sustainable land management. Reducing illegal activity, like establishing secure land tenure, is therefore a prerequisite for environmentally effective policy in the land-use nexus.

Ecosystem service valuation approaches can inform land-use decisions

Ecosystem services provide significant benefits to society that are regularly un-priced or under-valued by markets (OECD, 2019[22]). The loss of these services due to environmental degradation, therefore, leads to significant cost if these services (e.g. water purification) have to be replaced - and can result in welfare and distributional impacts. For example, in Indonesia the loss of forest is associated with an increase both in childhood disease among rural communities and in local ambient temperatures (Herrera et al., 2017[23]; Wolff et al., 2018[24]).

Economic instruments to address the loss of ecosystem services are used across several of the case study countries (discussed below). Incorporating the valuation of these services into the land-use planning mechanisms could be a useful tool to help reconcile the goals of the nexus. Quantifying the changes in ecosystem services resulting from different policy options, and the value of these changes to society, is a key step to better management of nexus areas. However, despite several ongoing programmes targeting a better understanding of ES mapping and valuation, none of the case study countries has consistently integrated this approach into land-use planning systems.

The EU Mapping and Assessment of Ecosystems and their Services (MAES), aims to create a conceptual model linking pressures to ecosystem conditions and define a broad range of indicators to track ecosystem condition and service delivery across the EU. As part of this initiative, the EFESE (L’évaluation française des écosystèmes et des services écosystématiques) in France aims to assess the extent, quality and value of ecosystems. EFESE has already produced six assessments of different ecosystems.1 Despite some success in using the results of EFESE to aid policy design, a recent EU assessment suggests the outputs are not, as yet, sufficient to effectively incorporate ES values into decision making (Ling et al., 2018[25]).

Beyond the EU, the natural capital approach has been used by both Indonesia and Mexico to try and incorporate the value of ecosystem services into decision making. Indonesia has been tracking forest resources for more than 30 years through the pioneering System of Integrated Environmental and Economic Accounting (SISNERLING). There is also a legal mandate in Indonesia requiring all government departments to develop and inventory of natural resources.2 Development of the SISNERLING is ongoing with the support of the World Bank WAVES (Wealth Accounting and the Value of Ecosystem Services) partnership, which includes improved accounting, the development of land accounts for land-use and land-cover change and a pilot water account for the Citarum River basin (WAVES, 2017[26]).

Despite the considerable progress under the initiatives described above, sufficient data to underpin policymaking is lacking and capacity gaps remain in the case study countries. Consequently, the success of this approach for balancing nexus goals is largely untested. Accelerating the development of and strengthening existing natural capital accounting and ecosystem service valuation approaches is an important opportunity to improve the ability of land-use planning mechanisms to manage trade-offs between the different areas of the nexus.

Land-use planning

An important regulatory instrument for the nexus areas is land-use planning. Land-use planning is defined by Metternicht (2017[27]) as:

Land-use planning thus includes issues relating to spatial planning, the zoning of land for specific purposes, and rights to manage land in both urban and rural areas. Approaches to land-use planning are variable within the case study countries, reflecting the different national contexts of development and land tenure.

However, there are some common approaches to land-use planning across the case study countries, with decentralised responsibility and spatial planning approaches being widely used. In most case study countries, decentralised responsibility for land-use planning involves national governments setting overarching framework legislation, providing guidelines and standards for how to adopt the most appropriate land use options. In most cases, land-use planning authority is further split between state-, region- or provincial-level governments and municipalities, and carried out through the development of spatial plans, the designation of protected areas, the issuance of permits, and the implementation of national-level policies.

This decentralisation of land-use planning to sub-national governments is unsurprising given the role of planning and development in generating revenues at a local level through taxes. Decentralisation of land-use planning also allows sub-national governments to tailor development to suit the local socio-enviro-economic circumstances, and use the most appropriate solutions to manage nexus goals, within the frameworks and guidelines laid out at a national level. Local public budgets rely on certain types of revenue-yielding land use. But ecosystem service provision is not generally revenue yielding. Some of the case study countries, such as Brazil and France, operate schemes under which local authorities are compensated financially for allocating land to ecosystem service provision. These schemes are known as inter-governmental fiscal transfers (discussed below) can allow local authorities to favour less intrusive land uses over the development of land.

In terms of decentralised land-use planning, there is, however, a key implementation gap between theory and practice. In Indonesia and Brazil, for example, poor regional-level implementation of national-level spatial planning guidelines has led to significant environmental degradation and is hampering the ability of these countries to balance nexus goals. In Indonesia, the lack of clear land tenure and the differential maps used by different nexus-relevant ministries (e.g. Ministry of Agriculture and the Ministry of the Environment and Forests) have contributed land conflicts (Abram et al., 2017[28]) and opportunities for illegal logging, mining and agriculture (Gaveau et al., 2017[7]; Carlson et al., 2012[29]). It is essential that the underlying spatial data used to create plans is consistent across all the nexus-relevant ministries. Indonesia is attempting to harmonise the use of spatial data via the One Map policy, which will contain 85 thematic layers, including concession boundaries, and will be used to underpin land-use decisions. Since its inception in 2011, progress has been hampered by capacity constraints, inter-ministerial conflict and lack of stakeholder enthusiasm (Shahab, 2016[30]). But, 83 of the 85 layers were completed by 2019, and the data was made accessible to the public in 2018 (OECD, 2019[12]). Once complete, the One Map should provide a basis for resolving land tenure and permitting issues.

In Brazil, weakening environmental governance threatens to further undermine land-use planning systems (Rochedo et al., 2018[15]). “Security suspension” (“suspensão de segurança”) is often used to circumvent planning laws and allow infrastructure development, such as hydropower dams, inside ecological-sensitive areas (Fearnside, 2015[31]). The ease with which government can circumvent environmental protections allows the national government to prioritise large infrastructure development over the needs of local (particularly indigenous) populations and undermines the ability of Brazil to balance nexus goals. The significant gap between land-use planning in theory and practice in Brazil and Indonesia creates issues within the nexus. Thus both countries would benefit if the national level planning norms and guidelines were applied and enforced consistently at a municipal level. Achieving sufficient vertical coordination of national norms and guidelines, however, is challenging and will require dedicated institutional mechanisms (chapter 4) and a mix of incentives (such as intergovernmental fiscal transfers) and deterrents, such as credit blacklisting (e.g. in Brazil).

Urban expansion poses a threat to cropland globally, and is expected to result in the loss of 1.8-2.4% of cropland by 2030 (Bren d’Amour et al., 2016[32]). Low-density urban areas are also associated with higher road transport emissions and habitat fragmentation (OECD, 2018[33]). Consequently, provisions limiting urban sprawl and encouraging densification reduce the potential additional pressure on global crop and wild lands, representing a significant nexus alignment. Both France and Ireland have specific measures to encourage densification in their spatial-planning systems. Since 2018, France has utilised the principle of “no net land artificialisation”, which means that agricultural and other non-urban areas should be spared from development. In Ireland, the national planning framework (Project Ireland 2040) includes the control of urban sprawl as a specific objective , with a target of 40% of all new housing to be built within existing built-up areas (Government of Ireland, 2018[34]). Finally, both Ireland and France also include references to biodiversity, either as a specific objective to enhance biodiversity (as in Ireland) or to ensure ecological coherence though the creation of Green and Blue belt networks (trames verts et bleus). Biodiversity-specific planning measures and efforts to limit urban sprawl are well aligned with nexus goals and should be utilised more broadly.

Protected areas

Protected areas (PA)3 are the cornerstone intervention for conserving biodiversity. Within the case study countries, the coverage of PAs has been growing, though there is still large variation in extent across countries, ranging from 12.2% (Indonesia) to 32.7% (New Zealand) of total land area in 2019 (see Figure 5.1). PAs however, represent a range of approaches from strict protection to more general national and international land-use designations, where countries can control or restrict the type of land-use management is allowed within a certain area.

The types of PAs employed by countries are influenced by national land contexts, particularly in relation to land tenure and unmanaged areas. In countries with secure land tenure and small extents of unmanaged land (Ireland and France), land-use restrictions tend be controlled through PA designation that overlap or are entirely within private land. In Ireland and France, for example, sites are designated as Natura 2000 under EU law. Other designations with differing objectives are also used, such as National Parks. Natura 2000 sites are intended to protect high quality habitat or regional nature parks, and aim to reconcile certain types of land management with biodiversity. In Ireland Natural 2000 sites often overlap with private land, and impose restrictions on activities allowed in order to maintain the quality of the site. The situation is similar in France which is subject the same EU regulations as Ireland. This approach, however, if not well managed with sufficient stakeholder engagement, can lead to conflicts between agricultural and environmental stakeholders, who often perceive each other to have conflicting goals (even if their agendas are aligned) such as in Ireland (Woodworth, 2018[35]; Visser et al., 2007[36]). A more decentralised approach, with extensive stakeholder consultation and site specific management plans, such as employed in France, can reduce the potential for conflict (OECD, 2016[37]).

