Climate Change: Climate Change: Pro-poor Adaptation, Pro-poor Adaptation,

Risk Management, Risk Management, and Mitigationand Mitigation

Mark W. RosegrantDirector

Environment and Production Technology Division

OutlineOutline

• Climate Change and Variability Impacts on Climate Change and Variability Impacts on

Agriculture and the PoorAgriculture and the Poor

• Pro-poor Mitigation: Constraints and Pro-poor Mitigation: Constraints and

OpportunitiesOpportunities

• Investing in Climate Change for the PoorInvesting in Climate Change for the Poor

CLIMATE CHANGE AND CLIMATE CHANGE AND VARIABILITY IMPACTSVARIABILITY IMPACTS

Impacts and Vulnerability toImpacts and Vulnerability toClimate Change and VariabilityClimate Change and Variability

• Rich countries emit majority of greenhouse gas Rich countries emit majority of greenhouse gas (GHG) (GHG)

• Poor countries are more vulnerablePoor countries are more vulnerable

– Geography (hotter, less rain, more variation)Geography (hotter, less rain, more variation)

– Greater dependence on agriculture and natural Greater dependence on agriculture and natural resourcesresources

– Limited infrastructure and low-input agricultureLimited infrastructure and low-input agriculture

– Low income, poverty and malnutritionLow income, poverty and malnutrition

– Thus, lower adaptive capacity (also including inadequate Thus, lower adaptive capacity (also including inadequate complementary services, like health and education)complementary services, like health and education)

Geographical Distribution of Vulnerability, 2100Geographical Distribution of Vulnerability, 2100with and without mitigation along an A2 emissions scenario with and without mitigation along an A2 emissions scenario

with a climate sensitivity of 5.5°Cwith a climate sensitivity of 5.5°C

Source: Yohe et al. (2006)Source: Yohe et al. (2006)

PRO-POOR MITIGATION: PRO-POOR MITIGATION: CONSTRAINTS AND OPPORTUNITIESCONSTRAINTS AND OPPORTUNITIES

Why Mitigation?Why Mitigation?

Mitigation and adaptation are Mitigation and adaptation are bothboth essential. essential.

• Human-caused climate change is already occurring Human-caused climate change is already occurring

• Adaptation efforts are already taking place and must be Adaptation efforts are already taking place and must be expanded expanded

• But adaptation becomes costlier and less effective as the But adaptation becomes costlier and less effective as the magnitude of climate changes growsmagnitude of climate changes grows

• The greater the amount of mitigation that can be achieved at The greater the amount of mitigation that can be achieved at affordable cost, the smaller the burdens placed on adaptation affordable cost, the smaller the burdens placed on adaptation and the smaller the sufferingand the smaller the suffering

• Effective mitigation generates income in rural areas, increasing Effective mitigation generates income in rural areas, increasing adaptive capacityadaptive capacity

Pro-Poor Climate Mitigation PolicyPro-Poor Climate Mitigation Policy

• Climate change policy can generate income for Climate change policy can generate income for

small farmers and investment flows for rural small farmers and investment flows for rural

communitiescommunities

   

• Requires effective integration from global Requires effective integration from global

governance of carbon trading, to sectoral and governance of carbon trading, to sectoral and

micro-level design of markets and contracts, and micro-level design of markets and contracts, and

investment in community managementinvestment in community management

Estimated Potential Emission Savings and Estimated Potential Emission Savings and Costs by SectorCosts by Sector

SectorSector

2050 Annual 2050 Annual Emissions Savings Emissions Savings

(GtCO(GtCO22))

Average Annual Average Annual Cost($/tCOCost($/tCO22))

~2025-2050~2025-2050

Deforestation Deforestation 3.5-5.03.5-5.0 22

Afforestation and Afforestation and ReforestationReforestation

1.0-2.01.0-2.0 5-155-15

Land management practicesLand management practices 1.0-2.01.0-2.0 20-2720-27

Agriculture (methane & nitrous Agriculture (methane & nitrous oxide)oxide)

1.01.0 2727

BioenergyBioenergy 2.0-3.02.0-3.0 2525

Waste and fugitive emissions,Waste and fugitive emissions,

industrial processesindustrial processes

4.14.1 3-53-5

Fossil fuel related, excludingFossil fuel related, excluding

bioenergybioenergy

40.040.0 22-3322-33

Source: Adapted from various estimates, Stern Review, pp. 244-263Source: Adapted from various estimates, Stern Review, pp. 244-263

