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Boosting climate finance for sustainable food systems

June 12, 2023
topic:Climate action
tags:#food security, #carbon credits, #climate action, #COP28, #Sustainable Agriculture
located:Spain, India, Uruguay
by:Chermaine Lee
Food systems are responsible for one-third of global greenhouse gas emissions. Can carbon trading in agriculture help curb them?

Boosting climate finance to curb greenhouse gas emissions in the agricultural food system is a necessary step in order to achieve countries’ ambitious net zero goals, experts said at the Innovate4Climate summit organised by the World Bank in Bilbao, Spain in late May. 

Food systems are currently responsible for one-third of global greenhouse gas emissions, roughly 70 percent of which emanate from agriculture and land use activities. However, a report from the Climate Policy Initiative (CPI) revealed that only 4.3 percent of the world’s climate finance was spent on agrifood systems in 2019 and 2020. 

Daniela Chiriac, manager of climate finance at CPI, said at a panel during the conference in Bilbao that climate finance to mitigate greenhouse gases in the agrifood system needs to be up sevenfold for proposed solutions to work.

Climate finance gap

"In the case of the agricultural production segment," Chiriac told FairPlanet after the panel, "the gap is the most striking, as it received only 0.7 percent of total climate finance while being responsible for almost 14 percent of global GHG."

Climate finance has been hailed as a crucial factor in enabling countries to effectively implement their national determined contributions and mitigate the impacts of climate change, as outlined in Article 6 of the Paris Agreement. However, despite some countries taking the initiative to establish their own carbon trading systems, the operational intricacies of these mechanisms are still under active discussion and deliberation.

Carbon credit trading enables individuals or companies to engage in the buying or selling of verified and measured quotas of greenhouse gases from one another. Credits are issued when greenhouse gases are sequestered, reduced, or avoided. This trading practice primarily takes place in two markets: compliance and voluntary trading. Compliance trading is regulated and enforced by the government, while voluntary trading operates on a voluntary basis.

Chiriac explained that the challenges for insufficient climate finance in agrifood systems so far mostly stem from the fragmented nature of crops, agricultural practices and technologies. Since a lot of the carbon sequestration potential largely depends on local contexts, measuring and monitoring carbon sequestration for trading is challenging, she added. 

"These uncertainties deter investments […] Agriculture is perceived as inherently risky by investors and requires high transaction costs," she said. For small-scale farmers, who represent about 95 percent of farms around the world and provide up to 80 percent5 of food produced in Asia and Sub-Saharan Africa, such high costs can curb their passion in voluntary carbon trading. 

For countries in the Global South, which disproportionately experience the detrimental consequences of human-induced climate change, the current level of climate finance at approximately USD 630 billion per year falls significantly short of the required amount. Estimates suggest that up to $6 trillion per year will be needed until 2050 to adequately address the challenges at hand.

Chiriac further stated that capacity-building for carbon trading systems is crucial. 

"Enhancing the capacity of agri-businesses can act as de-risking mechanisms for investments in the sector. Increased technical capacity of agri-enterprises, especially in the areas of business management and accounting diminishes their risk of default," she explained. 

Uruguay: greening livestock farming

During a panel discussion at the I4C conference, Cecilia Jones, a climate change advisor at Uruguay's Ministry of Agriculture, emphasised that public finance allocated to mitigation and adaptation projects falls short of what is needed.

Uruguay, being one of the world's largest beef producers and exporters, has been actively exploring methods to reduce methane emissions in its livestock farming sector, which is responsible for nearly 80 percent of the country's total methane emissions.

As outlined in Uruguay's Nationally Determined Contributions (NDC), the country aims to achieve a reduction of up to 46 percent in methane emissions from beef production. 

One of the strategies being investigated by Jones' team involves soil organic carbon capture. This approach entails replenishing soil carbon and nutrients by regularly relocating animals to fresh pastures, thus preventing overgrasing.

"We are interested in being able to quantify the positive impact of good livestock practices in increasing soil organic carbon to mitigate GHG emissions. We hope to increase capture and therefore contribute to the Paris Agreement goals," Jones told FairPlanet after the panel. "That line of work is independent from the potential development of a carbon credit system."

Uruguay is actively considering various other measures to effectively curb methane emissions in its livestock farming sector. These measures align with similar efforts being pursued globally and encompass research into feed additives that have the potential to minimise methane generated through enteric fermentation, which refers to the burps produced by cows and sheep.

India: incentivising farmers for carbon trading

In South Asia, India made a significant move by unveiling a draft carbon credit trading scheme in April. As the world's second-largest rice producer, closely following China, India acknowledges that rice cultivation contributes to 10 percent of global methane emissions. Therefore, the government is actively striving to curtail emissions and achieve its ambitious net-zero target by 2070.

With its substantial population, India continues to be home to a quarter of the world's undernourished individuals, while one in five residents lives in poverty. Consequently, balancing the imperative to implement sustainable practices with the need to maintain high yields holds paramount importance for the country.

The presence of vested interests in carbon trading has been evident throughout, as exemplified by a private initiative launched earlier this year. This program has established a carbon trading project in rice-growing states such as Punjab and Haryana, offering farmers the opportunity to earn carbon credits. By adopting sustainable practices such as low-till and direct seeding techniques as alternatives to the conventional method of heavy ploughing, farmers can effectively preserve carbon.

According to reports in local media, approximately 45,000 acres of rice paddy have already enrolled in this initiative. The program aims to sell the carbon credits and reinvest 75 percent of the generated revenues back into the farmers' welfare. This not only incentivises the adoption of environmentally friendly practices but also ensures that the benefits of carbon trading flow directly to the individuals at the heart of sustainable farming efforts.

During a panel discussion at the I4C conference, the Indian government's Project Director emphasized that the challenge of implementing a national carbon credit trading system lies in ensuring food security and fairness for farmers.

"We need to incentivise farmers to promote low-carbon agriculture. It’s a tall order: how do you make sure that they get a fair price from the carbon credit market? Soil carbon credits can be a way forward […] Procedures can be simplified to boost access to this system."

World leaders are expected to hash out the details of Article 6 at the annual United Nations climate change summit COP28 in November this year.

Image by James Beltz.

Article written by:
Chermaine Lee
Asia Desk Editor
Spain India Uruguay
Embed from Getty Images
Food systems are currently responsible for one-third of global greenhouse emissions.
Embed from Getty Images
Climate finance has been hailed as a crucial factor in enabling countries to effectively implement their national determined contributions and mitigate the impacts of climate change.
Embed from Getty Images
The challenge for a national carbon credit trading system is to ensure food security and fairness, according to Indian government’s Project Director at a panel in I4C conference.