Agriculture Is the Real Climate Battleground

Climate policy has long treated agriculture as a secondary concern, something to address after the heavy lifting on energy and transport is done. That assumption is now untenable. Food systems generate roughly one third of all human-caused greenhouse gas emissions. They occupy nearly half the world’s habitable land. They consume 70% of freshwater withdrawals globally. And they drive the majority of tropical deforestation. Yet agriculture receives less than one tenth of global climate finance. This mismatch, between the sector’s climate footprint and the attention it commands, has become one of the most consequential blind spots in the global response to warming.

 

The numbers are no longer ambiguous

 

The latest FAO data puts global agrifood emissions at 16.2 gigatonnes of CO2-equivalent in 2022, or 29.7% of the global total. The IPCC AR6 places the broader agriculture, forestry, and land-use sector at 22% of emissions. When supply chains, transport, packaging, and food waste are included, the figure approaches 34%. These are not marginal contributions. They are structurally embedded in how the world feeds itself.

Agriculture’s emissions profile is also chemically distinct from energy. While energy systems produce mostly CO2, agriculture dominates the other major warming gases. It generates roughly 44% of global anthropogenic methane and 81% of nitrous oxide. Enteric fermentation from ruminant livestock alone produces approximately 2.8 gigatonnes of CO2-equivalent per year. Rice paddies emit methane at a scale comparable to the aviation sector. Food waste, at over a billion tonnes annually at retail and consumer levels, adds another 8 to 10% of global greenhouse gases.

The land-use dimension compounds the problem. In 2024, the tropics lost a record 6.7 million hectares of primary rainforest, nearly double the previous year. At least three quarters of that loss is driven by agriculture, with cattle ranching alone responsible for 41% of tropical forest clearing. An estimated 133 billion tonnes of carbon have been lost from the world’s soils since farming began.

 

Finance is flowing in the wrong direction

 

The World Bank’s 2024 report, Recipe for a Livable Planet, estimates that $260 billion per year is needed to halve agrifood emissions by 2030 and reach net zero by 2050. The expected return: $4 trillion in benefits, a ratio of 16 to 1. Yet only $95 billion annually in climate finance reaches the sector, just 7.2% of total global flows. The FAO and Climate Policy Initiative place the true need closer to $1.1 trillion per year.

Meanwhile, governments spend roughly $842 billion annually on agricultural subsidies, of which an estimated 87% are price-distorting or environmentally harmful. Harmful subsidies outweigh positive climate investment in the sector by a factor of nearly nine to one. India’s fertiliser subsidies alone run approximately $23 billion per year, driving nitrogen overuse that generates over 100 million tonnes of CO2-equivalent annually. Brazil provides approximately $88 billion in agricultural credit each year, with $25.5 billion in tax waivers flowing to major agribusiness firms. The EU’s Common Agricultural Policy, budgeted at €387 billion for 2021 to 2027, achieved meaningful early reductions but has stalled. Widespread farmer protests in 2024 led the Commission to relax environmental rules, and its post-2027 vision prioritises competitiveness over sustainability.

💡 The real climate subsidy scandal is not in fossil fuels alone. Governments spend nearly nine times more on harmful agricultural subsidies than on positive climate investment in food systems. Reforming this ratio, not inventing new instruments, may be the single highest-leverage policy intervention available.

The financial sector’s role deserves particular scrutiny. A 2025 Global Witness investigation found that banks have earned $26 billion in income from financing 50 companies most responsible for deforestation since the Paris Agreement. The Forests and Finance Coalition documented $72 billion flowing to forest-risk commodity sectors in the most recent 18-month period. JPMorgan Chase, the largest deforestation lender, arranged deals worth approximately $9.4 billion with firms implicated in forest destruction.

Rabobank offers a revealing case study. The Dutch bank, often positioned as a leader in sustainable agriculture, holds €23.5 billion in lending to industrial livestock companies, including €280 million to JBS and €226 million to Tyson Foods. Agriculture loans generate 40% of the bank’s financed emissions despite representing only 17% of its assets. To its credit, Rabobank’s Responsible Commodities Facility in Brazil provides low-interest loans to soy farmers who commit to zero deforestation, backed by UK retailers and the Inter-American Development Bank. But the scale of such programmes remains small relative to the conventional lending book. This tension, between incremental green initiatives and continued financing of high-emission operations, is not unique to Rabobank. It defines the position of nearly every major agricultural lender.

 

Voluntary coalitions have collapsed

 

The Net Zero Banking Alliance formally ceased operations in October 2025. From its peak of 146 member banks holding $75 trillion in assets, six major Wall Street banks departed in late 2024 and early 2025, followed by Canada’s top five, HSBC, UBS, and Barclays. By mid-2025, membership assets had fallen 45%. The Net-Zero Insurance Alliance had already disbanded in 2024, and the Net Zero Asset Managers initiative suspended activities.

