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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? 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 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… 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 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 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 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 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 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 Promoting no tillage, without decreasing yields 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 Brazil: 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 USA About 20 million ha of no-tillage Similar benefits Brazil No tillage in the State of Santa Catarina Source USDA CO2 Is Europe behind ? 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 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 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) 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) 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