6. An evaluation of Norway’s agricultural policy performance in achieving its national objectives

The OECD country reviews assess policies in terms of their potential to contribute to a productive, sustainable and resilient food system, following the OECD Agro-Food Productivity-Sustainability-Resilience (PSR) Policy Framework (OECD, 2020[1]). This framework derives from the Declaration of the 2016 OECD Agricultural Ministerial in which all OECD member countries agreed on shared goals for the agriculture and food sector: provide access to safe, healthy and nutritious food, improve the standards of living of producers, improve inclusiveness and, in order to achieve those goals, contribute to the sustainable productivity growth and resilience of the sector. Norway, like all other OECD countries, also has its own objectives for its agricultural policies. This chapter seeks to (i) make an assessment – based on evidence and indicators – of the extent to which Norway has achieved its policy objectives and desired outcomes using available metrics; and (ii) benchmark Norway’s progress in achieving a more productive, sustainable and resilient food and agriculture sector, relative to other OECD countries. First, the objectives and outcomes are measured through available indicators and existing analysis. Then a specific analysis of the trade-offs and complementarities between productivity and sustainability is undertaken using econometric techniques to compare Norway with other OECD countries.

According to the White Paper on agricultural policy, (Ministry of Agriculture and Food, 2016[2]) and the annual budget, there are four objectives for agricultural policies in Norway: food security and preparedness, maintaining agriculture across the entire country, increasing value added, and sustainable agriculture with lower GHG emissions. The objectives and their more specific components are elaborated in Figure 6.1. In general, agricultural policy in Norway dictates that consumers are to be provided with nutritious, high quality products, and the production process should be mindful of aspects related to the environment, public health, and animal welfare. Norway’s agricultural policy aims at safeguarding agricultural resources, developing know-how, and contributing to the creation of employment and value added in farming and farm-based products throughout Norway.

Broadly, these objectives are aligned with the Declaration of the 2016 OECD Agricultural Ministerial and the OECD Agro-Food Policy Framework (OECD, 2020[1]) provides a tool for analysing policies to improve productivity, sustainability, and resilience. However, not all the elements of the structure of objectives in Figure 6.1 are fully reflected in the PSR outcomes and the set of indicators used in the OECD Framework. But the main features of these objectives are reflected: productivity growth is a useful proxy for the creation of economic value; OECD agri-environmental indicators can be used to assess Norway’s environmental sustainability objectives; and the risks of food insecurity and preparedness are reflected in the need for a more resilient sector. The set of indicators that are used to measure outcomes in the PSR Framework include: Total Factor Productivity (TFP) growth; agri-environmental indicators such as nitrogen and phosphorus balances, agricultural GHG emissions, on-farm energy consumption, and the farmland bird index;1 and indicators of resilience for which there is not a set of internationally comparable indicators, though national sources can be used to infer different aspects of resilience such as likelihood, consequences and uncertainty of selected systemic food security risk. While not all of Norway’s objectives can be evaluated using available indicators, particularly landscape, these indicators capture a variety of important metrics that are useful for cross-country comparisons. Further, these indicators are particularly relevant in Norway, where limitations in available arable land underscore the importance of maintaining the short and long term viability of the soil.

According to the White Paper (Ministry of Agriculture and Food, 2016[2]) food security is to be achieved through national production, trade and safe warding of the production base. In other documents, such as the 2020 budget, this objective is more narrowly identified with increasing food production and strengthening the competitiveness of the agricultural sector (Agriculture Budget Committee, 2020[4]). Overall, Norway is a country with high income per capita and low inequalities, that provides a high stability of access to nutritious food to all of its population. The system is highly resilient to systemic shocks, ensuring food security for all the population and livelihoods to producers. Recent analysis and the experience with COVID-19 suggest that Norway’s food system is highly prepared for disasters and supply disruptions, has the capacity to meet the nutritional needs of the population, and has a high level of preparedness. This capacity is particularly enhanced by the ability to trade with other countries through the food system. Norway is a net food importer and its food security objectives are achieved to a great extent through trade and globally interlinked value chains. Other aspects of food security are also the result of regulations in areas such as food safety and health.

In 2017, the Norwegian Directorate for Social Security and Preparedness (DSB) produced a report on Risk and Vulnerability of Norwegian Food Supply (Directorate for Social Security and Preparedness (DSB), 2017[5]). Mandated by the Ministries of Agriculture and Food and of Industry, Trade and Fisheries, this report undertakes an assessment of the risks and vulnerabilities affecting Norway’s food system and makes suggestions for policy changes. The main focus of the report is on the capacity of the system to absorb and cope with systemic shocks that could affect food security. However, other aspects of resilience such as the capacity of the system to recover and adapt to the new risk environment and to be transformed by learning from the lessons of the shocks, are not evaluated.

Using a diversity of expertise, the report identifies and evaluates six scenarios of systemic shocks affecting the Norwegian food system for the next fifty years in terms of two outcomes: “weakened nutrition” of the population and possible related societal instability. Two of the six scenarios have their origin in the agricultural sector: animal or plant disease and crop failure. The other four scenarios are more systemic social and economy-wide shocks. Each scenario is characterised in detail and then an assessment of the likelihood, vulnerability, consequences, uncertainty and controllability is made on a scale from 1 to 5 (very low, low, moderate, strong and very strong).2 The study measures vulnerabilities on a full supply system basis considering national production, resources, the trading system and logistics.

The systematic assessment of all scenarios in the study and their consequences are summarised in Table 6.1. All six scenarios are assessed to have low or very low consequences on food security. With the exception of power supply failure (scenario 2), the likelihoods of each scenario are considered to be low. The total risk is calculated by combining the likelihood, consequences and uncertainty (unknown risks). Across all scenarios, total risk is evaluated to be between low and very low while the controllability – understood as the availability of effective measures and tools for the government and the private sector – is assessed to be between strong and moderate. For the scenarios related to the agricultural sector, the controllability on animal and plant diseases and on crop failure are assed to be strong.

As a result of this assessment, “DSB has not identified any high risk for Norwegian food supply. There may be various types of disturbance in food supply for example logistics problems and short-term scarcity of some goods. The events in isolation can also have serious consequences for the conditions for Norwegian food supply, for example national production, but do not get large consequences for the food supply to the population. An important prerequisite here is that functioning international trading systems make it possible to import food” (Directorate for Social Security and Preparedness (DSB), 2017[5]).

Overall, the DSB report has four main cross cutting conclusions and recommendations about the food security resilience of Norway. First, ensure alternative communication and power solutions for the food supply in the case of emergency. Second, the possibility of importing food is a key prerequisite for Norwegian food security, and the Directorate for agriculture should monitor the risk of international supply failure and ways to diversify these potential risks. Thirdly, develop a common “planning foundation” to handle supply challenges in case of a military attack on Norway or other complex incidents. Finally, investigate the ability of the authorities and industry to co-operate to prevent and handle plant, animal and fish diseases.

