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MODULE 7: POLICY DEVELOPMENT AND INSTITUTIONS

Contents 7.1 Mainstreaming CSA into National Policies and Programs ............................................................ 2

a) Climate Smart Agriculture within an Inclusive Green Growth Framework ................................. 2 b) Identification of “climate smart” policies and programs ............................................................. 3 c) Providing an enabling legal and political environment ................................................................ 4 (d) Legal and Regulatory Frameworks ................................................. Error! Bookmark not defined. (a) Role of Prices and Subsidies .......................................................................................................... 5 (b) Incentives for CSA investments..................................................................................................... 8 a) Role of local institutions and participatory approaches ............................................................. 14 (b) Role of non-state actors .............................................................................................................. 15 (c) Linking Disaster Risk Management, Social Safety nets and Climate Adaptation in Local resilience Building ............................................................................................................................... 16 (d) Using Success Stories for Policy Guidance and to facilitate Scaling up ...................................... 18 (e) Monitoring and assessment framework ..................................................................................... 19

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7. Mainstreaming CSA into National Policies and Programs

7.1 Climate Smart Agriculture within an Inclusive Green Growth Framework

Agencies have similar definitions for green economy and inclusive green growth. UNEP defines a green

economy as “one that results in improved human well-being and social equity, while significantly

reducing environmental risks and ecological scarcities” (UNEP 2011). OECD (2011) defines green growth

as “fostering economic growth and development, while ensuring that natural assets continue to provide

the resources and environmental services on which our well-being relies.” The World Bank (WB 2012)

defines green growth as economic growth that is environmentally sustainable: green in that it is

efficient in use of natural resources; clean, in that it minimizes pollution and environmental impacts; and

resilient in accounting for natural hazards and the role of environmental management and natural

capital in preventing physical disasters. For FAO the green economy embraces a vision that tries to steer

economic development in the direction of sustainability, of which there are five key pillars: renewable

energy and energy efficiency, waste management and minimization, sustainable use of natural

resources, and green job creation.

Inclusive green growth and climate smart agriculture are complementary concepts, and are part of a

broader sustainable development agenda. Inclusive green growth seeks to “operationalize” sustainable

development by reconciling developing countries’ urgent need for rapid growth and poverty alleviation

with the risks of lock-in and irreversible environmental damage. As such, green growth policies focuses

on what is required in the next 5-10 years to sustain robust growth without locking economies into

unsustainable patterns. Green growth also considers explicitly some features which are “implicit” in CSA,

including pollution from agriculture, protecting biodiversity, food safety and increasing processing and

transport efficiency throughout the value chain “from farm and forest and water body to fork and

factory and office and home”.

Policies must facilitate "using natural capital without using it up". Positive inter-actions between natural, physical, human and social capital are key. Agriculture is indeed key to broader green growth as well as to climate smart development because of its role as a principle “user” of natural capital (70% of water extracted, 40% of land area, together with land use change and forestry produces 30% of global GHG emissions), and because of the key contribution it makes to food security and human welfare. So green growth in agriculture, forestry and fisheries is about meeting the needs of people for food, fuel, timber and fiber and contributing to economic development and poverty reduction while maintaining and enhancing the resilience of the natural ecosystem functions on which this growth depends, and addressing the new challenge of climate change. It is resource-efficient, clean and low-carbon emitting, and resilient.

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a) Identification of supporting CSA policies and programs

Climate-smart agriculture needs to be mainstreamed into core government programs with appropriate prioritization of level and content of public support for CSA. Priority needs to be given to CSA practices that bring productivity gains as well as enhanced resilience and reduced emissions.

A guiding FAO principle with respect to climate smart agriculture is the “no-regrets” approach. It emphasizes measures that should be taken regardless - even in the absence of climate change - because they improve the efficiency of present agriculture practices as well as in forestry and fishery. At the same time, they put farmers, the foresters or the fisherfolk in a better position to adapt to or mitigate the effects of climate change. Frequently a CSA measure will contribute to both adaptation and mitigation (conservation tillage stores moisture and organic matter in the soil (increasing adaptive capacity) and sequesters carbon. Such policies create adaptation and mitigation synergies and reduce tradeoffs through an integrated approach.

Climate smart agriculture has a strong public good element (a good with benefits for the broader economy and society, or which generate benefits in a different location from where the activity takes place)1; CSA may include externalities (when an individual, firm, or country takes an action but does not receive all its benefits) or co-benefits (multiple benefits in different fields resulting from one policy, strategy, or action plan), or both, as well as private goods. Most climate smart agriculture options either bring environment benefits (improved water quality, enhanced fertility, enhanced resilience to drought, improved efficiency) or reduce negative externalities (floods, pollution, GHG emissions, soil erosion, deforestation), generating non-market public goods (climate resilience, enriched soil with carbon) as co-benefits. They bring a mix of private and public goods.

Public support for CSA is justified by its public good element and at a general level the key challenge is removing public subsidies that provide perverse incentives for adopting CSA, and reallocating resources to programs that provide incentives for adoption of CSA practices.

1 Erosion control measures in an upper watershed may help to control flooding in a lower watershed; or control of field

nutrient run-off will help maintain adequate water downstream.

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Many policies and programs which support productivity enhancement are “climate-smart”. These include improved technologies and innovation, resource efficient use of land, water, energy and other inputs, improved access to information and infrastructure, efficient markets and risk management tools. Programs which support reduced loss and waste, value-chain enhancement, improvements to rural infrastructure and access to improved weather and climate services are also climate smart and the challenge is to tailor such policies to the national political and climatic specific context building on existing environmental strategies and ad-hoc programs.

Most climate change adaptation measures also relate closely to existing strategies. The most effective way of supporting resilient agricultural systems and rural communities is to incorporate adaptation into other policies (IISD).2 This has been the principle behind the Pilot Program for Climate Resilience (PPCR), one of the programs supported through the Climate Investment Funds (CIF). It has approved US$ 1 billion of grant and concessional finance for mainstreaming resilience into core programs, and in all participating countries agriculture and water management feature strongly. The PPCR may provide a useful model for how countries access climate finance for adaptation in a development context under a future Climate Green Fund, building on the lessons from ongoing programs and using their implementation arrangements

b) Providing an enabling legal and political environment

In order to secure an enabling environment for the development and mainstreaming of CSA in the overarching national plan, appropriate institutions with effective and transparent governance structures are needed to coordinate between sectoral responsibilities and across national to local institutions.

