Market Mechanisms Can Safeguard Nature from Food Production Impacts

During Climate Week one year ago, WWF’s Markets Institute introduced to the world Codex Planetarius, a proposed system of minimum environmental performance standards to improve the sustainability of globally traded food and soft commodities, and the 1% Fund, a market mechanism to address the environmental externalities that are not reflected in commodity prices.

Since then, we have been hard at work. Our website now hosts more than a dozen research papers examining the need for global environmental standards for commodity production; the key impacts, metrics, and minimum performance standards that must accompany them; and how standards and compliance are likely to affect global trade. And we’ve been conducting a host of desktop pilot studies to test our theories about how environmental production standards would interact with the complexities of food commodity production as well as the government data systems that track performance.

We’re presenting some of the results of those studies at Climate Week in New York this week, and nearing a decision about whether the Proof of Concept that we’ve been undertaking warrants further research and development, including the enlistment of on-the-ground implementation of performance standards and a trial of how the 1% Fund would work in practice.

The early results of the Proof of Concept work have been encouraging. We’ve seen interest from insurance companies, for example, which have long avoided agriculture as a primary market focus because of the lack of common, credible data about the impact of producing commodities and the risk climate change will create for commodity producers and the food system.

We’ve also learned where voluntary standards have fallen short (rewarding the best performers vs. moving the worst), even as there is more appetite from governments to take active roles in legislating and mandating that companies be more responsible in their supply chains and in their actions.

And by looking at the trends and potential costs and benefits of Codex Planetarius across the supply chain for farmers, traders and markets, we have determined that the mitigation impact of Codex will be positive after an initial period of adjustment. While the impact on some specific products, like soy and coffee, is likely to be significantly higher than the average, the overall impact of Codex on markets and prices is not likely to have a material impact on trade flows, food security, and livelihood.

That is because, unlike the high levels of tariffs that have been implemented recently on imports into the United States, Codex Planetarius and the associated 1% Fund are not likely to have a significant effect on the price of finished goods. A 1% levy on raw material prices added to all food exports, regardless of destination or supply chain, would provide the funds needed for producers to make food production more sustainable and resilient, even in the near term.

The global production of food has the largest impact of any human activity on the planet. The latest models suggest that climate change will cause a 10-15% reduction in net primary productivity of renewable natural resources by 2050. To turn this trend around, we need to make food production more resilient. The place to start is to reduce the current impacts of producing food. Codex Planetarius presents an opportunity to put in place a set of standards that provides global food producers with the financial resources they need to address climate change, environmental degradation, and growing food demand.