The DSB report did not consider a risk scenario of a pandemic like COVID-19. However, the food security resilience of the Norwegian food system is being validated during the current crisis. The complex impacts of the response to the pandemic on production, incomes and intermediary inputs, on consumption habits and the composition and channel of demand, and on the transport and logistics, have not questioned the continuity of the supply chain, farmers’ income and the access to food. The government has taken measures to facilitate the supply of farm labour, creating incentives for laid off workers to work on agriculture and compensating farmers suffering the lack of seasonal workers (Chapter 2). The DSB recommendations are aligned with the first analysis of COVID-19 global food and agriculture policy responses by the OECD, which emphasises the critical role of trade and open, transparent and predictable international markets (OECD, 2020[7]).

Another report, “Performance check for the implementation of agricultural policy”, delivered by the budget committee in April 2020 to inform the agricultural agreement annual negotiations, calculates two different indicators: the degree of self-sufficiency and the coverage ratio. Self-sufficiency is defined as the percentage of Norwegian produced food relative in the country’s consumption (consumption minus imports divided by consumption), all at the wholesale level and calculated on energy equivalent terms. Coverage ratios are calculated as production divided by consumption. Figure 6.2 shows the values of these indicators in 2019 for selected products. The degree of self-sufficiency was 45%, down from 50% in 2017 due to a severe drought in Norway. There are high degrees of self-sufficiency for animal products, and low degrees for crop products including fruits and grains. In terms of coverage ratios, production of fish covers 2121%, or more than twenty times Norwegian consumption and is mainly exported. In total, food calories produced in Norway reach 86% of total food calories consumed while trade opens opportunities for exporting fish production surpluses and importing mainly grains and vegetable products (Chapter 1). These results underscore the capacity of Norway to produce sufficient calories but highlight its reliance on trade to provide a more diverse and balanced diet for its citizens. Some Norwegian institutes such as the Productivity Commission also find little merit in focusing the discussion on agriculture self-sufficiency, excluding the sea-food production that is exported (Productivity Commission, 2015[8]).

Finally, a third report, (Bullock, Mittenzwei and Wangsness, 2016[9]) applies the Norwegian Jordmod model to analyse the provision of public goods (food security, biodiversity and GHG emissions) by the agricultural sector and the trade-offs between outcomes under different policy scenarios.3 The study finds that the use of current tariffs, subsidies, and milk quotas lead to levels of food security above minimum requirements, and an under-delivery of two public goods: biodiversity and reductions of GHG emissions. The minimum requirement for each public good is defined as a level robust against irreversible degradation. Following the National Nutrition Board definition of minimum daily food requirements, the authors estimate the minimum production requirements for a “crisis menu” of energy, proteins and fats (additional to those coming from normal fish consumption and grain stocks). The minimum biodiversity is measured in terms of two indicators: area in semi-natural grassland and high nature value farmland. Two alternative measures to reduce GHG emissions are considered: an emission cap at 20% reduction and an emission tax. In the baseline scenario based on the current subsidy and import tariff regime. This study finds that Norway is supplying 90% more calories than the minimum required, while other public goods such as biodiversity and GHG emission reduction are estimated to be delivered below minimum requirements. According to this modelling work, there is large scope for optimising the agricultural policy package to ensure the delivery of the minimum requirements on food security while delivering on biodiversity and reduced GHG emissions well beyond the 20% target. Furthermore, this could be achieved with a reduction of 35% of the support to agriculture, primarily through a reduction in farm subsidies and import tariffs. Similar results are found in (Brunstad, Gaasland and Vårdal, 2005[10]) that estimate that a better provision of public goods could be achieved with land extensive production techniques rather than focusing policy on production per se.

The Norwegian landscape and climate conditions combined with national support policies determine the allocation of agricultural activities across the country. The agricultural areas with the best growing conditions are dedicated to grain cultivation, while those with less favourable ones are used for animal husbandry. The objective of keeping land opened with production capacity even in regions with very low comparative advantage on production is enforced through both legal protections of agricultural land (Chapter 3) and costly agricultural policies – mainly location specific rates of price support and coupled payments – that have been designed to “channel” specific production to specific locations (Chapter 2). This agricultural policy set – sometimes called “production channelling” policies – has succeeded in preserving both agricultural land and the cultural landscape. The regional distribution of agricultural production has been a policy objective since the 1950s and has been supported by policy instruments including high grain prices, regionally and structurally differentiated payments (including transport subsidies), and a quota system for milk production (Chapter 2). In addition to agricultural production, this set of policies is aimed at broader regional development through entrepreneurship and the growth of ancillary industries such as agri-tourism, processing, and the promotion of local food. As a result, Norway achieves the objective of agricultural production in all regions in Norway, resulting in a regional pattern of production and increased cultivated land, but with high costs including direct production costs, transportation costs, and payments to producers.

The composition of different products and activities varies significantly across regions (Chapter 1). There are five major regions that are distinguished in Norway based on their common geographic characteristics and mode of production. The Eastern Lowlands are concentrated on cereals and contribute to 68% of agricultural land in Norway used for this purpose as well as over two-thirds of overall production volume. The small southwest region of Jæren is dedicated primarily to intensive livestock and has 10% of the Norwegian cows and the highest productivity in milk production. The central lowlands are not specialised and have a mix of crops and animal husbandry. The southern valleys and mountains produce extensive livestock and sheep and account for nearly 70% of national sheep production. Finally, the North region spreads beyond the Arctic Circle with harsh natural conditions and produces mainly dairy and beef (and reindeer) at a relatively low productivity compared to other regions. While there is regional specialisation, such as animal husbandry in the north and grain production in the southern parts of the country, all main agricultural products are produced to some extent in the each of the different main regions of Norway. In 2018, roughly one-third of the agricultural area in use was used for growing crops and this share has declined by 5 percentage points over the last twenty years (Statistics Norway, 2020[11]). The remaining agricultural area in use was attributed to pastures, meadows and other permanent grasslands typically used for grazing-pastures or harvesting of grass (Chapter 1).

Norway is a wealthy economy with a welfare state based on abundant energy and natural capital but a scarcity of agricultural land and available labour (Forbord and Vik, 2017[12]). Oil and gas account for nearly 20% of Norway’s economy, and hydropower, fishing, forestry and minerals are also important sectors. The size and revenues from natural resources have important ramifications for the overall economy as well as farmers. The revenues from oil and gas are deposited into the world’s largest sovereign wealth fund which helps finance a generous welfare state. The growth of the overall economy, also driven by oil prices, has resulted in strong local labour markets, bolstered by co-operation between unions, employers and government and increasing urbanisation. This ‘tripartite’ system has led to relatively low wage inequality and low unemployment for both men and women (Nilsen, 2020[13]), and generates strong pull factors away from agriculture.4 Over a long period, the number of active farmers has declined by around 3% annually (Forbord, 2014[14])) and agricultural labour productivity has risen correspondingly.