In New Zealand, as well as state owned and managed PAs, “conservation covenants” are an important mechanism for protecting important ecosystems. Under a covenant, landowners enter into legally binding contracts with the Government to protect natural features or areas of natural habitat on their land. In many cases, covenanting land may make economic sense through improvements in water regulation and quality, provision of amenity value to the property, exclusion of stock from areas of land that are difficult to access or manage, and financial transfers to the farmers (QEII National Trust, 2018[38]).

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Figure 5.1. Protected area as a share of total domestic land area

Source: OECD (2019[39]), Protected Area Statistics, https://doi.org/10.1787/5fa661ce-en.

Note: Graph displays an aggregate of all PA reported to the IUCN which includes categories I-VI and No Category. For full methodology see source.

In countries with large areas of unmanaged land, PAs play a key role in preventing the conversion of forests (and other ecosystems) and conserving wilderness areas. While not completely effective, protected areas have reduced deforestation in Brazil (Nolte et al., 2013[40]), Mexico (Pfaff, Santiago-Ávila and Joppa, 2016[41]) and Indonesia (Gaveau, Wandono and Setiabudi, 2007[42]; Gaveau et al., 2012[43]). In Mexico, Brazil and Indonesia, current and historic funding shortfalls have hampered their effectiveness. By controlling land conversion, PAs can contribute to reducing emissions from land use change. In the Brazilian Amazon, an effective PA system could save 8GtCO₂e (emissions from LULUCF in Brazil were 1.17GtCO₂e in 2016 (SEEG, 2018[44])) between 2010 and 2050 (Soares-Filho et al., 2010[45]) as well as providing biodiversity benefits. Conversely, ineffectively managed PAs can become a significant source of emissions, for example deforestation in PAs in Indonesia contributed 139.4MtCO₂e a year between 2000 and 2012 (Collins and Mitchard, 2017[46]).4 Finally, simply excluding activity from a certain area through a PA can displace that activity to another region, either within or outside the same country reducing their ability to balance nexus goals. For a system of PAs to reduce ecosystem degradation and emission from land-use change effectively, these leakage impacts must be considered.

In Brazil, 80% of the current PA system was gazetted after 2000 and now covers 29.1% of the total land area (OECD, 2019[39]). As well as the more traditional PAs, Brazil also makes extensive use of indigenous territories, which now cover 21% of the Amazon region (Le Tourneau, 2015[47]) in addition to the 22.6% already within other PA (de Marques, Schneider and Peres, 2016[48]). This approach has proved to be successful at reducing deforestation up to 2015 (although recent trends may be different). While the biodiversity benefits are less clear, the clarity of tenure associated with this approach to PAs is of benefit to nexus as it prevents conversion if sufficiently enforced. Indigenous reserves (and other forms of community managed PA) could be used more broadly to control land-use change and have the added co-benefit of addressing significant human rights issues.

Moratoriums and other land use restrictions

Moratoriums on certain land-use activities or the use of products from certain areas and other targeted land-use restrictions can work to help effectively balance nexus goals, especially in cases when effective land-use rules in one ecosystem should not be applied in other areas. For example, the high carbon value of peatlands and the emissions from soil oxidation after drainage can undermine climate change targets and therefore they may not be suitable sites for afforestation (Miettinen et al., 2017[49]; DAHG, 2015[50]). Indonesia, for example, has had a moratorium on the issuing of new operating permits in primary forest and peatland areas since 2011,5 and more recently a regulation banning the clearance of all peat areas until after a zoning process (ongoing as of end 2018) has been completed.6 Ireland has also restricted the use of ecologically sensitive and carbon dense peatland areas through regulation (DAHG, 2015[50]).

In isolation, a moratorium will not effectively control land use, particularly in challenging governance environments, where enforcement of other regulations may be lacking. Instead, it should form one part of a broader toolkit of policy instruments that includes a range of reforms, incentives and dis-incentives aimed at altering land use. In 2006, pressure from downstream consumers (including McDonalds and Wal-Mart) and consequently commodity traders (e.g. Cargill) to avoid buying soy grown on deforested areas in the Amazon, led to the soy moratorium in Brazil. The moratorium has been credited with helping achieve a 70% reduction in annual extent of deforestation in the Amazon by 2013 (although recent trends suggest this might be reversing) (Gibbs et al., 2015[51]). Importantly, the enacting of the soy moratorium coincided with parallel efforts by the Brazilian government to reduce the rate of deforestation through land registration (under the CAR), improve monitoring, increase enforcement and expand the PA network (Gibbs et al., 2015[51]; Nepstad et al., 2014[52]). This means that the moratorium itself was just one component of a larger strategy to control land-use change. Contrastingly, in Indonesia, where efforts to improve environmental enforcement, monitoring and reform land tenure are less well developed, the moratoriums on new concession licences have been less successful at reducing deforestation (although deforestation has reduced since 2015) (Hansen et al., 2013[53]; Busch et al., 2014[54]).

Restricting land use within a single biome or ecosystem can shift environmentally destructive behaviour elsewhere (a process known as leakage, see above), undermining the potential nexus benefits of these approaches. To some extent, this is true with the soy moratorium in Brazil, which only covers the Amazon biome, and has shifted the expansion of soy production to the neighbouring, non-forest, Cerrado biome. In the Cerrado rates of habitat loss were consistently 2.5 times that of the Amazon from 2002 to 2011 (Strassburg et al., 2017[55]). Failing to consider the possible leakage of activities restricted by moratoria can lead to significant misalignments between nexus goals in other areas. Hence, targeted restrictions should be consistent with other national and local land-use policies and should consider the potential leakage impacts.

Standards and restrictions

Regulatory standards can have important nexus impacts, either by directly defining which activities are and are not legal in a given area or by officially mandating the use of resources. Such standards can be used in several different aspects of the nexus, such as land cover or use, type and level of agrochemical inputs (e.g. fertilisers and pesticides), mandates for water quality and the control of pollution. Standards and restrictions can be applied in a variety of ways (e.g. through zoning and permits) at local, national and international levels (e.g. EU water framework directive).

In Ireland, the number of cattle has increased by 740 000 animals (10.3%) from 2010 to 2018, predominately driven by a 38% increase in the dairy herd (Central Statistics Office, 2019[56]). This growth has also corresponded with a 10% growth in fertiliser sales in both 2017 and 2018 as dairy farming has intensified. To address the environmental consequences of this increased intensity of farming, Ireland has a nitrates derogation programme that requires intensive livestock farms (defined at above 170kg of livestock manure nitrogen/ha) to adhere to derogation measures designed to reduced pollution. These measure are predominated aimed at breaking the nutrient transport pathway (such as controlling when and how fertilisers are applied) (DAFM, 2019[57]). These derogation measures, in principle, facilitate the sustainable intensification of agriculture, so the value of sector can grow while the environmental impact is minimised, and are, therefore, well aligned with the nexus goals. However, the increasing intensification of dairy farming has corresponded to an ongoing decline in water quality in Ireland (3% decline between 2013-2015). A decline suggesting that this approach may not be sufficient to fully ameliorate the environmental impacts of intensive agriculture (EPA, 2018[58]). Supplementing these kind of derogation measures with other economic incentives, such as taxes (see below), could help improve their effectiveness. This approach was recently suggested in New Zealand, where similar environmental issues from the intensification of dairy farming exist (The Tax Working Group, 2019[59]).

National-level biofuel blending targets are a good example of a standard that can be misaligned with nexus goals. For example, in Indonesia, biofuel blending targets are likely to be driving ecosystem degradation, emissions from land-use change, undermining food production goals by occupying land for food crops, and encouraging the expansion of oil palm plantations. This particular policy was created in response to concerns about reliance on oil imports rather than any nexus-related goals, which likely led to the misaligned (Wright, Rahmanulloh and Abdi, 2017[60]).

