1. ‘Carbon Insetting’
Adding Value to Agricultural Production in Nicaragua
(Coffee and Dual-Purpose Cattle)
‘Carbon Insetting: Capacity Building Event’ held by Plan Vivo Foundation on 10th of November, London
Presentation by Lisette Phelan, Eric Rahn, Rein van der Hoek and Peter Läderach
2. ● CIAT’s Objective
o To reduce hunger and poverty, improve nutrition and increase the eco-
efficiency of agriculture.
● Interest in Carbon Insetting
o Climate Change – ‘Adaptation through Mitigation’.
● Case Study Value Chains
o Crop: Organic Coffee Production, Nicaragua
o Livestock: Dual-Purpose Cattle Production, Nicaragua
CIAT’s interest in ‘Carbon Insetting’
5. Past CIAT Experience:
Organic Coffee Production, Nicaragua
● Objective
To increase the resilience of production systems and
improve the livelihoods of smallholder coffee producers.
● Findings
Climate change has implications at all levels of the
value chain.
● Methodology
Identification of suitable agronomic practices with
carbon credit generation potential.
● Lessons Learned
Carbon insetting appeals to both the private sector and
smallholder coffee producers.
Source: Läderach et al., 2010
7. Current CIAT Focus:
Dual-Purpose Cattle Production, Nicaragua
● Objective
To assess the feasibility of carbon certification of livestock-related practices
which lead to reduced GHG emissions, improved farmer livelihoods and a
more efficient, productive and resilient supply chain.
● Project Plan: ‘Carbon Insetting in Dairy Value Chains’
A. Identify suitable agronomic practices with carbon credit generation
potential.
B. Identify the socio-economic and cost-benefit implications of carbon
efficient livestock practices.
C. Develop a project design document for the dairy sector to implement
carbon insetting projects.
8. Source: FAO, 2013; Thomas et al. 2013
Current CIAT Focus:
Dual-Purpose Cattle Production, Nicaragua
10. MSc Research:
‘Adding Value to Dual-Purpose Cattle Chains in Nicaragua’
● Objective
● Research Hypotheses
● Methodology
● Expected Findings
11. 98% said they had noticed ‘climate change’
56% said the rainy season was shorter than in the past
65% said it was ‘more difficult to plan production’
65% said there was greater feed scarcity and disease incidence
95% said the risks associated with production had increased
82% said production costs had increased
58% said milk productivity had declined
80% said they would like to improve their production systems
Initial findings of household survey of 40 farmers in 5 districts:
85% said they would take part in a PES scheme
CIAT’s Objective
CIAT is the International Center for Tropical Agriculture. It aims to develop technologies, methods and knowledge for smallholder farmers to make production more competitive, profitable, sustainable, resilient and economically/ecologically sound.
Interest in Carbon Insetting
For CIAT, ‘Carbon Insetting’ is a strategy to confront climate change, improve farmer livelihoods and enhance the resilience of supply chains.
In the context of CIAT’s expertise and existing work portfolio, engagement in ‘Carbon Insetting’ is a logical development.
It builds on Decision and Policy Analysis (DAPA) work to date on ‘Ecosystem Services’ and ‘Linking Farmers to Markets’.
It complements CIAT’s work in leading the CGIAR research programme on Climate Change, Agriculture and Food Security (CCAFs).
CIAT believes:
All agricultural value chains have an environmental impact.
Synergies exist between climate change mitigation and adaptation activities.
Economic value can be derived from social value - profits can be maximised through environmentally sustainable actions.
Smallholder farmers must be incentivised to adopt sustainable practices, and compensated for ecosystem service provision.
Carbon credits are a viable form of compensation, given that the carbon market is well-established.
‘Carbon insetting’ is an alternative to offsetting which creates shared value within a supply chain.
It provides private sector with an opportunity to create conditions leading to win-win outcomes for all supply chain stakeholders.
Private sector can reduce their GHG emissions and their carbon footprint through ‘Carbon Insetting’ activities.
