The triple challenge facing food systems - ensuring food security and nutrition, providing livelihoods along the food chain, and safeguarding environmental sustainability - are interconnected, and require coherent and mutually reinforcing policies. This chapter examines Romania’s policy objectives for the agro-food sector, which are framed within the broader EU Common Agricultural Policy (CAP) and include social, environmental and economic dimensions. The chapter assesses Romania’s recent performance in terms of sustainable agricultural productivity growth, examining the economic productivity of agriculture together with greenhouse gas emissions and other agri-environmental trends.
Policies for the Future of Farming and Food in Romania
Abstract
The EU’s Common Agricultural Policy (CAP) provides the broader policy direction for Romania’s agricultural policies and strategies, the objectives of which focus on social, environmental and economic aspects.
After a long-lasting negative trend of output growth, Romania’s agricultural output experienced a significant increase during the period 2011-20, driven by total factor productivity (TFP) growth. Over this period the TFP growth rate was above the OECD average.
Agricultural GHG emissions in Romania followed the same path as output growth, but since 2011 emissions have grown at a slower rate than the value of total output, therefore reducing the emissions intensity of agricultural output.
In Romania agricultural yields and productivity levels are still low compared to other OECD countries, with scope to improve labour productivity, the main driver of TFP growth.
6.1.1. Policy objectives
National policy objectives are formulated in the context of EU policies and strategies
As outlined in Chapter 2, Romania’s agricultural policies are formulated in the context of its European Union membership. Thus, national policy objectives are in line with the EU’s Common Agricultural Policy (CAP) and consider the broader policy direction given by EU-level plans and strategies such as the European Green Deal, the Farm to Fork Strategy and the Biodiversity Strategy. In this context, a first level of policy objectives is provided by the goals agreed on by EU Member States for the 2023-27 reform of the CAP (Figure 6.1). The objectives focus on social, environmental and economic aspects, with knowledge and innovation as a cross-cutting goal for the sector.
Key policy objectives of the 2023-27 Common Agricultural Policy
Source: (EC, 2022[1]).
In 2015, the Romanian Ministry of Agriculture and Rural Development launched a strategy for the agri-food sector setting the vision and the strategic objectives for the medium (2020) and long term (2030) period (MARD, 2015[2]). The strategy is centred around five strategic objectives:
Increase the share of agri-food consumption covered by domestic production and reinstate Romania as a net agri-food exporter.
Accelerate structural transition towards professional and economically viable farming and aquaculture, while aligning with demographic trends and ensuring an equitable phasing out of surplus farm labour.
Limit the impact of the agricultural and fisheries sector on the environment and promote climate change resilience in agriculture and rural areas.
Improve living standards in rural areas.
Improve the institutional framework.
The objectives of Romania’s CAP Strategic Plan (CSP) 2023‑27 (see Chapter 2) seek to address economic, social and environmental issues and should guide interventions in the agro-food sector financed by the 2023‑27 CAP and the state, regional and local budgets. In this regard, the CSP is the most important national plan for agriculture, due to the relevant budget allocated and the wide range of interventions addressing the specific needs of Romania, while also delivering on EU-level objectives. The key strategic objectives of Romania’s CSP (see Section 2.3.1) include competitiveness, and social and environmental sustainability goals (MARD, 2022[3]) that are aligned with the productivity, sustainability and resilience policy goals reflected in the 2016 OECD Ministerial and the 2022 Declarations.
Food systems around the world must deliver on a formidable “triple challenge”: ensuring food security and nutrition for all, providing livelihoods to farmers and others in the food chain and promoting rural development, and ensuring environmental sustainability (OECD, 2021[4]). Given the global nature of the triple challenge, it is pertinent to assess the performance of Romania regarding the general goals of increasing Productivity, Sustainability and Resilience (OECD, 2020[5]). These three dimensions encompass many aspects of the economic, social and environmental goals of the CAP (OECD, 2023[6]) and match with the objectives of Romania’s CSP listed above. This section focuses on benchmarking environmentally sustainable productivity performance, analysing the path that the Romanian agricultural sector is taking in terms of productivity growth and main environmental outcomes. The overall assessment of Romania is undertaken in the Assessment and Recommendations chapter.
Solving the puzzle of the triple challenge requires co-ordinated and synergic policies that generate the innovation and transformation of the agricultural production system Policies need to enhance productivity growth through a pathway that is environmentally sustainable. This entails achieving Total Factor Productivity (TFP) growth and, at the same time, ensuring that the gains in efficiency imply producing more with less natural resource and are associated with lower environmental impacts.
6.2.1. Agricultural productivity growth
Total factor Productivity growth has been a key driver of agricultural output growth over the last decade
Agricultural total factor productivity (TFP) growth reflects the ability of the sector to use inputs and land more efficiently, thus achieving a higher output per unit of inputs or per hectare of land. Productivity growth is also desirable because a more efficient use of resources is in line with the main objectives for agricultural policies in Romania, such as strengthening sector competitiveness, ensuring a viable income for farmers as well as creating new businesses and job opportunities in rural areas.