While both Brazil and Indonesia directly regulate land cover, their approaches are contrasting. Under the forest code (CAR), Brazil mandates the minimum level of forest cover on farms, which varies between biomes (80% in the Amazon and 20% in Cerrado). Enforcement has been challenging, with one study finding only 6% of properties which had deforested illegally taking steps to reforest (Azevedo et al., 2017[14]). The legal requirement for forest cover targets will likely lead to biodiversity and ecosystem benefits. However, revisions to the CAR in 2012 (upheld but the supreme court in 2018), could reduce its environmental impacts. The revisions allow for a reduced forest cover requirement on private land (from 80% to 50%) in states in the Amazon, if the state has more than 65% of its area covered by conservation units and indigenous territories, potentially allowing the conversion of up to 15 million ha of forest (Freitas et al., 2018[61]). Indonesia takes the opposite approach to Brazil, by legally requiring the conversion of all land7 (e.g. from forest to plantation) within a plantation concession within six years of the concession licence being issued.8 Companies failing to do so risk having non-converted areas transferred to other companies, a policy that has already conflicted with international sustainability standards, such as the Round Table on Sustainable Palm Oil (RSPO) (discussed in section on certification below).

Regulatory standards can also regulate the legal status of certain types of import products and trade practices, and can be important instruments for ensuring forest product legality. Bi- or multilateral, product-specific memoranda of understanding or trade agreement provisions can be an effective approach for preventing the occurrence of export-driven illegal logging, promoting sustainable production standards and addressing leakage impacts.9 One example are the voluntary partnership agreements (VPAs) that the EU has concluded with Indonesia and a number of other countries. VPAs regulate trade in tropical timber and to enforce certain production standards, including through the Forest Law Enforcement, Governance and Trade (FLEGT) scheme. The EU prohibits placing illegally harvested timber and derived products on the EU market, and requires importers to perform ‘due diligence’ checks on timber and timber products.10 By exempting timber with FLEGT licenses issued by the Indonesian government under the VPA from these checks, the EU provides a powerful incentive for timber legality and sustainable production standards in Indonesia. Mexico, too, adopted a new forestry law governing trade in forest products in 2018,11 but critics note the persistence of loopholes for illegally harvested timber to enter the country (Ortiz Tapia, 2018[62]). The impact of the law on curbing trade in illegal forest products will, therefore, be important to observe.

Environmental provisions in trade agreements and other trade policy measures

Requirements for and support to sustainable land-use practices in mutual agreements governing trade relations between trading partners (e.g. Regional Trade Agreements) is a potential way to improve the land-use nexus performance. General environment-related provisions are included in the vast majority of regional trade agreements (RTAs), although approximately one third of RTAs that make reference to the environment do so in the preamble only (Monteiro, 2016[63]). Provisions specific to a particular issue such as land use, on the other hand, are less frequent. One such example is the Comprehensive Economic Partnership Agreement between Indonesia and the European Free Trade Association (EFTA) states (Government of Indonesia and European Free Trade Association, 2018[64]), which was signed at the end of 2018. The agreement includes a chapter on sustainable development and trade, with sub-sections dedicated to specific sectors or sub-sectors. The strict enforcement and monitoring of adherence to the principles set out in this chapter will be essential to ensure a positive impact on land-use outcomes. An environment chapter or provisions on co-operation and participation in environmental matters however remain the exception among the trade agreements that Indonesia is a party to (OECD, 2019[12]).

Variations of land-use references are also included in trade agreements relevant to other case study countries. In Mexico, for instance, the North American Agreement on Environmental Cooperation (NAAEC), a side treaty of NAFTA, governs environmental aspects of trade with Canada and the US, Mexico’s main trading partner. While the land-use impacts of NAFTA seem mixed (see chapter 1, (Mayrand, Paquin and Gagnon-Turcotte, 2008[65]) and (Aguilar et al., 2011[66])), in 2018, a successor to NAFTA was signed with the United States – Mexico – Canada Agreement (USMCA). USMCA contains a chapter on the environment, which includes specific articles relating to trade and biodiversity, trade and conservation, and trade and sustainable forestry management (including a reference to carbon storage) (Governments of the United States; Mexico and Canada, 2018[67]). The environmental provisions contained in the USMCA are furthermore expanded and detailed in the accompanying Environmental Cooperation Agreement (Commission for Environmental Cooperation (CEC), 2018[68]), which also provides for co-operation between the three countries on issues such as biodiversity protection, natural resource management and environmental governance.

A key determinant of the success of environmental provisions in trade agreements to positively influence trade-land use interactions is the extent of their actual implementation and enforcement. In general, information on the implementation of environmental provisions of the case study countries’ existing trade agreements is limited. OECD analysis has found evidence that certain institutional arrangements and governance mechanisms, such as those aiming at increased public involvement in the verification of the implementation of environmental provisions, can benefit the concrete implementation of such provisions (George and Yamaguchi, 2018[69]).

Unilateral trade policy measures can also be an important determinant of land-use outcomes. Demand-side examples of this type of policy measure include preferential tariffs for climate- and/or biodiversity-friendly products (“environmental goods and services”), such as efficient waste management equipment. A supply-side example is the reduction of export subsidies or credits for certain land-intensive agricultural goods, such as most animal products. Another such example is the imposition of charges on exports of goods with substantial associated nexus impacts. Depending on international prices, the Indonesian government for instance imposes both an export levy (ranging between USD 0 and USD 50, (Ministry of Finance, 2018[70]) and an export tax (ranging between 0% and 22.5% (FAO, 2017[71])) on exports of palm oil and its derivatives. Revenues from the export levy, moreover, are in part used to support domestic palm biodiesel production. On the demand-side, import restrictions on nexus-relevant goods such as on corn and rice have been applied by the Indonesian government to meet domestic self-sufficiency targets (FAO, 2017[71]).

Environmental Impact Assessments (EIA) and Strategic Environmental Assessments (SEA)

EIA are used globally to control the impacts of development. Generally, EIA are applied on a project basis and involve and expert of assessment of the expected impacts of the project in predefined environmental domains such as biodiversity, water pollution and climate change. The results of the EIA can then be used by the relevant planning authority to recommend changes (which may be legally binding) to the proposed plan to limit the environmental impacts. Best practice for EIA are summarised briefly in Box 5.1. For large strategic development plans that involve multiple projects, the environmental impact of each project may not be large, but the aggregate impact of all the projects in the plan can be significant. In these cases individual EIAs of the individual projects would not be sufficient control the impacts of the whole development plan SEA can be used as to assess the whole plan as well.

Environmentally-relevant taxes

Environmentally-relevant taxes can be used to provide a price signal to reduce activities with damaging environmental impacts such as pollution, GHG emissions and water abstraction. Taxes also have the potential to mobilise revenue, which can fund other interventions in the nexus. In general, environmentally-relevant taxes raise the price of an environmentally harmful activity or good, thereby reducing demand and associated environmental impacts. Taxes can reduce the impact of an activity cost effectively, by allowing the polluters to adjust their input variables in a way that suits them. Taxes can also be dynamically efficient by creating a continuing incentive to find new and innovative ways to reduce impacts. However, the cost-effectiveness, and ultimately the environmental effectiveness, of environmentally-relevant taxes vis-à-vis other policy instruments depends on a variety of factors, including the elasticity of demand for environmentally harmful inputs and the level of sensitivity of environmental outcomes to specific activities (Hardelin and Lankoski, 2018[76]).

Emissions trading schemes

Emissions trading schemes (ETS) set a cap on allowable levels of emissions. Different ETS can have different levels of coverage (e.g. geographically or in terms of gases, sectors), and different levels of stringency. Three of the case study countries have national or supra-national emissions trading schemes in place. These are the EU ETS (used in Ireland and France) and the domestic ETS in New Zealand. Currently, emissions from agriculture and forestry are not included in the EU-ETS and emissions from agriculture are excluded from the New Zealand system (although agricultural emissions have to be reported under the system). Agricultural emissions have so far been excluded from the EU ETS (except NO₂ emissions from the production of chemical fertilisers) due to concerns surrounding the accuracy of monitoring, reporting and verification, which could lead to distributional impacts through the over- or under- allocation of permits (European Commission, 2008[86]). More recent technological advances, however, have led to suggestions that its exclusion could be revisited (Grosjean et al., 2018[87]). The New Zealand Emissions Trading Scheme (NZ ETS) is the primary policy instrument underpinning New Zealand’s climate change mitigation efforts and, in principle the only ETS in the world to include all sectors of the economy (OECD, 2017[88]). However, due to political constraints and concerns about economic impacts, the entry of the agricultural sector, which is the largest contributor to national emissions, has been delayed several times. Further, NZ ETS carbon prices are well below estimates of the social cost of carbon, and too low to achieve its intended influence (OECD, 2016[84]; OECD, 2017[88]).

Currently, emissions trading schemes and other carbon markets are unlikely to have a major influence on land-use decisions because they exclude the impacts of a primary driver of land-use change, ecosystem degradation and non-energy related emissions: agriculture (Grosjean et al., 2018[87]; OECD, 2016[84]). New Zealand has the only scheme in the world designed to include this sector, but so far its implementation has been slow. It remains to be seen if emissions trading can help balance climate and food goals by encouraging innovation and efficiency increases in the agricultural sector, and land use change between sectors (e.g. from agriculture to forestry). The further integration of agriculture in to the NZ ETS is recommended, as it would serve as a proof of concept. Despite having limited impacts on emissions, the NZ ETS has provided an incentive for afforestation. If the forest planted is native forest, it could also provide biodiversity benefits, representing a significant nexus alignment (Leining and Kerr, 2016[89]).