CSA policies and support measures need to be mainstreamed into broader public policy, expenditure and planning frameworks at both central and local level. There also needs to be coordination, both between concerned agencies at central level and local level. CSA strategies need to be incorporated into legal and regulatory frameworks if they are to be implemented. Strategies also need to take account of current legislation and regulations.

Annual budget laws, where public expenditure planning is transposed into budget allocation to the responsible line agencies are a core legal and regulatory instrument for implementing CSA policies. Aligning capacity and financing with responsibility is key in this regard. . Operations and maintenance as well as investment budgets need to be considered. Raising new sources of revenue for CSA strategy implementation may also be considered through the establishment of an integrated investment framework to attract national and international climate funds from different sources of public and private finance . Where decentralized government organizations have responsibility for certain elements of strategy implementation, it is important that financial flows from central government, or local revenue-raising capacity, are sufficient for them to carry out their responsibilities consistent with the law. . In countries

2 IISD, Designing policies in a world of uncertainty, change, and surprise, Adaptive policy-making for agriculture and water

resources in the face of climate change, International Institute for Sustainable Development, 2006

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where prices are still regulated, price support regimes would also need to be reviewed, and options for re-allocating public support from price support to other means of support reviewed. Land tenure regimes are important. Secure land rights provide the enabling environment for the investment in sustainable land and water management that is a key element of CSA. Land tenure is complex and systems need to be adapted to country circumstances. Specialists working on CSA need to work together with land tenure specialists to understand systems and work within them. As instance, simple land registrations systems in Ethiopia have facilitated investment in sustainable land management; providing land-users rights to trees facilitated “re-greening” in Niger; and transferring long term land use rights to users in China has played a key role in broader watershed restoration and climate smart agriculture. Land tenure regimes also demonstrated the link between sound agricultural and sound forest land use planning; land rights provide a key enabling environment for investing in sustainable intensification,” for landscape restoration and for sustainable woodland and forest management. Land management regulations may also play a role; for example through requiring control of grazing

animals, protection of stream beds or erosion control mechanisms; but such measures only work where

they can be implemented and enforced , and there is public acceptance of them and understanding of

why they are needed. Voluntary mechanisms and incentives are equally important. Another important

consideration is cross-sectoral synergies in regulatory frameworks , between CSA and social safety net

policies for example; and CSA and energy or land-use regulations.

Regulations governing private sector investment must create an enabling environment for CSA. While taking into account the importance of improving the overall business environment through simple, transparent regulations and tax structures, finance regulations can “incorporate” climate-smart requirements into lending conditions. The example of BDNES (the Brazilian National Development Bank) is illustrative: screening guidelines for loans are consistent with the Equator Principles, the BDNES has improved its environmental and social screening processes, developed specific guidelines for sustainable agriculture, livestock and forest management, increased the attractiveness of green lines of business, increased the focus on social inclusion and decreased BDNES’ carbon footprint.

7.2 Improve Market Accessibility: Policy and Financial Instruments

(a) Role of Prices and Subsidies

Most governments around the world intervene actively in the operation of their agricultural markets. Reasons governments intervene to support farm prices is that they often are volatile. Climatic conditions, over which farmers have no control, are an important determinant of how much a farmer harvests in a given year. The most common approach The most common approach to supporting the price of an exportable agricultural product is to create a government agency to buy any quantity of a

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product offered by the country's farmers at the guaranteed "support price." So price support has certainly a role to play in countries affected by climate change, but that most often other forms of support (regulations, incentives, investments in technology, infrastructure, connectivity or the broader enabling environment, social marketing and use of social capital ) are more effective in addressing market failures. Price support is most often channeled through subsidies to inputs (fertilizer, energy, water, seed). 3 With the exception of countries where input use is currently low, price support and energy subsidies should be replaced with policies that recognise and reward climate-smart agricultural practices, provide an enabling environment for value added, and commercialisation and trade. Landscape approaches and incentives are needed for a better management of agricultural productivity, carbon storage, fresh water cycling, biodiversity protection and pollination. Such approaches allow trade-offs to be explicitly quantified and addressed through negotiated solutions among various stakeholders. Therefore, in countries with low-input/low-output systems, a fertilizer subsidy may initially be justified to increase yields and enhance vegetative growth and soil carbon. Analysis suggests that the fertilizer subsidy adopted in Tanzania as part of the agricultural productivity project (up to 50 kgs per hectare) is “climate-smart” in that it has increased productivity, and helped increase biomass in and above the soil, enhancing both resilience and sequestration. But the price support needs to be accompanied by extension advice and access to reasonable information on rainfall to ensure correct, and timely, fertilizer application.

In countries where fertilizer use is already high price support may not be ‘climate-smart . In land-scarce intensely farmed agricultural systems with already high levels of inputs, subsidization of inorganic fertilizer encourages overuse, with limited long-term productivity impact and deleterious effects on the environment. In densely populated, land scarce countries with already high rates of intensification different policies may be needed. Indeed the policy of Vietnam is “five reductions, one must” Accordingly, farmers are encouraged to use rice varieties with clear origin, pure breed and guaranteed quality (one must). “Five reductions” are to reduce seeds, reduce water (certain times), reduce fertilizers, reduce pesticides, and reduce post-harvest loss. With this process, apart from reducing the amount of rice seeds to nearly 50 percent, other agricultural materials such as chemical fertilizers, pesticides and water are cut down from 20 to 30 percent from earlier while the productivity increases from 15 to 20 percent.

