Significant capital needed to meet net zero goals

MANILA, Philippines — Agriculture-based economies such as the Philippines require significant capital to shift to  low greenhouse gas (GHG) farming practices to meet net zero goals, according to a report by the business and economics research arm of McKinsey & Co.

Mckinsey & Co. said these economies need to adopt low-emission farming practices, which would entail investing massive capital and mobilizing millions of stakeholders.

Apart from the Philippines, other countries in this group include Ghana, Kenya, Morocco, Senegal and Sri Lanka.

“Our analysis suggests that for countries with significant agriculture sectors, a net-zero transition would require a broad shift to low-GHG farming practices,” McKinsey said.

McKinsey said these countries source a large share of employment and income from agriculture, accounting for up to about 55 percent of jobs and up to about 30 percent of gross domestic product.

Moreover, a majority of these countries have exposure to physical climate risk, subjecting their agricultural workforce to increased heat and humidity under warming scenarios and agricultural output leading to variable crop yields, the research firm said.

“The result is fairly high transition-exposure scores, given the need to reduce the agriculture sector’s significant emissions, through both low-emissions farming practices and potentially adapting the sector’s production mix to fulfill changing local and global demands for food and crop-based fuel,” McKinsey said.

It said implementing interventions that reduce emissions and increase carbon sequestration have the additional benefit of lower operating costs, and improving resilience to physical climate changes, in turn leading to other benefits.

“For example, interventions such as agroforestry and improving the quality of inputs like seeds and fertilizers can help increase productivity and can lead to a sharp decline in deforestation and raise incomes,” McKinsey said.

However, these interventions would require significant capital spending and a concerted effort to reach millions of smallholder farmers.

“This capital spending will be needed to improve farmer access to high-quality inputs and improved farm technologies (such as electric farm equipment),” the research arm said.

“Providing farmers with relevant skills and training will also be required to sustainably increase yields while simultaneously reducing emissions,” it said.

Apart from reducing GHG emissions in the agricultural sector, McKinsey said these countries also have a strong opportunity in pursuing GHG reduction developments.

This is because these countries are typically located in areas with high levels of solar irradiance, which have a theoretical solar potential of more than five kilowatt-hours per square meter of land each day on average.

“Scaling up solar energy generation capacity, therefore, represents a significant opportunity. Some countries also have relatively high abatement potential from reforestation and afforestation,” McKinsey said.

“As with some other archetypes, these countries are expected to invest substantially in new assets as they grow their economies; this offers the potential to leapfrog and build out low-emissions assets,” the research firm said.