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CLIMATE CHANGE:
CRISIS and OPPORTUNITIES
CAP Reform: entrepreuneurial opportunities in the
enlarged EU
ELO Conference, Brussels, 6 & 7 November 2003
Climate Change
Mitigate risks while promoting
sustainable rural development
François Falloux
Vice President, Eco-Carbone
ELO, Brussels, November 6th, 2003
[email protected]
Five questions
1.
2.
Is there a real climate change crisis?
What can be done about it?
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3.
4.
5.
Adapting to Climate Change (CC)?
And/or mitigating the CC Risk?
How can farmers adapt to CC?
Mitigating CC risk and promoting
sustainable agriculture: missed opportunity?
How to grasp it in rural Europe? Possible
role for ELO?
Five preliminary remarks
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Focus on carbon bio-sequestration…but,
Links among carbon sequestration, GHG
emission reduction and biomass energy
Virtuous circle with quality water resources
Kyoto, a first small step  R&D but stronger
constraints to be expected
CAP Reform and Climate Change: 2 parallel
stories until to now
Kyoto Protocol: expected impact
GHG
With Kyoto
Without Kyoto
Time
Q1. Is there a Climate Crisis?
Historical and Projected Future (ppm, CO2)
600
500
400
300
CO2
200
100
0
1000
1850
2000
2060
An emerging crisis building up…
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Last years, particularly 2003, the hottest…
Towards a double CO2 before 2100
Impact on climate and agriculture
Other impacts on biodiversity/forestry,
water supply and coastal zones
High expected costs but winners and losers
But, still uncertainties…
Q2. What can be done globally
about the CC risk?
Initiatives to reduce risk
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Uncertainties  Precaution Principle
UNFCC signed in 1992
The Kyoto Protocol (1997) and its
current impact despite non-ratification
Both adaptation to climate change and
reduction of GHGs
Not to forget the likely losers…
Q3. How can farmers adapt
to CC?
Adaptations measures from farmers
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CC adaptation, a neglected field worldwide including in
Europe;
Incorporating CC risk at the macro level:
 Agricultural sector planning in relation to extreme
events (droughts and flooding);
 Effort in meteo information and forecasting;
 Institutional development (research, extension,
farmers associations);
 Agricultural insurance and re-insurance;
Incorporating CC risk at the farm level:
 Applying risk factor in investment decision making;
 Developing alternative strategies.
Q4. Are there opportunities to
mitigate CC risk while promoting
sustainable agriculture?
Yes! Emerging carbon market
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It grows every day despite uncertainties
From 1996 to 2000: slow growth
Acceleration starting in July 2001 with about
60Mt of C-equivalent transacted so far for
about $500 million
Expected fast increase to reach 500Mt of
C/year in 2008 meaning $5 to $10 billion!
Current average price of $6 to7/t of CO2equivalent but wide range
1t of C-equivalent = 3.6t of CO2-equivalent
Carbon Market 2001-2002
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About 100 million tons of CO2!
10%
0%
28%
25%
USA
WB C Funds
Canada
Europe
Japan
15%
22%
Emerging carbon market
$billion
60
50
40
High
Medium
Low
30
20
10
0
2000
2010
2020
Source: World Bank Study 1998 & 2002
Some Financial Mechanisms
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World Bank Carbon financing with 5 funds
(PCF, BioCF, CDCF, NCDF, Italian CF) =>
leading the carbon business today. Hence
importance to have the World Bank seal!
The Dutch System
The English Market
Chicago Climate Exchange
Internal Markets within large oil companies
$
$
Mutual
Fund
Multinationals
and Govts..
C
credits
Carbon
Projects
Entreprises
C
Credits
New Financial Mechanisms
But the C opportunity almost
not used in European
agriculture and land
management so far despite
large potential!
Potential: storing carbon and reducing
GHGs in rural areas
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Promoting no tillage, without decreasing yields
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Up to 60t of C captured per ha
60% less fossile fuel consumption
40% less fertilizer consumption
Large risk mitigation (drought resistance, water
pollution)
Rehabilitating landscape with hedges, reforestation
Improving waste management while producing
energy
Producing biofuels without having to “freeze”
lands
Two interesting cases
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Brazil:
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15 million ha of no-tillage and growing
Additional storage of up to 50t-C/ha
Substantial decrease of production costs
~50% in fossil fuel consumption
 ~40% chemical fertilizers
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USA
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About 20 million ha of no-tillage
Similar benefits
Brazil
No tillage in the State of Santa Catarina
Source
USDA
CO2
Is Europe behind ?
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Less than 1 million ha of no tillage and C
sequestration not yet regarded as a priority
European eco-systems less fragile
Climate change not integrated in European
CAP so far
Yet similar benefits could be expected as in
Brazil and the USA
Network in progress such as ECAF
Possible Future Directions…
…for European Agriculture
Integrated landscape approach
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Rehabilitating hedges and windbreakers
Reforesting areas marginal for agriculture
No tillage
Biofuels production
Waste management and energy production
Towards integrated contracts
Farmers associations role
Food industries, e.g. Sustainable Agriculture
Initiative (SAI)
WITHOUT PROJECT SITUATION (Baseline)
Biomass and Residues
Production
CH4 & N2O
Vinasse
Burning
Energy
Agro-industrial
Benefits
Organic Fertilizer
Storage
CH4
Sugarcane
Alcohol/Sugar
CO2
Bagasse
Storage
CH4
COGEN
Electricity
For the Mill
WITH PROJECT SITUATION
Biomass and Residues
Production
Vinasse
Energy
Agro-industrial
Benefits
Organic Fertilizer
Storage
Environmental
Benefits
Carbon
Sequestration
Biogas
Sugarcane
Alcohol/Sugar
CO2
Bicarbonates
Litter
Decomposition
CH4 & N2O
Bagasse
Storage
COGEN
Heat & Power
for the Mill
Electricity
to the Grid
Soil Carbon
Charcoal
Forest
Wood
Soil Fauna
Diversity
Erosion
Control
Other
Benefits:
Health
Q5. How to grasp the CC
opportunity in rural Europe
and possible role for ELO?
CC opportunity in rural Europe and
possible role for ELO
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Increase lobbying for incorporating climate change in
CAP
Promote the integrated approach linking energy, GHGs
reduction and C sequestration
Promote CC related pilot projects in European rural
areas
Set up multi-partnerships involving ELO, ECAF, SAI
(food industry), etc.
Strengthen public/private partnerships in this integration
European Carbon Funds for rural development?
Conclusions (1)
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Climate change, an opportunity to seize
A way to cover a substantial part of the new
investment through the sale of carbon credits
Potential to bring co-investors
Potential to improve financial results
combined with an improved green image
But some key conditions to be met…
Conclusions (2)
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But some key conditions to be met:
 Integrating carbon right at the beginning of the
diagnosis
 Having key carbon buyer booked a.s.a.p.
 Solid transparent baseline proving additionality
 Robust carbon measurement program
 Integrated approach: a way to increase C
credits, mitigate risks for C buyers and therefore
attract them
Eco-Carbone ready to help meet these conditions