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CLIMATE CHANGE: CRISIS and OPPORTUNITIES

CLIMATE CHANGE: CRISIS and OPPORTUNITIES. CAP Reform: entrepreuneurial opportunities in the enlarged EU ELO Conference, Brussels, 6 & 7 November 2003. Climate Change Mitigate risks while promoting sustainable rural development. François Falloux Vice Pr e sident, Eco-Carbone

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CLIMATE CHANGE: CRISIS and OPPORTUNITIES

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  1. CLIMATE CHANGE: CRISIS and OPPORTUNITIES CAP Reform: entrepreuneurial opportunities in the enlarged EU ELO Conference, Brussels, 6 & 7 November 2003

  2. ClimateChangeMitigate risks while promoting sustainable rural development François Falloux Vice President, Eco-Carbone ELO, Brussels, November 6th, 2003 Ffalloux@wanadoo.fr

  3. Five questions • Is there a real climate change crisis? • What can be done about it? • Adapting to Climate Change (CC)? • And/or mitigating the CC Risk? • How can farmers adapt to CC? • Mitigating CC risk and promoting sustainable agriculture: missed opportunity? • How to grasp it in rural Europe? Possible role for ELO?

  4. Five preliminary remarks • Focus on carbonbio-sequestration…but, • Links among carbonsequestration, GHG emission reduction and biomass energy • Virtuouscircle with quality water resources • Kyoto, a first small step R&D but stronger constraints to be expected • CAP Reform and Climate Change: 2 parallel stories until to now

  5. Kyoto Protocol: expectedimpact GHG With Kyoto Without Kyoto Time

  6. Q1. Is there a Climate Crisis?

  7. Historical and Projected Future (ppm, CO2)

  8. An emerging crisis building up… • Last years, particularly 2003, the hottest… • Towards a double CO2 before 2100 • Impact on climate and agriculture • Other impacts on biodiversity/forestry, water supply and coastal zones • High expected costs but winners and losers • But, still uncertainties…

  9. Q2. What can be done globally about the CC risk?

  10. Initiatives to reduce risk • Uncertainties  Precaution Principle • UNFCC signed in 1992 • The Kyoto Protocol (1997) and its current impact despite non-ratification • Both adaptation to climate change and reduction of GHGs • Not to forget the likely losers…

  11. Q3. How can farmers adapt to CC?

  12. Adaptations measures from farmers • CC adaptation, a neglected field worldwide including in Europe; • Incorporating CC risk at the macro level: • Agricultural sector planning in relation to extreme events (droughts and flooding); • Effort in meteo information and forecasting; • Institutional development (research, extension, farmers associations); • Agricultural insurance and re-insurance; • Incorporating CC risk at the farm level: • Applying risk factor in investment decision making; • Developing alternative strategies.

  13. Q4. Are there opportunities to mitigate CC risk while promoting sustainable agriculture?

  14. Yes! Emerging carbon market • It grows every day despite uncertainties • From 1996 to 2000: slow growth • Acceleration starting in July 2001 with about 60Mt of C-equivalent transacted so far for about $500 million • Expected fast increase to reach 500Mt of C/year in 2008 meaning $5 to $10billion! • Current average price of $6 to7/t of CO2-equivalent but wide range • 1t of C-equivalent = 3.6t of CO2-equivalent

  15. Carbon Market 2001-2002 • About 100 million tons of CO2!

  16. Emerging carbon market $billion Source: World Bank Study 1998 & 2002

  17. Some Financial Mechanisms • World Bank Carbon financing with 5 funds (PCF, BioCF, CDCF, NCDF, Italian CF) => leading the carbon business today. Hence importance to have the World Bank seal! • The Dutch System • The English Market • Chicago Climate Exchange • Internal Markets within large oil companies

  18. $ $ Mutual Fund Carbon Projects Entreprises Multinationals and Govts.. C credits C Credits New Financial Mechanisms

  19. But the C opportunity almost not used in European agriculture and land management so far despite large potential!

  20. Potential: storing carbon and reducing GHGs in rural areas • Promoting no tillage, without decreasing yields • Up to 60t of C captured per ha • 60% less fossile fuel consumption • 40% less fertilizer consumption • Large risk mitigation (drought resistance, water pollution) • Rehabilitating landscape with hedges, reforestation • Improving waste management while producing energy • Producing biofuels without having to “freeze” lands

  21. Two interesting cases • Brazil: • 15 million ha of no-tillage and growing • Additional storage of up to 50t-C/ha • Substantial decrease of production costs • ~50% in fossil fuel consumption • ~40% chemical fertilizers • USA • About 20 million ha of no-tillage • Similar benefits

  22. No tillage in the State of Santa Catarina Brazil

  23. Source USDA CO 2

  24. Is Europe behind ? • Less than 1 million ha of no tillage and C sequestration not yet regarded as a priority • European eco-systems less fragile • Climate change not integrated in European CAP so far • Yet similar benefits could be expected as in Brazil and the USA • Network in progress such as ECAF

  25. Possible Future Directions… …for European Agriculture

  26. Integrated landscape approach • Rehabilitating hedges and windbreakers • Reforesting areas marginal for agriculture • No tillage • Biofuels production • Waste management and energy production • Towards integrated contracts • Farmers associations role • Food industries, e.g. Sustainable Agriculture Initiative (SAI)

  27. CO2 WITHOUT PROJECT SITUATION (Baseline) Biomass and Residues Production Energy Agro-industrial Benefits Vinasse Storage Organic Fertilizer CH4 & N2O Burning CH4 Sugarcane Alcohol/Sugar Electricity For the Mill Storage Bagasse COGEN CH4

  28. WITH PROJECT SITUATION Biomass and Residues Production Energy Agro-industrial Benefits Environmental Benefits Carbon Sequestration Vinasse Storage Organic Fertilizer Biogas Sugarcane Alcohol/Sugar CO2 Soil Fauna Diversity Bicarbonates Litter Heat & Power for the Mill Storage Bagasse COGEN Decomposition Erosion Control Electricity to the Grid CH4 & N2O Soil Carbon Charcoal Other Benefits: Health Forest Wood

  29. Q5. How to grasp the CC opportunity in rural Europe and possible role for ELO?

  30. CC opportunity in rural Europe and possible role for ELO • Increase lobbying for incorporating climate change in CAP • Promote the integrated approach linking energy, GHGs reduction and C sequestration • Promote CC related pilot projects in European rural areas • Set up multi-partnerships involving ELO, ECAF, SAI (food industry), etc. • Strengthen public/private partnerships in this integration • European Carbon Funds for rural development?

  31. Conclusions (1) • Climate change, an opportunity to seize • A way to cover a substantial part of the new investment through the sale of carbon credits • Potential to bring co-investors • Potential to improve financial results combined with an improved green image • But some key conditions to be met…

  32. Conclusions (2) • But some key conditions to be met: • Integrating carbon right at the beginning of the diagnosis • Having key carbon buyer booked a.s.a.p. • Solid transparent baseline proving additionality • Robust carbon measurement program • Integrated approach: a way to increase C credits, mitigate risks for C buyers and therefore attract them • Eco-Carbone ready to help meet these conditions

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