Assessing Investment & Financial flows for Mitigation in the Agriculture Sector

UNDP I&FF Methodology Guidebook: Mitigation

Agricultural activities generate a large share of the world’s anthropogenic non-CO2 emissions, accounting in 2005 for about 41% of N2O & about 47% of CH4

CO2 is released largely from microbial decay or burning of plant litter & soil organic matter

REGIONAL CENTRE: PLEASE PROVIDE PIE CHART OR GRAPHIC: WHAT ARE THE APPROXIMATE GHG EMISSIONS FROM THE AGRICULTURE SECTOR (DIFFERENT CROPS) IN THE RESPECTIVE COUNTRY?

Definition of the agriculture sector

Define scope & boundaries for the assessment

Define the institutional framework Specify the time horizon for the

analysis: 2005-2030 recommended Build on existing model for the sector

where possible Estimate contribution of agriculture to

overall GDP

1. Establish key parameters of the assessment

Define boundaries for the assessment1. Establish key parameters of assessment

Can include Production and/or processing of

agricultural products Food crops, floral crops, nursery plants,

agri-biofuel crops non-food crops … Livestock: certain species, certain

diseases, lifestock fodder … Diary production and/or processing

Scoping the agriculture sector

Define boundaries for the assessment1. Establish key parameters of assessment

Divisions Groups Classes

Crop & animal production, & related service activities

Growing of non-perennial crops

Cereals, leguminous crops & oil seeds, vegetables, roots, tubers, …

Growing of perennial crops

Tropical & subtropical fruits, pome fruits & stone fruits, other tree & bush fruits & nuts, …

Plant propagation Plant propagation

Animal productionCattle & buffaloes, horses & other equines, camels & camelids, sheep & goats, swine & pigs, …

Mixed farming Mixed farming (crops & animals)

Support activities to agriculture & post-harvest crop activities

Support activities for crop production, animal production, …

Data collection, rely on national accounts data The System of National Accounts (SNA) constitutes the

primary source of information about the economy Systems of integrated environmental & economic accounts

(SEEA) were developed to address statistical gaps Other sources: Agriculture Inventories, National

Communications, FAO agriculture product reports etc.

2. Compile historical I&FF data and other input data for scenarios

2. Compile historical I&FF data and other

input data for scenarios

Data collection, rely on national accounts data

Examples of I&FF data disaggregation in each sub-sector

2. Compile historical I&FF data and other

input data for scenarios

Data sources

Data sources complementing national sources

FAOSTAT: Contains data on crop & animal production, trade, & consumption; agricultural prices; agricultural resources; & food security:

http://faostat.fao.org/site/291/default.aspx

http://faostat.fao.org/default.aspx http://www.fao.org/statistics/countrystat

Define the physical basis for the Baseline Scenario

A baseline scenario: description of what is likely to occur in the absence of ADDITIONAL policies to address climate change; expected socioeconomic trends (e.g., population growth & migration, economic growth), technological change (if relevant), & expected business-as-usual investments in the sector.

3. Define Baseline Scenario

3. Define baseline scenario

Characterizing each relevant agriculture subsector over the assessment period Assuming no new climate change policies

are implemented Baseline scenario reflects

Current sectoral & national plans Expected socioeconomic trends Expected investments in the subsectors

Define baseline scenario

3. Define baseline scenario

Define physical basis for the Baseline Scenario

Baseline scenario reflects Current sectoral & national plans Expected socioeconomic trends Expected investments in the subsectors

Information should be disaggregated by Year (starting 10 years before the Base Year) Source (by corporations & government) Type (national funds, foreign direct

investment, official development assistance)

Estimate current I&FF for the sector

Project future I&FF As far as possible, project sub-sectors

first & then aggregate the I&FF for the whole sector.

If not information over planning period available, analyze agricultural product supply/demand relationships for the country by comparing the projection of future demand for agricultural products with available annual timber yields, harvested sustainably.

4. Derive I&FF for baseline scenario

4. Derive I&FF for baseline

scenarioEstimate current I&FF for the sector

Type of flow Type of physical asset

Investment flows

Agricultural & livestock developmentAgricultural land resources & water resources, pasturesAgricultural inputsFood crop & cash crop productionLivestockAgricultural alternative development

Financial flows

Agricultural extension & reform, grassland managementPolicy & planningEducation/trainingAgricultural & livestock research & servicesPlant/post-harvest protection & pest controlAgricultural & livestock financial servicesAgricultural co-operativesLivestock/veterinary services

4. Derive I&FF for baseline

scenarioEstimate annual I&FF

Cumulative investment*(2005-2030)

Funding entity category Source of funds

(billion2005 $) (%)

Households Domestic funds

Governments

Domestic funds (budgetary)    Foreign borrowing (loans)    Foreign aid (ODA)    

Corporations

Domestic equity    Foreign investment    Domestic debt    Foreign borrowing    Government support    Foreign aid (ODA)    Total    

Adding costs to baseline scenario

* Drought-resistant seeds (2005 $/unit), machinery(2005 $/piece), fertilizers (2005 $/kg), irrigation channels(2005 $/meter) …

Define the physical basis for the Mitigation Scenario A Mitigation scenario: description of what is likely to occur when

mitigation measures are taken; & required investments in the sector to implement them

The mitigation scenario should also describe expected socioeconomic trends, & technological change (if relevant)

5. Define Mitigation scenario

5. Define mitigation scenario

Two approaches to define Mitigation Scenario

3 broad mechanisms through for mitigation in agriculture sector

Reducing emissions: More efficient management of carbon & nitrogen flows in agricultural ecosystems

Enhancing removals: Recovering carbon lost by agricultural ecosystems through improved management, & withdrawing atmospheric CO2

Displacing emissions: Using crops & residues from agricultural lands as a source of fuel, contributing to biomass feedstocks for energy use

Define the physical basis for the Mitigation Scenario

5. Define mitigation scenario

Measure Mitigation measure

Examples

Field level Cropland management

Nutrient management, tillage, residue management etc.

