The emissions intensity of agri-food value chains is under significant scrutiny – and for good reason. The agri-food system accounts for 25-35 percent of global greenhouse gas emissions. The scale of this impact, combined with an increasing focus on agriculture as a major source of Scope 3 emissions, has driven significant levels of investment in decarbonization along the value chain.
This is a huge task. To be consistent with a 1.5C scenario by 2050, McKinsey estimates that agriculture will need to deliver further reductions of up to 80 percent of the estimated 14.4 gigatons of CO2 equivalent it generates.
As important as these investments in decarbonization are, the impact won’t be fast enough to help us avoid many of the extremes of a 1.5-2.0C warming scenario, and this poses an enormous challenge to agricultural production itself.
Climate impact on ag
The need for climate adaptation and resilience solutions in agriculture is urgent. According to the UN Food and Agriculture Organization, agriculture is the sector most affected by climate change.
Over the last three decades, agricultural losses accounted for an average of 23 percent of the total impact of disasters across all sectors, and 40 percent of countries reported economic losses due to climate change.
Droughts caused more than 65 percent of these losses, amounting to approximately $3.8 trillion in crop and livestock production losses.
We’re feeling this acutely in Australia, too, with the Australian Bureau of Agricultural and Resource Economics and Sciences reporting that 2023-24 agricultural production is expected to decline due to significantly hotter and drier conditions.
Daytime temperatures from August to October were higher than average, including in some major cropping areas that experienced temperatures at least 5C above average.
Three opportunity areas
While technology solutions are only one tool in the much-needed climate adaptation and resilience toolkit, they do hold significant potential. We see opportunities to invest in solutions across three categories.
First is meeting the challenges of growing food and fiber outdoors, as this becomes riskier.
Crops and livestock will be exposed to more frequent and extreme abiotic stresses, and we’ll see increased incidences of pest and disease risk for agriculture globally. In an industry where timing is everything, more variable weather will increase the risk of loss and damage.
Fortunately, technology can speed up genetic improvement, enhancing resilience to new extremes. Better genetics can also provide backup solutions: if an initial crop fails, faster-growing, more drought-resistant substitutes can help reduce losses. And smaller, more nimble autonomous equipment will allow farmers to lower their exposure to weather related interruptions and damage.
The second opportunity comes with the reversal of globalization.
The impacts of climate change won’t be limited to challenges on-farm. The past few years have clearly shown that agri-food value chains are extremely vulnerable to global shocks, whether induced by pandemics or armed conflict, and climate change will likely increase the incidence of supply-chain shocks.
Innovations in renewable energy, waste, and resource recovery, and the falling costs of technological infrastructure will make it possible for new economic models to emerge at regional scale. Local and regional energy and input production (like Jupiter Ionics), modular waste recovery solutions (like Goterra) and agrivoltaic renewable energy infrastructure are just a few examples of promising solutions.
The third opportunity arises from the digitally driven financialization of risk.
While it is widely expected that climate change will drive up agricultural insurance costs globally, there will also be opportunities to create more specific and tailored risk management solutions for farmers.
As value chains become more digitally connected and increasingly observable, there will be ever greater opportunities to create risk, credit and insurance solutions, and to embed them into contractual flows, lowering the costs of administration and payout.
Time to prioritize
There is no point having a decarbonized food system that can’t produce food. Yet, perhaps because the risks of inaction are borne differently between decarbonization and adaptation, we have seen far more emphasis on decarbonization so far.
As the climate shifts, and farming in many parts of the world requires more resilience to increasingly extreme conditions, there are grave risks of inaction.
The impacts of a failure to increase the pace of investment in adaptation and resilience will be felt most directly on farms, but they will multiply, impacting regional economies and eventually severely diminishing production capacity and sovereign food security.
Investment in climate adaptation and resilience for our agri-food system is a massive opportunity, and it’s time we give it the priority it deserves.
Matthew Pryor and Sarah Nolet are co-founders and managing partners of Tenacious Ventures.