Box 5 : Increasing Output, Damaging the Ecosystem: The Use and Misuse of Input Subsidies in India

In India, fertilizer and other input subsidies contributed to rapid development of irrigation and more intensive farming methods, resulting in increases in yields and food security: by 2010, irrigated wheat yields in some provinces averaged 4.5 tons per hectare. Subsidized energy is now contributing to excess groundwater withdrawals, however (about 75 percent of groundwater used in Punjab and Harayana

3 This section will not discuss price volatility in detail ; this is a key area. Volatility is shaped by a mix of short term

and long term factors including weather variations, export restrictions sometimes imposed as a result of drought or flood, rising demand for food, and for some commodities (especially maize and soybean) the growing role of biofuels

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originates from overexploited aquifers), requiring pumping water up from ever-deeper aquifers and salinization of aquifers in some areas. The fertilizer subsidy—which cost the government $30 billion (2 percent of GDP) in 2008—is contributing to excessive use of nitrogen compared with phosphorus and potassium, contributing to nitrate pollution of rivers and aquifers. There are, however, difficult and well recognized political economy challenges in reforming the pattern of subsidies.

Source “What Price Resilience?” Prince’s Charities’ International Sustainability Unit 2011.

Subsidized energy has contributed to aquifer depletion in water scarce countries like Yemen, and inadequate water regulation and pricing regimes (and hence lack of incentives to conserve water) have contributed to widespread drainage and salinity problems in a range of irrigation-dependent economies (including Pakistan, India and Uzbekistan). Addressing these problems needs a range of both price and non-price interventions to ensure adequate water delivery (without reliable water farmers will not be willing to pay) and drainage. Facing growing energy demand, high oil prices and an urgent need to reduce greenhouse gas emissions, bioenergy is an essential energy option for a range of applications as part of a mix that includes energy efficiency, renewable energy, and changed patterns of production and consumption. In some cases governments have subsidized production of agricultural commodities for bio-energy (eg. maize in US, though the support measures were recently phased out, or rapeseed in Northern Europe) as part of broader energy policies. Indeed, the sustainable use of bioenergy presents a major opportunity to address climate change by reducing fossil CO2 emissions. Whether or not these are “climate-friendly” depends very much on the ecosystem and underlying enabling environment, as well as alternative land use options. Analysis suggests that support to production of ethanol from sugarcane in land-abundant and water-abundant areas of Brazil or Mozambique is “climate-smart”, taking a life-cycle analysis approach, while support to production of biofuels from maize or rapeseed in temperate climates is not; furthermore subsidizing such production, on land suitable for food-crops, may contribute to driving up its price. There nevertheless is a role to sustainable bio-energy production in CSA, both from woody biomass, and from newer sources that are currently under development. 4 In many countries there is poor access to long-term finance, often a requirement for investing in CSA. As instance, in Ghana (where the business environment is among the best in Africa) little long term finance for smallholder agriculture is available. Policies in support of subsidized interest rates have generally been unsuccessful; often a range of non-price interventions (incentives, regulations) are likely to work better. Improved access to long term finance is especially important in tree-crop cultivation where replacing older trees with newer, higher yielding varieties may imply short term revenue losses. Another country example is Brazil, where in a far-sighted policy reform in the 1970s, where the country was still a net food importer, reduced direct support to agricultural production, focusing instead on support programs targeting public good measures; these included research into crop breeds, land use and farming systems adapted to Brazil’s tropical ecosystems. EMBRAPA has a global reputation as a research institution, Brazil is a global agricultural exporter and adoption of soil conservation tillage is widespread for key commodities such as soybean (see also box 4 above)..

4 This chapter does not address in detail the debate surrounding bio-fuels or broader bio-energy, or the possible trade-offs

between use of land for this purpose and food production.

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b) Regulations for adoption of CSA Regulations need to be adapted to country environments, and accompanied by other supporting incentives if they are successful in changing behavior and providing incentives for adoption of CSA. Where broader institutional capacity and governance is weak, regulations alone are unlikely to be effective. A ban on charcoal trading in Tanzania, for example, proved unenforceable since charcoal is the main cooking energy source for urban Tanzanians. But the system of forest and woodland management by local districts, in line with the decentralization law, is consistent with both local interests and more sustainable forest and woodland management, and has been combined with support for tree planting measures. Often a mix of regulations and incentives is needed. In the Loess Plateau watershed restoration program in China key elements for success were regulation of free grazing of small ruminants, together with technical support measures for improved fodder production for stall feeding; secure land rights for the farming population, participating in the watershed restoration program, and technical support for landscape restoration and agricultural productivity enhancing measures. In the highly populated, densely farmed areas of Central and Western Kenya, where land rights are clear, there has for decades been a requirement to plant trees/tree crops on 10% of the land; many farmers exceed this percentage because of the range of income earning and regulating services these trees provide. But in Ghana the current regulatory system for revenue allocation from timber harvesting outside forest reserves, where revenues are divided between the Forestry Department and Stool Chiefs (traditional leaders), does not necessarily provide an incentive for local communities to manage forests sustainably. The impact of regulations on production incentives must be considered. As instance Ukraine, an upper middle income country, is a key global wheat producer; but during the 2010 drought, as global wheat prices rose, there was concern that this key staple could not be provided in adequate quantities, at reasonable prices, to meet local requirements, especially of lower income people, and an export ban was imposed (a regulatory measure). This impacted Ukraine’s reputation as a reliable supplier of good quality wheat, and it reduced incentives for farmers to make the investments needed to increase productivity. The Ukrainian government since then has reconsidered its policy and has initiated a social protection system targeted at low income and vulnerable people, so that they have the means to buy food in times of high prices, while Ukrainian farmers still have incentives to increase productivity and output. Regulations also need to be adapted to changing circumstances, Vietnam, once a food deficit country and concerned with food security, still regulates rice production, requiring that rice be grown on certain areas. Over the last 30 years poverty has declined sharply in Vietnam and it is now a global rice, aquatic and other agricultural products exporter; Vietnam is revising this policy to give farmers more choice on what to grow and provide incentives for production of higher quality rice, while providing social protection for the most vulnerable.