Grazing land & pasture management

Grazing intensity, Increased productivity, nutrient management, Fire management, Species introduction

Management of organic/peaty soils

Avoid drainage of wetlands

Restoration of degraded lands

Erosion control, organic amendments, nutrient amendments

Livestock management

Improved feeding practices, specific dietary additives, animal breeding

Manure/ biosolid management

Improved storage & handling, anaerobic digestion, efficient use as nutrient source

Bio-energy Energy crops, solid, liquid, biogas, residues

Research, education etc.

Sector-wide Diffusion of new field-level practices, early warning, disaster management, Infrastructure development

Project I&FF associated with the Mitigation Scenario

Compile annual estimates, disaggregated by investment entity, source, investment flow type, & financial flow type

Estimate annual investment costs associated with the alternative management plan

6. Derive I&FF for Mitigation Scenario

6. Derive I&FF for mitigation

scenario

Project I&FF associated with the Mitigation Scenario

Adding costs to mitigation scenario

Cumulative infrastructure (2005-2030)

Unit cost

Facility/TechnologyDrought-resistant seeds

(# units purchased) (2005 $/unit)

Machinery (# tractors etc.) (2005 $/piece)

Fertilizer (# kg purchased) (2005 $/kf)

Irrigation channels (# meters installed)(2005 $/meter)

Total  

6. Derive I&FF for mitigation

scenario

Project I&FF associated with the Mitigation Scenario

Adding costs to mitigation scenarioCumulative

investment(2005-2030)

Funding entity category

Source of funds (billion 2005 $)

(%)

Households Equity & debt

Governments

Domestic funds (budgetary)    Foreign borrowing (loans)    Foreign aid (ODA)    

Corporations

Domestic equity    Foreign investment    Domestic debt    Foreign borrowing    Government support    Foreign aid (ODA)    Total    

Subtract the baseline annual I&FF, by entity & source, from the mitigation annual I&FF, by entity & source

Subtraction of the Baseline Scenario from the Mitigation Scenario

Sum incremental amounts over all years, by entity & source

7. Estimate changes in annual I&FF needed to implement adaptation

[

Subtract the baseline annual I&FF from the mitigation annual I&FF

7. Estimate changes in

annual I&FF needed to implement mitigation

For each chosen agriculture mitigation option, the analysis should identify the incremental investment (total dollars) by source (domestic funds, ODA, FDI etc.) up through 2030 to support the respective agriculture management option

[

Summarizing incremental investments

7. Estimate changes in annual I&FF

needed to implement mitigation

REGIONAL CENTRE: PLEASE INSERT COUNTRY FIGURES FOR THE TEST RUN

Investment (billion 2005 $)Cumulative (2005-

2030)Incremental

Funding entity category

Source of funds Baseline scenario

Mitigation

Scenario

HouseholdsEquity & debt Baseline

valueMitigation value

Mitigation minus Baseline value

Governments

Domestic funds (budgetary)Foreign borrowing (loans) … … …Foreign aid (ODA) … … …

Corporations

Domestic equity … .. …Foreign investment … … …Domestic debt … … …Foreign borrowing … … …Government support … … …Foreign aid (ODA) … … …Total

Sum(Baseline)

Sum (Mitigation)

Sum (Mitigation minus Baseline)

Determine policy instruments & measures to encourage changes in I&FF Identify the entities that are responsible for the significant incremental

changes in I&FF. Determine the predominant sources of their funds, distinguish between public & private sources of finance

Assess policy options & summarize the projected I&FF for the key sector When addressing policy options, social, economic & environmental

benefits should be assessed qualitatively

8. Evaluate policy implications

Assess contribution and suitability of different policy options given country conditions

8. Evaluate policy

implications

Examples of mitigation & policy optionRegulations and standards

Taxes & charges

Tradable permits

Subsidies & incentives

Information instruments

Reserach & development

Voluntary agreements

Definition

Specific abatement technologies or minimum requirements for pollution output

A levy imposed on each unit of undesirable activity by a source

Limits emissions by specified sources, each source holds & trades permits

Direct payments, tax reductions, price supports

Public disclosure of environm. information

Government spending and investment to generate innovation on mitigation

Agreement between government & private parties on environm. objectives

Benefit Good if clear thresholds can be defined & to ensure minimum standard

Efficient, on the long run development of new technology

Emission reductions are reached at the economically least cost

Easily accepted by private sector

Prerequisite for accept. of most other instruments.

Potential long-term benefit for national economy as research hub

Often favoured by industry because of their flexibility

Challenges

No incentive to go beyond the target

High coordination challenge, low short-term effect

Difficult to allocate initial shares to sources

Requires fiscal expenditures

Low effectivity if used alone

Almost no short- & medium-term effect

Often lack of enforcement

For more information on synthesizing results, documentation & the completion of the report, please refer to the Reporting Guidelines

9. Synthesize results and complete report

Q&A CLARIFICATIONS

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