For agriculture specifically, the implications are severe. The Forests and Finance Coalition’s 2025 report found that half the world’s top 30 banks financing deforestation-linked sectors were members of these voluntary sustainability initiatives. There was, the report concluded, no evidence that membership had curbed harmful financial flows. Global Canopy’s Forest 500 assessment reinforced the finding: 60% of the 150 assessed financial institutions have no deforestation policy at all. The share of policies actually fell from 45% in 2023 to 40% in 2024, reversing a decade-long trend. Vanguard and BlackRock, which together provided over $1.6 trillion to Forest 500 companies, maintain no deforestation policy.

💡 The collapse of the NZBA does not just remove a framework for banking accountability. It reveals that for agriculture, the voluntary era produced essentially no measurable change in capital allocation. The sector now enters a regulatory vacuum at the precise moment when financial flows matter most.

 

Where leverage actually exists

 

The most consequential recent developments share a common feature: they are mandatory or market-creating, not voluntary.

Denmark enacted the world’s first carbon tax on agricultural emissions in June 2024, starting at approximately $43 per tonne of CO2-equivalent in 2030 and rising to roughly $100 by 2035, with revenue recycled into green transition support. No other country has followed, but the model establishes a template that policymakers elsewhere will find difficult to ignore.

The EU Deforestation Regulation, though delayed twice, to December 2025 and again to December 2026 for large operators, will eventually require companies to prove their products are not linked to post-2020 deforestation. Fines of up to 4% of annual EU-wide turnover create material consequences. The repeated delays reflect genuine political difficulty, but the regulation’s existence changes the calculus for commodity traders and their lenders.

On the technology side, Bovaer, the methane-reducing feed additive, received FDA approval in May 2024 and is now authorised in over 68 countries. It reduces enteric methane by approximately 30% in dairy cattle and up to 45% in beef, at a cost of $0.30 to $0.50 per cow per day. For rice, alternate wetting and drying techniques cut methane emissions by 30 to 48% while saving irrigation water and maintaining yields. These are not speculative technologies. They are commercially available and cost-effective.

Yet a 2023 analysis of 17 major agricultural countries signed onto the Global Methane Pledge found that none had concrete measures to reduce agricultural methane. The tools exist. The policies to deploy them largely do not.

 

The soil carbon question

 

Soil carbon sequestration has attracted significant attention as both a climate solution and a revenue opportunity for farmers. The theoretical potential is real: 4 to 5 gigatonnes of CO2 per year under near-complete adoption of best practices. But realistic estimates, accounting for economic, logistical, and behavioural constraints, place the achievable figure at 0.28 to 0.43 gigatonnes of carbon per year. That is meaningful but modest against annual fossil fuel emissions of 10 gigatonnes.

The scientific literature has grown more cautious. Accumulation rates slow as soils approach equilibrium, typically sustaining gains for only two to three decades. Stored carbon can be reversed if practices are abandoned. Current agricultural soil losses, estimated at 1.9 to 2.4 petagrams of soil organic carbon annually, actually exceed the sequestration potential under improved management. The voluntary agricultural carbon credit market, valued at just $36 million in 2024, reflects these uncertainties. Generic avoidance credits now trade below $1 per tonne, while durable removals exceed $300. Markets are signalling deep scepticism about permanence.

💡 Soil carbon is worth pursuing for its co-benefits: improved water retention, soil health, and farm resilience. But framing it primarily as a climate offset mechanism risks overpromising on sequestration while underinvesting in the harder work of absolute emissions reduction from livestock, fertilizers, and land-use change.

 

What this means for sustainable finance

 

For banks, asset managers, and institutional investors, the implications are increasingly concrete. Agriculture is not a niche sustainability concern. It is a material source of financed emissions, regulatory risk, and physical climate exposure. The collapse of voluntary coalitions has removed the soft infrastructure that allowed institutions to signal intent without altering behaviour. What remains is a landscape shaped by regulation, litigation risk, and the growing expectation that financial institutions will account for the agricultural emissions embedded in their portfolios.

The arithmetic is straightforward. Agriculture emits one third of greenhouse gases, occupies nearly half of habitable land, drives the majority of deforestation, and receives less than one tenth of climate finance. Voluntary approaches have not closed that gap. The institutions that move early to align agricultural lending with credible transition pathways will not only manage risk better. They will be positioned to capture the significant upside that the World Bank’s 16-to-1 return ratio suggests is available. Those that do not will find themselves increasingly exposed, not to reputational risk alone, but to the regulatory and physical consequences of a food system that the climate can no longer afford.