(b) Incentives for CSA investments

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Investment in CSA brings long term gains in productivity, resilience and reduced emissions/increased sequestration, and that farmers, and governments, need to take advantage of a range of financing sources. The most successful programs often blend sources of funding. Incentive measures need to focus on overcoming barriers to adoption of CSA practices. The main barriers are two-fold: first, CSA often involves upfront investments which take time to yield productivity gains; second, the value of environmental benefits which CSA brings are not accurately accounted for in present markets. Developing countries will need to improve the efficiency of production methods for export products if they are to compete, or may need to shift to alternative products that have less of an environmental impact. Incentives can take many forms and include instruments such as payment for environmental services or intensification of “carbon footrprints” campaings. The Plan Vert (Green Plan) of Morocco takes an integrated approach to providing incentives for CSA. The Plan takes account of the increasing challenges posed by water scarcity in its river basin management approach to increasing productivity and competitiveness while also recognizing the social issues of many rural communities. It has a dual approach: in irrigated areas it provides incentives for improving water management and conservation, as well as value chains and international market integration. In rainfed areas it increases access to social services, supports participatory natural resource management initiatives and also supports a program for replacing arable crops by more drought tolerant olive and other tree crops (these programs combine support for enhanced productivity, climate resilience and reduced emissions land and water management practices). Implementation is supported by a range of measures incorporated into policy instruments, as well as by targeted support for specific technical innovations. Box 6 below provides an example of a targeted support program in Zambia.

Box 6: Climate smart agriculture incentives for adoption

Colombia

In Colombia there is a new focus on integrated landscape planning, within a broader strategy for sustainable agriculture, forest intensification and reduced deforestation. One key theme is “to be a good cattle farmer it is necessary to be a good agricultural farmer”. A mix of policies and incentives has supported sustainable productivity increases for livestock by encouraging landscape-based mixed agro-sylvi-pastoral systems. The aim has been to introduce trees and improved pasture in grazing lands, providing improved fodder and shade and reducing heat stress for animals and soil degradation. Results have included increased meat and milk yields as well as improved water infiltration, increased bird populations, reduced methane generation, and improved carbon capture (López 2012). . These approaches have helped achieve “triple wins” of increased productivity, enhanced resilience to climate variability, and reduced carbon emissions (“climate-smart agriculture”).

Zambia

In Zambia support has focused on technology advice to producers, together with modest support to

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overcome the upfront costs of moving to conservation agriculture, including greater incorporation of

trees into the agricultural system. Five basic conservation farming technologies are being used: retaining

crop residues, concentrating tillage and fertilizer application in a permanent grid of planting basins or

series of planting rows, completing land preparation in the dry season, weeding aggressively to reduce

plant competition, and intercropping or rotating nitrogen-fixing legumes on up to 30 percent of

cultivated area. Many farmers also incorporate nitrogen-fixing trees, which provide fodder and

fuelwood. As of 2010, Zambia had restored 300,000 hectares, in an effort that involved more than

160,000 households. Conservation agriculture practices doubled maize yields over those achieved with

conventional plowing systems and increased cotton yields 60 percent. A recent study finds returns of

$104 per hectare for plots under conservation agriculture in Zambia—5.5 times the $19 per hectare of

plots under conventional tillage .

Source: Scherr, S. J., L. E. Buck, T. Majanen, J. C. Milder, and S. Shames. 2011. “Scaling-up Landscape Investment Approaches in Africa: Where Do Private Market Incentives Converge with Landscape Restoration Goals?” Background paper for the Investment Forum on Mobilizing Investment in Trees and Landscape Restoration, EcoAgriculture Partners and Program on Forests (PROFOR), Washington, DC.

Lopez R. 2012. “Sustainable Agriculture and Animal Production in Colombia.” Paper presented to the, Ministry of Agriculture and Rural Development of Colombia during Sustainable Development Week, Bogota.

Valuation of ecosystem services, where activities in one part of an ecosystem or economic sector

benefit those in another, remains a challenge. But “payment for ecosystem services” has become an

increasingly important policy instrument for providing incentives for adoption of CSA. Carbon finance is

an important example of this approach, which focuses on mitigation, but as the previous sections have

highlighted, CSA provides adaptation and watershed protection benefits also. Broadly conceived,

incentives include indirect mechanisms such as laws and regulations, and direct incentives such as cash

or non-cash subsidies and other forms of support. There are also a variety of tools for delivering direct

incentives, including cash subsidies and grants, as well as non-cash support in the form of technical

assistance.

What distinguishes “Payment for ecosystem services” (PES) as an innovative form of finance compared

to other tools is the degree of conditionality attached to the payments. Payments for environmental

services reward land users for adopting specific practices that are known to deliver certain

environmental services (e.g. reduction in run-off and erosion, biodiversity conservation). Because of the

scientific complexity and transaction costs involved, it is rarer that PES schemes reward land users for

quantified delivery of environmental services (GHG sequestration or emissions reduction through

carbon payments is an exception). Most schemes rewarding land users for improved watershed

management, for example, make payments for the adoption of recommended practices, rather than

measuring changes in hydrological flows. Rewards for GHG emission reductions or carbon sequestration

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may take either form, making payments for the performance of actions or – as in the case of carbon

markets – payments based on estimated net emission reductions.

Payments for watershed services are particularly relevant in the context of future climate change,

because of the ecosystem services that they provide. In many contexts, water services to downstream

users can be enhanced through improved management of vegetation cover and tillage practices.

Increased adoption of these practices may serve to limit the impacts of variability and change in

precipitation and water flows. Some such schemes targeting upland or mountainous areas, may also

serve other objectives such as poverty alleviation or income generation, but there are also cases where

the dual objectives of enhanced environmental service provision and poverty alleviation are not able to

be met simultaneously. In the lower watersheds wetland and coastal ecosystem restoration can help

protect against saline intrusion and coastal flooding. (Vietnam and Bangladesh are examples of

countries with programs in this area).

