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Impacts of climate change in Ethiopian agricultural and the role of agricultural insurance in disaster risk reduction and resilience Jemal Seid Climate and Geospatial Research Program Africa-Asia Conclave on Loss and Damage Due to Climate Change Instituting a global agricultural insurance programme as a risk-sharing and transfer mechanism for developing countries August 25-26, 2016 • Nairobi, Kenya [email protected] , [email protected] Outline Agriculture and Climate Change in Ethiopia The nexus between Climate, Agriculture and the Economy Past Trends of Ethiopian Climate What do climate projections tell about Ethiopia’s climate? How does climate change impact Ethiopia’s agriculture? Ethiopia's initiatives to respond to the challenges of CC Existing DRM mechanisms, policies and system Agricultural Risk factors and Mitigation Mechanisms in Ethiopia Agricultural Insurance in Ethiopia: Best Practice, Challenges and Opportunities Way forward Agriculture and Climate Change in Ethiopia Characteristics of Ag in Ethiopia • Production farmers: dominated by smallholder • >95% of all the farms • Production is predominantly rainfed – only 4.5% of arable land is under irrigation • Primary producers of agricultural production • Directly employs over 80% of the labor force • Low-input/low-output • Low productivity (yield, labor) • Spend about 60% of income on food (AASR, 2014). Challenges posed by CC • adds to the exiting challenges • making worse the tight resources constraints • more erratic and extreme weather patterns • threaten food production • Accelerate envt’l degradation • increase vulnerability of SHHs • accelerate rural poverty The nexus between Climate, Agriculture and the Economy Trends ofPast Ethiopian Climate with Respect to the Trends of Ethiopian Climate Global Climate Change Historical Climate Variability (1982-2012) Rainfall coefficient of variability(%) Probability of failed seasons (%) (EIAR,2015; Tesfaye et.al, 2014) Historical rainfall trends The linear seasonal rainfall trend (mm/decade) over 1978-2007 Belg season(FMAM) Meher season (JJAS) (Source: EPCC, 2015 ). (Source: EPCC, 2015). Historical temperature trends The linear seasonal mean temperature trend (°C/decade) over 1981-2014 (Source: EPCC, 2015 ). What does historical climate records tell us about drought frequency in Ethiopia ? Source: Adapted from Tesfaye and Assefa (2010) and NMSA (1987) Doc ID What do climate projections tell about Ethiopia’s climate? Projected rainfall changes 2025-2049 : RCP 2.6 2025-2049 : RCP 8.5 Percentage Change = 2.95 Percentage Change = 4.67 14 12 14 10 12 Latitude [o] 10 6 8 4 2 6 0 4 Latitude [o] 12 8 6 5 10 4 8 3 6 2 4 -2 34 36 38 40 42 o 44 Longitude [ ] Ensemble of 26 models 46 48 34 36 38 40 42 o 44 46 48 Longitude [ ] : Source: EIAR, 2015 Projected temperature changes 2025-2049 : RCP 2.6 Source: EIAR, 2015 2025-2049 : RCP 8.5 Ensemble of 26 models Doc ID How does climate change impact Ethiopia’s agriculture? Impact on Agricultural Water Resources 20 A1B AET (%) 2046-2065 AET (%) 2080-2100 15 -0.5 5 -1 0 A1B A1B A2 A2 B1 -1.5 B1 0 -10 -5 -20 -10 Ground water (%) 2046-2065 Ground water (%) 2080-2100 Soil water (%) 2046-2065 Soil water (%) 2080-2100 A1B 0 -40 B1 0 10 -30 A2 A2 B1 -15 Stream flow(%) 2046-2065 -20 Stream flow(%) 2080-2100 Impacts on Crops: Maize CSRIO -2050 MIROC-2050 Tesfaye et al., 2015 Tef suitability changes 2020-A2a 2050-A2a 11 % 1 7 % 12 % 2020-B2a 1 1 % 2050-B2a Evangelista et al. 2015 Sorghum suitability changes 2020-A2a 7 % 2050-A2a 7 % Evangelista et al. 2015 2020-B2a 12 % 2050-B2a 3 % Barley- suitability changes 2020A2a 2050A2a 2020-B2a 31 % 46 % 36 % 2050-B2a 3 7 % Evangelista et al. 2015 Impact on Crop Disease and Pests • At a global scale, pests and diseases attribute to an average yield loss of 18% and 16%, respectively in major crop species (IPCC, 2014) • Climate change will alter potential losses to many pests and diseases as changes in temperature can result in geographic shifts through changes in seasonal extremes Example, wheat rust risk responds to ENSO events • Climate change may also influence the migration of agronomic and invasive weeds species Impact on Livestock • Pastures and forage crop production and quality; availability and price; • Change in range