Carbon and Agriculture: The Big Picture

Shefali SharmaInstitute for Agriculture and Trade

Policy6 December 2010, Cancun

Agriculture: The Complex Story

• Agriculture Sector is much more than a “source” or “sink” of greenhouse gas emissions

• It is multifunctional and touches on many aspects of our lives (food, fuel, fiber, culture, biodiversity, trade)

• Provides livelihoods for over 70% of the population in the Global South

Problematique: Growing food demand and population by 2050 requires massive increases in food production

Proposed Solution: Intensification of Agriculture using which methods? Which Technologies?

Problematique: Bulk of mitigation potential for agriculture in Global South and in soil carbon

Proposed Solution: Soil carbon sequestration, both as means of financing ag investment and reducing greenhouse gases

Ignores: Current causes of food insecurity; drivers of deforestation. Fails to address extreme market concentration and the “hourglass” shape of the agriculture sector that drives production and consumptions choices; land tenure and rights; financial markets and price volatility

We currently produce enough food to the feed the world; but over a billion people are food insecure today

Hourglass Shape of the Sector

Consumers

Vertical and horizontalMkt Concentration of Agribusiness in ag inputs,grain trading, milling and processing, retail

Ability to set buyer and seller price by oligopoly structure

Producers

1.5 billion peasants on 380 million farms800 million people growing urban gardens410 million gathering the hidden harvest of forests

and savannas190 million pastoralists100 million peasant fishers

In addition 370 million of these are also indigenous people

Source: IAASTD

Who Produces Our Food? Small scale farmers, Fisher-folks and Pastoralists

(Women)

A viable Food Future 2010

Yet disenfranchised by• Ever decreasing agriculture investment in agriculture

(public); failure of private sector to deliver • Agriculture prices below the cost of prod; price

volatility• Land tenure issues—insecurity of land; control over

natural resources• Increased risk—export markets; no safety nets• No infrastructure: roads; storage• Lack of affordable/ecological inputs that are adaptive

as well as contribute to mitigation• Incentives for proprietary, costly technologies and

practices that do not necessarily result in increased yields but increase risk

Solutions should focus on adaptation

• Put food producers at the center

• Focus on “Not just Carbon” but practices that are able to deliver on mitigation benefits (organic; agroecological approaches)

• Address biodiversity, essential for resilience

• Put animals back on the farm and out of factories

• Internalize costs of production and address systemic issues

Soil Organic Matter

Living Carbon

• Holds water

• Cements soil particles and reduces soil erosion

• Increases nutrient storage & availability

• Humus can last 2000 years in the soil

(slide reproduced from IFOAM)

Electron micrograph of soil humus

K

The IAASTD Reports

(www.agassessment.org)

Multi-stakeholder: 400 authors, 52 countries

Multi-disciplinary

Multi-locational: Global / sub-Global Reports

Mitigation: Where do we begin?

“Please eat less meat. Meat is a very carbon intensive commodity.”

Rajendra Pachauri, Chair IPPC, Nobel Laureate 2007

(Reproduced from Niggli, U. Fibl www.Fibl.org)

Soil Carbon and Markets

• Will carbon mkts provide reliable funding for small holders?

• Who will control the price for carbon?

• What role of speculators?

• Leakage and permanence; MRV of soil carbon

• Transaction costs?

Climate change

policy

Governments

Caps

Allocations

Sellers:

-co’s/ compliers

- proj developers

-speculators

Exchanges/

Brokers

Buyers:

- compliance

- speculative

GHG offset

projects

GHG

reductionsVerifiers

Certifiers

Crediting

agency

Carbon funds &

other financiers

Project

developers

Carbon trading

Other strategies

to reduce GHGs

establish

set

certify

verify

createfinance

develop/

finance

apply to

issue

trade

trade

return return

distribute

Host

government

apply to

approve

Allowances

Offset

credits

trade

The “private” carbon market without government subsidies, supply and demand

Price and volume volatility in the EU’s ETS trades: 2006-2008 (J. Mason)

OTC metric tons of carbon vs metric tons in regulated exchanges

Unregulated and non-transparent financial trade window called “over the counter trade” (OTC) has helped to severely destabilize commodity markets.

Financial speculators can make unlimited bets through this window. The US market in Over the Counter trading is worth $300 trillion (Bank of Int Settlements, 2008).

Unfair price info. advantage to traders since OTC not reported.

In 2008, 44% of carbon traded on the European Emissions Trading Scheme was through over the counter trade. And EU looking to include terrestrial carbon into ETS.

Role of Speculation in food and ag

• Between 2007 and the spring of 2008, the food price index shot up by 85%, then in a few months, agriculture commodity prices fell by 60%.

• Massive price spike and drop was devastating for developing countries, particularly net-food importers; increased price of inputs because linked to oil

• Drove another 150 million people into hunger. According to UNCTAD, the extent of price volatility during the food crisis cannot be attributed to supply and demand alone

• Wide consensus that speculation on commodity markets by financial traders had a significant role to play in creating the crisis.

Concluding Remarks

• Proposals seeking to include all land-based activities into calculations for emissions and for sinks

• Expansion of CDM into soil carbon

Yet numerous questions remain about rights; science; equity, risks and benefits to small farmers

Transaction costs are real: FAO estimates close to 17 billion euros between 2010-2030 to run mitigation projects. IPCC and FAO estimates for adaptation range in the billions (60 billion USD).

•These schemes cannot work without financial support from governments, intergovernmental organizations like the World Bank (which is public money).

•No data on the breakdown of payments between carbon developers/managers and actual small holders.

Our responsibility to prioritize adaptation with mitigation benefits. Solutions exist.

Business As Usual Is No Longer An Option.

Thank You!

ssharma@iatp.org