CDM Conditions for Offset Projects – CDM Conditions for Offset Projects – High Transaction CostsHigh Transaction Costs

1.1. Additionality Additionality – Must demonstrate that carbon sequestration or emission reductions Must demonstrate that carbon sequestration or emission reductions

would not have occurred if it were not for the incentives provided by would not have occurred if it were not for the incentives provided by CDMCDM

2.2. Measurable Measurable – Carbon sequestration or emission reductions of projects must be Carbon sequestration or emission reductions of projects must be

quantifiable ex-ante and monitorable ex-postquantifiable ex-ante and monitorable ex-post

3.3. PermanencePermanence– Sequestered carbon must remain sequestered indefinitely (or for at Sequestered carbon must remain sequestered indefinitely (or for at

least as long as to be equivalent to reducing atmospheric GHG by least as long as to be equivalent to reducing atmospheric GHG by emission reductions)emission reductions)

4.4. Leakage preventionLeakage prevention– Prevent (or account for) direct or indirect GHG emissions from CC Prevent (or account for) direct or indirect GHG emissions from CC

mitigation projectmitigation project

CDM Conditions for Offset Projects – CDM Conditions for Offset Projects – High Transaction CostsHigh Transaction Costs

5. Social benefits5. Social benefits

– Evidence of contribution to a country’s sustainable development Evidence of contribution to a country’s sustainable development

– If cost-effective and practicable social benefits should be If cost-effective and practicable social benefits should be

quantified, verified and certified together with the carbon quantified, verified and certified together with the carbon

sequestration or emission reductionssequestration or emission reductions

6. Environmental benefits6. Environmental benefits

– Carbon project with inherent local environmental benefits stands a Carbon project with inherent local environmental benefits stands a

higher chance of being sustained in the long runhigher chance of being sustained in the long run

7. Cost effectiveness7. Cost effectiveness

– Land Use, Land Use Change and Forestry activities and Land Use, Land Use Change and Forestry activities and

monitoring must monitoring must be cost effective and practical if they are to be be cost effective and practical if they are to be

appliedapplied

Constraints to Pro-Poor MitigationConstraints to Pro-Poor Mitigation

1.1. High transaction costs of Clean Development High transaction costs of Clean Development

Mechanism (CDM) Conditions for Offset Projects in Mechanism (CDM) Conditions for Offset Projects in

Developing Countries Developing Countries

– Information about carbon benefits to potential buyers, Information about carbon benefits to potential buyers,

obtaining information about project partners, organizing obtaining information about project partners, organizing

project participants, capacity building and ensuring parties project participants, capacity building and ensuring parties

fulfill their obligationsfulfill their obligations

– Transaction costs per unit of emission reduction are higher Transaction costs per unit of emission reduction are higher

for projects involving many smallholders and forest for projects involving many smallholders and forest

communitiescommunities

– Projects with smaller land areas may lack economies of Projects with smaller land areas may lack economies of

scalescale

Constraints to Pro-Poor MitigationConstraints to Pro-Poor Mitigation

2.2. Carbon sequestration from soil carbon and avoided Carbon sequestration from soil carbon and avoided

deforestation––important areas for climate deforestation––important areas for climate

mitigation and for poor developing countries––are mitigation and for poor developing countries––are

excluded from CDMexcluded from CDM

3.3. CDM-eligible assets from afforestation and CDM-eligible assets from afforestation and

reforestation are excluded from European Union-reforestation are excluded from European Union-

Emissions Trading Scheme Emissions Trading Scheme

Expanding Pro-Poor MitigationExpanding Pro-Poor Mitigation

1.1. Establish international capacity building and Establish international capacity building and

advisory services (public-private partnerships)advisory services (public-private partnerships)

– Capacity-building and advisory services for potential Capacity-building and advisory services for potential

investors, project designers and managers, national investors, project designers and managers, national

policymakers and leaders of local organizations and policymakers and leaders of local organizations and

federationsfederations

– Establish regional centers to assist countries and Establish regional centers to assist countries and

communities involved in forest carbon trading, soil communities involved in forest carbon trading, soil

carbon sequestration, otherscarbon sequestration, others

Measures to Reduce Transaction CostsMeasures to Reduce Transaction Costs

2. 2. Institutional innovations Institutional innovations

– Companies or agencies offer specialized business services Companies or agencies offer specialized business services

for low-income producers for low-income producers

• e.g. in negotiating deals or design of monitoring systemse.g. in negotiating deals or design of monitoring systems