Private sector can secure raw material supply, gain competitive advantage, reduce resource requirements, and reduce price pressures.
Private sector can increase the resilience of their supply chain and the livelihoods of the smallholder farmers with whom they work.
References:
http://ciat.cgiar.org/about-us
http://dapa.ciat.cgiar.org/overview/
Banerjee, A.; Rahn, E.; Läderach, P.; van der Hoek, R. (2013) Shared Value: Agricultural Carbon Insetting for Sustainable, Climate-Smart Supply Chains and Better Rural Livelihoods.
CIAT (2013) Carbon insetting to confront climate change, improve farmer livelihoods and enhance supply chain resilience [http://www.slideshare.net/CIAT/carbon-insetting]
Läderach, P.; Haggar, J; Lau, C.; Eitzinger, A.; Ovalle, O.; Baca, M., Jarvis, A.; Lundy, M. (2010) Predicted impact of climate change on coffee supply chains.
Läderach, P.; Haggar, J.; Lau, C.; Eitzinger, A.; Ovalle, O.; Baca, M.; Jarvis, A.; Lundy, M. (2013) Mesoamerican coffee: building a climate change adaptation strategy. CIAT Policy Brief No. 2. Cali, Columbia: International Center for Tropical Agriculture (CIAT).
Rahn, E.; Läderach, P.; Baca, M.; Cressy, C.; Schroth, G.; Malin, D.; van Rikxoort, H.; Shriver, J. (2013) Climate change adaptation, mitigation and livelihood benefits in coffee production: where are the synergies? Mitigation and Adaptation Strategies for Global Change.
For CIAT, a ‘Carbon Insetting’ project must:
Identify mitigation activities which have the potential to not only reduce the supply chain carbon footprint but also smallholder farmer vulnerability to climate change.
Implement activities which lead to a reduction of GHG emissions or maintain/increase carbon sequestration. The activities considered will vary depending on the extent of deforestation, land degradation, agricultural practices, availability of technology and knowledge.
Activities should have carbon credit potential, enabling the private sector to compensate smallholder farmers for improved land management and adoption of good agricultural practices.
The suitability and cost-effectiveness of these activities should be monitored on an ongoing basis, with feedback sought from both smallholder farmers and the private sector.
Activities are suitable when they do not lead to leakage (transfer of emissions outside project boundaries) and should have an element of additionality (will not occur in the absence of carbon credit provision).
References
Banerjee, A.; Rahn, E.; Läderach, P.; van der Hoek, R. (2013) Shared Value: Agricultural Carbon Insetting for Sustainable, Climate-Smart Supply Chains and Better Rural Livelihoods.
CIAT (2013) Carbon insetting to confront climate change, improve farmer livelihoods and enhance supply chain resilience [http://www.slideshare.net/CIAT/carbon-insetting]
In exploring the feasibility of ‘Carbon Insetting’ as a climate change mitigation and adaptation strategy, CIAT has to date focused on Nicaragua.
The are many reasons for this:
Nicaragua is the third poorest country in Latin America.
It has a GINI coefficient of 40.5, a national poverty rate of 42%, and a high incidence of rural poverty, namely 80%.
Nicaragua is highly vulnerable to climate change and due to its dependency on rainfed agriculture, will be severely impacted by precipitation and temperature variability.
Extreme weather events (droughts, floods, landslides and storms) are expected to occur with increased frequency, however, to date, there has been limited investment in mitigation and adaptation measures.
Agricultural production accounts for 17% of GDP, with the livestock sector accounting for 39% of this share and 59% of employment in rural areas.
The most important livestock production activity is cattle grazing on permanent pasture, currently accounting for 54% of land use in Nicaragua.
93% of GHG emissions stem from agricultural land use and deforestation as the agricultural frontier shifts through clearing of land for expansion of cattle production systems.