After a period of stagnant total production and total factor productivity (TFP) growth through the 1990s, Norwegian agriculture has experienced some of the highest annual TFP growth in the OECD since 2000, at an average annual rate of 2.2%. This is on par with the G20 average and well above the Nordic and OECD averages (1.6% and 1.4%, Figure 6.3) (USDA Economic Research Service, 2019[15]). Among the Nordic countries, Finland and Iceland experienced a similar development, while Sweden and Denmark had weaker TFP growth. Labour reductions led to fast growth in gross total output per worker and TFP. Both total output and productivity growth have been above the OECD and Nordic averages since 2000, reflecting Norway’s achievements on production.

The breakdown of output growth into its components of output, inputs and TFP helps to understand the acceleration of TFP growth since 2000 (Table 6.2). Both total agricultural output and the use of inputs remained relatively stable in the 1990s in Norway. However, since 2000 total agricultural output increased while the use of labour and machinery inputs declined, leading to fast TFP growth. Agricultural labour declined precipitously with a much larger reduction than in machinery and other inputs. Unlike its Scandinavian neighbours, which saw larger reductions in the 1990s, Norway’s reduction in agricultural labour was more rapid in the period 2000-10. Despite this high TFP growth since 2000, nitrogen fertiliser usage has increased alongside declines in total agricultural land and stable livestock numbers, resulting in little improvement in environmental outcomes (USDA Economic Research Service, 2019[15]; Statistics Norway, 2019[16]).

Agriculture’s share of employment halved from 2000 to 2016. This reduction was stronger than in most other comparable countries reaching one of the lowest shares of agricultural employment in the OECD, 2.1% in 2016 (1.6% in agriculture and forestry excluding fisheries). Compared to other sectors in the Norwegian economy, agriculture and forestry have also seen one of the largest reductions in labour. Capture fisheries and aquaculture saw a similar reduction of its labour force in the period 1990-2010, but the trend has since reversed as a result of the high growth in the export-oriented aquaculture industry, with relatively little government support (USDA Economic Research Service, 2019[15]).

Reduction in farm labour is part of a long-term structural change that has occurred alongside declines in the number of farms, increasing farm sizes and legal changes that facilitated access to rented farmland (Chapter 1). Since 2000, the consolidation process accelerated and the number of farms with over 50 ha has increased from 2 000 to 5 000. Low profitability and long hours of work combined with a strong urban labour market have sustained the steady decline in the number of active farmers. Despite significantly higher levels of support to producers in Norway, this trend is common to other OECD countries (Forbord, 2014[14]). These developments also cement Norwegian agriculture’s position as one of the most capital-intensive in the OECD area. Norway has the lowest number of workers per machinery among all European countries (a ratio of 0.6 workers per tractor equivalent compared to 1.0 in the EU28 and 2.3 in the OECD) (USDA Economic Research Service, 2019[15]).

While labour and machinery use have declined substantially, nitrogen fertiliser and livestock per land area have increased since 1990 due in part to slight declines in total agricultural land area. Norway’s fertiliser usage intensity continues to be amongst the highest in the OECD and 20% higher than the OECD average (102 vs. 91 kg/ha on average since 2000). In the past two decades, Norway’s nitrogen fertiliser intensity (kg/ha) grew at a similar rate to the OECD average (1.8% vs. 1.9% annually) while other Nordic countries experienced declines of 1% annually (USDA Economic Research Service, 2019[15]) The total amount of nitrogen fertilisers experienced declines between 2000 and 2005, and are currently at the same level as they were in 2000 (Statistics Norway, 2019[16]).5 In contrast, total phosphorus fertilisers have declined by half since 1990, reflecting policies targeted towards reductions. Phosphorus fertiliser intensity declined by 1.6% annually over the same period in Norway and declined by over 1.8% annually in the OECD and other Nordic countries. At the same time, total livestock numbers have been steady while density grew nearly three times faster than the OECD average. Only five countries in the OECD area had greater livestock density growth, including Korea, Ireland, and Israel (USDA Economic Research Service, 2019[15]).6 Further investigation should be done to understand which farmers are most likely to leave the sector and how to incentivise those that stay to improve their productive efficiency and environmental impact.

The dynamics of the food value chains in Norway are to a great extent determined by the structure of the primary sector, with farmers organised in strong co-operatives with market power in some stages of the value chain. Examples include both the meat and dairy sectors. It is difficult to measure the increase in value creation in the whole industry, but there is evidence that support to primary agriculture has had an impact on increasing consumer price differentials that disadvantage Norwegian consumers, processors and retailers compared to their neighbours. Agricultural policies and the annual agreements with farmers have focused on ensuring that income for a representative farm (including policy transfers) follows a similar evolution as salaries in other sectors. These policies do not generate incentives for innovative market value creation to exploit new opportunities in the value chain and constrain farmers’ decisions. Despite high concentration of the retail sector, it has contributed to reducing margins in recent years. On the contrary, the processing sector has experienced lower increases in labour productivity (negative in some periods) and it has contributed to some degree to increases in price differentials (Chapter 5).

The agri-environmental priority areas for the government in Norway include landscape, biodiversity, clean water and clean air. The specific objectives outlined by the Ministry of Agriculture and Food are to reduce pollution and GHG emissions, maintain sustainable land management, and ensure the cultural landscape and biodiversity. While policy towards land management and the cultural landscape has had some success, achieving reductions in nutrient balances and both domestic policy goals and international commitments related to GHGs, ammonia emissions and water protection have proved challenging (Chapter 3). Difficulties stem from various potential sources including farmer support without sufficient environmental conditionalities, a lack of adoption of environmentally sustainable technologies and techniques, and the separation of livestock production and arable crops (regionalisation of coupled support), leading to reduced nutrient efficiency and higher ammonia emissions.

The Agriculture and the Environment report of Statistics Norway (Snellingen Bye et al., 2019[17]) undertakes an updated overall agri-environmental assessment of the country covering most of the policy objectives. According to this report, more than 2 000 endangered species are threatened, with the number of nesting couples of most common birds being significantly reduced in the last decades. The number of animals, and the quantity of manure –which represent respectively 38% and 58% of all nitrogen and phosphorous used in farming- has decreased slightly in the last decade, but sales of these nutrients in fertilisers have been relatively stable. The consumption of electricity in agriculture has fallen by 25% since 2001, but the use of diesel is stable. Discharges of nutrients from agriculture to waterways vary markedly between different regions but account for up to 40% of such discharges in southeastern parts of the country; in the last two decades fish farming has overtaken agriculture as the main source of discharges, particularly for phosphorous (Snellingen Bye et al., 2019[17]). GHG emissions from agriculture have remained relatively stable, while the country has difficulties to reach international commitments related to GHG emissions (Chapter 3), ammonia emissions and water quality. In 2017, agriculture represented 75% of total emissions of nitrous oxide (N2O), out of which 77% came from manure and fertilisers. Agriculture also emits 51% of methane (CH4, mainly from animal husbandry) and 94% of ammonia (NH3), which are slightly above the OECD averages (45% and 90%) (OECD, 2018[18]).

