Carbon pricing call for agricultural assets

The chief executive of Olam, one of the world's biggest traders of agricultural commodities, has called for carbon pricing in the face of rising concerns about climate change.

Sunny Verghese, who heads the Singapore-based company, said that in order to control dioxide emissions, a cost needed to be put on greenhouse gases. "We must price carbon. If something is free, we will use it indiscriminately," he said in a speech closing this year's FT Commodities Global Summit in Lausanne.

The comments come as some resource companies have voiced their strong opposition against carbon taxes and permit systems.

Nevertheless, leaders of agricultural and food businesses are increasingly speaking out on the subject of green issues and sustainability, especially in the face of a rising population and the expected increased demand for food over the next few decades.

Speaking at the same conference David MacLennan, chief executive of Cargill, said the prolonged drought in California and the threat of a global water crisis were some of the signposts that sustainability needed to become the "new normal" for commodities businesses.

He also asked if genetically modified crops could be a "boon" to sustainability because they decreased a farmer's carbon footprint and help to mitigate the impact of climate change.

Mr Verghese listed climate change as one of the six developmental challenges affecting the future of global agricultural businesses, along with food, water and energy security, and sustainable economic growth and poverty.

According to a study by The Economics of Ecosystems and Biodiversity, a global initiative focused on drawing attention to the economic benefits of biodiversity, the cost "natural capital" that is taken out of the environment every year from things such as water use and carbon emissions totalled $2tn-$4tn a year.

Olam had taken six years to map its own global carbon footprint and now knew the amount of carbon dioxide emissions linked to the production of 1 tonne of almonds and 1 tonne of rice.

Mr Verghese said: "Half of my profits last year came from the benefits of nature." Olam made S$608.5m (US$452m) in after-tax profits last year.

Painting a bleak picture of the situation surrounding the food situation around the globe, he said obesity would become a leading economic issue by 2030.

"Malnourishment isn't just about the lack of food," he said pointing to forecasts that, in 15 years, the world would be spending $35bn in addressing obesity and overweight issues.

Mr Verghese dismissed the notion of further significant increases in farming productivity as "nonsense".

He said that all the low hanging fruits on agricultural productivity had been exhausted with productivity rises averaging 1.3 per cent a year between 2001 and 2010, and 0.4 per cent a year over the past four years.

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