conditions, • Change in water availability, • Changes in the distribution of livestock diseases and pests (e.g. tsetse fly infestation increase); • the direct effects of weather and extreme events on animal body conditions such as health, growth and reproduction (Smith et al. 1996; Ethiopia's initiatives to respond to the challenges of CC Existing DRM mechanisms, policies and system • The Government of Ethiopia (GoE) has a strong political commitment to respond to prevailing and emerging challenges of climate change and disasters. new national policy on Disaster Risk Management developed with the implementation plan National Disaster Risk Management Commission (NDRMC) established The structure and content of this policy and approach is a first for Africa and Ethiopia has shown constructive leadership in this area. (ACCRA,2016). • National Policy and Strategy on Disaster Risk Management Full DRM cycle – prevention, mitigation, preparedness, response, recovery and rehabilitation Aligned with the Hyogo Framework for Action Shift in orientation from crisis management to a multi-sectoral and multi-hazard DRM approach Informed decision making based on strong risk assessments and early warning system Legal backing with proper institutional structure Linkages to Other Polices and Strategies (PASDEP, GTP, The Agriculture Sector Policy and Investment Framework (PIF), CRGE, and others,. … (GoE, NDRM Policy, 2014) 22 The role of risk transfer and insurance in disaster risk reduction and climate change adaptation Past experience Agricultural Risk factors and Mitigation Mechanisms in Ethiopia Agricultural crops are susceptible to a variety of risks • • • • • • • • recurrent drought pest and diseases outbreak extreme weather condition (temperature, rainfall) flood, frost, fire, wind, hail, land degradation, transportation problem, price fluctuation market problem etc. causing either • yield reduction at farm level • value of crop losses at market level. • ……… Traditional Approaches a farmer sow his small land with different types of crops Risk smoothing: a land tenure systems locally called ‘Yekul’ Risk sharing: Ex-ante iddir, a burial society, Productive Safety Net Program (PSNP) – Gov’t. Traditionally selling of animals and other productive assets Equb, a savings organization, help households cope with unexpected expenses. Informal institutions such arrangements usually inclined to focus on humanitarian and short term assistances. The gov’t also address through emergency assistance provided via Disaster Prevention and Preparedness Commission (DPPC) as a relief work. Post ante The most widely used traditional ex-ante and post ante risk mitigation mechanism by small holder farmers Weather Insurance In Ethiopia-The Pilot Projects Macro Level Index Insurance 2006: WFP has introduced & piloted a Macro level weather risk insurance to address the impact of weather risk shocks through market mechanism as an ex-ante measure The first National Index based Insurance Premium amount US$ 930,000. = European reinsurer AXA Re according to WFP, the pilot project has evidenced the fact that transferring catastrophic risks to global market is possible within the Ethiopian context. Targeted 5 million people. The project had utilized an index derived from 10 years of rainfall data from 16 weather stations across Ethiopia. • 80% correlation between rainfall levels and the number of food aid beneficiaries in each year, suggesting that rainfall is a reliable objective indicator of drought-triggered vulnerability and social assistance needs. Indeed as the pilot did not involve local insurers, no lesson was learned by the industry players in the market. (Devereux and Guenter, 2007; Balzer and Hess, 2009) Weather Insurance In Ethiopia-The Pilot Projects Micro Level weather index insurance: Case study Alaba (2008), Southern region Bofa, WICI (2009), Oromia Region Adi ha WICI (2009), Tigray Region The world Bank and Ethiopian Insurance Corporation (EIC) has piloted a weather index insurance in 2008. Nyala Insurance S.C. (NISCO) in collaboration with the WFP Dedebit MFI – took part in the designing & marketing process as well as advancing the premium payment Target group: 26 smallholder farmers are Insured. However the number of Insured farmers has reduced by more than 50% in the following