Based on available data, Norway’s water quality is relatively good, while trends in agricultural production at the regional level put coastal and groundwater at risk. Amongst European countries, Norway has the lowest concentrations of nitrogen and phosphates in fresh water on average, though this conceals large heterogeneity at the regional level. Phosphorus loading presents the largest threat to eutrophication and water quality, and policy measures have been adopted to mitigate this threat with reasonable success. Specific policies include production subsidies, manure management legislation, and local subsidies administered through Norway’s regional environmental programme (RMP) and specialised measures in agriculture (SMIL). These measures have targeted a number of practices including the reduction of spring tillage and manure application since 2005 (Hellsten et al., 2019[19]; Bechmann, 2016[20]). Mitigation techniques and regulations on tillage to improve water quality have been found to have a pronounced impact on erodible soils, particularly in autumn-tilled land (Skøien, Børresen and Bechmann, 2012[21]). However policy changes in the past decade have led to a fall in the area under reduced tillage between 30% and 40% since 2012. Even if policies and uptake have been more targeted to regions with more needs, these developments deserve to be monitored to ensure the improvements in eutrophication and soil erosion are not reversed.

The OECD agri-environmental indicators provide further insight into the potential environmental effects of input intensity with respect to water quality and air pollution (OECD, 2019[22]). Notably, Norway’s nutrient balances are amongst the highest in the OECD and have not significantly declined in recent years in contrast with the OECD overall and other countries with high nutrient surpluses (Figure 6.4). Norway’s nitrogen surpluses declined by just 0.2% annually since 2000, compared to the OECD median of 0.8% and declines in other Nordic countries of 1.4% (OECD, 2018[18]). Total nitrogen inputs from all sources have been stable since 2000, and the composition by source was stable as well. Norway is amongst the countries with the highest nitrogen fertiliser usage per agricultural land area: 100 kg/ha since 1990, in contrast with the OECD median which is currently below 50 kg/ha due to sustained reductions. Only Germany, Belgium, Luxembourg, and the Netherlands have higher application rates per area in the OECD, though they all achieved strong improvements in application rates since 2000. Roughly half of Norway’s nitrogen inputs are generated by fertilisers and 41% come from manure. Nitrogen outputs in Norway are composed predominantly of pastures (70%) and cereal crops (26%) (OECD, 2018[18]). The use efficiency ratio is also low in Norway at only 50% of inputs embedded in the outputs. Though nitrogen surpluses do not directly capture environmental damages, high nitrogen surpluses are associated with potential environmental problems due to nitrogen runoff and air pollution from the soil. 7

Similarly, Norway’s phosphorus surplus is surpassed only by Japan and Korea in the OECD.8 Norway has the highest phosphorus usage intensity (kg/ha) in Europe, followed closely by Italy, Germany, and France, and nearly twice as high as in Denmark and Finland. Some progress has been made in improving its phosphorus balance which fell from 13 kg/ha in 2005 to 10 kg/ha in 2015. This decline of half a percentage point annually was much smaller than the 60% reduction in the OECD median, and the use efficiency ratio remains very low at 55 (OECD, 2018[18]). Since 2000, most countries have reduced their phosphorus surpluses considerably. The share of phosphorus inputs has changed over time, with an increasing share of manure (mainly cattle) from 47% to 57% at the expense of fertilisers. The specialised agricultural production in different regions breaks the P cycle between animals and crops and aggravates problems with P surpluses. Areas with high livestock densities have high levels of soil P as the application of animal manure often exceed crop P requirements, while specialised arable farming regions have to import mineral P fertiliser to compensate for the lack of manure. Rebuilding the P cycle by transporting manure has some potential for environmental gains (Hanserud et al., 2017[23]; Hanserud et al., 2016[24]).

Agricultural activities impact air quality mainly through ammonia emissions and greenhouse gas emissions. Globally, agriculture accounts for nearly 90% of total ammonia emissions due to volatilisation from livestock manure and synthetic mineral N fertiliser application (Bouwman, 1997[25]). In Norway, the agricultural sector contributes 93% of ammonia emissions (Chapter 2). This is comparable to the OECD average despite the smaller size of the sector in Norway. Between 2005 and 2016, agriculture emitted 31 000 tonnes of ammonia, almost 5% more than the previous decade (OECD, 2018[18]). Despite a 20% decline between 1990 and 1995 to 27 tonnes per hectare, ammonia emissions intensity per hectare grew steadily to above pre-1990 levels at an average annual rate of 0.8% per year. Over the same period, the OECD average remained at 1995 levels, growing at just 0.05% over two decades. Furthermore, since 2000, Norway’s total agricultural ammonia emissions have remained constant, similar to the rest of the OECD and other Nordic countries (OECD, 2018[18]).

The increase in total factor productivity has been accompanied by increases in greenhouse gas emissions per hectare of agricultural land (including methane and nitrous oxide from animal husbandry and fertilisation) and declines in emissions per output. Agricultural GHG emissions in the OECD area are rising due primarily to higher agricultural soil emissions (OECD, 2019[22]). Norway’s performance follows a similar trend, with GHG emissions per hectare increasing since 1995 and the fastest growth occurring since 2010.9 In contrast, emissions intensity per unit of output has been declining for the past two decades in the OECD (Figure 6.5), but only began declining in Norway after 2004.10 Despite the relatively small size of the sector, both in terms of value and total land area, agriculture accounts for about 8.4% of Norway’s emissions of greenhouse gases (Norwegian Ministry of Climate and the Environment, 2018[26]). Since 1990, Norway’s agricultural sector has only reduced its total GHG emissions by 5% and its ammonia emissions by 3%. This is far from the overall objective of reducing emissions by 40% in 2030 and current plans do not envisage agriculture making a significant contribution to the 2030 commitment (Norway’s Intended Nationally Determined Contributions).

The changes in GHG emissions intensity (both per hectare of agricultural land and unit of output) are on par with average trends in other Nordic countries and similar to those in the rest of the OECD, though Norway is amongst the worst emitters both per land area and unit of output. Due to having a predominant livestock sector and poor performance in emissions abatement relative to other livestock producing countries, Norway remains in the top half of OECD countries in terms of greenhouse gas emissions per hectare and amongst the top five in emissions per unit of output, on par with countries that have large livestock sectors including Luxembourg, Ireland, Iceland, and New Zealand. Norway’s greenhouse gas emissions are made up primarily by enteric fermentation due to the digestive process of livestock (51%) followed by agricultural soils (37%) and manure management (6%) (OECD, 2018[18]). In the livestock sector, the emissions intensity declined by 24% for pig and dairy production since 1990, though there was no improvement in emissions intensity in cattle production.

