Food systems Archives - Zero Carbon Analytics

Congo Basin deforestation threatens regional rainfall and global cocoa supply

November 18, 2025 by Joanne Bentley-McKune

Key points:

The tropical rainforests of the Congo Basin regulate rainfall both locally in Central Africa and across West Africa, but deforestation risks jeopardising this vital water source.
New ZCA analysis finds that deforestation in the Congo Basin could disrupt rainfall and significantly reduce cacao yields, resulting in substantial losses for producers and rising costs for importers.
The West African countries of Ivory Coast, Ghana and Nigeria, along with several Central African nations, account for more than 70% of global cacao production. Ivory Coast, the biggest producer, could see cumulative losses of almost 1.6 million tonnes by 2050.
Falling yields will be increasingly costly for importers as the impacts of deforestation accelerate over time. Deforestation is projected to contribute 11% of the total cocoa price in 2030, rising to 40% by 2050.
In 2050, Europe could end up paying USD 33.8 billion more for the equivalent of its current annual imports due to Congo Basin deforestation. With normal market growth and the price impacts of extreme weather factored in, Europe’s 2050 cocoa imports could total USD 84 billion, nine times the 2025 cost.
EU importers could face cumulative costs of USD 256 billion by 2050, almost double the global chocolate industry’s 2024 market value of USD 130 billion.
The Netherlands, Belgium and Germany – the biggest EU importers of Ivory Coast cocoa – could pay USD 13.1 billion, USD 6 billion and USD 4.4 billion more in 2050 for current shipment volumes, respectively, due to deforestation price impacts.
Our analysis found a critical window for intervention, as impacts remain manageable through the 2030s but accelerate dramatically after 2040.
Funding forest conservation in the Basin will be cheaper for the EU than the cost of inaction. EU importers could benefit from USD 1.8 to USD 6 in avoided costs for every dollar invested, depending on the conservation approach.
All conservation scenarios analysed showed promising returns, even at a 50% success rate, with community-led restoration showing the biggest benefits.

The Congo Basin’s rainforests drive regional rainfall

Rainforests are crucial for sustaining life on Earth, playing a vital role in carbon sequestration and hosting exceptional biodiversity. But, forests have an even more profound importance for our climate than carbon storage – they regulate the Earth’s temperature and freshwater flows.

Plants recycle 80–90% of rainfall back into the air in a vital feedback loop that sustains the global water cycle and cools the planet. Forests generate water in a process called evapotranspiration: Trees draw up groundwater through their roots and release it from their leaves, returning water to the atmosphere where it turns into clouds and falls as rain, creating a natural cooling system. In tropical areas, this recycling is so effective that air moving over forests produces at least twice as much rainfall as air moving over non-forested land.

The moisture forests release creates rainfall both locally and further away. A well-known example is the Amazon’s ‘flying rivers’, massive flows of water vapour generated by trees and carried by atmospheric currents, which deliver rainfall across Latin America up to thousands of kilometres away.

This type of long-distance climate link is called a teleconnection. In some parts of the world, losing a forest-rainfall teleconnection may present a “more imminent threat even than global warming”.

A less-studied but equally vital teleconnection exists between the Congo Basin in Central Africa, which contains the world’s second-largest tropical rainforest after the Amazon, and West Africa. The Congo Basin’s tropical rainforests generate up to 83% of local rainfall – more than the Amazon – keeping the climate humid and fuelling ongoing rainfall. This moisture does not just sustain the Congo Basin, as seasonal winds carry it hundreds of kilometres westward to deliver almost one-fifth of rainfall in West Africa.¹

Deforestation disrupts this natural system

Deforestation disrupts the natural process of water recycling, as cleared forest can no longer pump moisture into the atmosphere. In the Congo Basin, this could result in rainfall reductions of up to 40%. The high proportion of local rainfall controlled by the rainforest means that the Basin could be the region in the world where deforestation will have the biggest impact on rainfall.

Forest loss also disrupts the natural cooling system. Without the cooling effect of evaporation, the solar radiation that would normally drive evapotranspiration creates hot, low-pressure zones which alter regional wind patterns. These interact with West Africa’s monsoon winds, which bring the region’s crucial rainy seasons, in a climate teleconnection, causing the monsoon rain band to shift inland during the Northern Hemisphere summer and reducing rainfall along the West African Guinea coast.² Climate models show the disruption of this teleconnection could decrease rainfall by up to 20% along the Guinea coast during the rainy season.³

Deforestation in the Congo Basin, driven by small-scale agriculture and settlements, is a growing concern. If current rates of forest loss and degradation continue, 27% of the forest could be destroyed by 2050,⁴ directly threatening local rainfall and the moisture transport systems that millions across Africa rely on for water and agriculture. The destruction places farmers’ livelihoods and commodity supply chains at risk, making forest conservation in the Congo Basin a critical environmental security issue.