References
http://data.worldbank.org/country/nicaragua
Holmann, F. (2014) Situation Analysis of the dual-purpose (milk and beef) value chain in Nicaragua.
World Bank (2009) Nicaragua - Country Note on Climate Change Aspects in Agriculture. Washington, DC.
[https://openknowledge.worldbank.org/handle/10986/9479]
Objective:
To increase the resilience of production systems and improve the livelihoods of smallholder coffee producers in northern Nicaragua.
For Nicaragua, coffee is of economic importance as the country’s largest export, generating 20-25% of revenues and contributing significantly to national GDP. It is also of social importance, however, with its production constituting a source of livelihood for more than 30,000 smallholder producers and their families, while providing employment for a further 280,000 full-time and seasonal labourers.
Climate change is expected to severely impact on Nicaragua’s capacity to produce and export coffee over the next four decades. Climate models and crop-niche suitability predictors indicate a shift, indeed a decline of 85%, in the altitudinal zones suited to production by 2050, with precipitation and temperature variability leading to an 82% decline in the volume of coffee produced and consequently, an 83% decline in export revenues generated.
A 5-10% decline in annual rainfall will reduce water available for cultivation and processing, while flowering, triggered by the first rainfall, will also be impacted with variability in precipitation leading to flower or fruit drop and stunted growth resulting in smaller beans of lower quality. A 2-2.5 degrees Celsius increase in temperature, meanwhile, will lead to a faster rate of coffee bean ripening, thus also negatively impacting on cup quality.
Temperature and precipitation pattern changes will also increase the vulnerability of the coffee crop to pests such as the coffee berry borer and fungal diseases such as coffee rust.
Findings:
Climate change has implications at all levels of the value chain.
Avoiding heavy economic losses across the supply chain, preventing a decline in the quality of coffee beans and securing continued cultivation of high value Arabica coffee as opposed to lower value Robusta coffee (which has comparatively greater potential under high temperature conditions), will require a supply chain-wide response.
55% of CO2 emissions stem from agronomic practices. This implies that the impacts of climate change on production, to an extent, can be mitigated by strengthening the adaptive capacity of smallholder producers and encouraging adoption of improved agronomic practices and more sustainable management of natural resources.
Methodology:
Identification of suitable agronomic practices with carbon credit generation potential.
A consortium of stakeholders consisting of CIAT, FLO-CERT, Catholic Relief Services and Sustainable Food Lab was established to identify agronomic practices leading to carbon sequestration, which would additionally qualify for carbon credits. The Cool Farm Tool was used to assess carbon stocks and quantify GHG emissions. To ensure that these practices would be contextually appropriate and appeal to the Nicaraguan coffee cooperatives and the private sector partner involved, feedback was sought from both parties.
Practices identified as sequestering carbon:
Shade diversification
Living fences
Coffee agroforestry on degraded sites
Quesungual on beans-maize plots
Silvopastoralism
Of these, the practices identified as having carbon credit generation potential were:
Living fences and coffee agroforestry incorporating 5-10 tree species
Lessons learned:
Carbon insetting appeals to both the private sector and smallholder coffee producers, and can facilitate the creation of shared value leading to the realisation of win-win outcomes.
The private sector has a role to play in incentivising smallholder coffee producers in Nicaragua to adopt improved agronomic practices and increasing producers’ access to technologies, information and markets.
In this context, carbon insetting involving purchase by the private sector actor of validated carbon credits generated through on-farm activities was identified as a feasible and innovative climate change mitigation and adaptation strategy. Creating shared value for both smallholder producers and the private sector, it has been identified as enabling the private sector actor to reduce its overall GHG emissions, as well as enhancing the resilience of its supply chain and improving the livelihood security of its coffee producers.
References
Läderach, P.; Haggar, J; Lau, C.; Eitzinger, A.; Ovalle, O.; Baca, M., Jarvis, A.; Lundy, M. (2010) Predicted impact of climate change on coffee supply chains.
