One of Europe’s top agriculture sector lenders says farms will have to cut emissions or go organic as pressure on the industry mounts to produce food in an environmentally sustainable way.

Director of Food and Agriculture at Rabobank in the Netherlands, Alex Datema, is himself a fourth-generation dairy farmer, and says the sector faces choices including using technology to cut nitrogen output, switching to organic farming, relocating or reducing output.

He made the comments in an ­interview with the Bloomberg news service.

“We have to take steps back to build a clear future for agriculture and that’s a painful process,” he said. “We can try to find out how you can combine producing a lot of food per hectare without harming the environment, by saving biodiversity and with it being good for the climate,” he said.

Rabobank’s status as one of Europe’s biggest agricultural lenders and the fact that Dutch farms are seen as being on the frontline in a wider European push to reduce agricultural emissions means the comments will be of major interest here.

The bank’s once-substantial Irish presence is now limited to a wholesale banking arm in the IFSC in Dublin but its size and importance in the EU means it plays an outsize role in the sector.

All euro-area banks are set to come under greater scrutiny for lending to high-emission sectors, including farming, as the European Central Bank moves climate change up its policy agenda.

The regulator has also begun collecting data on lending by banks and other funders to high emissions-generating sectors and entities, including farming, as well as on the insurance risks of more frequent fires and floods.

Rabobank at one stage owned Ireland’s ACC Bank before shutting it down in the wake of the financial crisis as well as an Irish savings bank Rabodirect, also shut after the crash.

Rabobank has been criticised in the past by environmental groups for being supportive of intensive farming, including its home market where farms have traditionally been among Europe’s most productive and high-yielding and where an accelerated effort to reverse that has triggered a political backlash among farmers and the wider public.

The outgoing Dutch government outlined a policy goal to halve nitrogen emissions from agriculture by 2030 which includes buying up thousands of farms close to nature reserves and cutting emissions across the remaining operators.

Rabobank has estimated the policy could lead to a 30pc reduction in the dairy herd over 15 years and a sharp drop in milk exports.

The less accommodating policy landscape for dairy in the Netherlands helped Dutch dairy giant Royal A-ware’s decision to develop a major cheese plant in Kilkenny, in partnership with Glanbia, to produce varieties including edam, gouda and emmental for export.

Following lengthy planning delays, including a challenge on environmental grounds, work on the plant began in June this year and it is scheduled to be operational in 2024.

The Irish dairy sector is also facing climate pressures. Up to 65,000 dairy cows may have to be removed from the herd every year for three years at a cost of €200m if the farming sector is to meet climate targets, according to an internal Department of Agriculture briefing paper.​

Reporting on: www.independent.ie