The particular relevance of payments for GHG mitigation services (including carbon sequestration) in

agriculture sector lies in the synergies between enhanced delivery of these environmental services and

the achievement of other sectoral objectives, such as reduced erosion (e.g. due to improved land

management) or pollution (e.g. from untreated livestock waste), increased productivity (e.g. due to

increased soil fertility), increased incomes (e.g. due to plantation of agroforestry cash crops) and

enhanced food security. In the context of global concern with deforestation, where agriculture is often

one of the main drivers of deforestation, improvements in agricultural practices can also increase

environmental service flows from other land uses, such as forestry.

Box 6 Payments for ecosystem services: examples from Costa Rica and Ethiopia The Pago por Servicios Ambientales (PSA) program, implemented in Costa Rica in 1997, was one of the first schemes to pay people to provide ecosystem services. Under this program, private landowners and communities receive payments for conserving the forest and helping protect water quality downstream. Financing for the scheme comes from grants, earmarked taxes, and buyers of ecosystem services, including municipal utilities. As of 2005 about 280,000 ha had been regenerated using this approach; however Costa Rica has had a 40 year program of support to landscape restoration. Near Ethiopia’s Great Rift Valley, the Humbo Assisted Natural Regeneration Project (implemented with the help of World Vision), farmer-managed regeneration of the natural forest encourages new growth from felled tree stumps that are still living. The regeneration of nearly 3,000 hectares has resulted in increased production of wood and tree products, such as honey and fruit, which has increased household revenues. Improved land management has also stimulated grass growth, providing fodder for livestock that can be sold as an additional source of income. Regeneration of the native forest is expected to provide an important habitat for many local species and reduce soil erosion and flooding. The forest now acts as a carbon sink, absorbing and storing nearly 0.9 million tons of CO2 over the project life. The project is the first reforestation project in Africa to be registered with the United Nations Framework Convention on Climate Change (UNFCCC). The operation is regarded as a model for scaling up under a broader green growth and landscape restoration strategy for Ethiopia.

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Source: Pagiola, S. 2008. “Payments for Environmental Services in Costa Rica.” Ecological Economics 65 (4): 712–72.

Brown., D., P. Dettman, T. Rennado, H. Teferu, and A. Tofu. 2011. Poverty Alleviation and Environmental Restoration Using the CDM (clean Development Mechanism): A Case Study from Humbo Ethiopia. Africa Adapt World Vision, Dakar

The scale of agricultural carbon market transactions is currently limited, but the range of activities

included in existing schemes indicates a wide potential relevance to many developed and developing

countries. Currently, methodologies exist in voluntary and sub-national regulatory markets for GHG

accounting from sustainable land management, sustainable grassland management, improved livestock

feed, reduced livestock feeding time, livestock waste management, biofuel energy production, improved

use of nitrohen fertilizer, agroforestry and afforestation, and GHG mitigation in rice cultivation.

Experience is being gained in linking smallholders with carbon markets through initiatives such as the

BioCarbon Fund. The examples of the China Biogas project and Kenya agricultural soil carbon project

have been cited above. Other initiatives, such as carbon labeling of agricultural products may also be

used to provide incentives for adoption of CSA practices.

Initial experiences suggest nevertheless that the productivity – and thus income – benefits of adopting improved agricultural practices are a far more important incentive to producers than the financial flows from carbon markets or carbon labeling.

The key role of enhanced productivity in climate smart agriculture broadly and GHG emission reduction

in particular must be highlighted. In the United States, for example, production efficiency in the dairy

industry soared over the past 60 years. In 2007, producing 1 billion kilograms of milk required just 10

percent of the land, 21 percent of the animals, 23 percent of the feed, and 35 percent of the water used

to do so in 19445. Productivity increases, innovation, and genetic improvements are a “low-hanging

fruit”: in India, average milk yields are only 3.4 kilograms a day compared with the world average of 6.3

kilograms, and only 20 percent of animals are cross-bred; doubling productivity would halve greenhouse

emissions per cow. Supporting research and development into improved productivity and land and

water management systems remains a core priority.

The previous sections have summarized the different policy instruments (price, regulation, incentives,

climate finance) that can be used to support climate-smart agriculture Bringing these together through

the right mix of incentives can support CSA effectively.

Box 8 Linking Productivity, adaptation and mitigation through incentive measures: the case of Karnataka The US$ 120 million Karnataka Watershed Project , addressed dryland and hill-farming practices over

5 There are negatives, including the geographical concentration of livestock waste, increased water and air pollution, and reduced animal

welfare. These problems could be avoided with the right mix of incentives and regulation to ensure animal welfare, protect water bodies and manage waste.

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and area of 0.5 million hectares benefiting about 1.8 million people, Leading with participatory approaches it brought in improved technologies and farming practices, leading to recovery of groundwater levels (up 50-90 feet in 3 agro-ecological zones) improved groundwater discharges (from 250 to 326 gallons /hour) , resulting in average crop yield increases of 24-26% and increases in household income of about 53%. In a related follow up operation, the Mid Himalayan watershed project. It supported social mobilization, soil and water conservation treatments taking a micro-watershed approach, farm system intensification including improved horticultural practices and animal health, forest institution capacity building, income generating activities and institutional strengthening. Watershed management operations in some areas of India (eg the Mid Himalayas in Umal Pradesh) are now leveraging IDA and local funding with carbon finance in reforestation programs. Source: World Bank

Box 9 Enhancing Productivity, Resilience and Land and water use efficiency in Xinjiang China The objective of the US$ 120 million Turpan Water Conservation Program in Xinjiang, China is to reduce the risk of flooding and groundwater overdraft, and increase water supply to industry and water productivity for irrigated agriculture in the arid Turpan Basin of Xinjiang Uygur Autonomous Region. This will be achieved by transferring water currently wasted through non-beneficial evapotranspiration (NBET) and some of the water currently consumed for irrigation in the agricultural sector to industrial and environmental uses, while at the same time: (i) mitigating the risk of flooding, (ii) increasing farmer's income and productivity of consumptive use in agriculture, and (iii) reducing groundwater overdraft for the preservation of the oasis ecosystems and the ancient Karez water supply systems. In addition to supporting investments and improved technologies, is supports implementation of government policies (for regulation of groundwater overdraft) and regulations (for establishing ET (evapotranspiration) based water rights systems) and institutional frameworks (eg for water users associations). Implementation of these frameworks will improve water allocation for consumptive use while making water available for additional groundwater recharge to preserve the oasis ecosystems and cultural heritage of the Karez water supply system. Source Turpan Water Conservation Program Project Appraisal Document World Bank 2010

7.3 Improving access to Knowledge and Monitoring: role of implementing actors

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a) Role of local institutions and participatory approaches

Participatory approaches are more likely to build lasting results, than “top-down” approaches. But they need to be adapted to local circumstance and cultures. CSA policies and programs, in common with development programs across sectors, need to be aligned across levels of government. In many countries decentralization processes have not sufficiently been accompanied by local level capacity building. Developing CSA policies and programs requires an understanding of the structure and functioning of different levels of government. This principle “cuts across” sectors6.

