Working paper: Transition risks for the Argentine agricultural sector

The National Institute of Agropecuaria Technology (INTA) and NewClimate analyze the transition risks facing Argentina’s export-oriented agricultural sector in the context of increasingly carbon-constrained commodity trade. The report suggests that Argentina should find ways to reconcile plans to promote its agricultural export model with its stated climate ambition. By exploring and implementing mitigation options that help the sector reduce its emissions intensity, Argentina can strengthen its position as a key exporter of agricultural products to world markets.

Principle results :

Argentina’s export-oriented agricultural sector is the backbone of the country’s economy. Exports of agricultural commodities generated more than 65% of total export earnings in 2020, representing the country’s main source of foreign exchange. Argentina is one of the world’s largest exporters of soy and beef products and aims to further boost agricultural production as part of its agricultural export model.

However, the sector also accounts for 37% of the country’s total greenhouse gas (GHG) emissions. The sector’s growth targets and Argentina’s aim to secure its strategic position as a key exporter of soy and beef derivatives are difficult to reconcile with the country’s stated climate ambition to achieve neutrality. carbon by 2050. A credible path to carbon neutrality requires all sectors of Argentina’s economy to start decarbonizing today.

The survey results indicate that stakeholders representative of Argentina’s export-oriented agriculture, dairy and livestock sectors do not expect the introduction of more national commitments. stringent on GHG mitigation for the agriculture sector and do not perceive these commitments to be critically important to export volumes or exports. prices of agricultural products. They are, however, aware of the transition risks associated with more ambitious climate action in third countries, particularly in the EU, but generally perceive the economic risks as low.

Stakeholders may underestimate the implications and economic impacts of more stringent environmental requirements imposed on international trade flows by countries with a more progressive climate agenda. The ratification of the EU-Mercosur trade deal, which faces strong political opposition due to the lack of environmental safeguards and enforcement mechanisms, as well as political voices calling for the introduction of a meat tax in the EU, are an example.

In this study, we show that an EU carbon tariff with full coverage of agricultural imports would have disruptive effects on global trade flows, significantly decreasing the export competitiveness of key producers such as Argentina to the EU. ‘European Union. Evidence from partial equilibrium modeling suggests that Argentina would experience significant negative impacts on GDP and domestic employment already at moderate carbon pricing levels. This is due to a sharp decline in EU demand for Argentine exports of soybean and beef products as well as falling commodity prices.

As countries increasingly introduce stricter environmental requirements and tax regimes, which are imperative to meeting the Paris temperature targets, global agriculture trade will become increasingly GHG constrained. The decarbonization of trade flows is likely to represent a transition risk for major agricultural commodity exporters such as Argentina. Taking early action to reduce the GHG intensity of agricultural production systems could, in turn, represent a decisive source of competitive advantage for exporting countries.

Lana T. Arthur