Besides the case-study countries’ (supra) national-level ETS presented in this section, globally multiple ETS exist at sub-national scale, too. Sub-national ETS can be of relevance to land-use outcomes by including carbon credits from reduced tropical deforestation in third countries or regions (such as those issued under the System of Incentives for Environmental Services (SISA) programme in the Brazilian state of Acre, (Duchelle et al., 2014[90])). A case study country-relevant example for the potential of sub-national ETS to contribute to reducing deforestation is California’s Cap-and-Trade programme. CARB, the scheme’s governing body, has endorsed a tropical forest standard. This standard will facilitate the future allowance of tropical forest offsets into the ETS (CARB, 2018[91]), as envisioned by a Memorandum of Understanding between the States of California (United States), Chiapas (Mexico) and Acre (Brazil) signed in 2010 (State Governments of Acre, Chiapas, 2010[92]).

ETS have the potential to play a role in balancing nexus goals at both national and sub-national levels. Importantly though, without careful guidelines on what activities qualify for emissions credits, ETS could lead to carbon sequestering actives with negative biodiversity consequences, or even negative climate impacts, if activities such as forestry on peat areas are incentivised.

Biodiversity offsets

Biodiversity offsets are “measurable conservation outcomes resulting from actions designed to compensate for significant residual adverse biodiversity impacts arising from project development after appropriate prevention and mitigation measures have been taken” (BBOP, 2009[93]). Biodiversity offsets tend to work via the mitigation hierarchy (avoid, mitigate, offset).17 The fundamental principle that underpins biodiversity offsets is that the impact of development activities can be offset if a sufficient quantity of high quality similar habitat can be created or restored. Thus, well-designed biodiversity offset policies can, in theory, allow for development while achieving a baseline goal of no-net loss of biodiversity, or the more ambitious net-gain objective, through the provision of compensatory measures (OECD, 2016[94]).

Biodiversity offsets can allow development while delivering ecosystem, and in some cases, climate co-benefits (e.g. if the offsets results in the creation of new forest), and are a useful instrument for balancing nexus goals. With the exception of Ireland, all the case study countries have introduced some form of biodiversity offset programme, though these vary substantially in terms of geographic scope, sectoral coverage and design features (e.g. mandatory18 or voluntary). While the general characteristics of these schemes are summarised in Table 5.3, not enough information is available to comprehensively compare their effectiveness.

A lack of clear and consistent guidelines for biodiversity offsets at a national level can reduce the uptake of offset mechanisms and undermine their ability to prevent environmental degradation. In New Zealand for example, Brower et al. (2017[96]) found only 15% of Department of Conservation concessions for commercial activity on conservation land contained compensatory provisions and that of those only 68% reached full compliance. A lack of clarity, technical capacity and enforcement has also undermined the offset schemes of Brazil (Souza and Sánchez, 2018[97]) and a now-replaced, one-off offset scheme in Mexico (OECD, 2016[95]). In France, despite the principle of avoid, reduce, offset being established in law as far back as 1976, the lack of clear guidelines undermined the implementation of effective offsets at a local level until a series of reforms in 2007 (OECD, 2016[37]). The offset process in France was further strengthen in 2013 by guidelines on applying the mitigation hierarchy. In 2016, the French biodiversity law granted the local authority powers to prevent projects where compensatory measures were not sufficient to meet the targets of no-net loss of biodiversity and formally integrated the mitigation hierarchy into the environmental code. Finally, the 2016 law also made the Ministry of Ecological and Solidarity Transition responsible for the creating a database to track biodiversity offset measures, strengthening the process.

Careful design and oversight of biodiversity offsets are essential to ensure consistency between nexus goals. Payment-in-lieu schemes, for example, allow for economies of scale, and spending can be targeted to specific at-risk ecosystems. They also allow countries to adopt a more flexible approach to compensatory mechanisms, ensuring actions can be tailored to specific socio-ecological contexts, without having to create lengthy guidelines. The Mexican CUSTF (Programa de Compensación por Cambio de Uso de Suelo en Terrenos Forestales), for example, aims to compensate for all development in forested areas by requiring developers to pay into the Mexican forest fund. This money is then used to carry out rehabilitation activity in forested areas. The CUSTF covers many sectors with the most common ones being mining, energy transmission, tourism, and agriculture (OECD, 2016[95]). Similarly Brazil operates a payment-in-lieu scheme that requires developers pay into a fund which manages the National System of Units of Conservation (SNUC) (OECD, 2016[94]).

However, unless actions are carried out in a spatially and ecologically balanced way (e.g. according to the Natura 2000 network), biodiversity offset approaches could facilitate the destruction of ecosystems in areas at high-risk of development which host globally important biodiversity. Further, offsets can lead to temporal imbalances if the offset actions occur some time after the habitat conversion. The Mexican CUSTF programme, for example, has experienced difficulty in allocating the resources collected to appropriate offset projects, resulting in delays between land-use change and the creation of offsets (OECD, 2016[95]). Designing offset programmes to account for spatial and temporal imbalances is, therefore, important.

Finally, by taking a more national systematic approach to offset supply countries can avoid the issues associated with project by project approaches seen in New Zealand and France (pre 2008) (Quétier, Regnery and Levrel, 2014[98]; Brower et al., 2017[96]). Biodiversity offset schemes that apply to ecosystems such as forests, or to sectoral activities such as mining, oil and gas, agriculture, are able to target pressures that are relevant to both biodiversity and climate mitigation. But better monitoring, reporting and verification efforts are required to ensure that offsets are delivering these benefits, particularly at the agricultural frontier.

Payments for ecosystem services, including REDD+

Government support to land use

Agriculture is the single largest component of land use across all the case study countries and hence government support relevant to agriculture is likely to have significant impacts on land use. This support is highly variable and may include, among other things, market price support for agricultural commodities, payments based on agricultural outputs (whether current or historical), direct support for inputs such as fertiliser, fuel and water, preferential credit for the acquisition of equipment or land, support for improved agro-environmental practices, and support for technology research and development. Subsidies relating to forestry are also of key importance to the nexus, especially in light of the role forests are expected to play in climate mitigation through carbon sequestration. There are also a range of subsidies supporting the development of infrastructure and reducing the cost of transport that can play a role in altering patterns of land use and hence are relevant to the nexus.

Agricultural support

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Figure 5.2. Producer support estimate as a percentage of gross farm receipts (GFR) 1996-2016

Note: Data for Indonesia only available until 2015

Source: OECD (2019[110]), Producer and consumer support estimates database, https://doi.org/10.1787/6ea85c58-en

National (and international) subsidy regimes can represent significant alignments or misalignments in the nexus sector. Support, in particular for agriculture, can have large impacts on nexus areas, both positive and negative. Government support to agriculture varies substantially across the six countries (Figure 5.2). Indonesia, for example, has the highest rate of agriculture support among the case study countries, estimated to be 29.1% of gross farm receipts (GFR) in 2015 (OECD, 2019[110]).

The subsidy environment in the land-use nexus is complicated with many misalignments, synergies and opportunities to improve. Agricultural support in the case study countries can take different shapes, be that through decoupled payments21 in the EU and Mexico or more direct producer support in Brazil and Indonesia. Agricultural support can have negative environmental impacts if it lowers the cost of finance available to farmers without constraints, if it supports unsustainable practices by lowering the costs of inputs without constraints, if it supports output directly, or if it creates a gap between domestic price of commodities and the international markets (Market Price Support – MPS) (OECD, 2016[111])(Table 5.5). Such support can help maintain unsustainable agricultural practices, maintain agriculture in marginal areas or facilitate the expansion of agriculture, leading to land-use change – such as deforestation and wetland conversion – which can reduce ecosystem services provision.