Box 10 Improving Climate Resilience through Participatory Pastoral Development in Ethiopia . Ethiopian pastoralists are among the most vulnerable of any group to climate shocks. Yet livestock products, including hides and skins, are a key source of livelihood in Ethiopia, and the second largest source of foreign exchange earnings after coffee. Well managed range-lands have and pastoral systems are climate-resilient while bringing economic benefits while conserving the natural environment. A community pastoral development program in Ethiopia (US$ 80 million) aims (i) to increase the resilience of Ethiopian pastoralists to external shocks; and (ii) improve the livelihoods of beneficiary communities, and thereby to contribute to overall poverty alleviation in Ethiopia. There are four components to the project. The first, for sustainable livelihoods enhancement, strengthens decentralized and participatory planning at the community/kebele (sub-district) and woreda level, operating within the regional government structure. Women and men in pastoral and agro-pastoral communities design and implement Community Action Plans (CAPs) that reflect their development priorities. The second is pastoral risk management. The goal is to improve the existing pastoral early warning system through a participatory approach as well as the establishment of an early response fund, and to support disaster preparedness and mitigation investment planning and financing of associated subprojects. The third is participatory learning and knowledge management at the community level; and support knowledge management and information exchange at the federal and regional levels. Finally, the fourth component is project management, supporting project management units at the regional and federal levels to coordinate, supervise and implement project activities under the direction of the ministry of federal affairs and pastoral commissions/bureaus of each region Source: Ethiopia Pastoral Development Project World Bank Project Appraisal Document

6 Unpopular decisions may nevertheless need to be taken (eg reduction of energy subsidies to restore fiscal balances and

reduce distortions) . The key is transparency, communication, and social protection measure for potential “losers” in policy reform

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(b) Role of non-state actors

The key message is that civil society, private sector and financial institutions are all key in successful development of CSA. Civil society organizations can play a role both in development of new, adapted technologies and in extension. Paddy Rice production systems pose special challenges; the majority of GHG emissions in the agricultural sector in Vietnam, for example, are linked to paddy rice production. The “System of Rice Intensification” an approach to rice cultivation which aims to increase rice yields significantly while reducing requirements for seeds, water and chemical inputs through planting methods based on the principles of using single, young transplants at wide spacing, the application of compost, mechanical weed control and intermittent irrigation. The system originated in Madagascar, and has been successfully tested in 30 countries, in West Africa, Latin America and Asia, with civil society organizations often playing a strong role. As instance, the Kenya agricultural soil carbon project is supported by World Vision, an NGO with many years experience in Western Kenya. Using local knowledge is also important. Improving the broad enabling environment for responsible investment has a key role to play in climate-smart agriculture. Many private sector companies are committed to reducing the environmental footprint of their operations; they are also the principal actors in value chain enhancement and in connecting farmers with markets. . Box ..below provides an example of a technical innovation by a private sector organization in India which has developed a production system adapted to local conditions.

Box 11 Producing a resilient backyard chicken in India Kegg Farms in India has bred a robust and improved dual-purpose backyard chicken. The “Kuroiler” lays 100–150 eggs a year (many more than the 40 eggs a year the Desi chicken lays) and grows to 2.5 kilograms in about half the time a Desi chicken reaches 1 kilo. The chickens typically command a premium of about Rs 60 per kilo over other broiler chickens, because the meat is darker and more flavorsome. Kegg Farms produces about 16 million day-old chicks a year, which it sells to 1,500 small enterprises that raise the chicks for about two weeks before inoculating them and selling them to about 6,500 bicycle salespeople, who sell them to some 800,000 farmers, most of them women, many located in some of the remotest parts of the country. The turnover in sales of chicks is about $5 million a year, with another $5 million turnover by the thousands of small rurally based businesses that grow and sell the chicks. An independent assessment indicates that the average gross revenue generated per Kuroiler chick (as eggs and meat) is $3.10. With some 16 million chicks distributed annually, total output is about $50 million, with a net profit of about $10 million. Profits from the Kuroiler are significantly higher than profits from the Desi bird. The Kuroiler birds contribute significantly to household cash flow. Women have maintained control over their chicken-growing enterprises as the business has become more commercial. The success of Kegg Farms reflects several factors. Its chickens are more robust than other chickens, are better able to scavenge food, and have higher food conversion ratios. The company’s business model features a devolved, rural-based distribution system with in-built incentives.

Source :Isenberg, D. 2006. “Keggfarms (India): Which Came First, the Kuroiler(TM) or the KEGG(TM)?”

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Harvard Business Review Case Study.

(c) Linking Disaster Risk Management, Social Safety nets and Climate Adaptation in Local resilience Building

The key message is that successful design and implementation of CSA approaches requires integration with DRM and social safety net programs together with cross-sectoral coordination. Social safety nets are important in both middle income and lower income countries. In poor agriculture-dependent areas (as in the Ethiopia example, see below, or Niger) improving the resilience and productivity of the natural resource base forms part of a DRM/social safety net/adaptation strategy. But even where DRM or social protection may be the driving force of the intervention, agriculture and natural resource management have a role to play. Two examples are provided below.