Since the 1990s, Norway has used a system of regulations and economic instruments that target reductions in soil erosion and phosphorus losses rather than nitrogen losses and ammonia emissions (Chapter 2). These measures have proved insufficient: payments to agricultural producers for environmental objectives cover only 0.3% of the total support to farmers and the potential spill-overs from phosphorous on nitrogen that did not materialise. In contrast, Sweden and Finland target both nutrients and already have half the N balance of Norway (Hellsten et al., 2019[19]). Denmark, the Nordic country with the most success in achieving both nitrogen reductions and emissions reductions, did so primarily through legislation, and has recently begun transitioning towards voluntary incentive schemes.

One measure that has been identified to efficiently reduce ammonia emissions in Norway is the use of low emissions manure spreading techniques, including band spreading and injection, with the potential to decrease emissions by between 45-90% by minimising surface exposure. In Norway, however, 88% of slurry fertiliser is applied through broadcast spreading, while 35% and 28% of slurry is applied through broadcast spreading in Finland and Sweden, respectively (Hellsten et al., 2019[19]). This technique has been banned in Denmark since 2002, and other Nordic countries have used a mix of regulation and economic incentives to encourage the adoption of injection manure, for example.

Agricultural intensification can harm biodiversity, though this can be difficult to assess. The farmland bird index, based on trends in selected groups of breeding bird species depending on agricultural land for nesting or feeding, is often used as a proxy. Similar to the rest of Europe, the index for Norway has declined over the last two decades, but with a small rebound in recent years. However, the index value for Norway (53% of the 2000 base level in 2018) remains one of the lowest in Europe (Eurostat, 2018[27]). A recent report by the Norwegian Environment Authority attributes reductions in key bird species, particularly ground-nesting birds, to a number of factors including land management, mowing frequencies and techniques, and agri-environmental practices such as slurry band spreading. While some practices show promise for increasing bird species such as minimum tillage and buffer strips, the reversal in current trends are unrealistic given current agricultural practices (Eggen, 2020[28])

In order to achieve the goal of sustainable productivity growth, countries will need to both increase their productive efficiency while simultaneously improving their sustainability performance. Throughout the twentieth century, agricultural output increased through a mix of both extensification (to bringing new lands into production) and intensification (increasing the use of labour, machinery, energy, fertiliser and other inputs to raise yields). In recent decades, however, growth in TFP, rather than extensification or intensification, has been the principal means of increasing agricultural output, due to more efficient use of land, labour, capital and inputs (Coomes et al., 2019[29]). TFP growth has the potential to encourage efficient food production with fewer negative environmental externalities and more positive feedback to ecosystem services. For instance, advances in genomic science or precision agriculture that allow for a more judicious application of fertilisers provide opportunities for sustainable productivity by improving TFP through reductions in inputs with negative environmental externalities. Though, productivity growth alone is not a panacea. Recent TFP growth in agriculture has been driven more by labour-saving technological change with only marginal impacts on environmental outcomes. This is particularly true in the case of Norway, where TFP growth driven by labour reductions has not been accompanied by declines in nitrogen fertiliser usage or livestock density, partly due to agricultural policies that are not targeted to specific environmental outcomes and market price support without conditionality.

While the consequences of extensification and intensification on environmental outcomes are well understood, the relationship between TFP growth and environmental sustainability has been difficult to identify.11 This section first analyses the relationship between individual agri-environmental indicators and productivity growth across the OECD to provide evidence on the potential complementarities between environmental outcomes and productivity and different productivity-sustainability pathways. Norway’s performance in achieving improvements in each indicator along with agricultural productivity are assessed relative to performance in the rest of the OECD. In the second part of the section, these indicators are combined into single scores to provide a more complete picture of Norway’s relative performance in achieving sustainable productivity as outlined in the PSR framework.

Environmental performance can be assessed using a variety of metrics that capture short- and long-term impacts of agricultural production. These potential measures include farm-level environmental management strategies, or direct measures of environmental impacts when they are available (e.g. reductions in nutrient runoff). To measure sustainability in this section, in line with the indicators outlined in the PSR framework, three OECD agri-environmental indicators are used to capture direct environmental outcomes that are by-products of agricultural production: GHG emissions per unit per hectare (and unit of output) as proxy for the impacts on climate change and air quality; Nitrogen surplus (NS) in kg/ha which measures the potential water quality impacts of nitrogen runoff and leaching as well as long term productivity; and phosphorus surplus (PS) in kg/ha which measures potential water quality impacts of phosphorus runoff. While these metrics do not capture the full picture of environmental costs and benefits, they are consistently available across countries, capture many of the relevant environmental costs and are used for international benchmarking (OECD, 2018[18]; OECD, 2020[30]).

The performance in OECD countries and selected emerging economies in terms of changes in TFP as compared with changes in nitrogen balance per hectare and GHG emissions per hectare is plotted in Figure 6.6. Two periods are considered: 1997-99 to 2005-07 (Panel A) and 2005-07 to 2013-15 (Panel B). Norway follows a general trend observed across OECD countries, in particular in the most recent period, of relative decoupling between nitrogen balances and productivity growth, and relative coupling of GHG emissions per area and TFP (OECD, 2020[30]). Relative decoupling in this case means that the relevant environmental parameter is increasing at a slower rate than TFP. Norway’s productivity growth was below average in the first period and above average in the second while the percentage change in nitrogen balance shifted from being positive to negative in the most recent decade. However, as in many OECD countries, the improved productivity performance of the sector has come with increases in GHG emissions per hectare during the second period. Norway performed below the OECD median on these two agri-environmental indicators. These correlations between productivity and sustainability trends do not imply causality but provides insights on observed TFP growth paths.

Since 1990, the productivity-sustainability path across OECD countries shows annual growth in agricultural productivity that tends to occur alongside reductions in nutrient balances and increases in GHG emissions per area. Using annual data between 1990 and 2016, Figure 6.7 and Figure 6.8 plot these paths as the estimated relationship between annual agricultural total factor productivity growth and growth in nitrogen balance, phosphorus balance, and GHG emissions (per area of agricultural land and unit of output).12 The negative slopes in Figure 6.7 between nutrient balance growth (nitrogen or N, and phosphorus or P) and TFP growth imply that during periods of increasing TFP growth countries also experience lower nutrient balance growth. Moreover, at positive TFP growth rates, N and P balances tend to be declining (have negative growth rates), that is, environmental outcomes improve during periods of productivity growth, as it occurs in the right lower quadrant of panels A and B in Figure 6.7. While these estimates cannot disentangle the source of productivity growth, they suggest that there are complementarities between TFP and sustainability over the past two decades in high income countries that may be driven partially by more efficient nutrient application and improved technology. The estimated shapes and slopes also suggest that the complementarity between TFP growth and nitrogen balance are lower than those for phosphorus balance, raising the potential need for more direct policy interventions targeted towards nitrogen abatement.