While the total amount of support relative to gross farm receipts varies considerably, MPS accounts for a large part of the total producer support in all the case study countries (Table 5.5). On the basis of their analytical frameworks, the selected environmental indicators, and the data used, Henderson and Lankoski (2019[112]) find that market price support can be among the most environmentally harmful types of producer support measures. Several countries also subsidise inputs which may lead to unsustainable practices, such as the electricity subsidy for pumping water in Mexico and a zero rate of VAT on fertilisers in Ireland and Indonesia. Further, concessional loans and insurance for agriculture, particularly working capital for commercial farmers in Brazil and the development of timber plantations in Indonesia (Mcfarland, Whitley and Kissinger, 2015[113]; OECD, 2018[114]), may encourage land use change. However, appropriate regulatory frameworks managing nexus impacts and environmental constraints on allowable activities should, in theory, limit adverse effects in some cases. Examples include, the Nitrates Directive in the EU (i.e. relevant to the France and Ireland case studies), which includes restrictions on the application of fertiliser in certain environmentally sensitive areas or the whole territory, and in Brazil environmental and climatic zoning is used to restrict access to subsidies in certain environmentally important regions (OECD, 2018[114]). Understanding where and how to reform potentially environmentally-harmful subsidies, is important for minimising the nexus impacts of agricultural support.

Reforming the most distortive and potentially environmentally harmful support is key to addressing misalignments in the nexus, but understanding the impacts of support is challenging and requires context-specific analysis. The first stage in reforming subsidy systems is, therefore, to identify and assess the nexus impacts of existing subsidies. France has undertaken a study to assess the impacts of public incentives on biodiversity (Sainteny et al., 2011[115]), and Indonesia has recently completed a peer review of its remaining fossil fuel subsidies as part of the G20 process. Greater application of national and peer reviews of subsidy regimes would help ensure incentives with negative nexus impacts are reformed.

Other forms of agricultural support can have complicated impacts on nexus areas. For example, Brazil allocates substantial funding for research and development, 30% of general services support to agriculture was spent on knowledge and innovation in Brazil, compared to 0.5% in Indonesia (Mcfarland, Whitley and Kissinger, 2015[113]; OECD, 2018[114]). This has allowed Brazil to increase the productivity of the soy crop in recent decades (Figueiredo, 2016[116]), and led to some decoupling of production growth from agricultural expansion. These improvements can allow the expansion of food production (and other agricultural products) without the need to convert areas of forest to cropland, and hence help to ensure consistency across nexus areas. However, they can also create incentives to increase cultivated area if expansion is not mediated through other instruments, such as the soy moratorium (discussed in section on regulatory instruments) and other forest conservation measures (Koch et al., 2019[117]). A lack of funding for this area, has, among other things, led to a significant yield gap in the Indonesian oil palm sector, where the average yield is (3.6t/ha) well below the theoretical maximum potential (7t/ha) (Coordinating Ministry of Economic Affairs, 2011[118]). There are also sub-optimal yields from cattle farming in some areas of Brazil, where efforts to conserve forest might lead to intensification, suggesting considerable scope to better balance nexus goals (Koch et al., 2019[117]).

There is also opportunity to improve the environmental conditionality of both coupled and decoupled support payments in Ireland and France. Payments through the European Union Common Agricultural Policy (CAP) in Ireland and France are worth approximately EUR 1.2 billion and EUR 7.1 billion in 2016 respectively, of which 99.9% in Ireland and 85% in France was de-coupled (European Commission, 2017[119]). According to OECD estimates (2019[120]) around 50% of agricultural support in the European Union is conditional on environmental constraints, which represents a considerable resource for potentially improving the environmental performance of farming within these countries. Whilst environmental cross-compliance measures are mandatory, recent reviews of the environmental and cost-effectiveness of these mechanisms suggest they lack the specificity and stringency needed to substantially reduce the environmental impacts of agriculture (OECD, 2020, forthcoming[121]).

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Table 5.5. Distortive and potentially environmentally harmful support
Market price support
Country	% of MPS in PSE (USD million 2016-18 average)		% of MPS in gross farm receipts
Brazil	48.6% (1 994)		1.3%
Indonesia1	91.4% (28 952)1		22.6%
Mexico	28.2% (1 261)		2.3%
New Zealand	83.0% (114)		0.6%
EU	19.0% (19 553)		3.8%
Other distortive and potentially environmentally harmful support
Country	Policy	Year Active	Expenditure (2016-18 average)	Potential mechanism for impact
Brazil	Preferential interest rates on working capital loans	2008-Present	515	May support unsustainable practices on commercial farms. However, environmental and climatic zoning restrictions apply
Indonesia1	Subsidised fertiliser	2012-present	1 7111	Reduces the cost of fertiliser inputs potentially leading to excess inputs and supporting agriculture in marginal areas
Mexico	Subsidised electricity for pumping water	2001-Present	404.3	Could support unsustainable water extraction and use, leading to ecosystem impacts and increased demand for electricity
New Zealand	NA	NA	NA	NA
Note:1 Indonesian data only available to 2015 so figures are 2013-15 average.
Source: (OECD, 2019[120]) Agricultural Policy Monitoring and Evaluation 2019, https://doi.org/10.1787/agr_pol-2018-en; (OECD, 2017[122]) Agricultural Policy Monitoring and Evaluation 2017, https://doi.org/10.1787/agr_pol-2017-en

The current CAP architecture will be replaced from 2020, and the proposed new framework aims to give more freedom to countries to design their own agri-environmental conditions (European Commission, 2018[123]). This presents an opportunity for France and Ireland to tailor direct payment mechanisms to their specific national contexts and, therefore, improve the performance of these mechanisms in managing nexus goals. Nonetheless, assessment of the environmental impacts of these measures is lacking and evidence for their environmental effectiveness remains equivocal (OECD, 2018[124]; OECD, 2020, forthcoming[121]). Greater monitoring of the environmental impacts of these measures, as proposed in Ireland under the Food Wise 2025 plan (DAFM, 2015[125]), and increased flexibility in the type of environmental constrains allowed, would help ensure decoupled payments work effectively to ensure consistency between nexus areas.

Land reform

As highlighted earlier, secure land tenure is essential for effective policies in the land-use nexus. In France, Ireland and New Zealand, land tenure is mostly clear and secure, but to achieve clarity and security of tenure in Indonesia and Brazil, significant reform is required. Land reform in Indonesia has two major components relevant to the forestry sector; the first is the promotion and expansion of community forestry and the second is agrarian reform. Indonesia has aims to have a total of 12.7 million ha of forest under community management, 4.5 million ha of which is to be allocated by the end of 2019 (Ministry of Environment and Forestry, 2018[144]). Under these programmes, the rights to manage and access land are transferred from the Indonesian state to a local community group. The Indonesian Ministry of Environment and Forestry identifies these schemes as an inclusive pathway to climate change reduction and poverty alleviation by providing access to and the ability to profit from forest resources for local communities (Ministry of Environment and Forestry, 2018[144]). However, the actual amount of land transferred to community management totalled 1.7 million ha by 2018, and while the rate of land reform is increasing, further efforts are needed to strengthen and streamline the process of land reform (Ministry of Environment and Forestry, 2018[144]). Several factors have caused this delay, notably budget cuts to the MoEF and complicated lengthy certification process. However, social forestry schemes still represent a promising pathway for land tenure reform. Efforts to streamline the application process for community forestry are underway, and it has been reduced from 2-3 years to approximately 1 year. But the process is still complicated and capacity building is required to improve community access and the environmental performance of social forestry schemes.

The second component of land reform in Indonesia is agrarian reform. Under the programme of agrarian reform (known as TORA), 9 million ha of land for agriculture will be redistributed to rural communities in order to reduce poverty and inequality. Of this, 4.1 million ha will come from the national forest estate (Ministry of Environment and Forestry, 2018[144]). While this programme targets social goals, it could potentially have negative biodiversity and climate impacts, if the redistributed land contains biodiversity rich ecosystems (e.g. primary forest) or is on peat land areas (Miettinen et al., 2017[49]).

In Brazil, land reform is at a more advanced stage and the approach has been different. The Forest Code has prioritised the mapping and identification of individual land holdings in forested areas and enrolling them in the national CAR (Cadastro Ambiental Rural) system. As of August 2016, 3.7 million properties covering 387 million ha, were enrolled in the CAR (Azevedo et al., 2017[14]). Through this system, enforcement efforts, such as credit black-listing, are used to target land holders who have deforested illegally. While there are issues surrounding the actual enforcement of the Forest Code, with Azevedo et al. (2017[14]) finding only 6% of registered properties took steps restore illegally cleared land, the registration of properties alone reduced deforestation by 10% (Alix-Garcia et al., 2018[156]). Land reform was thus a key component of Brazil’s successful efforts (until 2015) to reduce deforestation in the Amazon.24

The current approaches to reforming land tenure in Brazil and Indonesia are well aligned with nexus goals. Evidence from Brazil suggests that just by the act of registering a property, the rate of deforestation decreases, bringing with it ecosystem and climate benefits (Alix-Garcia et al., 2018[156]). The situation in Indonesia is somewhat more complicated with overlapping institutional jurisdictions and conflicting maps leading to illegal land-use. As such, despite the mixed results of community forestry so far (Santika et al., 2017[157]), continuing efforts to extend community management are essential for removing misalignments in the nexus.

