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: 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 assessment 1. 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 assessment 1. Establish key parameters of assessment DivisionsGroupsClasses 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 Animal production Cattle & 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

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:   

 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  A s 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

Estimate current I&FF for the sector Type of flowType of physical asset Investment flows Agricultural & livestock development Agricultural land resources & water resources, pastures Agricultural inputs Food crop & cash crop production Livestock Agricultural alternative development Financial flows Agricultural extension & reform, grassland management Policy & planning Education/training Agricultural & livestock research & services Plant/post-harvest protection & pest control Agricultural & livestock financial services Agricultural co-operatives Livestock/veterinary services

4. Derive I&FF for baseline scenario Estimate annual I&FF Cumulative investment* ( ) Funding entity categorySource of funds (billion 2005 $)(%) 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 MeasureMitigation measureExamples Field levelCropland managementNutrient 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 managementImproved feeding practices, specific dietary additives, animal breeding Manure/ biosolid management Improved storage & handling, anaerobic digestion, efficient use as nutrient source Bio-energyEnergy crops, solid, liquid, biogas, residues Research, education etc. Sector-wideDiffusion 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 ( ) Unit cost Facility/Technology Drought-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 scenario Cumulative investment ( ) Funding entity category Source of funds(billion 2005 $)(%) HouseholdsEquity & 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 ( )Incremental Funding entity category Source of fundsBaseline scenario Mitigation Scenario Households Equity & debtBaseline 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 option Regulations and standards Taxes & charges Tradable permits Subsidies & incentives Information instruments Reserach & development Voluntary agreements DefinitionSpecific 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 BenefitGood 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 ChallengesNo 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

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