The productivity-sustainability path in the case of Norway leads to estimated relationships between nutrient balance growth (N and P) and TFP growth over the same period are also negative but the slopes are flatter.13 In Panel A of Figure 6.7, the average performance of Norway with respect to this curve in 1990-2000 and 2000-2016 shows a significant improvement in productivity growth but only minor improvements in N balances. In both periods, Norway is located above the estimated curve, implying higher N balance growth than the average for its level of TFP growth, though the average growth is within the 95% confidence interval. In Panel B, the performance of Norway with respect to this curve in 1990-2000 and 2000-2016 shows that during the recent significant improvement in productivity growth, P balance growth was positive in contrast to most of the OECD countries. Norway is located above the estimated curve, particularly in the period 2000-16 when Norway is in the highest extreme of the 95% confidence interval, implying higher P balance growth than the average for its level of TFP growth. These results are consistent with TFP growth that is being driven by factors other than technological change or management practices that decrease the use of fertilisers or improve their efficiency. Norway’s performance relative to the OECD averages suggest that Norway is not taking full advantage of opportunities for more sustainable (in terms of nutrient balances) productivity growth as seen in other countries.

The productivity-sustainability path (in terms of GHG emissions) across OECD countries is depicted in Figure 6.8. This figure plots the estimated relationship between annual growth in GHG emissions (per hectare and per unit of output) and TFP growth across OECD countries. In contrast to nutrient balances, there is a positive and significant correlation between productivity growth and emissions intensity per hectare. The positive slope in the graph (Panel A) suggests that annual increases in productivity have been coupled with increased growth in GHG emissions intensity per hectare. For years with positive TFP growth, GHG emissions growth rates per hectare are often positive. This implies that despite faster TFP growth, drivers of emissions such as manure management and agricultural soils continue to rise, albeit at a slower rate than output, leading to worsening overall emissions. The average performance of Norway with respect to this curve in 1990-2000 and 2000-2016 shows a significant improvement in productivity growth together with a relative deterioration of GHG emissions performance per area in the second period. Norway was below the curve at the 1990s – with negative growth of GHG emissions per hectare – but above the curve after 2000, with increases in GHG emissions per hectare well above those in other countries with similar TFP growth, due in part to declines in agricultural land. Furthermore, Norway is above the highest extreme of the 95% confidence interval. At the same time, total emissions have slowly declined and emissions growth per output is declining during periods of TFP growth amongst OECD countries (Panel B). This trend is consistent with TFP growth being driven by reductions in inputs, technologies, or management practices that produce emissions, though the primary source of this relationship cannot be identified. Taken together, while Norway, and the OECD overall, have made progress in reducing emissions growth intensity per output, their goal of substantially reducing total emissions is not being achieved through improved TFP and the existing policy environment.

In the following analysis, Norway’s environmental performance and productivity growth are benchmarked with respect to the rest of the OECD using a combined measure of sustainable productivity rather than its individual components. Given that inputs into production may have both short- and long-term impacts on the environment and productivity and can act either as substitutes or complements in production, countries can follow different productivity-sustainability paths with potential trade-offs between individual measures of sustainability and productivity as shown in the previous section.

Several thresholds for relative sustainable productivity growth are used in this analysis to benchmark Norway, following previous OECD analysis (OECD, 2019[31]). The three thresholds (or measures) used here combine an index of environmental performance (including N and P balance and GHG emissions) with the TFP growth rate and they vary both in their trade-offs within environmental outcomes and between environmental outcomes and productivity. All of the indices, including productivity growth, are standardised using the full set of OECD countries. Therefore, each index and the corresponding thresholds represent each countries’ performance relative to the rest of the OECD.

  • Weak sustainable productivity (SPW), the least stringent threshold, is measured as the average performance of all sustainability and productivity indicators. By taking the average of the environmental index and TFP, this measure allows for substitution both between environmental outcomes and between these outcomes and productivity.

  • Strong sustainable productivity (SPS), the most stringent threshold, is calculated as the worst performing indicator out of both the environmental outcomes and productivity. Measuring sustainable productivity using the worst performing indicator does not allow for substitution either between the different environmental outcomes or productivity and therefore bad performance in one indicator cannot be compensated or substituted with better performance in another.

  • Semi-strong sustainable productivity (SPSS) is the average of the worst environmental indicator and TFP. This measure does not allow for substitution among environmental outcomes but does allow for some substitution between productivity and environmental outcomes (OECD, 2019[31]).

Following these definitions, the indicators of productivity and environmental outcomes (nitrogen and phosphorous balance and GHG emissions for the purpose of this analysis) are combined to provide a benchmark of sustainable productivity growth across OECD countries, following the scoring method in Chapter 3 of OECD (2019[31]). Given the sensitivity of GHG emissions performance to the choice of the particular outcome (per hectare, per output, or total emissions), all three are considered in the analysis to provide a full picture of Norway’s performance. Further, it should be noted that the following analysis is in terms of relative performance compared to other OECD countries which allows for comparisons of how changes in Norway’s indicators perform relative to those in other countries. The full methodology is discussed in Annex 6.B. In the following analysis, first Norway’s performance at achieving sustainable productivity growth in recent decades is benchmarked relative to other OECD countries over the period 2000-16. Second, environmental indices are assessed at current levels (2014-16) and combined with TFP growth to capture where Norway stands moving forward as a result of their recent performance.

Figure 6.9 plots the weak environmental index measured in growth rates against normalised TFP growth over the period 2000-16. The metric of GHG emissions per hectare is used as the measure of GHG intensity. The weak environmental index is the average of the standardised environmental outcomes and higher numbers means better environmental outcomes. Norway outperformed two-thirds of OECD countries in terms of TFP growth since 2000, with TFP growth rates similar to those of the United States and slightly behind Iceland. In contrast, Norway’s environmental performance is below the median in the environmental index (black bubble in lower right quadrant). Countries that are located to the right (or above) the dashed line achieved weak sustainable growth over the period 2000-2016.14 This line represents where the average of the environmental index and normalised TFP are zero. While Norway’s performance in average environmental growth rates were below the OECD median, the good performance in TFP compensated for the poor environmental performance and they achieved weak sustainable productivity growth. Only two countries had both fast relative growth (in the top ten countries in terms of TFP growth) and above median improvements in average environmental sustainability performance: Finland and Luxembourg. Denmark and the Netherlands also achieved substantial improvements in sustainability while being near the median in TFP growth.15 Compared to other countries with high livestock density and similar production structure, Norway’s progress in terms of environmental outcomes has been mediocre, while still maintaining strong productivity growth. These findings are similar when considering other measures of emissions. Norway performs marginally better when including GHG emissions per output and total GHG emissions instead of emissions per land area.

The performance of other Nordic countries, especially Denmark, Finland, and Iceland, as well as the Netherlands suggests that much further progress can be made on average environmental performance in Norway without sacrificing substantial productivity. In Denmark, for example, policies like the banning of broadcast manure spreading in 2002 have proved to be both cost effective and beneficial to farmers. Much of Denmark’s initial improvements in reducing nitrogen losses and emissions, were achieved through legislation, with a recent shift towards a geographically differentiated and voluntary framework (Dalgaard, 2014[32]). This system of regulations, combined with the broader agricultural policy environment, have the potential to encourage substantial improvements in sustainability alongside sustained productivity growth. In addition to regulation, the existing innovation system can be leveraged to improve the complementarity between productivity and sustainability. This includes environmental incentives to adopt technologies and management practices that lead to sustainable productivity growth such as precision agriculture, reprogramming agricultural extension services to focus on how to adopt technologies that improve environmental performance in a cost effective manner, and using digital information services to improve monitoring for efficient agri-environmental payment schemes.

