GRAY MAGUIRE: SA agriculture woefully unprepared for EU carbon crunch

Just before Christmas last year, agriculture & land reform minister Thoko Didiza had much to crow about as she reported a second consecutive year of record-breaking bumper harvests in the agricultural sector. While the final numbers are not yet out, analysts have predicted that SA might increase its exports from R160bn in 2020 to R173bn in 2021.

As the only sector other than government services to grow in 2020 (at a whopping rate of 13.4% for the year, to boot) and employing considerably more than double the mining sector’s total workforce, agriculture’s importance cannot be understated.

But before we start patting ourselves on the back with too much vigour, serious consideration must be given to some ominous clouds on the horizon. Over the past month the Trade & Industrial Policy Strategies (TIPS) research group has released two reports unpacking the increasingly foreboding trade impacts of the European Green Deal (EGD).

The EGD is a wide-reaching framework of policy initiatives aimed at transitioning the European economy into a more sustainable state, and is set to herald a new era of environmental regulations at a global level. The EGD will have significant implications for the R270bn worth of goods SA exports to the EU for starters, but foreshadows the development of similar initiatives in other SA export destinations, including the US and Japan, on the back of the new emission reduction commitments that came out of COP26 in Glasgow in November 2021.

While there are several key sectors that are set to be affected, including mining, manufacturing, metals, transport equipment and chemicals, agriculture’s critical role in both our export and domestic economy requires that it receive special attention.

According to TIPS, SA’s agricultural exports are extreme outliers at the global level in carbon intensity. With an intensity of more than 1,100 tonnes of carbon dioxide equivalent (tCO2e) per $1m of exports, SA is almost twice as carbon intensive as the second country, Poland, at a mere 650 tCO2e per $1m. Most countries have an intensity of between 100 and 500 tCO2e per $1m.

As a result of the EGD, the EU has grown mightily concerned about less stringent environmental and climate policies in non-EU countries that result in “carbon leakage” that can shift emissions outside Europe to places like SA. To counteract this, the EU has developed the carbon border adjustment mechanism (CBAM), which places a tax on emissions from imports relative to the carbon emitted during the production of imports from non-EU countries.

The mechanism will be introduced in a transitional phase in January 2023 until the end of 2025, with a focus on direct emissions from the electricity, cement, fertiliser, steel and aluminium sectors. But the commission is also proposing to aim for an “EU-level objective to reach climate neutrality in the combined land use, forestry and agriculture sector by 2035, including non-CO2 agricultural emissions, such as those from fertiliser use and livestock” under its Farm-to-Fork Strategy.

The Farm-to-Fork programme is explicit in its intent to “support the global transition to sustainable agri-food systems through its trade policies and international co-operation instruments” by focusing on environmental impacts, climate change and biodiversity.

Yet in SA we have done little to prepare for this rapidly approaching market crunch. The carbon intensity of the sector is just horrific. We have no national organic production policy in place, and farmer subsidy programmes such as the Massive Food Production Programme rely on the distribution of genetically modified organisms (GMOs) and synthetic fertilisers and pesticides, due to the limitations in place under section 36 of the Agricultural Products Standards Act, which was promulgated way back in 1947.

As a country we have already witnessed first-hand how flip-flopping on electricity policy imperatives has brought that sector to its knees. We urgently need the state to wake up and smell the coffee. A sea change is coming to the agri-export sector, and we must rise to meet it.

• Maguire is carbon project manager at Climate Neutral Group SA. He writes in his personal capacity.