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Strategic financing is essential to an effective climate change strategy

5 December 2023, Dubai, UAE — The International Fertilizer Association (IFA) and the International Rice Research Institute (IRRI) co-hosted a side event at COP28 entitled “At the crossroads between productivity and mitigation: financing the transition of agriculture” bringing together experts from government, research, the private sector and finance institutions to discuss the cross-sectoral, interconnected and boundary-pushing solutions that are shaping climate finance today to help the agriculture sector balance GHG mitigation and productivity objectives.

Rice, the world’s most consumed staple, is responsible for 10% of global methane emissions. It is the second biggest methane source in agriculture after livestock. In Southeast Asia where the majority of rice is grown, rice cultivation accounts for 25-33% of the region’s methane emissions. And in rice-producing countries, the percentage of contribution is almost comparable to the transport sector’s. Therefore, concerted efforts on a global scale are needed to reduce its negative impact and create effective adaptation mechanisms for economies and societies.

In his opening remarks, Mr. Pham Ngoc Mau, Deputy Director General of the Department for International Cooperation, Government of Vietnam, presented the country’s progress towards achieving the ambitious goal of its Nationally Determined Contributions (NDCs). He emphasized that by 2050, the country plans to have net zero GHG emissions in the agriculture sector. On the way to achieve this goal, they aim to cover one million hectares of targeted cultivated area with high-quality, low-emission rice in the Mekong Delta by 2030.

Dr. Bjoern Ole Sander, IRRI’s Country Representative in Thailand and Senior Scientist for Climate Change highlighted two options that have the potential for the biggest impact. One focuses on water management, which offers a straightforward solution: lessen water use to reduce GHG emissions. More importantly, water management is already part of national strategies, and has existing methodologies for incentivizing farmers through carbon payments. The second is a transparent monitoring, reporting, and verification (MRV) system that can be used to understand how carbon payments are being made. Some tools offered by the MRV system are a GHG calculator and remote sensing/satellite data that detects consistencies or changes in farmers’ practices. He further emphasized that all of these interventions must be made with the farmers in mind - discovering the best ways to compensate them, and asking what carbon credit is fair to them. He said, “As IRRI, our main stakeholders are smallholder farmers. They produce what we eat and in a smallholder context, they are often poor. And they are the ones we ask to change their current practices. So, they should also be the ones who benefit from any payments, public or private.”

Views from private sector partners were also well-represented on the panel. Holger Treidel, Head of Section Climate Change and Climate Policy at Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, stressed the importance of supporting agricultural practices proven to deliver concrete climate mitigation outcomes while protecting farmer livelihoods. Wagner Albuquerque de Almeida, Director of Global Manufacturing‚ Agribusiness, and Services at IFC, and Lori Kerr, CEO of FinDev Canada, spoke about the potential of blended finance tools to support the agriculture sector’s sustainable transition, and how they sought to reach farmers more effectively with financial tools tailored to their unique challenges.

Owen Hewlett, Chief Technical Officer of The Gold Standard Foundation called for a better matching of finance and agriculture programs, highlighting the need to think beyond carbon payments.

On the private sector side, Hanh Nguyen, Head of Sustainability at OCI Global, explained the decarbonization of the fertilizer industry, and the important role that fertilizers, when managed correctly, play in reducing GHG emissions for farmers. She also stressed the importance of soil health, and investing in practices that protected and restored soils globally. On financing, she raised the point that new solutions were particularly sought for emerging markets.

In her closing remarks, Alzbeta Klein, CEO and Director General of IFA asked the panelists what they hoped would be achieved at COP28. The panel responded by citing a few key actions that must be prioritized. One is the call for ambitious global targets that are strongly based on scientific evidence. Another is to support smallholder farmers through setting a fair participation process and ensuring that they are involved in the early stages of planning. Lastly, they recommend advocating for supportive policies that channel the finances where they are most needed.