Leveraging Carbon Markets to Support Smallholder Farmers in Africa: Lessons from Experience

By Seth Shames, Senior Project Manager, EcoAgriculture Partners

As the documented and projected impacts of climate change become increasingly alarming, and pressure mounts for dramatic global mitigation efforts, carbon credit markets have developed as a popular policy mechanism.  Though still largely focused on the energy sector, opportunities have emerged for smallholder farming communities to earn carbon credits through the development of land-based carbon monitoring methodologies, particularly for sustainable land management systems. In Africa a handful of projects have now been designed to address the substantial financing gap, leveraging carbon markets to support these systems. In a new policy brief released yesterday, EcoAgriculture Partners and the CGIAR Research Program on Climate Change, Agriculture and Food Security (CCAFS), with contributions from project developers in Africa, synthesize lessons from six of these projects. Recommendations for project managers and policy makers interested in exploring the potential of smallholders to benefit from carbon markets are detailed below.

It’s All About Relationships
Many of the lessons from these projects highlighted the importance of the local community structure of participating farmers. Strong relationships between the carbon project managers and community groups are critical. World Vision has worked on livelihood projects in the Humbo area of Ethiopia for nearly three decades, and over that time has built relationships and trust with local communities. Projects also worked very hard to empower local actors to manage projects, developing local capacity and buy-in so that the community and farmers’ groups see themselves as long-term managers. Vi-Agroforestry in Kenya actually set out to develop new partnerships, which would allow local institutions to take on long-term project management roles. Partnerships are also important for scaling up. In the case of the Cocoa Carbon Initiative in Ghana, project developers worked through the well-established national cocoa farmers cooperative.

Benefits Beyond Carbon
Because carbon prices on the international market are highly volatile, and carbon payments themselves are low on a per farmer basis, it’s important to prioritize the non-carbon benefits of these projects. By participating in carbon projects, farmers can access technical information, training, and inputs that allow them to increase yields, diversify their income streams, and potentially adapt to a changing climate. Environmental Conservation Trust (ECOTRUST) of Uganda worked with farmers to open bank accounts, where the project’s carbon contracts were used as collateral for loans. Good carbon project management also addresses gender dynamics, helping to foster more equitable participation and rights. CARE International set about increasing the project’s benefits to women by including trees they preferred which provided firewood, fodder, shade, and fruit into the carbon project. Yet formalizing carbon rights has the potential to create conflict within communities, particularly in places where resource rights regimes are not clear. This can be exacerbated depending on how payments are allocated and distributed. The International Small Group Tree Planting Program (TIST) in Kenya supported conflict resolution mechanisms within farmer groups by establishing clear community decision-making processes in which elected officers served rotating terms.

Making the Money Work
While carbon payments are not the primary benefit for farmers to participate in projects, project managers still need to make the finances work and ensure that farmers aren’t taking on any financial risk themselves. Particularly for these projects, where most costs occur in the early phases and payments don’t take place until later, it is essential to prioritize upfront financing for both projects and farmers. In the past, most of this upfront finance for projects has come from donors, because low carbon returns of agriculture projects haven’t enticed private investors. The benefit for donors in contributing to such a model is that their initial investment has the potential to set up a financing mechanism through carbon credits that provide a long-term flow of funds to project managers and farmers to support sustainable land management practices.

Supportive policy
Based on the experience of these projects, it is clear that models for using carbon markets to support smallholder farmers have not been perfected. In fact, in the long-term the carbon project may not end up being be the most effective model to leverage climate mitigation finance to support sustainable land management. The experiences from these projects could be used to inform a new generation of mechanisms including Nationally Appropriate Mitigation Actions (NAMAs) or eco-certification. Regardless of what the future holds for agricultural mitigation finance, the outcomes will be directed by policy choices. The following recommendations suggest ways that policy-makers could support efforts by smallholders to take advantage of mitigation opportunities:

1. Strengthen and clarify the international incentives system for agricultural mitigation, including establishing the platforms need to allow land-based carbon credits and the institutions and measure methods to support them.
2. Link projects to climate adaptation and agricultural development resources, in addition to those more limited opportunities within mitigation finance.
3. Clarify tenure and carbon rights, so that clear and equitable property rights, laws, and regulations for land and carbon create incentives for farmers to invest in long-term productivity of their land and improve the chances of a successful carbon project.
4. Support efficient monitoring systems to capture the full range of benefits gained from agricultural carbon projects, putting more effort into establishing adaptation metrics for agriculture and integrated indicators for effectiveness of climate-smart systems.

Read the Policy Brief: Shames, S. 2013. How can small-scale farmers benefit from carbon markets? CCAFS Policy Brief 8. May 2013.

Download the related full report (released July 2012): Shames, S, E Wollenberg, LE Buck, P Kristjanson, M Masiga, and B Biryahwaho. 2012. Institutional innovations in African smallholder carbon projects. CCAFS Report 8.

Photo credit: K. Traumann (CCAFS)