Four future scenario's

• The government will either continue with its current “means-based policy” or move gradually to a “target-based policy”, which means more freedom of choice for companies.

• It is farmers who bear the costs of producing more sustainably. Either that or they are paid for it. 

From a means-based policy to a target-based policy

The government is aiming to achieve sustainability by deploying mandatory measures and regulations, which is part of the current (generic) means-based policy. As far as Rabobank is concerned, this policy not ideal, nor is it fully effective. In Rabobank’s view, a target-based policy leads to more leeway and responsibility for farmers. In this kind of policy, farmers achieve their sustainability goals within clearly defined parameters. Incentives could be linked to achieving these sustainability goals, as an example. The targets focus on the climate, nature and the environment with tasks set out in the climate agreement, the Water Framework Directive, the National Programme for Rural Areas and the Nitrogen Act. The task facing farmers includes reducing their fossil fuel consumption by switching to sustainable alternatives. Farmers will also have to reduce their nitrogen emissions, for instance through extensification and/or innovation. 

Agricultural transition research
In this research, we identify which policy is best suited to achieving sustainability goals cost effectively: a means-based policy or a target-based policy. Read about the research (Dutch only)

Shrinkage and earning opportunities

We assume that meeting society’s requirements and making a bigger contribution to general prosperity will entail a contraction of output in most sectors. The extent of the contraction and the earning potential if production is slowed down depends on the choices that the government, chain and consumers will make. We outline four scenarios:

1. Significant shrinkage through involuntary termination. The chain and the government will not be paying for the requisite sustainability in primary sectors. The sector is shrinking because many farmers no longer have a feasible earning model. The cost incurred for making the sector more sustainable is low because there is a significant contraction in production. Achieving sustainability comes in part from this contraction. Companies that do invest in sustainability absorb the costs through substantial economies of scale and/or multifunctional operations.
2. Contraction due to accelerated economies of scale. The emphasis is on financially efficient production on large farms that produce according to environmental standards because of the government’s target-based policy. Involuntary termination takes place if there is no leeway for economies of scale. The chain and the government will not be paying for the requisite sustainability. The marketing of their sustainable produce is aimed at European consumers and the high-end global market.  
3. Enforced contraction through extensification. In this scenario, the government determines how big the sector can be and which (mostly environmentally friendly) production methods entrepreneurs can apply. The government promotes standards-based extensification, the means-based policy and payment for green-blue services. Businesses can also ensure that they are financially viable by expanding their operations into areas such as childcare, care farms, farm campsites and farm shops. Farmers for whom extensification and/or expansion is not a viable business model will be forced to end their business operations.  
4. Limited shrinkage through new revenue models based on true value.  In this model, the chain offsets the costs and benefits of sustainability against product prices (based on smart chain concepts) and the government supplements payments for green-blue services. Contraction is also to be expected in this scenario, but the contraction is less severe because the revenue model is adequate.  Farmers are able to invest in conversion, extensification, innovation and/or relocation and are therefore more in control. Food production and processing take place where environmental conditions are most suitable. Importing animal feed from Europe is no longer necessary.¹ Nutrient cycling is kept within the borders of Northwestern Europe. The combination of a target-based policy and new revenue models provides a good basis for shaping the sustainability of agriculture and increasing its contribution to general prosperity. 

   
   

NB: there is shrinkage in all scenarios. When we talk about limited shrinkage, shrinkage or significant shrinkage in the scenarios, we mean the relative movement compared to the expected shrinkage of 30% that PBL predicts for livestock farming as a whole.

¹Source: WUR, Hannah van Zanten, Circular Food System Model, 2022

Agricultural transition research
Farms now derive 3.3 per cent of their turnover from secondary income. This equates to €1.1 billion. The expectation is that this turnover will grow from €3.4 bn to €5.1 bn by 2030, while the growth rate based on farming will be lower. That is why the revenue model will change. Read more about secondary income (Dutch only)