years and did not picked up from there. • 137 Small holder farmer with average land holding size of 0.5 hectares • These farmers are members of the Lume Adama Farmers Cooperative Union (LAFCU) and • mainly growers of Haricot bean, Teff and Cereals Premium: purchased by Lume Adama Cooperative Unions for their members covering 159.75 hectares of haricot beans. Oxfam America and the Colombia University have played a major role in designing and coordinating this satellite data based WICI pilot. Target group: 200 farmers • Horn of Africa Risk Transfer for Adaption Program (HARITA) Oxfam, with funding from The Rockefeller Foundation, partnered with Swiss Re, The International Research Institute for Climate and Society (IRI), The Relief Society of Tigray, Dedebit Credit and Savings Institution, Nyala Insurance Company, and Africa Insurance Company Developed a weather index insurance based on advanced satellite technology More than 12,200 farmers in 45 villages in Northern Ethiopia will benefit from drought protection. In 2012 year's drought conditions each farmer receive a share of the total $322,772 in payouts offered through HARITA to help cover crop losses. It’s was the largest Weather Index Insurance Payout for Small Scale African Farmers Triggered by Satellite Technology. https://www.oxfamamerica.org/ Other pilots in Ethiopia Linking formal and informal insurance – iddirs IFPRI-Oxford-BG/OIC Linking credit with insurance UC San Diego – EEA – FAO - Nyala/Dashen Insuring livestock in (agro-) pastoralist areas Index-Based Livestock Insurance for Pastoralist (IBLI) Cornel - ILRI- OIC Pilot between 2011 and 2014 in Dodota, Shashemene, Bako areas Very little uptake even when subsidized Uptake is significant but the adoption rate is very low Best practice • In the face of climate change, piloting diversified adaptation techniques, including crop insurance, is one of the coping strategy that GoE is helping to introduce in order to reduce the vulnerability of smallholder farmers in Ethiopia who are totally dependent on erratic rainfall and crop failure. • In late October 2015, a total of 12,000 smallholder farmers in four regions started to benefit from Ethiopia’s first weather index insurance claims payment to cover the loss for this year’s crop failure due to El Nino. The weather index insurance claims paid out 2.6 million ET birr covering a total of around the selected smallholder farmers in Oromia, Gambella, Benishangul Gumuz and Tigray regions. • In March, 2016 launched a new crop insurance that covers 15 million smallholder farmers in five years based on vegetation index. The national level vegetation index based crop insurance aims to insure the farmer against weather related risks. Labeled Normalized Difference Vegetation Index (NDVI), the new insurance uses a long standing index used by national and international agencies to monitor the occurrence of drought. (PFEA; EIC; ATA, 2016) Challenges and opportunities Opportunities Challenges: • • • • • • • • Farmers lack awareness on agricultural insurance Legal and regulatory framework not yet implemented Lack of reliable data to analyze risk: Inadequate capacity building work for private insurance companies, cooperatives and MFIs Limited financial capacity Lack of banking credit (loan) to the smallholder farmers Limited range of Micro-insurance products High administrative costs of agricultural insurance • Government policy • Commitment of NGOs • Establishment of reinsurance companies domestically • Continuing recent research endeavour Way forward • Aggressive nationwide campaign to create awareness about the product among major stakeholders mainly by the concerned government organs and International Agencies are required. • Building on the already established reliable delivery channel by focusing on capacitating cooperative unions, MFI ….. • Availing quality weather data (both historical and real time) • Strength collaboration and partnership between Government, NGOs, domestic insurers, farmer cooperatives/microfinance and bankers • Strengthening and capacitating the existing crop insurance products • The product needs a detailed legal framework which includes regulations governing the development and operation of micro insurance products. Thank your for attention [email protected] , [email protected]