Aslihan Arslan Natural Resource Economist, EPIC Team

ESA - FAO http://www.fao.org/climatechange/epic/en/

October 2, 2012

Climate-Smart Agriculture

(CSA)

An Overview

Overview

I. Basic CSA principles

II. SLM

III. Role of climate finance

IV. FAO-EC CSA project

2

I. Basic Principles

3

* agricultural sector includes crop, livestock, forestry, fisheries and aquaculture.

• The agricultural sector* of

developing countries is expected

to produce food and income to

support food and nutrition

security, and poverty reduction for

a growing world population.

• At the same time, climate change

(CC) is posing new threats to

world food systems.

• To achieve global development

and food security objectives we

need to transform agricultural

systems, aiming for higher and

more stable returns to agricultural

production and more sustainable

food systems.

Three pillars of CSA

• Prioritizing the multiple objectives of CSA depends on the role of agriculture in economy and society.

• In low income, highly agriculture-dependent economies, where CC impacts are estimated to be significant and negative, CSA involves agricultural growth for food security that incorporates necessary adaptation, and captures potential mitigation

HOW DOES CSA DIFFER FROM CONVENTIONAL

AGRICULTURE?

• Conversion of energy sources from

human to animal and fossil fuel

dependent machinery.

• Increased use of fertilizer, pesticides

and herbicides (highly dependent on

fossil fuels) generally very

inefficiently applied.

• Expansion of agricultural land area

through deforestation and conversion

from grasslands to cropland.

• Increased specialization in

agricultural production and marketing

systems.

•Emphasizing improved and hybrid

crop varieties

Key features of conventional

agriculture intensification

• Use of energy efficient technologies

for agricultural power (irrigation or

tillage).

• Increased efficiency of fertilizer and

wider use of organic fertilizer.

• Intensification on existing land

areas as main source of production

increase rather than expansion to

new areas.

• Greater diversification in

production, input and output

marketing systems.

• Valuing the resilience of traditional

varieties

Key features of Climate-Smart

Agriculture

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II.

Focus on Sustainable Land Management

(SLM)

Sustainable Land Management (SLM):

key component of CSA

• Poor soil fertility is a key constraint to agricultural productivity growth and thus food security/poverty reduction

• Increasing soil fertility is an important component of many developing country ag. development strategies

• Increasing soil fertility has potential adaptation and mitigation benefits

• Years of attempts to promote adoption of SLM have shown there are considerable barriers that have generally not yet been overcome

Question: If SLM is so good for farmers as well as the environment, why is the adoption rate so low?

• Tenure Security: lack of tenure security and limited

property rights (limits on transfer), may hinder

adoption of SLM

• Limited Access to Information, e.g. very low levels

of investment/support for agriculture research and

extension. CC adds uncertainty.

• Up-front financing costs can be high, whilst on-farm

benefits not realized until medium-long term

– Local credit markets very thin

– Local insurance options very limited

Classic barriers to technology adoption

Adoption Barriers:

Short run trade-offs & long run win-win

B. Investment Barrier to Adoption

Time ==>

Baseline net income Current net income

•Temporary net loss to farmer

•New management practices introduced

Source: FAO 2007

Short-run tradeoffs stronger for

poorer farmers

Baseline net

income

NPV/HA over 20

years

No years to positive

cash flow

No of years to positive

incremental net income

compared to baseline

net income

($/ha/yr) ($/ha) (number of years) (number of years)

Small 14.42 118 5 10

Medium 25.21 191 1 4

Large 25.45 215 1 1

Source: Wilkes 2011

Size of herd

III.

Role of Climate Finance

to Support CSA

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What is climate finance?

• Finance to support adaptation or mitigation

activities

• Includes public (GEF) and private (carbon

markets) sectors

• Green Climate Fund (GCF) $100

billion/year by 2020

15

The role of climate finance for CSA

• Can bring a small, but significant share of new finance

to agricultural sector of developing countries.

• Financing mechanisms and institutions are only now

being developed – so there is opportunity to shape

them to support CSA

• Needs to support specific features of CSA:

– Financing for long term transitions

– Focus on resilience vs. average productivity gains

– Attention to efficiency of input/resource use

– Focus on adaptive capacity/flexibility

Climate finance can represent a significant,

but small share of overall investment

requirements for agricultural growth

•Source: FAO (preliminary estimates)

0

50

100

150

200

250

300

Current

investment

Meeting demand

in 2050

Public

Private

•US$ billions per year (gross)

142

209

30

Additional

Funding for

Mitigation

Climate-Smart Agriculture: main points

• CSA involves multiple objectives; food security and

poverty reduction are priorities for LDCs

• Need to improve institutions to support the adoption of

CSA activities (e.g. SLM, diversification, SRI)

• Important to design emerging climate finance

mechanisms to support specific needs of agricultural

sector in developing countries

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IV. FAO-EC Project

Climate Smart Agriculture: Capturing synergies between

food security, adaptation and mitigation

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•2009 FAO initiates program of work on FS and CC for Copenhagen

•Indicating considerable potential to capture synergies and link CC finance to agriculture

•2010 Initiation of discussion between EC, FAO & potential natl. partners

• Driven by need for action at country level

•2011 Project development; background technical studies

•2012 Project initiated in Malawi, Zambia and Vietnam

Background on the project

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Core Need

Develop a policy environment & an agricultural investment strategy to attain increased food security and provide resilience under climate uncertainty

Potential entry points:

• Conservation agriculture

• Livestock/crop mix

• Agriculture/Forest interface

• SLM in uplands

• Role of climate risk and uncertainty

• Role of legal and institutional environmental

• Input support efficiency

OUTCOMES RESEARCH COMPONENT

NEEDS

Statistical analysis: climate shocks, producer behavior, adoption and

institutions

•2

Policy simulations: using cost/benefit surveys of CSA “entry points”

•3

Legal & Institutional appraisal: mapping institutional relationships.

•4

Climate data: Climate variability and uncertainty in predictions

•1 Climate smart agricultural

solutions for different contexts

Appropriate instruments for

prioritization, financing, and

adoption

Development of an investment

proposal.

Capacity to implement a CSA

strategy

•An evidence base for implementation for climate smart agriculture.

•A strategic framework to guide action and investment on CSA.

•

Outputs

POLICY SUPPORT COMPONENT

Horizontal coordination across relevant national ministries

•1

Vertical coordination between national and international

•2

Capacity building for more evidence-based and integrated policy-making

•3

•Climate smart agriculture investment proposals and possible financing sources, including climate finance.

Project Framework

Thank you!