Läderach, P.; Haggar, J.; Lau, C.; Eitzinger, A.; Ovalle, O.; Baca, M.; Jarvis, A.; Lundy, M. (2013) Mesoamerican coffee: building a climate change adaptation strategy. CIAT Policy Brief No. 2. Cali, Columbia: International Center for Tropical Agriculture (CIAT).
Rahn, E.; Läderach, P.; Baca, M.; Cressy, C.; Schroth, G.; Malin, D.; van Rikxoort, H.; Shriver, J. (2013) Climate change adaptation, mitigation and livelihood benefits in coffee production: where are the synergies? Mitigation and Adaptation Strategies for Global Change.
Management practices identified as having carbon credit generation potential:
Carbon Sequestration
Afforestation/Reforestation (Forest on degraded areas; Coffee agroforestry; Tree planting as windbreaks)
Carbon footprint reduction potential
Avoided deforestation
References
Rahn, E.; Läderach, P.; Baca, M.; Cressy, C.; Schroth, G.; Malin, D.; van Rikxoort, H.; Shriver, J. (2013) Climate change adaptation, mitigation and livelihood benefits in coffee production: where are the synergies? Mitigation and Adaptation Strategies for Global Change.
Objective:
To increase the resilience of production systems and improve the livelihoods of smallholder dual-purpose cattle farmers in central Nicaragua.
Dual-purpose cattle production is the most important livestock activity in Nicaragua, providing a source of livelihood for more than 136,600 smallholder farmers who engage in milk production, as well as calf-development for sale to abattoirs, slaughterhouse and intermediaries for further fattening.
Entailing lower levels of risk than specialization in either milk of beef production, dual-purpose production is characterized by low productivity and low profit margins, but enables farmers to diversify their income source and reduce their vulnerability to price fluctuations.
Like coffee production, dual-purpose cattle production is expected to be severely impacted by climate change over the next few decades. Temperature and precipitation variability, and increased frequency of extreme events (drought, floods, storms) will reduce water available for production, exacerbate feed and forage shortages (particularly during the dry season) and increase the prevalence and intensity of diseases and parasites, further undermining productivity and efficiency.
Globally, an estimated 18% of GHG emissions stem from ruminant grassland-based production systems. In the context of Nicaragua, this is significant given that 93% of emissions stem from agricultural land use and grazing on permanent pasture accounts for 54% of this land use, with dual-purpose cattle fed a diet consisting of mostly native and improved forages.
There is considerable scope to reduce GHG emissions and land degradation associated with dual-purpose production where improved agronomic and animal husbandry practices are adopted, however, smallholder farmers currently have few incentives to do so.
This is due to the fact that, although dairy and meat exports have increased over the last decade, the price captured by smallholder farmers relative to other actors in the supply chain has not increased, while they have also failed to see supply chain gains competitiveness materialize into greater access to credit at low interest rates, markets, technical assistance, inputs, information and services.
Although smallholder farmer have an important role to play in adapting to and mitigating the impacts of climate change, a chain-wide response is required as climate change will impact on the productivity and efficiency of the dual-purpose supply chain as a whole.
Project Plan:
Identify suitable agronomic practices with carbon credit generation potential.
CIAT is working with CATIE, Heifer International, the University of Göttingen, Universidad Nacional Agraria, the University of Florida and Mississippi State University to identify agronomic practices leading to carbon sequestration, which could qualify for carbon credits.
In this context, a questionnaire and a variation on the Cool Farm Tool will be used to assess:
GHG emissions
carbon stocks (above- and below-ground)
carbon sequestration potential of 4 pastureland systems (natural and improved forages - with/without trees)
carbon sequestration potential of live fences and secondary forest
Identify the socio-economic and cost-benefit implications of carbon efficient livestock practices
To ensure agronomic practices identified are appropriate and appeal to both smallholder dual-purpose farmers and potential private sector partners (dairy and meat processors), the project will evaluate identify the socio-economic and cost-benefit implications of adoption of these practices.