– Locally accountable intermediary organizations can manage Locally accountable intermediary organizations can manage

projects and mediate between investors and local people projects and mediate between investors and local people

• e.g. local environmental group in the Scolel-Té project, Mexicoe.g. local environmental group in the Scolel-Té project, Mexico

– Transaction costs reduced by developing carbon projects in Transaction costs reduced by developing carbon projects in

communities with active local organizations in placecommunities with active local organizations in place

• e.g. a proposed carbon project in Harda, India, relies on existing hamlet e.g. a proposed carbon project in Harda, India, relies on existing hamlet

and federation institutions established for community forestryand federation institutions established for community forestry

Measures to Reduce Transaction CostsMeasures to Reduce Transaction Costs

3.3. Simplified standards (baseline and monitoring) for Simplified standards (baseline and monitoring) for

small-scale projects small-scale projects

– Agroforestry and community forestry projects should be Agroforestry and community forestry projects should be

specified as eligible for simplified modalitiesspecified as eligible for simplified modalities

– Simplified emission reduction credits calculated using Simplified emission reduction credits calculated using

standardized reference emission rates for agroforestry and standardized reference emission rates for agroforestry and

forestry activities in specific locations, determined and forestry activities in specific locations, determined and

verified by independent bodiesverified by independent bodies

– Similar for soil carbon sequestrationSimilar for soil carbon sequestration

Measures to Reduce Transaction CostsMeasures to Reduce Transaction Costs

4.4. Adequately dealing with permanence issue of Adequately dealing with permanence issue of

carbon sequestrationcarbon sequestration

– Ton-year approach: Payment for mass-time units of Ton-year approach: Payment for mass-time units of

carbon avoids the need for "locking up" land in forest carbon avoids the need for "locking up" land in forest

land uses for prolonged periods because credits are land uses for prolonged periods because credits are

calculated according to carbon storage durationcalculated according to carbon storage duration

– Shorter term contracts also viableShorter term contracts also viable

Example: Chicago Climate Exchange Example: Chicago Climate Exchange Agricultural Soil Carbon OffsetsAgricultural Soil Carbon Offsets

• Simple, standardized rules for issuing credits for agricultural Simple, standardized rules for issuing credits for agricultural carbon emission reduction and soil sequestrationcarbon emission reduction and soil sequestration

• Offset projects involving less than 10,000 mt COOffset projects involving less than 10,000 mt CO22 equivalent per  equivalent per

year register and sell through Offset Aggregator year register and sell through Offset Aggregator

• Eligible projects include continuous conservation tillage and grass Eligible projects include continuous conservation tillage and grass planting planting

– 5-year contractual commitment to continuous no-till or strip till 5-year contractual commitment to continuous no-till or strip till (conservation tillage) on enrolled acres(conservation tillage) on enrolled acres

– Tillage practice must leave at least two-thirds of the soil surface Tillage practice must leave at least two-thirds of the soil surface undisturbed and at least two-thirds of the residue remaining on the undisturbed and at least two-thirds of the residue remaining on the field surfacefield surface

– CCX contracts issued for conservation tillage at a rate between 0.2 and CCX contracts issued for conservation tillage at a rate between 0.2 and 0.6 metric tons CO0.6 metric tons CO22 per acre per year based on carbon sequestration per acre per year based on carbon sequestration

ability of the soils ability of the soils

Investing in Climate Change for the PoorInvesting in Climate Change for the Poor

• Climate change policy can create new value-added for Climate change policy can create new value-added for

pro-poor investmentpro-poor investment

• Increases profitability of environmentally sustainable Increases profitability of environmentally sustainable

practicespractices

• Need to streamline measurement and enforcement of Need to streamline measurement and enforcement of

offsets, financial flows, and carbon credits for investors offsets, financial flows, and carbon credits for investors

• Enhance global financial facilities and governance to Enhance global financial facilities and governance to

simplify rules and increase and manage funding flows simplify rules and increase and manage funding flows

for mitigation in developing countriesfor mitigation in developing countries