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Dr. Charlotte Streck

8 July 2011

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Incentives and Benefits

for Climate Change

Mitigation for

Smallholder Farmers

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Agriculture is special…

– Caters for basic needs

– Agriculture is directly affected by climate change

– Site and context specific

– Source and sink of carbon

– Adaptation and mitigation intrinsically linked

– Complex links between trade, food security, and climate change

– Close relation to emissions from forestry

– Agriculture can generate multiple benefits for food security, adaptation, mitigation and development Climate Focus, July 8 Charlotte Streck

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Introduction: Climate-Smart Agriculture

Food Security

Development

Adaptation Mitigation

Climate Smart

Agriculture

10-12%

18%*

Agricultura

l

Emissions

Forestry

Emissions

* Includes land-use

change

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Climate-smart agriculture: sustainable intensification and livelihoods

Cropland

ManagementGrazing land

Management

Restore

organic soils

Restore

degraded

lands

Coffee carbon-increasing yield - converting sun grown to shade coffee-soil and nutrient management

Forest carbon-REDD+- “releasing natural forests” for synthetic or organic fertilizer

Smallholder agricultural carbon-increasing yield- sustainable land management-Soil and nutrient management

Rangeland carbon- preventing desertification - land restoration by providing incentives to reduce overstocking-efficient feeding practices

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Smallholder Agriculture

Highly diverse -> no uniform solution

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Removing Barriers to Implementing CSA

- CSA must provide net benefit to farmer

- Farmer must be able to overcome barriers

to implementation

Financial Social/Institutional Technological

Lack of assets and

savings

Poorly functioning

markets

Lack of technical

expertise

Little access to credit No or limited market

access

Lack of baseline data

Lack of infrastructure

and equipment

Limited marketing

information or

understanding

Existing resource

degradation

Little access to

insurance

Weak tenure security

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Overcoming Investment Barriers

Direct Financial Incentives

• PES Schemes

• Carbon Markets

• Credit

Risk-sharing Mechanisms

• Insurance

• Crop-based

• Index-based

Private Sector Investment

• Public-Private Partnerships

• Labeling & Certification

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How can climate finance help overcoming these barriers?

-New $$$

-New actors

-New partners

-New financing paradigm

Climate Focus, July 10 Title, Presenter

9 Climate Focus, July 8 Charlotte Streck

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Climate Finance (Mitigation)

Project based (CDM

type)

Project based

(programmatic/landscape

level)

Landscape level /

sectoral(market

based, fund based)

NAMA crediting

path (fund/market

based)

NAMA support path (fund based)

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Risks and Opportunities of Climate FinanceCDM type PoA/

landscape

Sectoral/

market

NAMA

(crediting)

NAMA

(support)

Ultimate

beneficiary

Farmer – beneficiary

Level of

change

Incentives on

the project level

Incentives for

changes at the

landscape level

Policy change

Incentives for the gov to adopt

PoMs (can involve project

incentives)

Policy change

Policy change

Enabling

activities

Contractual

partner

Project

owner

Aggregator Govmnt Govmnt Govmnt

Finance Ex post

Directly to the

farmer

Ex post

To be

distributed by

aggregator

Ex post

To be

distributed by

gov

Ex post

To be

distributed by

gov

Ex ante

To be

distributed by

gov

MRV Project level Project level but

standardized

Sector (MRV,

high tier)

Sector (possibly

lower tier)Policy level

MRV

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A basket of approaches

NAMA support path

PoA/landscape level projects

Demon-stration

activities

Fund based finance (can be market linked)

Market finance

NAMA support finance:•Allows govs to access climate finance•Can support ag extension systems•Advance finance possible (farmer level subsidies)

Market finance:•Demonstration activities•Voluntary market PoA/landscape level interventions

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International Climate Finance Options

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Implementation Phases

1st phase:

Readiness

• Activity: Strategy development, capacity building, training

• Goal: Build knowledge and ownership in the government and among stakeholders

• Finance: High proportion of public finance.

2nd phase: Demonstration

• Activity: Project scaling and limited commercialization; consolidate project and financing institutions.

• Goal: Prove and expand project, program and policy concepts; attract private capital to agricultural communities; build supply chains

• Finance: Large but falling fraction of public finance.

3rd phase:

Scaling up

• Activity: Direct private capital into landscape-scale activities; integrate ag policies in Low Carbon Development Strategies

• Goal: Scaling up of CSA practices, full implementation

• Finance: Most investment from private sources; Ongoing public finance for certain infrastructure and services.

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Climate Finance & Smallholder Support

Finance

• Context Specific

• Tailored and targeted to where it can be most effective

• e.g. ex-ante vs. ex-post payments

Institutions

• Utilize existing structures in innovative arrangements

• Improve coordination across institutions and financial sources

• Need to identify coordinating body, recipients, & delivery mechanism

MRV

• UNFCCC National Inventories and Reporting

• Growth of Life Cycle Analysis (LCA)

• Role of NAMAs

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ExampleClimate-smart agricultural finance facility (CAFF)

An initiative supported by the Rockefeller Foundation

Presented by Charlotte Streck, ClimateFocus &

Timm Tennigkeit, Eduard Merger UNIQUE forestry consultants

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Conclusion

Identify priority actions

Develop MRV systems

Leverage private funds

Time matters!

Next Steps

• Conduct interviews

• Identify case studies

• Distill lessons for climate finance

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- Thank you!

Climate Focus, July 8 Title, Presenter

Charlotte Streck