Figure 6.2 shows the trend of agricultural productivity growth over the last 30 years in Romania, in which the evolution of productivity shares many similarities with other countries that joined the European Union in the early 2000s (OECD, 2023[6]). The 1990s decade was marked by the transition from communism to the market economy, which came with a sharp decrease of agricultural output. The use of variable inputs use decreased significantly following the cuts to fertiliser subsidies which had been a key driver of Romania’s agriculture growth. At the same time, TFP growth also decreased (-1.33%), contributing to the fall of outputs.
During the first decade of the 2000s, the negative trend in output and productivity growth persisted, yet signs of recovery started to appear in the whole economy. Capital use increased in agriculture, partly led by the impressive performance of the rest of the economy and the appetite for investments that came with the EU accession in 2007. At the same time, labour outflows from rural to urban areas, together with massive emigration to third countries resulted in a sharp decrease in labour use (see Chapter 1).
The third period corresponds to the 2011-2020 decade, when agricultural outputs grew at an average annual growth rate of 1.17%, ending a long-lasting trend of negative output growth of Romania’s agricultural sector. This growth was mainly driven by agricultural productivity – TFP grew at an annual rate of 1.3% – but also by an increase in both capital and variable inputs. Moreover, most of the gains in TFP result from improved labour productivity. Labour use increased only during the 1990s, as agriculture absorbed part of the labour outflows generated by the quick deindustrialisation of the country (Ianoş and Secăreanu, 2020[7]).
Decomposition of Romania’s agricultural output growth by decade
Note: TFP growth is calculated as a residual, equal to growth in output minus growth in inputs.
Source: Authors’ calculations based on USDA (2022), International Agricultural Productivity (database).
Labour productivity has been the main driver of Romania’s TFP growth
In line with the European Union, where agricultural productivity growth has mainly been driven by labour productivity growth (OECD, 2023[6]), also in Romania recent productivity gains were mainly driven by the ability to increase the productive capacity of farms while reducing the labour force. Figure 6.3 shows the extent to which labour productivity has sharply increased over the last two decades – except for years such as 2020, when productivity was negatively affected by one of the most severe droughts that Romania has experienced over the last five decades.
Evolution of Partial productivities and TFP growth in Romania, Index (1991 = 1)
Note: TFP growth is calculated as a residual, equal to growth in output minus growth in inputs.
Source: Authors’ calculations based on (USDA ERS, 2024), International Agricultural Productivity database.
Following the accession to European Union, the Romanian farming sector has experienced a significant structural change, and as the number of farms diminishes and their size increases farmers are taking more advantage of economies of scale, thus needing less labour. Despite consistent growth, Romania has still the lowest labour productivity levels of the European Union (four times below the EU average) and the largest agricultural labour force, with 1.8 million people employed in the primary sector (see Section 1.2.1).
While land productivity also increased over the last decade (yields of most crops are increasing, see Section 1.3.3) capital productivity decreased steadily from 2004 to 2012 and has not recovered since. Finally, variable input productivity has not increased, which is not a good signal, given the more intensive use of them by Romanian farmers over the last decade and their potential impact on the environment.
Romania’s TFP growth rate is on par with the EU27 average
Romania experienced moderate growth in both productivity and output in the most recent decade, putting an end to the long-lasting negative trend that began in the mid-1980s. The annual TFP growth rate of 1.3% during the 2011-2020 period is above the OECD average of 0.82% and similar to the EU average of 1.2% (Figure 6.4). Compared to peer countries, Romania’s TFP growth performance ranks at the average, behind countries such as Lithuania and Poland, yet ahead of Czechia and Hungary. This is a notable improvement compared to the previous decade, when Romanian TFP growth was slower than most peer countries. Moreover, there is margin to further increase TFP: yields and productivity levels are still low compared to other OECD countries, and with the largest labour force in the European Union the country has a large margin to keep raising labour productivity, the main driver of TFP growth.
Agricultural TFP growth in selected countries
Source: Authors’ calculations based on USDA (2022), International Agricultural Productivity (database).
6.2.2. Sustainable productivity growth
Agri-environmental sustainability is important for the whole economy but has particular impact on agricultural productivity. A deteriorating natural resource base may reduce the country’s resilience to climate variability and depress present and future agricultural productivity. Productivity growth needs to follow an environmentally sustainable path.
Agricultural GHG followed the trends of output growth…
Given the triple challenge, countries need to find pathways to decouple GHG emission growth from output growth so that agriculture also contributes to climate change mitigation. This can occur when innovation enables the farming sector to produce more with less inputs or help to reducing the GHG intensity of the inputs. The latter is captured by the emissions factor, which measures the amount of agricultural GHG emissions per unit of input.1 In sum, emissions can grow less than output either because less inputs are needed per unit of output (higher TFP), or because less polluting inputs are being used (lower emission factor).
Following paths of other OECD and EU economies, Romania’s agricultural growth is based on a shift towards labour saving technologies and towards a more intensive use of variable inputs (fertilisers and feed). At the same time, as shown in Figure 6.5, over the last decades agricultural GHG emissions followed the same direction than output growth: during the 2000s output decreased at an average annual rate of 0.60% and GHG emissions at 0.59%, while over last decade (2011-2020) output grew by 1.48% on average each year, and GHG emissions grew by 0.78%.