Rather than considering just the average of environmental performance and productivity, Figure 6.10 plots productivity growth along with the strong environmental growth index to measure semi-strong and strong sustainable productivity (semi-SSP and SSP) growth. Instead of the average of standardised growth rates across the indicators, the strong environmental growth index measures the relative growth of each country’s worst performing environmental indicator. Countries located above the dashed line achieved semi-strong sustainable productivity growth between 2000 and 2016, meaning that they improved both productivity and the performance of their worst environmental indicator relative to other countries. In Norway, the worst performing environmental outcome, GHG emissions per hectare, had a negative score that exactly counterbalance the TFP growth, and therefore Norway barely achieved semi-SSP growth. Because of the below median performance in GHG emissions reductions per hectare, Norway’s overall environmental performance was not sufficient to achieve strong sustainability productivity growth (SSP), which captures the worst performing indicator (including TFP). Only those countries in the upper-right quadrant achieved strong sustainability growth including Luxembourg, Finland, and the Netherlands. The strong sustainable productivity performance achieved by these countries with similar production structures to Norway suggests that TFP growth can be achieved without having to trade off environmental performance, even where there are high marginal costs of abatement. Rather, there may be complementarities in production techniques that improve all environmental outcomes, such as advancements in precision agriculture, or policies that target abatement of environmental damages directly (OECD, 2013[33]). Similar analyses were conducted using total GHG emissions and GHG emissions per output instead of GHG emissions per agricultural land area. In both cases, Norway achieves semi-strong sustainable productivity growth but does not achieve strong sustainable productivity growth.

Figure 6.11 shows the relationship between the levels – rather than changes – of environmental sustainability and TFP growth. The weak environmental scores in levels are plotted across OECD countries between 2014 and 2016 relative to standardised TFP growth since 2000. This figure provides a benchmarking of where Norway stands in terms of sustainability following a period of relatively high productivity growth (2000-16). Amongst the top ten countries in terms of productivity growth,16 only Norway and Luxembourg have an environmental score that is significantly negative (lower right quadrant), meaning that they have below median environmental outcomes despite fast TFP growth. Countries in the upper right quadrant achieved both positive TFP growth and have positive environmental scores compared to the OECD median, including Iceland and the United States. Countries above the dashed line have productivity growth that is high enough to compensate for negative environmental outcomes, thereby achieving weak sustainability productivity growth (SPW). Norway falls in the lower right quadrant and below the dash line, which means that it has not achieved weak sustainability and productivity growth. This is not surprising given that Norway has made little progress in reducing nitrogen balances and GHG emissions intensities in the past two decades. The performance of other Nordic countries, suggests that the nature of production may be a constraining factor in achieving sustainable productivity levels given current technological constraints, natural capital, and policy environments. Further, countries with high livestock densities,17 such as New Zealand, Ireland, and Luxembourg, and to a lesser extent Norway, tend to have relatively low environmental performance using these indices due to high nitrogen and phosphorus manure intensity as well as high GHG emissions. Sweden had negative scores on TFP but positive scores on weak environmental performance, while Switzerland had negative scores in both productivity and the environment.

There are four broad objectives for agricultural policies in Norway (Ministry of Agriculture and Food, 2016[2]): food security and preparedness, maintaining agriculture across the entire country, increasing value added, and sustainable agriculture with lower GHG emissions (Figure 6.1). The analysis in this and other chapters in this review reveals that the agricultural policy achievements are unbalanced in favour of some policy objectives in detriment of others, primarily in pursuing resilient food security and focusing on increased production and landscape spread across the country at the expense of the environment and the innovation and value creation in the value chain. Norway’s food system has achieved high food security standards and is able to produce some food even in the most remote areas of the country. However, TFP growth was not driven by innovation that reduced the use of inputs, but by movements of labour out of the sector and structural change towards high capital intensity and labour saving technologies. Despite high rates of growth in TFP, there has been little progress in terms of reducing negative environmental impacts due to sustained applications of nitrogen fertiliser and livestock production.

Due to the current policy environment, the analysis in this chapter demonstrates that Norway’s sustainable productivity performance is mixed relative to other OECD countries. Using either of the GHG emissions indicators (total, per hectare or per output), Norway has not achieved strong sustainable productivity growth over the past two decades. The performance of other livestock producing countries suggests that there are potential opportunities to improve in environmental performance without sacrificing productivity. Further, due to the structure of production, Norway does not achieve even weak agri-environmental performance in levels. The recent rapid TFP growth is not driven by the efficient allocation of environmentally damaging inputs or technological innovation. The policy emphasis on aggregate production rather than environmental outcomes is particularly concerning because their current levels of nitrogen and phosphorus surpluses, for example, are amongst some of the highest in the OECD. Agricultural policy in Norway continues to maintain the status quo of high levels of distortionary support and coupled policies, and a low share of agri-environmental payments and incentives for farmers to improve environmental outcomes.

This annex provides further details on the empirical analysis of agricultural productivity, GHG emissions intensities and nutrient balance. The methodology of the analysis is similar to Chapter 2 in (OECD, 2019[22]). Table 6.A.1 shows descriptive statistics of the data used for the period 1990-2015.

Figure 6.7 and Figure 6.8 were estimated using non-parametric local polynomial regressions. Local polynomial regressions are suitable for this analysis because they do not assume a particular shape of the relationship between the outcome and the covariates (Ordas Criado, 2008[34]). The method consists of running a number of local regressions at different values of the covariates with an optimal bandwidth. The density of the outcome is estimated by using the Epanechnikov Kernel function. A rule-of-thumb estimator selects the optimal bandwidth. Each graph includes only the two variables specified – growth in agricultural TFP and one of N balance growth, P balance growth, or emissions intensity growth – to create the graphs. The sample includes each country-year pair over OECD countries between 1990-2016 when data is available. All variables are in annual growth rates. A parametric model is also estimated as follows:

Yit=α+βXit+ηt+uit,

Where Yit is one of three dependent variables: growth rate of nitrogen balance, growth rate of phosphorus balance, and growth rate of GHG emissions intensity. These variables are regressed on agricultural TFP growth (Xit) and a set of yearly time dummies (t). Standard errors are clustered at the country level.

This analysis benchmarks Norway’s sustainable productivity performance using three thresholds: “sustainable productivity weak” (SPW) with perfect substitution between all environmental and productivity outcomes; “sustainable productivity semi-strong” (SPSS) with limited substitutability between environmental outcomes and productivity, but not among the environmental outcomes; and “sustainable productivity strong” (SPS) with no substitutability (OECD, 2019[31]; Lankoski and Thiem, 2020[35]).

