Agricultural Investment in a Time of Climate Change

1. Agricultural Investmentin a Time of Climate Change New Tools and Approachesfor Improving Investor Decision-Making and Producer Uptake

2. Recent, Ongoing FAO Work on Climate Change Tools • Mitigation: EX-ACT (Ex-Ante Carbon-balance Tool) – Determining the carbon balance of investments • http://www.fao.org/tc/tcs/exact/ex-act-tool/en/ • Adaptation: CLIMPAG – Assessing the impacts of climate change on agricultural yields • http://www.fao.org/nr/climpag/

3. EX-ACT Background • Agriculture is a major source of GHG, contributing 14% of global emissions. CC mitigation potential for the sector is high, and for the largest part (ca. ¾) located in developing countries. Many technical options are available, that however require changes in agricultural technologies and management practices: • Reducing CO2 emissions through reduction in the rate of deforestation and forest degradation, adoption of improved cropland mgmt. practices (reduced tillage, integrated nutrient & water mgmt.); • Reducing CH4 and N2O emissions through improved animal production and mgmt. of livestock waste, more efficient mgmt. of irrigation water on rice paddies, improved nutrient mgmt.; and, • Sequestering carbon through CA and improved forest mgmt. practices, afforestation and reforestation, agro forestry, improved grasslands mgmt., restoration of degraded land.

4. EX-ACT Background (cont.) • Nevertheless, there is a lack of methodologies to guide the integration of significant mitigation effects into the project/programme design process, and hence the decision making on funding aspects, complementing the usual ex-ante economic analysis of investments projects. • To fill this gap, three FAO divisions (Policy and Programme Development Support Division, Investment Centre Division, and Agricultural Development Economics Division) joined efforts to develop the EX-ACT tool, aimed at providing ex-ante estimations of the impact of agriculture and (agro)forestry development projects on GHG emissions and Carbon sequestration, indicating its effects on the Carbon balance.

5. EX-ACT: Logic, Contents and Outputs The logic behind the EX-ACT tool(with/without project situation comparison): • EX-ACT consists of a set of linked Excel sheets in which the project designer will insert basic data on land use and management practices foreseen under the project activities; • The main output of the tool is the C-balance resulting from project activities. The environmental services supplied by the project could then be priced, valued and incorporated in the economic analysis. Also, a set of indicators will complement the economic analysis providing information about the efficiency of the project in providing environmental services or the potential contribution of such services to farm incomes.

6. EX-ACT: Testing and Wide Scale Implementation • EX-ACT went through a peer-review process in order to be adopted in international organizations and donor agencies involved in agriculture and (agro)forestry investment projects. • After testing in a series of real-life cases (mostly IFAD projects) the tool is now available for free use by donors/IFI, technical agencies and development practitioners worldwide. Appropriate training, software updating and technical quality monitoring framework are being put in place. • Initiated for being used at project and program level, the tool will also be tested to be used in national sector strategies and policies (e.g. to compute the C-balance of aggregated agriculture sector strategies and policy options) or for regional initiatives.

7. CLIMPAG: Evaluation of Climate Change Impacts on Agricultural Yields • Adaptation practices require extensive high quality data and information on climate, and on agricultural, environmental and social systems affected by climate, with a view to carrying out realistic vulnerability assessments and looking towards the near future. • CLIMPAG is aimed at bringing together the various aspects and interactions between weather, climate and agriculture in the general context of food security. • It contains methodologies and tools (including modeling) for a better understanding and analysis of the effect of the variability of weather and climate on agricultural yields as well as data and maps.

8. CLIMPAG: Overall Picture Climate Projections – based on modeling Physical impacts on main crops and rangelands – livestock activities Impacts on farming systems Economic impacts Policy adaptation options – investment decisions

9. CLIMPAG: Data Available • A variety of data and tools are made available including: • climate indicators; • global climate grids, climate maps; • rainfall variability data; • climate monitoring; • climate risk and spatial interpolation.

10. CLIMPAG: Hotspots/Natural Disasters • Specific analyses provided on hotspots, i.e. areas where conflicts between the environment and agriculture disrupt agricultural production • For example, global water stress maps indicate areas where an excess or deficit of rainfall will have adverse impacts on agriculture • Analyses of natural disaster impacts on agriculture also provided through CLIMPAG • RADAR (Rapid Agricultural Disaster Assessment Routine)

11. CLIMPAG: Advice and Warnings • Recommendations provided based on synthesized data analysis; • Advice and warnings section provides information on: • Communication to farmers; • Crop insurance; • Frost protection; • Response farming; • Crop monitoring and forecasting.

12. CLIMPAG: Conclusions • Variety of information, easily accessible; • Useful tools in making agricultural policy and investment decisions; • Climate projections and modeling require reliable country-level agro-meteorological data series, adequate grid size; • Assumptions on technology trend may be predominant factor in models.

13. Mainstreaming Climate Change Adaptation/Mitigation in Investment Operationswith FAO Investment Centre Involvement • Illustrative List of Projects (total resources mobilised US$1.6 billion):

14. Mainstreaming Climate Change Adaptation/Mitigation in Investment Operationswith FAO Investment Centre Involvement • (cont)

15. Mainstreaming Climate Change Adaptation/Mitigation in Investment Operationswith FAO Investment Centre Involvement • (cont)

16. Mainstreaming Climate Change Adaptation/Mitigation in Investment Operationswith FAO Investment Centre Involvement • (cont)

17. Mainstreaming Climate Change Adaptation/Mitigation in Investment Operationswith FAO Investment Centre Involvement • (cont)

18. Mainstreaming Climate Change Adaptation/Mitigation in Investment Operationswith FAO Investment Centre Involvement • Summary:

19. Mainstreaming Climate Change Adaptation/Mitigation in Investment Operationswith FAO Investment Centre Involvement • (cont)

20. Mainstreaming Climate Change Adaptation/Mitigation in Investment Operationswith FAO Investment Centre Involvement • Sample summary: For additional info, queries on this topic, please contact Ms Katia Medeiros (FAO/TCI), EM: Katia.Medeiros@fao.org

21. Key Issues • Intensified experience sharing and stocktaking between practitioners and development institutions on how to address perceived needs/issues to foster adoption of novel CC related tools and approaches, which include: • Usually the main objectives of the investment project are not to mitigate or adapt to CC (stand-alone CC projects are still rare in our work); • Need for more clear and measurable CC adaptation/ mitigation elements for use in project design and implementation; inclusion of specific indicators; • IFI CC policies are clear at the conceptual level, but guidance on how to incorporate them into project design is lacking; • In some cases, better defined countries’ key priorities, enabling policies and operational regulations are needed.

22. Thank You