Intergovernmental Fiscal transfers

Every country has multiple governments (barring small city states) and intergovernmental fiscal transfers (IFT)25 are the mechanism through which they carry out fiscal decentralisation. As a result, IFT are the most important feature of sub-national finance in most countries. In general, IFT are used to ensure that the revenue available for sub-national governments is well matched to the needs of the population. IFT can incentivise and advance national, provincial or municipal level goals and objectives such as equality, public service delivery and poverty eradication. As such, IFT are important to the nexus and are of particular importance to large, decentralised countries such as Brazil and Indonesia.

In Indonesia, the revenue a district can earn from the shared revenue fund is directly proportional to the value of the forestry revenues earned, and there is currently no penalty for over-exploiting forested areas. Under the current IFT structure about 40% of the revenues from forestry activity are returned to the producing district. Consequently, district governments have an incentive to maximise forestry revenues through logging and conversion of forests to timber plantations (Nurfatriani et al., 2015[146]). Palm oil plantations also generate revenue which is returned to the producing district, and while the proportion of the revenue returned is much lower, the higher profitability of oil palm results in higher revenue for the producing district in real terms (Irawan, Tacconi and Ring, 2013[158]). This revenue transfer incentivises district governments to maximise their revenue by facilitating the development of plantations in forested areas.

In Brazil the ‘Ecological Value-Added Tax’ (ICMS-E) is a mechanism whereby tax revenues from one state/municipality are transferred to another, in return for providing some form of environmental protection. Since its inception in Paraná in 1991 the ICMS-E has been adopted in 17 states by 2018. ICMS-E was first implemented to reward municipalities for hosting PAs and 16 of 17 states now include specific protected area indicators (Droste et al., 2017[159]). The value of the ICMS-E differs from state to state, but can be up to 8% of municipal value-added tax revenue, and it has been shown to encourage the creation of PA, however analysis of its ecological impacts is lacking (Droste et al., 2017[159]).

France operates a similar system of fiscal transfer to Indonesia, the DGF, where municipalities are paid according to their area and population size. Since 2007 the DGF has also included an ecological component, which awards extra money to municipalities if they are in the core area of a national park, to compensate for the reduced development opportunities (Borie et al., 2014[160]). However, of the 36 783 municipalities in French territory only 150 were eligible for the ecological allocation (in 2014) which represented on 0.02% of the EUR 13.6 billion distributed by the DGF (Borie et al., 2014[160]).

By basing revenue redistribution on environmental performance, IFT could provide a powerful incentive to prioritise nexus goals at a local level, and be used to compensate local governments for providing large shares of national level goods such as biodiversity or climate mitigation. However, by prioritising agriculture, the Indonesian approach potentially creates misalignment between nexus areas. In contrast, Brazil and France utilise specific environmental criteria, but the proportion of revenue allocated under these mechanisms is relative small, limiting their impact. Increasing the revenue available under IFT for achieving specific well-aligned nexus goals would encourage local authorities to manage, sometimes conflicting, nexus areas while allowing them the flexibility to implement locally appropriate measures.

Life cycle assessment approaches

Product life cycle assessment (LCA) approaches employ quantitative methods to assess environmental impacts resulting from the entire life a product, from production to consumption. In LCA, all the impacts associated with the production of a good (e.g. GHG emissions) are considered embodied in the final good at the point of consumption. Therefore, LCA impacts are location independent, and LCA could help quantify leakage under pricing mechanisms such as ETS. LCA can also help to quantify adverse nexus impacts of traded land products more generally. The application, upscaling and further development of LCA approaches in different sectors is an important demand-side measure to prevent the adverse impacts of trade on nexus areas. In the case study countries there are several different initiatives promoting the use of LCA and other approaches to quantify and limiting negative upstream or downstream impacts of domestic production and consumption of goods and services.

The National Strategy to Combat Imported Deforestation (SNDI) (Ministère de la transition écologique et solidaire, 2018[164]), will include a number of demand-side measures to better assess and ultimately reduce deforestation in the supply chain of French goods and services. For example, the introduction of a “zero deforestation” reporting category in private sector CSR reports (measure 11.1) and in reports of non-financial information required from financial institutions and investors (measure 12.1) are both proposed under the SNDI. Moreover, the SNDI recommends a potential widening of the scope of a law prescribing the “duty of care” of French companies for social and environmental risks associated with their supply chains to explicitly include deforestation risks (measure 11.2).

The sustainability criteria for biofuels – as used by France and Ireland under EU regulations – is a good example of the application of LCA in policy. Under EU law, biofuels have to meet certain sustainability criteria requiring life cycle (cultivation, processing, transport) GHG emissions savings of at least 35% compared to fossil fuels.26 The application of LCA in this case was implemented after the initial law was passed, in response to concerns about the risks of indirect land-use change from agricultural expansion in response to increasing demand for oil crops (Frank et al., 2013[165]) . In December 2018 the Renewable Energy Directive II27 introduced a new approach to ILUC by setting a gradually decreasing limit on the countable use of biofuels with high ILUC-risk. As of February 2019, no definition of what feedstock counts as high ILUC-risk biomass has been adopted.

Sustainability criteria in national (or supra-national, such as EU) regulations also impact nexus issues and policy coherence in countries of biofuel or feedstock origin like Indonesia and Brazil. Indonesia, for instance, supplied 49% of the EU’s palm oil in 2017 (European External Action Service, 2018[166]), and around 40% of the EU’s palm oil imports are used for biofuel production (Deutsche Welle, 2018[167]). Oil palm is among the most efficient oilseed crops in terms of yield. As a consequence, if the adverse local production impacts and transport emissions are effectively reduced and managed, palm oil-based biofuels could in theory constitute an example of synergistic trade-land use interactions (Mekhilef, Siga and Saidur, 2011[168]). However, so far managing the impacts of palm oil production has proven challenging (OECD, 2019[12]). While there remains large scope to more effectively manage these trade-offs (Moreno-Peñaranda et al., 2018[169]) and to reduce the land-use impacts of the wider Indonesian palm oil production system (OECD, 2019[12])28, the introduction of the EU sustainability criteria for biofuels has indeed led to changes in Indonesian land-use regulations and practice (Hia and Kusumawardani, 2016[170]). Partly as a response to the criteria, Indonesian palm oil producers were required to follow certain production standards summarised under the Indonesian Sustainable Palm Oil (ISPO) regulation by 2014 (Ministry of Agriculture, 2011[171]).

The involvement of the widest possible range of actors on the supply- and demand-side is important if value chain and life cycle assessment approaches are to exert substantial positive influence on land-use outcomes. For example, the rapid increase in Chinese demand of several key commodity groups since the 2000s accounts for a substantial share of land-use nexus impacts attributable to exports in the case study countries. In 2016 82% of Brazilian soy exports were destined for China, and China constitutes the second-biggest export markets for both Indonesian palm oil and rubber, and the biggest for its forest products (Ministry of Agriculture; Fisheries and Food Supply, 2017[172]; BPS Statistics Indonesia, 2017[173]). Similarly, recent increases in Irish dairy and French roundwood exports are largely attributable to demand from China (Department of Agriculture; Food and the Marine, 2018[174]; Fédération nationale du bois, 2018[175]). Therefore, the involvement of China and other emerging economies in initiatives limiting land-use impacts beyond their own jurisdictional boundaries is essential.

Mandatory and Voluntary certification

A variety of certification schemes operate in the case study countries, both voluntary and mandatory, covering several nexus-relevant areas. One of the most common mechanisms is the certification of forest areas and forestry products. The Programme for the Endorsement of Forest Certification (PEFC) and the Forest Stewardship Council (FSC) are the two largest and most internationally recognised systems. All of the case study countries utilise these two certification mechanisms to differing extents (Figure 5.3). In general, both mechanisms aim to ensure the sustainability of timber supply chains by ensuring various management standards for forestry areas (such as biodiversity conservation and the delivery of ecosystem services) and the legality of timber for secondary products (PEFC, 2010[176]).

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Figure 5.3. Percentage of forest area under PEFC and FSC certification in 2014

Note: PEFC national standards in Indonesia and New Zealand were officially endorsed in 2014 and 2015 respectively, hence there were no certified forests in 2014.

It must be noted that Indonesia and Brazil have much larger extents of forest so even though only a small percentage is certified, the total area certified is much larger than either Ireland or France.

Mexico does not have a PEFC endorsed national standard.

Source: FAO (2015[177]), Forest Resources Assessment 2015, http://www.fao.org/3/a-i4808e.pdf.

