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OPINION: How can we grow more, sustainably, and pay for it? Financing agricultural intensification

Also posted in Spanish

CDKN’s Chief Executive Sam Bickersteth reflects on the challenge of growing more, nutritious food, with least environmental impact, and getting the institutional channels in place to finance it.

This week, leaders from the public and private sector gather for the Economist Summit “Feeding the World 2014 – Sustainable Solutions for a Global Crisis”.   It’s worth reminding ourselves that world cereal prices last year exceeded the level reached during the world food price spike of 2008.   What’s the impact of such high food prices on poor people?  How does the world tackle the triple challenge of addressing hunger and malnutrition, providing affordable food and minimising the environmental cost of our food systems? Could sustainable intensification of agriculture provide the answer? If so, what does it look like, and how can it be financed?

I don’t need to repeat some of the startling facts about food and agriculture that are well presented in the Climate Change Agriculture and Food Security (CCAFS) programme’s Big Facts Infographics. But with nearly one billion hungry people in the world, and global food production under assault from climate change, it’s clear that there is much to be done. In developing countries, where agriculture still plays an essential part of the economy and livelihoods for poorer people, vulnerability to climate extremes and weather disasters is particularly severe.

Sustainable, intensified agriculture: a real option

To feed a world of 9 billion in 2050, we will need to produce more food with less environmental impact.  Sustainable intensification of agriculture is seeking to achieve this through  using inputs more efficiently, reducing greenhouse gas emissions from agriculture and conserving natural capital, while  improving livelihoods and providing more nutritious food.   Agricultural practices must not only provide for billions more people, and dwindling natural capital, they must also become more resilient to existing – and future –  shocks caused by extreme weather and climate change.

Developing countries have rightly focused first on adaptation to climate change. Cutting or avoiding greenhouse gases may be an additional benefit of improved farm management, which could enhance developing countries’ access to climate finance and technologies. Lower emissions options that do not compromise development and food security goals are possible. These include improved rangeland management, agroforestry, livestock intensification or drying rice beds.  It’s on the agenda already: developing countries are preparing some 60 agricultural Nationally Appropriate Mitigation Actions (NAMAs) for registration with the United Nations Framework Convention on Climate Change, in the hope of attracting funding.

Creating financial incentives for climate-smart agriculture

Transforming the agricultural sector to integrate climate resilience and ambitious emissions reductions on a large scale will create winners and losers. Hence, it is critical that incentives for change are provided through access to finance. Such finance can support new actions and co-benefits. A CDKN-supported trial of agroforestry systems in Zambia does exactly this.  Reseach was undertaken to test farmers’ willingness to adopt Faidherbia albida (an agroforestry species that is effective in sequestering carbon) if offered subsidies to overcome the labour costs of establishing the trees. The payments were found to be particularly instrumental in encouraging uptake by the poorest and most vulnerable farmers. The randomised control trial (RTC) demonstrated that in the absence of these forms of incentive, farmers are unlikely to invest their time and money in new technologies.

Other incentive-based solutions such as Payments for Environmental Services (PES) are playing an increasing role in provision of environmental and livelihood benefits for smallholder farmers. A variation of PES has emerged in the practice of Reciprocal Watershed Agreements (Acuerdos Recíprocos por Agua, or ARAs, in Spanish) in various Latin American countries.  ARAs are locally designed and managed contracts between the members of water cooperatives and landholders in priority catchment areas. Landholders sign contracts that bind them to strict rules of land management: they must conserve the forest, avoid polluting livestock practices and enhance the biodiversity and forest carbon of their land. In exchange, they receive in-kind compensation that boosts their incomes and livelihood prospects. This also allows the communities to move from highly water-dependent annual agriculture towards more sustainable perennial and diversified agriculture, resulting in more climate-smart agriculture and more resilient ecosystems and populations. CDKN partner Rare has been drawing out lessons from ARAs and other schemes around Payment for Watershed Services.

These examples show that individual access to finance is essential to support a shift to sustainable intensification of agriculture. However, financing for climate change mitigation, adaptation and food security tends to be channelled via separate streams: few funding agencies look at how ‘triple wins’ can be achieved across these three areas in an integrated manner.  In addition, the majority of climate finance has been flowing to climate mitigation activities such as renewable energy, with little invested in the co-benefits of reduced emissions and increased resilience in agriculture.

Institutions for financing climate-smart agriculture

In view of this gap, there is a need for a new institutional set-up that takes advantage of the synergies between climate-resilient and low-carbon development in agricultural and investments in food security.  CDKN has supported research into appropriate climate finance mechanisms for agriculture based on analysis across in Bangladesh, Honduras and Kenya.  CDKN partners Perspectives and Germanwatch propose the establishment of national gatekeeper institutions to channel climate finance for agriculture and food security in a more integrated manner.  These gatekeeper institutions could ensure that the joint mitigation and adaptation potential of agriculture projects was spotted and pursued at country level. Such national institutions might also be best attuned to a country’s diverse farming types including smallholder farmers.

Large multinational companies are beginning to engage in this agenda – many Consumer Goods Forum companies, aware that 75% of deforestation is driven by agricultural expansion, have pledged to have deforestation-free supply chains by 2020.  And  they are now starting to look at sustainable agriculture (including intensification) as a key tool to deliver this. The new World Bank BioCarbon Fund window (with $280m in new funds pledged at the Warsaw COP) is designed to enable private companies to reduce risk and invest in  activities that sequester or conserve carbon emissions in forest and agricultural systems.

So while discussions around the potential of agriculture to reduce emissions and build resilience have moved forward slowly in the UNFCCC negotiations,  emerging alliances and programmes at international and national levels that are taking the opportunity to finance sustainable intensification of agriculture. A proposed Climate Smart Agriculture Alliance of global donors may be an important step forward in providing the finance needed.  The Green Climate Fund, too, may soon be in a position to catalyse the billions needed.


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