Congo basin deforestation puts African cocoa production at risk

One commodity at risk from the reduced rainfall is cocoa, produced from the seeds (cocoa beans) of the cacao plant, Theobroma cacao. Three out of four cocoa beans come from Africa, with the West African countries of Ivory Coast, Ghana and Nigeria, along with several Central African nations in the Congo Basin, accounting for more than 70% of global cocoa production.

Cacao can only thrive in a narrow band around the equator, called the ‘cocoa belt’, as it requires specific temperature and moisture conditions to grow. It is particularly sensitive to drought because it evolved in the humid Amazon Basin and has not adapted to the water stress from West Africa’s prolonged dry seasons. As a result, global cocoa supplies are particularly vulnerable to climate and land-use changes in the region.

Cacao cultivation in Africa is mostly low-tech, performed by smallholder farmers and relies almost entirely on rainfall, rather than irrigation. This rain-fed system makes crops highly dependent on reliable rainfall – a critical vulnerability given the crop’s low drought tolerance. Seasonal dry spells can severely reduce yields, and prolonged droughts can devastate entire harvests.⁵

Scientists believe that once forest loss exceeds a critical threshold, an irreversible ecological shift or ‘tipping point’ could be reached and the forest’s rain pump mechanism lost. Once gone, the mechanism cannot be fully restored, leading to persistently drier conditions locally and across West Africa, with cascading effects for supply chains. The threshold could be as low as 30% forest loss, or even lower, and Central Africa is estimated to have already lost 9% of its forests since 2000.

Impacts will be felt throughout the cocoa supply chain

Cocoa is not an easy raw material to replace in the confectionery industry, given its distinctive flavour and properties. As a result, prices tend to rise sharply when global cocoa supplies are low and buyers compete for limited stocks. The supply is highly inelastic, meaning production cannot be easily ramped up in response to a crisis, and even modest supply shocks trigger dramatic price swings.

For example, prices rose more than 400% in 2024 following crop failures in West Africa due to unseasonal wet weather followed by drought during the rainy season, driven by climate change.⁶ Swiss chocolate maker Barry Callebaut dropped its annual sales forecasts for 2025 due to “unprecedented volatility” in cocoa prices, resulting in a 20% drop in share prices.

Despite Africa’s dominance in cocoa production, the continent only reaps a small fraction of the value of the global cocoa industry. Farmers earn less than 7% of the final price when cocoa is sold as a chocolate, one of the smallest shares in the supply chain.⁷ Europe, the world’s largest importer of cocoa beans, captures the most profits in the higher-value stages of processing and manufacturing. The Netherlands and Belgium, for example, import cocoa beans, process them, then export cocoa products at a premium.

New ZCA analysis shows how deforestation could reduce production and destabilise global cocoa markets

New analysis by Zero Carbon Analytics shows how deforestation in the Congo Basin could disrupt cocoa production in the nine countries that make up three-quarters of global supply: Cameroon, the Central African Republic, Equatorial Guinea, the Democratic Republic of the Congo, and the Republic of Congo in Central Africa, and the West African countries of Ivory Coast, Ghana, Gabon and Nigeria.

Using deforestation trajectories and regional climate dynamics,⁸ research on how cocoa plants respond to drought,⁹ and the behaviour of cocoa in commodity markets,¹⁰ we projected how declining rainfall could reduce production and destabilise global cocoa trade.

African cocoa producers could face substantial yield losses due to rainfall decline caused by deforestation

Our analysis showed that deforestation-induced rainfall decline is projected to reduce cacao yields in all nine assessed countries, with cumulative losses totalling 256,000 tonnes across the nine countries by 2030, and 3.06 million tonnes by 2050 (Figure 1).

Figure 1

Major cocoa producers could face substantial losses, which could destabilise local economies. Ivory Coast, the biggest producer, could see cumulative losses of almost 1.6 million tonnes by 2050, around 80% of its current annual production volume. Cocoa is the biggest export commodity in Ivory Coast, making up roughly one-third of exports.

Losses could total 866,000 tonnes in Ghana, 377,000 tonnes in Nigeria and 205,000 tonnes in Cameroon by 2050. Cocoa accounts for more than half of agricultural exports in all three countries.

