Executive summary
Norway’s geography implies that much of the country’s current agricultural activity would not be viable without government support. As a consequence, Norway has the highest level of agricultural support of all OECD countries, with 59% of farmers’ revenues coming from government support measures. Most of this support is provided through market price support and payments linked to production, with only 3% of total support to the sector dedicated to research and innovation. In contrast, the fisheries and forestry sectors are not dependent on trade protection and high government support.
The stated objectives of Norway’s agricultural policies include ensuring food security and “preparedness”; maintaining agriculture across the whole country; increasing value added; and achieving sustainable agriculture with lower GHG emissions. While overall, Norway has high environmental standards and a commitment to open trade, agriculture is an exception with respect to economy-wide policies such as GHG emissions taxes and trade agreements.
The chosen policies encourage production, with the result that domestically produced food is available and agricultural activity is maintained over the entire country. However, they also make food significantly more expensive for consumers. Moreover, high support levels encourage current production decisions, providing a disincentive to innovation, and raise input prices for downstream industries, impeding the generation of value added. They also lead to increased environment stress while raising total GHG emissions. While productivity growth in Norway has been higher than the OECD average, it has been achieved via labour-saving technologies that elevate the input intensity of production and contribute to environmental pressures.
In sum, Norway achieves its first two objectives, but at the cost of the latter two. Alternative policy approaches can ensure food security and some geographical presence of agriculture, without stimulating additional production and imposing negative effects on sustainability and the generation of value added in the food sector. This study proposes such a new policy approach that would enable Norway to improve the productivity, sustainability and resilience of its agricultural sector, and achieve a balance across its multiple objectives. This approach has four main features: an increased responsiveness to markets to position the sector to better meet the needs of consumers and position it to improve its sustainability and innovation; a new approach to maintaining the regional presence of agriculture that gives more flexibility to farmers; a strengthened focus on agri-environmental outcomes; and an upgrade of the agricultural innovation system with a greater role for the private sector. Specifically:
Gradually reduce border protection and commodity-specific support in a predictable way to allow markets play their role in allocating production resources and responding to innovation demands. Transition co-operatives away from their market regulation role.
Clarify the meaning and value of agricultural land use in different regions to better orient policies and innovation incentives, and to measure success.
Make use of targeted support that is not connected to production to provide income support and complementary incentives to maintain land in agriculture, and improve environmental performance.
Reduce net GHG emissions from agriculture by restructuring support and treating the sector similarly to other sectors in the economy.
Direct policies towards sustainability priorities, for example, by increasing the share of payments conditional on adopting specific farming practices for environmental reasons beyond the current share of 15% of total support to producers.
Promote the development of environmental plans at the farm level and develop a system to monitor the agri-environmental performance of farms.
Introduce voluntary risk-management programmes to help farmers actively manage their business risk.
Strengthen cross-sectoral innovation priorities and the strategic roles of the Research Council of Norway and Innovation Norway in the Agricultural innovation system. Assure the independence of agricultural research institutes under the Ministry for Agriculture and Food (LMD) and strengthen cross-sectoral collaboration.
Building on existing agricultural innovation funds, enhance the incentives to match together public and private resources and to respond to business and social demands.
In order to achieve these objectives, Norway could explore wider stakeholder engagement in policymaking. The annual negotiation between government and farmer representatives should be reviewed to ensure it is well suited to current and emerging policy objectives. A multiyear framework agreement and the participation of a wider range of stakeholders could contribute to strengthened performance with respect to environmental and social objectives.