In this context, it will determine:
the vulnerability and exposure of livestock systems to climate change impacts
smallholder farmer current adaptation capacity and future needs
cost-benefits and trade-offs between climate change adaptation, mitigation and livelihood benefits
References
FAO (2006) Livestock’s Long Shadow: environmental issues and options
FAO (2013) Tackling Climate Change through Livestock A global assessment of emissions and mitigation opportunities
Galetto, A.; López, W.; Baumeister, E. (2007) Competitiveness of Milk Production in Nicaragua: An analysis of Productivity and Costs in Dual-Purpose Livestock Systems in the Matagalpa Region.
Holmann, F. (2014) Situation Analysis of the dual-purpose (milk and beef) value chain in Nicaragua.
Thornton, P.; van de Steeg, J.; Notenbaert, A.; Herrero, M. (2009) The impacts of climate change on livestock and livestock systems in developing countries: A review of what we know and what we need to know, International Livestock Research Institute (ILRI), Nairobi, Kenya.
Schütz, P.; Balsevich, F.; Reardon, T. (2004) Small Producers’ Access to Dynamic Markets: The Case of Beef in Nicaragua
If this is the carbon footprint for an efficient, intensive-production-based supply chain...imagine the gains to be made for a less efficient, extensive, pasture-based dual purpose supply chain in developing country!
Along a value chain, the major sources of emissions are:
Land use/Land-use change (2.5 Gt CO2-eq)
Manure management (2.2 Gt CO2-eq)
Animal production (1.9 Gt CO2-eq)
Feed production (0.4 Gt CO2-eq)
Processing and international transport (0.03 Gt CO2-eq)
On-farm emissions (direct and indirect) represent the biggest contribution to the carbon footprint of dairy and beef supply chains
For a ‘generic’ milk supply chain in the USA, the carbon footprint stems:
25% from enteric methane
24% from manure management
19% from feed rations
Grassland based production systems typically have higher GHG emissions than mixed production systems, which supplement with contentrate feed.
A dual-purpose production system offers greater gains compared to a specialized production system, however, in terms of GHG emissions reductions per unit of product.
Compared to beef, milk is a ‘non-extractive’ product, meaning that there is harvest without reduction of productive biomass (stock).
In the case of grassland-based production systems, the most effective GHG mitigation strategy is to increase animal productivity, leading to a reduction in the number of animals managed and in the carbon footprint of a product, while not impacting on volume produced.
In some regions of the world, high-quality pasture is not regarded as a feasible option for improving animal nutrition, however, in Nicaragua there has been significant uptake to date of improved forages, and there is still potential for more uptake.
Degradation of pasturelands in the Tropics can lead to a 95-97% reduction in carbon stocks.
A single improved grassland management activity can increase soil organic carbon stocks by 14-17%, with an additional improvement leading to a further 11% increase. (Soussana et al., 2010) Strategies combining 5-8 GHG emissions mitigation practices can lead to a 45% reduction of emissions per litre of fluid milk.
Marginal improvements in feed digestibility (i.e. use of improved forages) can lead to a significant reduction in methane emissions per kg of milk or beef produced.
References
FAO (2010) Greenhouse Gas Emissions from the Dairy Sector: A Life Cycle Assessment.
Gerber, P. J.; Henderson, B.; Makkar, H. B. S. (2013) Mitigation of Greenhouse Gas Emissions in Livestock Production: A review of technical options for non-CO2 emissions, FAO Animal Production and Health Paper.
Soussana, J. F.; Tallec, T. and Blanfort, V. (2010) Mitigation the greenhouse gas balance of ruminant production systems through carbon sequestration in grasslands, International Journal of Animal Bioscience, Vol. 4, pp. 334-350, Cambridge University Press.