Deforestation will have an increasingly big impact on cocoa prices

Our model projected how the price of cocoa would change until 2050, and how much deforestation would impact future prices. We looked at three components that drive cocoa price and compared their impacts over time. The components were:

Our projections showed that deforestation will have an increasingly big impact on cocoa prices (Figure 2). Until 2030, normal market growth is expected to account for the majority of cocoa price (>80%), with climate risk and deforestation having a relatively small impact. In 2030, we project a cocoa price of USD 11.6 per kilogram, lower than the peak price of almost USD 13 per kilogram seen during the 2024 supply crisis.

Figure 2

By 2050, Congo Basin deforestation will persistently reduce rainfall and cocoa production, resulting in shortages and triggering exponential price increases.¹⁵ Our projections show a cocoa price of USD 68.1 per kilogram in 2050 – almost six times the 2030 price.¹⁶ By this time, normal market growth will account for just 37.3% of the price, the climate premium will contribute a modest 22.5%, and deforestation will have the biggest impact, driving 40.2% of the price.

Without deforestation, normal market growth plus the climate risk premium would result in a 2050 price of USD 41 per kilogram, just over three times the peak price during the 2024 supply crisis. Deforestation risk escalates this price by nearly two-thirds.

Production losses would cost major EU cocoa importers

The rising price of cocoa could have significant cost implications for importers, particularly in Europe. Using Trase Earth’s data on cocoa exported from the Ivory Coast,¹⁷ the region’s biggest cocoa exporter, we estimated what increased cocoa prices could mean for the 15 European countries that account for the majority of imports: The Netherlands, Germany, Belgium, France, the United Kingdom, Italy, Spain, Estonia, Bulgaria, Poland, Croatia, Russia, Portugal, Greece and Switzerland.¹⁸ ¹⁹

Assuming shipment volumes remain stable at 2022 levels, deforestation could result in these countries together paying USD 33.8 billion more for cocoa imports in 2050 than in 2025 (Figure 3). Including baseline market growth and the climate premium, the total costs exceed USD 84 billion – nine times the 2025 cost. Without the impacts of deforestation, the 2050 costs drop to USD 50 billion, or 5.5 times the 2025 value.

These importers could face cumulative additional costs of USD 256 billion by 2050, if no conservation action is taken to protect or restore forests – almost double the entire global chocolate industry’s 2024 market value of USD 130 billion.

Figure 3

For the Netherlands, the biggest importer of Ivory Coast cocoa, rainfall decline due to deforestation could mean shipments cost an additional USD 1.8 billion in 2035, USD 4 billion in 2040 and USD 13.1 billion in 2050, compared to 2025. Combined with normal market growth and climate disruption, this results in a 2050 cost for the same volumes of almost USD 33 billion (Figure 4).

Belgium and Germany, the next biggest importers, could see deforestation raise the cost of shipments by USD 6 billion and USD 4.4 billion in 2050, respectively, bringing overall costs to between USD 15 billion and USD 11 billion.

Figure 4

There is a critical window for intervention

While impacts remain manageable through the early 2030s, they accelerate dramatically after 2040, transforming from millions to billions in annual costs. This trajectory suggests that without immediate action to halt deforestation, annual import costs could exceed what major buyers can absorb, undermining the viability of the Ivory Coast’s cocoa sector and passing costs on to consumers.

New EU regulations, expected by 2026, will require cocoa imports to be deforestation-free. In response, the European Investment Bank (EIB) issued a EUR 100 million loan to the Ivorian national investment bank (Banque Nationale d’Investissement, or BNI) to support sustainable cocoa production, youth and female employment, and traceable, certified supply chains in Ivory Coast.

In addition to promoting sustainable cocoa production, Ivory Coast and the EU are collaborating on large-scale reforestation and forest protection initiatives aimed at reversing decades of environmental degradation. These efforts are supported by an additional EUR 150 million investment from the EIB, which is helping to finance the country’s national forest preservation, rehabilitation, and expansion strategy.

Analysis shows that Congo Basin conservation is cheaper for the EU than the cost of inaction

Comparing Ivory Coast cocoa trade data with the future cost of deforestation reveals a clear economic case for importers to invest in forest conservation in the Congo Basin. The projected cost impacts of deforestation for all EU countries up to 2050 are enough to fund comprehensive conservation for multiple decades, preventing damage and supporting sustainable development across Central Africa. The EU is the largest importer of Ivory Coast cocoa, importing 1.16 million tons across 12 EU countries in 2022.