Large international certification systems, like FSC and PEFC, tend to have a large number of criteria for certification. As a result they do not represent a viable commercial option for smallholders or community managed forests, who often lack the capital and technical capacity required for the certification process (McDermott, Irland and Pacheco, 2015[178]). Despite offering a programme specifically tailored to these kinds of suppliers (small and low intensity managed forests programme), only 4% of forest area certified under FSC is managed by smallholders. Consequently, these programmes are not well aligned with forestry systems in tropical countries, which are typically dominated by community and smallholder managed areas. For example, in Mexico at least 70% of all forests is managed by Ejidos or Comunidades (two forms of communal tenure) which supply around 85% of all commercial roundwood (García-Montiel et al., 2017[179]). This lack of penetration into community and smallholder forest limits their utility for influencing nexus outcomes in the tropics, which is particularly important given small holder forestry generated an estimated USD 1.29 trillion in value in 2017 (Verdone, 2018[180]).

The PEFC operates slightly differently to the FSC and effectively endorses national level certification programmes that meet certain sustainability criteria. While national level forestry certification exists in all the case study countries, Mexico is the only case study country that does not have a PEFC endorsed standard.29 Instead, the state developed Mexico Forest Certification (MFC), has fewer and less rigorous standards, making it more attractive to smallholder and community managed forest. This is reflected in the uptake of certification schemes where smallholders favour the MFC and commercial operation the more rigorous FSC (García-Montiel et al., 2017[179]).

Beyond certification for timber management, there are a range of other state, non-state, national and international certification standards covering a wide variety of agricultural supply chains. Gruère (2013[181]) analysed 544 environmental labelling schemes and found around 63% of them were aimed at nexus relevant areas (chemical control, biodiversity conservation, natural resource management and climate change). There has also been a rapid increase in the use of certification and labelling, with a fivefold increase in systems from 1988 to 2007 (Gruère, 2013[181]).

In theory at least, certification standards can be used to balance goals, however, in some cases they can conflict with national legislation. The Round Table on Sustainable Palm Oil (RSPO) provides a good example of these legislative issues. Under the RSPO, companies are required to assess the biodiversity value of the concession and set aside areas of high conservation value preventing conversion. The same is also true under Indonesian law30, however the definitions of high conservation value are very different. Consequently, land set-aside under HCV can and has been excised from concessions and reallocated to non-RSPO companies for development into plantations, posing a challenge to RSPO implementation (Colchester et al., 2009[182]). Crucially, large markets have yet to adopt this standard: very little of the 10.6 Mt of palm oil imported by India and only 50 000 of the 4.8 Mt imported by China was RSPO certified (Schleifer and Sun, 2018[183]). Wider uptake would be needed to reach the goal of raising standards across the industry.

The second challenge to the effectiveness of certification as a tool to manage nexus goals is weak or poor enforcement of the standards. If not properly enforced, certification can fail to deliver environmental benefits and worse still it can be used to legitimise illegal activity. In Indonesia, the timber legality assurance system (SVLK) was set up in 2008 to ensure the legality of timber exported to the EU and issue FLEGT (Forest Law Enforcement Governance and Trade) licences to certified suppliers. However, the weak and inconsistent law enforcement in Indonesia has resulted in the laundering of illegal timber through certified companies (EIA and JPIK, 2017[184]). Weak enforcement of certification standards harms the credibility of the standard, particularly if such weak enforcement is publicly known. For many agricultural commodities and forest sector products, social and environmental production conditions are not visible to the final consumer. While certification schemes offer a way out of this situation of information asymmetry between producers and consumers, a lack of consumer trust (and consequently reduced price premiums) in turn can further limit certification effectiveness.

Certification is currently an effective tool for managing nexus goals in some areas, however, a lack of consistent price premium, capacity shortfalls (particularly among small holders), misalignments with national contexts and poor enforcement undermines its effectiveness. To improve the effectiveness of certification building capacity, particularly around community and smallholder land managers is essential, especially given the role they play in tropical agricultural systems (Verdone, 2018[180]). Finally, improving the auditing and enforcement capacity, again with a focus on more challenging governance environments in tropical systems, would help improve the effectiveness and the reliability of certification systems.

Agricultural information and knowledge transfer schemes

The decisions of individual land managers have a large influence on nexus outcomes, but despite advances in agriculture and forestry management, there are considerable differences between the performance of individual holdings. Closing the yield and efficiency gaps will lessen the pressure on unmanaged land areas, by reducing the need to open up new areas to meet production targets and reducing the emissions-intensity of production by fostering the uptake of climate-smart agricultural techniques.

There is, however, a strong caveat that knowledge transfer and informational approaches focused on efficiency gains and reducing yield gaps will only have the desired effects if they are introduced with a robust legislative framework, particularly concerning land-use change. If the other mechanisms to control land-use change are ineffective, closing yield gaps and increasing farmer efficiency could have the opposite effect, leading to increased biodiversity impacts and emissions. The increased profitability of production could create a rebound effect whereby the level of investment in the sector increases with an associated expansion of production into unmanaged areas. This phenomenon is of particular importance countries with large potential for agricultural expansion (e.g. Indonesia, Brazil and Mexico) and is likely to reduce the potential impacts of productivity increases in the absence of other effective policies (Martha, Alves and Contini, 2012[191]).

Aside from schemes focused on efficiency gains and closing yield gaps, knowledge transfer and information schemes can also be focused on encouraging more sustainable farming and forestry practices. Generally, these are in the form or advisory and extension services, which aim to facilitate and incentivise the uptake of environmentally beneficial land management practices, by highlighting the benefits to land managers and providing the knowledge and skills to put them into practice. Advisory and extension services are provided by a wide range of actors and institutions in the case study countries. For example, they are a key component of agriculture support programmes in Ireland (e.g. GLAS) and New Zealand (e.g Sustainable Farming Fund). While quantitative assessments of advisory and extension services is limited, evidence suggests they play a vital role in the uptake of environmentally-beneficial management practices (OECD, 2015[192]).

The six case study countries use several different approaches to knowledge transfer. In Ireland, knowledge transfer programmes are an integral part of agricultural support programmes (e.g. GLAS) and forestry support schemes (e.g. NeighbourWood scheme and Native Woodland Conservation scheme). In addition, there are several specific schemes directly addressing knowledge transfer in both the agricultural and forestry sectors (e.g. Forest Knowledge Transfer Group Scheme). For example, the Irish Beef Data and Genomics Programme (BDGP) tracks maternal traits of suckler cows in commercial herds to create an index that ranks the efficiency of individual animals under a five star system. This index is then used to support farmer decisions regarding replacement animals with the long-term aim of improving the efficiency of the Irish cattle herd as a whole. Improvements that will deliver emissions mitigation and improved production. The BDGP also require participating farmers to go through an emissions assessment under the carbon navigator programme, further increasing the mitigation impacts. Ireland also co-ordinates the efforts of knowledge transfer schemes, such as the BDGP, though the Origin Green32 programme (see Box 5.3).

Across the case study countries, the level of finance for knowledge transfer and innovation is highly variable. Brazil allocated 25.4% of all agricultural support to knowledge and innovation systems in 2015 (USD 1.8 billion) and Indonesia 0.5% in the same year (USD 209 million) (OECD, 2019[110]).33 To create the co-benefits required for effective management of trade-offs and ensure demand for agricultural products can be met in the future, significant investment in knowledge transfer and innovation programmes is key.

Brazil, the country with the highest level of government investment (both relative and absolute) in agricultural knowledge and innovation systems across the six case studies, has achieved significant success in raising the yields of important agricultural products. These include soy (yield increased from just over 1,000kg/ha in 1970 to 3 200 kg/ha in 2012) (Figueiredo, 2016[116]), beef (17.61 kg c.e/head to 40.13 kg c.e/head 1975-2006) (Martha, Alves and Contini, 2012[191]) and reducing direct emissions from agriculture (Mello, 2015[132]). The Brazilian approach is highly decentralised with the national government playing a co-ordinating role through the Ministry of Agriculture, Livestock and Food Supply, but the actual knowledge transfer and research activities are carried out by state and municipal level organisations such as EMATER (Technical Assistance and Rural Co-operation) and EMBRAPA (Brazilian Agricultural Research Corporation). However, despite the success of these schemes highlighted above, ongoing land-use change in the Cerrado (Strassburg et al., 2017[55]), and Amazon (Hansen, Stehman and Potapov, 2010[194]), highlights the importance of having robust systems in place to control land use and ensure that improved efficiency of production does not also lead to increased land conversion.