Thoma, G.; Popp, J.; Nutter, D.; Shonnard, D.; Ulrich, R.; Matlocke, M.; Kim, D. S.; Neiderman, Z.; Kemper, N.; East, C.; Adom, F. (2013) Greenhouse gas emissions from milk production and consumption in the United States: A cradle-to-grave life cycle assessment circa 2008, International Dairy Journal, Vol. 31, No. 1, pp. S3–S14.
Objective:
To examine whether there is scope through ‘Carbon Insetting’ to positively contribute towards the improved livelihood security and sustainability of smallholder farmers engaged in dual-purpose cattle production in Nicaragua.
Research Hypotheses:
There is a relationship between the outcome of Payment for Ecosystems Services (PES) scheme and value chain actors' willingness to pay (WTP) and accept (WTA) payment for service provision.
It is feasible to provide a PES where there is an explicit aim to generate social, economic, environmental and productivity benefits.
Carbon Insetting has the potential to generate 'win-win' outcomes for all value chain actors.
Methodology:
Household survey of smallholder dual-purpose cattle farmers to gain insight into their perception of climate change, PES schemes, ‘Good Agricultural Practices’ (GAPs), and the constraints impacting on their productivity and efficiency, undermining their livelihood security and sustainability.
Key informant interviews:
Food Processing Enterprises (Dairy, Meat, Coffee and Cocoa) to gain insight into their perception of the impact of climate-change-induced constraints on smallholder productivity and effectiveness, and their interest and motivation to engage in carbon insetting to create shared value and strengthen the resilience of the supply chain as a whole.
Agricultural Research Centres to gain insight into the role which they could and should play as facilitatory actors in supporting supply chain actors to design and implement a carbon insetting project.
Export, Investment and Cooperative Development Promotion Organisations to gain insight into their capacity and willingness to support food processing enterprises to design and implement a carbon insetting scheme.
Carbon Standards Certification Organisations to gain understanding of the carbon standards available to value chain actors and their suitability in the context of carbon insetting in Nicaragua.
GHG-Emissions-Reduction-Project-Development Organisations to gain insight into the business strategy and thinking behind carbon insetting, and the incentives and motivations underpinning private sector interest at a global level.
Expected Findings
The thesis will determine the feasibility of designing and implementing a ‘Carbon Insetting’ project in the context of dual-purpose cattle production.
It will provide preliminary insight into the extent to which 'Carbon Insetting' could lead to improved livelihood security and sustainability of smallholder dual-purpose cattle farmers in Nicaragua, given the constraints currently faced and their vulnerability to climate change.
It will provide insight into how carbon insetting could impact on the climate change resilience of the supply chain as a whole, taking the incentives underpinning processors' WTP and farmers' WTA payment for carbon sequestration as an indicator of commitment towards realising the ideal PES outcome (creation of shared value).
It will indicate the type of support required from actors outside the supply chain as regards capacity and willingness to create enabling conditions facilitating the design and implementation of a ‘Carbon Insetting’ project. Insights will be drawn from examples of where carbon insight has already been adopted – namely, in coffee and cocoa value chains in Central America.
The thesis findings will also increase understanding of the potential of improved forages to contribute to GHG emissions reduction, which is significant given that this potential is often overlooked in climate change mitigation and adaptation strategy discussions.
Improved forages are considered to have the potential to contribute to as much as 60-80% of total carbon sequestration in agricultural land where improved management practices are utilised to increase the productivity and efficiency of smallholder production systems and degraded lands are restored (Peters et al., 2013).
References
Peters, M.; Rao, I.; Fisher, M.; Subbarao, G.; Martens, S.; Herrero, M; van der Hoek, R.; Schultze-Kraft, R.; Miles, J.; Castro, A.; Graefe, S.; Tiemann, T.; Ayaraza, M.; Hyman, G. (2013) Tropical Forage-based Systems to Mitigate Greenhouse Gas Emissions
Initial findings of MSc research undertaken in the departments of Matiguas and Muy Muy, Nicaragua – smallholder perceptions regarding the impact of climate change and their willingness to take part in a carbon insetting PES project.
