Large-Scale Smallholder Farm Carbon Abatement Program by Conservation International

Investment Opportunity:25,000,000 USD
Organization:Conservation International-EverGreen Agriculture Partnership-World Vision

Globally, the agriculture sector is responsible for up to 10% of greenhouse gas (GHG) emissions. At the same time food production will need to increase by some 70% by 2050 to the meet the demands of a rapidly growing population. The majority of current and projected future agriculture-related GHG emissions come from low to middle income countries, where smallholder farmers predominate. While these farmers generally contribute low total GHG emissions, their emissions per unit of output is high, otherwise referred to as high emissions intensity. A range of GHG abatement and carbon sequestration opportunities exist on smallholder farms throughout low and middle-income countries including: increasing above and below ground woody biomass by massively scaling Farmer Managed Natural Regeneration (FMNR); reducing livestock emissions through improved management; increasing crop SOC, reducing fertilizer use and N2O emissions through low tillage, mulching and composting, and reducing residue burning.

The program will support at least 500,000 smallholder farmers and 1 million hectares of degraded farm and/or pastoral land in each country that joins the program. The program is modular and scalable and will launch in selected countries in East Africa, leveraging existing program capacity and field staff already in place by the partner organizations. The total emissions avoided or sequestered range from 4 to 6 tons of CO2 equivalent per hectare per annum. The project is planned to ramp up and scale rapidly to abate 35M tons of CO2 equivalent over the 10-year period per participating country. The carbon abatement program will be developed and managed by a central team to be known as the Carbon Development and Certification Unit (CDCU), reviewing the VERRA SALM methodology and Gold Standards Cool Farm Tool to quantify whole-of-farm GHGs and the market potential of each. An extension service model will be developed to support participating farmers across vast areas, and to monitor and record a range of activity data for each farm (e.g. number and type of trees regenerated, livestock data, crop management practices, fertilizer usage etc.). This model will include the training of community-based extension agents, who will provide services to their local smallholder farmers, equipping them with knowledge and increased capacity to undertake a range of sustainable farming activities to improve the sustainability, reliability and productivity of their farms, while increasing on-farm carbon stocks and reducing GHG emissions. These trained community members will be known as Community Agriculture Extension Officers (CAEO) and will be attached to existing farmer groups. The CAEOs will be financially rewarded through payment from carbon revenues. Payments will be based on the number of smallholder farmers the extension officer can bring into the program and the annual GHG reductions occurring under each farm within the extension officer’s jurisdiction. This proposed revenue sharing model will ensure CAEOs are motivated to bring farmers into the program and to also ensure monitoring data is collected and is of high quality. Each extension officer will be assigned a development area from which they are to bring farmers into the program. In each country, there will be a local implementation team known as the Country Program Implementation Team (CPIT) that will promote the program to local communities, identify suitable candidates to become extension officers, train the extension officers and then provide ongoing mentoring during implementation. In terms of data collection and management, individual farm inventories will be developed for each participating smallholder farmer. The carbon compliance manager will also undertake audits prior to each external audit of the annual monitoring report and emission reduction claims.

Scope: 1 country (initially located in East Africa region to leverage existing partners installed field capacity), 1 million hectares farm and/or pastoral land regenerated, 20 million trees regenerated @ 20 trees per hectare, 500,000 smallholder farmers and pastoralists benefiting (@average 0.5 ha per farmer), 32M tons of carbon credits cumulatively generated and sold over 10 years

Assuming 1 million hectares is included in the program and an average of 5 tons of GHG emissions are abated or sequestered per year on each hectare, then the program will generate 5 million carbon credits each year. However, to be conservative, it’s assumed it will take 5 years before the 1-million-hectare target is reached. Therefore, over a 10-year crediting period, it’s estimated that 32 million carbon credits will be generated. The benefit of including a focus on both methods of GHG emissions reductions (reduced emissions from livestock and sequestration from increased tree density), is that carbon credits can be generated in the following implementation of improved livestock and crop management practices, whereas carbon credits generated from sequestration activities will take at least 5 years to materialize. This allows participating communities to realize additional tangible benefits from the projects at an earlier stage of implementation, providing additional incentives, and an additional revenue stream to reinforce project sustainability and impacts.

Revenue generated is calculated by multiplying the number of carbon credits by the average price of carbon over the 10-year crediting cycle. Future carbon prices are difficult to predict and, therefore, it can be advantageous to work on a fixed price per tonne of carbon based on how much is needed to finance the project, rather than relying on selling credits on the spot market. A conservative price of USD3.50 has been used in the base case financial model. This is an approximation of the average price of carbon credits on the voluntary carbon market in 2016. Based on past experiences, we expect the first revenue from carbon credits to become available in year 3 of the program. Accordingly, alternative funding will be required for the first 3 years to fund the up-front implementation costs of the program. Therefore, a range of proposed funding modalities have been proposed in the financial model including:

  • Grants – grants from government and philanthropic sources could be acquired particularly in the first 5 years of the program. This would help to pay for certification costs and field staff.
  • Mass market product – e.g. an evergreen farmer sponsorship fund could be established whereby a person can sponsor a farm for USD60 and in return they will get 5 carbon credits retired each year they sponsor the farmer (which more or less offsets the fuel used in an average car per year) plus they will get a report on the benefits the farmer is getting from adopting the evergreen practices.
  • Impact investments – If not enough funds can be generated from grants and mass market products then impact investment could be used to help fund the early years of the program and then be paid off over the later parts of the program.

 

Scaling-up trees on farms with smallholder families, we promote evergreen agroforestry practices and Farmer Managed Natural Regeneration (FMNR). FMNR aims to systematically regrow (and manage) trees and shrubs from felled tree stumps, sprouting root systems or seeds. This is integrated into crops and grazing pastures, helping to restore soil structure and fertility, inhibit erosion and soil moisture evaporation, rehabilitate springs and the water table, and increase biodiversity. Some tree species also impart nutrients such as nitrogen into the soil. In addition, on-farm land and vegetation makes a major contribution towards conservation on site, while acting as a buffer to protected areas. The FMNR approach is based on the restoration, conservation and sustainable management of trees in agricultural landscapes through Ever Green practices and aligns with the Ecosystem Based Adaptation approach being used by Conservation International. These practices are proven and popular ways by which low and ultra-low income farm families, supported by World Vision’s rural agriculture micro-finance fund Vision Fund and savings group model, can increase their food crop yields, improve child nutrition, enhance their production of livestock and milk, increase sustainable wood production for energy generation, and produce timber as an asset base for the family and graduate upwards to higher levels of livelihood, climate change adaptation, and resilience. By linking the project to carbon credit markets helps align the incentives of all stakeholders to both create and sustainably manage and maintain restored farm landscapes.