General approaches

The potential of FLW reduction measures to address nexus issues varies widely according to site-specific and product-specific factors. Thus, the land-use, climate and ecosystem impacts of FLW are heavily influenced by the type of food that is lost or wasted. While milk and meat only contribute 11 per cent of food waste by mass, they account for 78 per cent of the land occupation linked to FLW (FAO, 2013[195]).35 By contrast, despite significant rates of loss, the land occupation associated with vegetables that are wasted is much lower due to their comparatively high yields. In terms of carbon emissions, cereal crops are the largest contributor (34%), largely driven by high fertiliser inputs and paddy field rice systems is Asia which are associated with significant methane emissions from decaying vegetable matter (FAO, 2013[195]). The contribution of cereals to carbon emissions is unsurprising given they constitute approximately 63% of the global food supply and around 57% of all plant-based FLW (Kummu et al., 2012[197]). Animal products on the other hand account for only 15% of total food waste by volume, but 33% of the carbon footprint of FLW (FAO, 2013[195]). Thus, focussing public policies on high impact animal based products and dietary shifts away from meat and dairy products may have a greater ability to relieve demand for agricultural land than policies to address food waste in a general sense, however it is likely both approaches will be required (Willett et al., 2019[198]).

The global food system is complex and consequently causes of FLW are complicated and multi-faceted as well. FLW occurs at every stage of the food production system36, with the highest levels (by volume) associated with the upstream phases (agricultural production and postharvest handling and storage) (FAO, 2013[195]; Kummu et al., 2012[197]). This varies by region, however, and in general high income countries are associated with higher volumes of downstream (processing, distribution and consumption) FLW than lower income countries (FAO, 2013[195]). Since the environmental impacts accumulate along the food supply chain, the later the product is lost or wasted in the supply chain the higher the environmental cost, however the largest proportion of these impacts is associated with the production of the food in the first place (FAO, 2013[195]). It is also important to note that reducing FLW to zero is likely not possible or desirable, as it could lead to reduced food security though increased prices under some scenarios (OECD, n.d.[199]).

Table 5.7 summarises some of the most important sources of FLW in industrialised countries. Actions to address FLW are variable, however, it is possible to define a generalisable hierarchy of actions for addressing FLW, as shown in Figure 5.4. Actions to prevent FLW are given the highest priority under this hierarchy, because they avoid environmental and economic impacts that stretch the length of the food value chain (FAO, 2017[200]; Tonini, Brogaard and Astrup, 2017[201]). Waste management strategies are the least-preferred measures under this hierarchy because of the substantial impacts that food production, processing, and transport have before this point (FAO, 2017[200]). Jørgen et al. (2016[202]) further suggest that actions should focus more on addressing the loss and waste of foodstuffs with the highest environmental impacts, such as animal products and cereal products, and less on those with reasonably low environmental impacts such as certain root vegetables. The EIU (2018[203]) recommend that these hierarchies should be adopted as part of the formal mandates of authorities charged with addressing FLW.

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Figure 5.4. Hierarchy of actions to address food waste based on the environmental, economic and social benefits typically associated with each class of action

Source: FAO (2017[200]) Save Food for a Better Climate: Converting the food loss and waste challenge into climate action, http://www.fao.org/3/a-i8000e.pdf

Case study examples

There are currently no globally consistent measures of FLW that allow for a comparison of the actual volumes of FLW at different stages of the food chain system across countries (see Chapter 2). Understanding what actions are appropriate and where in the system they should be implemented is, therefore, challenging and likely to be specific to national and sub-national contexts. There are opportunities to reduce FLW at every stage of the food chain system, with downstream losses (processing, distribution and consumption) that are higher in developed countries, making interventions at the later stages of the food chain system preferable. Upstream losses, however, are relatively larger in less developed countries, so targeting these losses, through the improvement of agri-food systems is key (Kummu et al., 2012[197]).

France is a global leader in efforts to reduce FLW, and its actions far exceed the requirements set out by the European Commission, however, to date there is little evidence regarding how successful these efforts have been. France takes a holistic approach to addressing FLW including mandates for education and new business practices. Consequently, France was ranked first out of 35 countries in the EIU’s (2018[203]) index of food loss and waste, which takes into account levels of food waste and the policy responses to it. The French success in passing legislation to address FLW can be attributed to broad public debate and lobbying efforts by civil society.

In 2016, France passed a range of bold measures specifically aimed at addressing FLW. These included granting tax benefits to farmers who donate food that would otherwise be lost, requiring supermarkets to sign agreements with local charities to donate unsold but still edible food, and imposing fines of up EUR 75 000 on supermarkets that discard food (Henz and Porpino, 2017[204]; EIU, 2018[203]). However, the proportion of food that must be donated is not specified by law and consequently, it is likely only a small fraction of food intended for refuse is redistributed. In addition, France has removed expiration dates from foods that do not pose time-sensitive health risks, undertaken information campaigns aimed at educating consumers about food waste prevention, and included food waste prevention within school curricula (EIU, 2018[203]). The lack of national level monitoring makes it difficult to assess the success of these programmes, but a 2017 study found around 24% of food intended for disposal had been redistributed to charities in the province of Isére (Gore-Langton, 2017[205]).

Mexico has a relatively low level of food waste when compared to the other case study countries, although measurement issues likely play a role in the favourable comparison. Measurement issues aside, Mexico does have a long-established and highly sophisticated Programme for Waste Prevention and Integrated Waste Management. This programme formalises the hierarchy of actions to address FLW (Figure 5.4) and therefore focusses efforts on waste prevention. Importantly it includes requirements to measure food waste, which places Mexico in a small grouping of (mostly highly-developed) countries to do so (Champions 12.3, 2018[206]). Furthermore, Mexico has partnered with the United States and Canada under the Commission for Environmental Cooperation (2018[207]) to form the Food Loss and Waste Measurement Expert Group in order to advance the measurement of FLW throughout the supply chain in North America. Given the international nature of food systems, transnational approaches to FLW such as this are particularly important.

Much like France, Mexico has also included FLW into agricultural policies and programmes. Specifically, under Mexico’s Agricultural Sector Programme 9 Strategy 1.6, goals include improving transport networks and storage facilities, investing in cold chain technology, and improving handling capacity for perishable foodstuffs, an approach also utilised in Indonesia (González, 2017[208]; The Ministry of Agriculture, 2015[209]). In addition, the Agricultural Sector Programme 10 Strategy 1.6.8 encourages the reuse of surplus food for the benefit of food-insecure populations (González, 2017[208]), highlighting the potential of FLW reduction programmes to contribute more broadly to food security goals and the SDGs.37

The redistribution of surplus food to food-insecure sections of society is a common approach to addressing FLW, with programmes in operation across New Zealand, France, Mexico, Brazil and Indonesia. This approach is particularly important in countries such as Indonesia and Brazil, where food waste is relatively high, and around one third and one quarter of the population are food insecure respectively. In Brazil, more food is wasted annually than would be required to ensure food security for the entire population - making FLW a moral as well as environmental issue in the country (Henz and Porpino, 2017[204]; Embrapa, 2018[210]).

Much like other facets of the land-use nexus, the complex nature of FLW makes broad approaches difficult, especially in countries with a wide range of socio-economic contexts and differing food systems. In these cases sub-national approaches may be best suited to addressing the specific FLW issues. The city of Palembang in Indonesia, has developed one such programme, which aims to reduce the estimated 116 000 tonnes of food waste produced every year through a programmes of education and biomass utilisation for compost and biogas (Ministry of Agriculture and the Technology Assessment and Application Agency, n.d.[211]). In 2016, the Federal district in Brazil approved a law requiring supermarkets to donate rather than destroy food that is not sold. Supermarkets in breach of this law face fines of up to 3 000 USD, however as of December 2017, no such fines had been levied (Henz and Porpino, 2017[204]).

While all the case study countries have some kind of programme to address FLW the extent and scopes of these programmes is highly variable,38 hence there is still considerable opportunity for improvement. The lack of quantitative, national level targets for reducing FLW outside of France is surprising given the economic and environmental rationale for action and the potential synergies with other key national policy agendas, such as climate change, biodiversity and food security. The absence of consistent FLW monitoring at national and sub-national levels explains to some extent why these targets are missing in many cases. The recent EU effort to define measurement standards (Directive (EU) 2018/851)39 is an important step forward for FLW. However, greater co-ordination at an international level would increase the understanding of this complex issue and help identify key leverage points for policy interventions. While national-level approaches may prove to be too general to effectively reduce FLW in some cases, having national guidelines to define the targets, monitoring systems and basic standards for handling food waste are key for defining the scope within which more specific sub-national actions could take place. While Mexico, France and Indonesia all include some measures for reducing food waste in the agricultural plans (and to some extent Ireland through the Origin Green programme), FLW often has a relatively low profile in the ministries that could have key roles to play (e.g. Agriculture, Transport, Trade). Reducing FLW should be a key component of strategies to balance nexus goals, since it would also result in reduced demand and GHG emissions.