Decomposition of changes in agricultural GHG in Romania,1991-2021
Note: Growth in output (dark green) and in emissions per unit of inputs (light green) contribute positively to the growth in GHG emissions (the diamond marker). Productivity (TFP) improvements (light blue) contribute negatively; thus, they are shown as negative values.
Source: Authors’ calculations based on USDA (2022), International Agricultural Productivity (database); and OECD (2022) Agri-environmental indicators (database).
… but over the last decade Romania has successfully achieved a partial decoupling of GHG emissions from production.
Even though Romania has not succeeded to increase output while lowering GHG emissions in any of the last three decades, since 2011 GHG emissions have grown at a slower rate than the value of total output, therefore reducing the emissions intensity of its agricultural output (i.e. emissions per unit of output) (Figure 6.6). Emission intensity is calculated as the ratio between GHG emission growth and output growth, and as such, it is a measure of the changes in the level of decoupling between the latter two. That is, Romania has successfully achieved a partial decoupling of GHG emissions from production.
Evolution of changes in agricultural GHG emission intensity in Romania, the European Union, and OECD
Note: Emission intensity measures the amount of greenhouse gases emitted per unit of output. Lower numbers show greater improvement.
Source: Authors’ calculations based on USDA (2022), International Agricultural Productivity (database) and OECD (2022) Agri-environmental indicators (database).
Romania launched a strategy setting the vision and the strategic objectives for the agri-food sector in 2015, which, together with the CAP objectives at EU level, should guide main policies affecting agriculture. The objectives of Romania’s CSP 2023-27 cover economic and social aspects, environmental sustainability, and innovation.
Romania has undertaken a significant structural adjustment in the most recent decades, with sharp increases in labour productivity. In the last decade the sector has expanded and turned into a path of output and productivity growth that is increasing farmers’ incomes and transforming the sector.
The innovations that have improved productivity performance have focused on labour saving technologies rather than on reducing the use of most environmentally harmful inputs. However, Romania has succeeded in achieving output growth that is above the increase in GHG, leading to partial decoupling of production from GHG emissions.
The challenge ahead is to consolidate the path of output and productivity growth that has been sometimes volatile, and make the next leap forward redirecting innovations towards environmental sustainability. Contributing to climate change mitigation is not enough and Romania should ensure good adaptation to the new uncertain environment generated by climate change.
References
[1] EC (2022), Key policy objectives of the CAP 2023-27, https://agriculture.ec.europa.eu/common-agricultural-policy/cap-overview/cap-2023-27/key-policy-objectives-cap-2023-27_en (accessed on 8 February 2024).
[8] Henderson, B. and J. Lankoski (2023), “Integrated approaches for agricultural sustainability and productivity assessments”, OECD Food, Agriculture and Fisheries Papers, No. 204, OECD Publishing, Paris, https://doi.org/10.1787/60cfa586-en.
[7] Ianoş, I. and G. Secăreanu (2020), “Romanian post-communist agriculture – structural dynamics and challenges”, Studia Obszarów Wiejskich, Vol. 56, pp. 73-102, https://doi.org/10.7163/sow.56.3.
[3] MARD (2022), CAP Plan 2023-2027 for Romania. Version 1.2, https://www.madr.ro/planul-national-strategic-pac-post-2020/programare-ps-pac-2023-2027/consultari-pns.html.
[2] MARD (2015), Strategia pentru dezvoltarea sectorului agroalimentar pe termen mediu și lung orizont 2020-2030, https://www.madr.ro/docs/agricultura/strategia-agroalimentara-2020-2030.pdf.
[6] OECD (2023), Policies for the Future of Farming and Food in the European Union, OECD Agriculture and Food Policy Reviews, OECD Publishing, Paris, https://doi.org/10.1787/32810cf6-en.
[4] OECD (2021), Making Better Policies for Food Systems, OECD Publishing, Paris, https://doi.org/10.1787/ddfba4de-en.
[5] OECD (2020), OECD Agro-Food Productivity-Sustainability-Resilience Policy Framework:, https://one.oecd.org/document/TAD/CA/APM/WP(2019)25/FINAL/en/pdf.
← 1. Equation (1) summarises this relationship: g(E) = g(Y) + g(EF) – g(TFP) (1)
where E corresponds to total GHG emissions, Y to total agricultural output, and EF to the emission factor, that is, the amount of GHG emissions per unit of input used, and TFP to total factor productivity, see (Henderson and Lankoski, 2023[8]). Equation 1 basically entails that any increase in GHG emissions is due to either an increase of the overall production, a more intensive use of polluting inputs or a drop in productivity.
The equation can be rearranged in the following form: g(Y) – g(E) = g(TFP) – g(EF) (2)
which indicates that the level of decoupling -the difference between output and GHG emissions growth rates- is equivalent to the increase in productivity plus the decrease of the GHG intensity of inputs.