Box 12 Social resilience within a climate and development strategy in Mexico: an integrated approach Through a US$ 750 million program Mexico is promoting State-level climate change action planning; disaster risk reduction and the implementation of sustainable land management and land use planning measures, especially at the municipal level; and community-level sustainable forest management. It focuses in particular on Mexico's neediest and under-served communities, An explicit theme is reducing the social impact, particularly among the most vulnerable, of climate change impacts. . It aims to increase access to relevant information, and the participation of civil society groups in the development of climate change adaptation policies. It also seeks to improve infrastructure risk and service management, and to restore forests, wetlands and other ecosystems that protect the poor from natural disasters and contribute to their well-being. It includes development of risk management programs and financing mechanisms. There are three responsible institutions for implementing the program: the Secretary of Social Development (SEDESOL), the Secretary of Agriculture, Livestock, Rural Development, Fisheries and Food (SAGARPA) and the National Forest Commission (CONAFOR). The Secretary of Environment and Natural Resources (SEMARNAT) will have a coordination role, which in turn has designated Nacional Financiera (NAFIN) as financial agent Source World Bank Project Appraisal Report 2012

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Ethiopia: a long term approach to resilience which links protection and productivity of natural assets, social safety nets and disaster risk management The current phase of Ethiopia’s long-standing Productive Safety Nets Program brings together US$ 750 million in financing. Its objective to reduce household vulnerability, improve resilience to shocks and promote sustainable community development in food insecure areas of rural Ethiopia. There are four elements to the program The first is a safety net grant to chronically food insecure households through: (i) labor intensive public works for able-bodied households; and (ii) direct support to labor-poor households. It will also support the woredas (local districts) to provide complementary inputs as well as technical supervision and monitoring of transfers and public work activities. The second is drought risk financing to provide timely resources for transitory food insecurity in response to shocks within the program areas. It will be financed using a contingent grant, which will provide resources for scaling up activities under the first component in response to localized or intermediate weather or price related shocks in program woredas. In the event no shocks occur, the resources of this component can be utilized to finance activities eligible under the first component of the 2013/2014 annual plan. The third component is institutional support. The fourth component is support to the Household Asset Building Program (HABP) aimed at: (i) strengthening the delivery of demand-driven and market-oriented advisory services for household investments; (ii) improving the efficiency and effectiveness of financial service delivery to food insecure households; and (iii) supporting program management. Around 80% of beneficiaries would participate in labor-intensive public works, building productive community assets that are planned within a watershed management framework. These community activities will include micro- and small-scale area closures/woodlots, agro-forestry, soil and water conservation measures such as hillside terracing and soil bunds, mulching of degraded areas, gully control, community roads, stream diversions, shallow wells, spring development, small dams, water ponds, drainage canals, vegetative fencing, fodder system collection, multi-purpose nurseries, construction and repair of classrooms, health posts and latrines, and the construction of child care centres. Around 20% of beneficiaries would be from labor-poor households including elderly, chronically sick or otherwise incapacitated households and these would receive transfers as Direct Support. The program has adapted and incorporated new technologies and approaches as it has evolved over the last 12 years. Together with the WFP (World Food Program) the Ethiopian authorities have developed LEAP (Livelihoods-Early Assessment-Protection) which combines early assessment, early warning, contingency planning and capacity building with contingent finance and a software platform that provides estimates of funding needs in the event of a weather shock. It uses ground and satellite rainfall data to calculate weather based indices for Ethiopia (even where there are no weather stations) and then integrates these with livelihoods and vulnerability data at local and national level. These indices are used to trigger contingent financing under the program, enabling earlier responses. LEAP is now integrating a flood index and seasonal forecast component. . Climate Smart Agriculture: A Call to Action. In collaboration with the African Union, CCAFS (Climate Change, Agriculture and Food Security), Department of Agriculture, Forestry and Fisheries of South Africa, IFAD (International Fund for Agricultural Development, PROFOR (Program on Forests), UNEP (United Nations Environment Programme), WBI (World Bank Institute), FAO (Food and Agriculture Organization), WFP (World Food Programme). Washington DC.

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(d) Using Success Stories for Policy Guidance and to facilitate Scaling up

Learning from approaches that work (and that do not) is key to developing ownership for widespread

adoption of CSA policies and programs . Principles include

(a) building sound learning and monitoring into pilot and smaller program design, including results

monitoring and economic evaluation.

(b) Pragmatism and a willingness to “learn by doing” and adapt and improve this requires a degree

of flexibility in implementation

(c) A willingness for particular government agencies (or particular development partners) to

coordinate and accept not having the leadership role in implementation, but also for budget

systems to be designed that facilitate transfer of resources between agencies, or delivery by

decentralized institutions, to facilitate delivery of results on the ground to scale.

(d) “scaling up” can include geographical scaling (extending programs that are successful in one

region to another) as well as content scaling (adding new elements to programs in the light of

experience or through building on existing implementation mechanisms.

Many of the examples given above incorporate these principles. One more is given below.

Rwanda: An integrated approach to landscape restoration Rwanda, one of the most land-scarce countries in Africa, is committed to supporting productivity enhancement and rural income growth while protecting land and water resources and increasing climate resilience. After a number of smaller scale initiatives, it has integrated improved land husbandry, water harvesting and irrigation into its long term development plans, including its CAADP (Comprehensive African Agricultural Development) process. The program seeks to improve rainfall management to reduce hillside erosion, through terracing, improving the soil under cultivation, managing water runoff and in some cases developing irrigation systems. It seeks to empower farmers through development of farmers’ groups and enhanced access to credit. The programme has resulted in reduced erosion and increased yields and crop commercialization, while incorporating of fodder trees into production systems has also facilitated integration of livestock into production systems. It proceeding watershed by watershed, with the objective of covering the entire country, and is benefiting from support from a range of development partners including a US$ 50 million grant from the GAFSP (Global Agriculture and Food Security Program),.

Climate Smart Agriculture: A Call to Action. In collaboration with the African Union, CCAFS (Climate

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Change, Agriculture and Food Security), Department of Agriculture, Forestry and Fisheries of South Africa, IFAD (International Fund for Agricultural Development, PROFOR (Program on Forests), UNEP (United Nations Environment Programme), WBI (World Bank Institute), FAO (Food and Agriculture Organization), WFP (World Food Programme). Washington DC.