The environmental indicators used in the analysis are Nitrogen surplus (NS), Phosphorus surplus (PS), and greenhouse gas (GHG) emissions intensity. The analysis includes three measures of GHG emissions intensity: per hectare of agricultural land, per value of total output, and total emissions. First, each environmental indicator (growth rates or levels) and agricultural total factor productivity (TFP) growth are standardised using modified z-scores to allow for comparisons across measures. The standardisation includes converting the indicators such that higher values, either in growth or levels, indicate better performance. The analysis can be done separately for either the levels of the indicators and the growth rates of indicators. The z-score converts all indicators to a common scale with an average of zero and a standard deviation of one. A modified z-score is used based on the median rather than the mean.

The modified z-score for each country c and indicator i is calculated according to the following equation:

Zc= xc-x~1.486*MADN

where xc is the value of the indicator for country cN, x~ is the median of the indicator across the sample of N countries, MADN= median(|xc- x~|) is the median absolute deviation. The MAD is multiplied by a constant 1.486 to approximate the standard deviation.18 The modified z-score tends to be more robust than the standard z-score. The countries used in the normalisation include all OECD countries except Chile, Colombia, Israel, and Estonia due to the availability of data for all of the measures and all of the years in the analysis.

Second, after the indicators (in levels and growth) are standardised, and two environmental scores are calculated using the z-scores of the environmental measures. The weak environmental score is calculated by taking an unweighted average of the z-scores of the environmental indicators (GHG intensity, NS, PS). The average provides an index that assigns equal weight to each indicator and allows for substitution in performance across different indicators. The strong environmental score is calculated by taking the minimum of the z-scores of the environmental indicators and captures the performance of the country’s worst environmental indicator or growth in this indicator.

Finally, the environmental scores and the normalised productivity growth are combined to construct three measures of sustainable productivity:

  • The first is a measure of weak sustainable productivity (SPW), which allows for substitution both across environmental outcomes and between productivity and environmental outcomes. The weak sustainable productivity score is calculated by taking an unweighted average of the weak environmental score and normalised productivity growth.

  • The second is a measure of semi-strong sustainable productivity (Semi-SSP). The measure is the average of the strong environmental score and the normalised TFP measure. This measure does not allow for substitution across environmental measures but reflects changes in the worst performing environmental damages, and allows for substitution with TFP performance.

  • The third outcome is a measure of strong sustainable productivity (SSP). The measure is calculated taking the minimum of the strong environmental score and the normalised TFP measure. By taking the minimum rather than average of the environmental indicators and TFP, this measure does not allow for substitution across any environmental measures or productivity.

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Notes

← 1. These indicators are not meant to represent fully the levels of sustainability. Other indicators which are indicative of the environmental impacts of agricultural production but for which data is not comprehensive enough for cross country comparisons include water quality, landscape, and soil erosion.

← 2. For instance, Scenario 5 defines a failure of grain supply as: a supply shortage of cereals due to national and international crop failure, with a bad monsoon season in India and The People’s Republic of China, and drought in North America and Europe; in this scenario national production covers only 10% of domestic demand for food cereals, while the Russian Federation and Ukraine issue an export embargo.

← 3. The Jordmod model is a recursive-dynamic multi-commodity model for Norwegian agriculture used to analyse impacts of market and policy changes on the agricultural sector and farm structural change in Norway (Britz and Bonn, 2018[36]).

← 4. Johnsen and Vik (2013[37]) argue that the development of the welfare state and opportunities in other industries, including in the oil industry, were strong pull factors causing people to leave the fishing industry, for example.

← 5. Total nitrogen fertilisers includes both organic and inorganic fertilisers. In Norway, the use of urea based fertilisers remains low, though changes in the relative prices of fertilisers may lead to increased usage in the future.

← 6. Livestock is measured as 1 000 head of cattle-equivalents by size (Hayami-Ruttan weights).

← 7. It is estimated that between 40% and 60% of nitrogen fertiliser is absorbed by crops while the rest is lost to the environment. Excess nitrogen either remains in the soil or volatilises after fertiliser application leading to ammonia and nitric oxide emissions. Because it is highly mobile, nitrogen can reach groundwater reserves due to leaching and reach surface water via runoff. Excess nitrogen leads to plant and algal growth in surface water, producing eutrophication that damages biodiversity. Further, nitrate concentrations in groundwater pose health risks to both livestock and humans. Nitrogen volatilisation contributes to higher concentrations of nitrous oxide which can lead to soil and water acidification which can lower crop yields and biodiversity.

← 8. Phosphorus surpluses are associated with environmental risks as excess P can lead to surface water contamination due to runoff and soil erosions. While phosphorus concentrations in water do not pose a direct risk to human health, they do favour the growth of cyanobacteria and algal blooms in water bodies.

← 9. Calculating emissions intensity per hectare captures changes in total emissions relative to agricultural land, which is a stable input in most OECD countries. This measure allows for comparisons of trends in overall GHG emissions scaled to national land usage. In general, the environmental effects in terms of greenhouse gas emissions tend to be primarily driven by extensive margin decisions (shifting between different types of agricultural land uses) as well as input usage intensity (primarily fertilisers and intensification of livestock) (OECD, 2019[31]).

← 10. One difficulty in using emissions intensity per unit of output is that the measure of output is calculated using the sum of the value of production across 189 crop and livestock commodities and represents the market value of food and agricultural products within each country. The use of domestic prices potentially over-estimates the real market value of production in countries where prices and quantities are distorted by market price supports.

← 11. There is a lack of empirical research on the trade-offs and synergies between TFP growth and sustainability. Coomes et al. (2019[29]) argue that this is due to how TFP is measured and a lack of sufficiently downscaled data that allow for the empirical depth need to “examine the dynamic interplay of sustainability and resilience outcomes with TFP changes in agriculture.”

← 12. The data used to estimate the figures taken from all OECD countries with available data over the period 1990-2016 (OECD, 2019[22]). The full methodology and sample behind the graphs in Figure 6.7 and Figure 6.8 are explained in Annex 6.A.

← 13. This negative correlation exists also in the United States and Denmark, for example, but the relationship is positive in Iceland and Sweden. Country specific slopes are estimated by regressing growth in nitrogen balance on agricultural TFP growth at the country level with time fixed effects included.

← 14. The dashed line indicates where the average of normalised TFP growth and the weak environmental growth score are equal to zero.

← 15. Agricultural policy contributes to sustainable productivity where there is low levels of production-related agricultural support, though countries like Denmark and the Netherlands have achieved these results in part due to a lack of production-related support and payments linked to environmental outcomes (Henderson and Lankoski, 2020[38]).

← 16. A subset of countries used in the analysis are shown in the figure.

← 17. Bubble size represents the country’s average livestock density per hectare.

← 18. The consistency constant is used to ensure that for large samples the median absolute deviation (MAD) becomes a consistent estimator of the population standard deviation. The value of 1.486 is used as a consistency constant under the assumption that the underlying distribution is normally distributed.

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