‘Significant investment opportunity’ in decarbonising Asia’s agri-food sector: report

DECARBONISATION presents a significant investment opportunity for Asia’s agri-food sector, given its large scale and need for technology implementation, according to a new report co-written by Temasek.

The third edition of the Asia Food Challenge report, published on Wednesday (Nov 1), said applying emissions-reducing technologies and practices across rice and cattle farms alone in Asia can improve farm-level gross margin by up to 16 percentage points.

Such large productivity gains would incentivise multinational corporations – many of which have set a 2030 decarbonisation target – to turn to these solutions.

Moreover, the physical farm-level technologies and assets required to cut the emissions in the rice and cattle farms by 2030 are estimated to cost US$125 billion, far lower than the estimated cost to decarbonise the aviation or energy sectors, the report’s authors said. 

Achieving net zero in global aviation was estimated to be only achievable by 2050 with investment of over US$5 trillion, while funding the energy transition in Asia in line with the target of limiting the average global temperature rise to 1.5 degrees Celsius is estimated to require US$5.7 trillion of investment by 2030, they pointed out.

The lower cost to decarbonise the agri-food sector is in large part due to the relatively low capital expenditure of the solutions and their high technological readiness level, they said. 

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The report was put out by state investor Temasek, together with professional services firm PwC, food and agriculture bank Rabobank, and Olam’s climate tech venture Terrascope. The focus is placed on Asia as the region feeds nearly 60 per cent of the world’s population.

More than 20 decarbonisation solutions for the agri-food sector were identified in the report. Some of those that can already be applied today include crop residue management and improved fertiliser efficiency, while next-generation solutions include biological manufacturing, green ammonia and predictive informatics.

Tapping carbon markets

In the report, the authors also highlighted the key role of carbon markets in driving adoption of technologies and practices that can decarbonise the agri-food sector, which the report noted accounts for half of South-east Asia’s greenhouse gas emissions, at 1.7 gigatonnes.

“Farmers need to be incentivised to adopt lower-emissions practices that are otherwise economically unfeasible,” they wrote. “Additional incentives, in the form of the carbon markets or tax relief for implementing these technologies and practices, are needed to increase uptake by farmers.”

The source of revenue from carbon markets by 2030 is estimated to range from US$2 billion to US$59 billion, the report noted. This presents an additional potential revenue stream for farmers who “may not otherwise take actions to decarbonise their operations”, they added.

The lower limit assumes a US$10-a-tonne carbon price covering 20 per cent of the sector’s emissions reductions potential, while the upper limit assumes the scenario of a regulated carbon market imposing a US$70-a-tonne carbon price on Asia’s agri-food sector.

These calculations were made based on the understanding that there is potential to cut greenhouse gas emissions in the Asian agri-food sector by about 12 per cent by 2030. This represents a reduction of nearly 840 million tonnes of carbon dioxide equivalent – an amount comparable to emissions from the entire global aviation industry last year – the report noted.

Companies can take this as an opportunity to generate carbon offsets from carbon sequestration, the authors added. This can be done through the integration of afforestation, restoration and reforestation approaches, many of which can be combined with forms of farming, they said.

Nevertheless, the authors acknowledged the challenges inherent in the carbon market. For one, not all sectors or companies are included in the regulated carbon markets in Asia, they said. 

The carbon price is also “too low” to enforce meaningful change in some areas that offer the highest potential for reduction, in large part due to the prevalence of low-quality, low-price carbon credits and offsets in the market, they said.

These typically support projects dealing with emissions avoidance from forested areas, which “have almost zero cost to implement”, since the cost of removing carbon from the air is multiple times higher than the current carbon price, they added.

To address these challenges, an agreed set of regulatory frameworks, including measurement standards, which take into account the duration and reliability of emissions reduction and sequestration, and accurate emissions factors will be required, they said.