(e) Monitoring and assessment framework

Monitoring and assessment for CSA should be integrated into existing measurement and assessment

systems for agriculture and climate responsible development: simple results based systems should be

used. A results based management framework is “a management strategy focusing on performance and

achievement of outputs, outcomes, and impacts” (OECD, 2008). It is a results chain that specifies the

link between the activities and the objectives of an intervention, from inputs, which support activities

that generate outputs, outcomes (and eventually impacts, though these are often difficult to measure

over a short to medium term time frame). 3Different agencies have somewhat different approaches and

there is no single “right results framework”.

Capacity for monitoring and evaluation needs strengthening in many countries. In a global survey of

more than 200 agriculture and M&E professionals, more than half of respondents characterized

agricultural M&E as ‘weak’ or ‘very weak’, and just over a third characterized it as adequate or better

(Lindstrom 2009). Functions of M&E that were viewed by a majority as strong were its functions in

supporting practical improvements in projects, donor accountability and ensuring alignment of

interventions with policy and strategy, while accountability to and empowerment of beneficiaries were

typically characterized as weak. Also the public goods nature of impact evaluations and the delayed

accrual of benefits to investors may provide weak incentives for investment in impact evaluation.

Measurement of adaptation is currently a debated topic, There are both theoretical and practical

reasons why there is no single approach to measurement of adaptation, adaptive capacity or of inverses

such as vulnerability (Hinkel 2011). Measurement of adaptation (or vulnerability) in general is hampered

by difficulties in defining the concept to be measured and the interaction of multiple factors which vary

geographically, at different scales and over time. Moreover, the purpose of measuring adaptation is

often poorly defined by policy makers (Hinkel 2011). Despite these difficulties, indicators have been

developed in a number of countries (see Mexico above and the PPCR countries) and are being applied.

OECD countries are also attempting to address these issues. In the UK the aim is to integrate national

adaptation plans and other supported adaptation actions with departmental and ‘whole-government’

development approaches. While this benefits implementation, it makes it difficult to measure the

impact of specific actions as opposed to the performance of the whole system. The UK has responded to

these multiple challenges by devising a flexible and multi-dimensional approach to measuring

adaptation (DEFRA 2010). Drawing on existing data collection channels has been identified as important

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for making such measurement feasible and less costly (DEFRA 2010, Hinkel 2011). OECD countries more

broadly have also argued for this approach.

Approaches to monitoring mitigation and the carbon footprint of operations are better developed,

through REDD strategies, through carbon footprinting tools such as the ex ante appraisal (FAO7, with

partnership of World Bank8, IRD9, IFAD, ADB...) and at value chain and at farm level (FAO10, USDA,

Unilever, ...), and through pilot carbon finance operations.

The attached chart illustrates a framework to compare impact of investment or policy options on the whole set of adaptation/resilience, food security- vulnerability and mitigation areas as in analysis used for assessment of the CAADP investment plans (FAO, 2011). Marginal abatement costs curves have also been developed to compare the cost effectiveness of different activities within low carbon development strategies11.

Improving broad information and data collection and availability is a priority in many developing countries. Policy formulation of climate smart agriculture strategies needs to be based on reliable information, including good quality data, documented vulnerabilities and accurate evidence in order to design targeted climate change strategies and interventions. Frequently these data are lacking or only available for some sub-sectors. In Africa, for example, while estimates of food produced for subsistence are generally monetized and reflected in GDP estimates, this is often not the case for timber and non-timber forest products. For example, the FAO Global Forest Resource Assessment, records the value of non-timber forest products in Europe as US$ 7 billion (where they are of minor economic importance) compared with US$ 0.5 billion in Africa, where they are of much greater importance. This gap has relevance in particular for prioritizing climate-smart approaches, whose benefits often include elements which are not easily monetized12.

7 Bockel et al, Mainstreaming carbon balance appraisal of agriculture projects and policies? A tool for measuring

Carbon-Balance in Ex-ante Project-Programme Impact Appraisal http://www.oecd.org/dataoecd/17/3/44781061.pdf 8 http://www.fao.org/fileadmin/templates/ex_act/pdf/case_studies/rwanda_LWH.pdf 9 http://www.fao.org/fileadmin/templates/ex_act/pdf/Bernoux_LD4-Panel2.pdf 10 http://www.fao.org/fileadmin/templates/ex_act/pdf/Climate_Mitigation_Potential_of_Rice_Value_Chain_EN_Mar.pdf 11

See, for example, “Analysis of GHG marginal abatement cost curves’, Jasper Favor et al Delft 2011 12

A program is under way to pilot valuing natural capital in national accounts through the WAVES (Wealth and Valuation of Ecosystems Services) initiative using country led approaches. Botswana, Madagascar, Colombia, Costa Rica and Philippines are participating at present, together with a number of OECD countries including Norway and Spain. The initiative is not discussed in detail in this chapter.

www.fao.org/tc/exact

Multi-criteria assessment of Climate-smartness of planned investments

Adaptation: Reducing vulnerability related to slow

onset climate change (increasing system

resilience)

Mitigation: Comparison against a

business as usual growth baseline

Dimensions of system resilience Reducing

vulnerability

to extreme

events

Carbon

sequestration:

C sequestered

(tCO2/ha) (net

balance)

GHG

emission

reductions:

GHG

reduced

(tCO2/ha)

(net

balance)

GHG

emission

efficiency:

GHG

reduced

from

increased

efficiency of

production

(tCO2/unit of

product) (net

balance)

Increase

physical

resilience

Increase

economic

resilience

Increase

social/human

resilience

Water

quantity

and

quality

Soil

resource

& soil

fertility

Seed

resources

Livestock

Income

diversification

Equity, risk

management

and off-farm

earnings

Diversity of

employment

opportunities

Health and

social services

Markets

Extension

and research

Technical

know-how

Connection to

social

networks

Education

and training

Information

management