Climate Change, Agricultural Policy and Poverty Reduction

Climate Change, Agricultural Policy and Poverty Reduction Mark W. Rosegrant Director Environment and Production Technology Division Presentation given to the Briefing Session No 4: The Climate Challenge and the ACP Responses, Session 2: Impact of climate change on rural development and the urgency to act , Brussels, Belgium, February 13, 2008

Outline
Climate Change and Variability Impacts on Agriculture and the Poor
Adaptation Strategies
Pro-poor Mitigation: Constraints and Opportunities
Conclusions: Investing in Climate Change Policy for the Poor

Climate Change and Variability Impacts

Impacts and Vulnerability to Climate Change & Variability
Rich countries emit majority of GHG
Poor countries are more vulnerable
Geography (hotter, less rain, more variation)
Greater dependence on agriculture and natural resources
Limited infrastructure and low-input agriculture
Low income, poverty and malnutrition
Thus, lower adaptive capacity (also including inadequate complementary services, like health and education)

Climate change will reduce production growth in many of the poorest countries and regions Percent change in agricultural production due to climate change, 2080 Source: Cline 2007

Adaptation Strategies

Climate Change Adaptation
“ Many adaptations can be implemented at low cost, but comprehensive estimates of adaptation costs and benefits are currently lacking…. “ (IPCC 2007)

Much Adaptation is Extension of Good Development Policy
Promoting growth and diversification
Investing in research and development, education and health
Creating markets in water and environmental services
Improving international trade system
Enhancing resilience to disasters and improving disaster management
Promoting risk-sharing, including social safety nets, weather insurance

Effective Adaptation Strategies
Requires judicious selection of measures within a policy context and strategic development framework
Must go beyond good development policy to explicitly target the impacts of climate change, particularly on the poor
Market signals
essential factor in determining the necessary responses to a changing environment
but involves potentially expensive time lags and overlooks equity
Climate change adaptation must therefore be proactive, not merely reactive

Critical Concerns for Effective Adaptation Strategies
Extent and actions to which government and international community
Offer incentives and investments to create and deploy improved technology and management techniques
Effect of public policy on crop and livelihood diversification
Impacts on current agricultural policies of the country
Incorporate climate variability and change into policy choices

Pro-Poor Mitigation: Constraints and Opportunities

Critical Step: Post-Kyoto International Climate Change Regime
Emissions targets, rates of convergence, and rates of growth in developing-country emissions
Level of emission allowances for developing countries
Level of caps by sector and industry
Sector-specific mitigation options
Incentives for international carbon trade
Transparency and complexity of administration
 All influence the regime’s impacts on economic growth, agriculture, food security, and poverty in developing countries

Sources of GHG Emissions
Sources: World Resources Institute 2007; World Development Report 2008
60% 18% 14% 4% 4%

Pro-Poor Climate Mitigation Policy
Climate change policy can generate income for small farmers and investment flows for rural communities
Requires effective integration
from global governance of carbon trading,
to sectoral and micro-level design of markets and contracts, and
investment in community management

Estimated Potential Emission Savings and Costs by Sector Source: Adapted from various estimates, Stern Review, pp. 244-63 22-33 40.0 Fossil fuel related, excluding bioenergy 3-5 4.1 Waste and fugitive emissions, industrial processes 25 2.0-3.0 Bioenergy 27 1.0 Agriculture (methane & nitrous oxide) 20-27 1.0-2.0 Land management practices 5-15 1.0-2.0 Afforestation and Reforestation 2-4 3.5-5.0 Deforestation Average Annual Cost($/tCO 2 ) ~2025-2050 2050 Annual Emissions Savings (GtCO 2 ) Sector

But minimal carbon trades in agriculture in developing countries
Only 3-4% of carbon trading is sourced from agriculture, land use, land use change, agroforestry and forestry
Only 3% of carbon trading is sourced from Africa

Constraints to Pro-Poor Mitigation
High transaction costs of Clean Development Mechanism (CDM) Conditions for Offset Projects in Developing Countries
Additionality, measurability, permanence, leakage prevention, social benefits, environmental benefits
Information about carbon benefits to potential buyers, obtaining information about project partners, organizing project participants, capacity building and ensuring parties fulfill their obligations
Transaction costs per unit of emission reduction are higher for projects involving many smallholders and forest communities

Carbon sequestration from soil carbon and avoided deforestation ― important areas for climate mitigation and for poor developing countries––are excluded from CDM
CDM-eligible assets from afforestation and reforestation are excluded from European Union-Emissions Trading Scheme
Constraints to Pro-Poor Mitigation

Expanding Pro-Poor Mitigation
Establish international capacity building and advisory services - E stablish regional centers for forest carbon trading, soil carbon sequestration, others
Institutional innovations linking communities to global markets – Specialized business services for low-income producers; locally accountable intermediary organizations to mediate between investors and local community
Simplified standards (baseline and monitoring) for small-scale projects - Make eligible for simplified modalities; simplified emission reduction credits calculated using standardized reference emission rates
Dealing with permanence issue in carbon sequestration – Allow short term contracts, payment for mass-time units of carbon

Conclusions

Investing in Climate Change for the Poor
Preliminary estimates from World Bank:
Annual Official Development Assistance = $100 billion
Foreign direct investment in developing countries = $150 billion
Gross Domestic Investment = $1,500 billion
Incremental annual investment requirements for adaptation to climate risk = $40 billion
Potential Annual Cost of Emissions Reductions in Developing Countries = $150-250 billion
Can be $150-250 billion value stream with appropriate policies

Investing in Climate Change for the Poor
Climate change policy can create new value-added for pro-poor investment
Increases profitability of environmentally sustainable practices
Employ advanced ICT to streamline measurement and enforcement of offsets, financial flows, and carbon credits for investors
Enhance global financial facilities and governance to increase and manage funding flows for both mitigation and adaptation

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Climate Change, Agricultural Policy and Poverty Reduction

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Climate Change, Agricultural Policy and Poverty Reduction — Presentation Transcript