We compared the cumulative costs the EU could face by 2050,²⁰ against recent investments made in conservation interventions in the region²¹ and found that funding actions to prevent deforestation in the Congo Basin²² could be economically beneficial, offering viable economic returns for sustainable finance.

We compared six conservation scenarios, each involving different shares of three intervention types:

Farmer-Managed Natural Regeneration (FMNR), a low-cost land restoration technique focused on growing trees and shrubs, including for food and timber
Subsistence agroforestry, where trees are integrated into agricultural land to bolster food security
Cocoa-banana agroforestry, or the co-growing of cocoa and banana trees.

Our conservation scenarios ranged from a low-cost community approach weighted towards FMNR, to a food security-focused scenario that is predominantly subsistence-based, and scenarios implementing different levels of agroforestry (Figures 5a and 5b).

All of the intervention scenarios provide clear benefit-cost ratios by 2050,²³ when they are anywhere between 50% to 100% successful at preventing deforestation-induced price increases.²⁴ Investments in conservation in the Congo Basin are robust, meaning they maintain positive returns even when projects are only 50% successful.²⁵

Figures 5a and 5b

The scenario that emphasises community-led restoration, which focuses on FMNR, showed the highest benefits. Returns range from 3:1 at 50% success to 6:1 at 100% success, meaning the EU could benefit from USD 3 to USD 6 in avoided costs by 2050 for every dollar it invests in community-led restoration.

Agroforestry-focused strategies showed slightly lower cost-benefit ratios, but still promise returns and may prove more sustainable in the long term, as they generate direct income streams that provide farmers with ongoing economic incentives to maintain projects, and give access to food and fodder.

The choice between strategies should ultimately depend on project-specific objectives, whether that be immediate cost-effectiveness, long-term sustainability, community ownership, or economic resilience.

1
West African forests themselves have an important teleconnection: they provide up to 30-40% of the total annual rainfall in the Ethiopian Highlands.
2
The coastal tropical region of West Africa that lies along the Gulf of Guinea.
3
This effect is also compounded by extensive local deforestation – for cocoa production as well as other commodities – within West Africa itself, which is believed to reduce local precipitation in adjacent forests by up to 50%. Local deforestation is also increasing the occurrence of extreme climate events in the region.
4
Compared to 2020.
5
Poor adaptation to local conditions also makes cacao trees susceptible to disease – a major contributor to reduced harvests in recent years.
6
Climate change is increasing the frequency of flooding and heatwaves in West Africa, and is anticipated to increase the severity of dry spells, reduce rainfall, and shift the timing of wet and dry seasons for parts of the West African cocoa belt.
7
Many farmers live in extreme poverty, often earning less than USD 1 a day, yet are reliant on this source of income.
8
Smith et al. (2023) projected that Congo Basin forest loss could reduce rainfall in the basin by 8-10% on average by 2100. We extracted country-specific forest loss percentages for Cameroon, the Central African Republic, the Republic of the Congo, the Democratic Republic of Congo, Equatorial Guinea and Gabon from Figure 4c. To capture how sensitive each region’s rainfall is to forest loss, we used Smith’s country-specific rainfall decreases for 2100 and translated forest loss percentages into rainfall reduction percentages for each country. For Ivory Coast, Ghana and Nigeria, we synthesise evidence from two climate modeling studies: Nogherotto et al. (2013) modeled complete removal of Congo Basin forest and found this reduced monsoon rainfall along the Guinea Coast by up to 20% (see figure 2 in source). Since our analysis uses the partial deforestation trajectory from Smith et al. (2023), we linearly scale Nogherotto’s estimates, acknowledging this assumes a linear relationship that may not hold across all deforestation levels. Duku & Hein (2021) simulated 50% tree cover loss in the Guineo-Congolian region and found rainfall reductions in West Africa of approximately 5-10% (Figure 5, panel a, in source), consistent with our linearly scaled estimate.
9
We drew from controlled field studies of cocoa in West Africa showing that 67% rainfall reduction causes 31% yield loss in cocoa trees, and scaled this to our rainfall reduction trajectory. We used an exponential decay function to capture the non-linear response of plants to water stress, where each additional percentage point of drought inflicts disproportionately more damage.
10
To model cocoa price responses to production scarcity, we implemented an exponential function reflecting commodity market dynamics. We calculated a ‘scarcity multiplier’ as exp(6.5 × production loss share), capped at 4.0× (400% increase), where production loss is derived from deforestation-driven yield declines. The coefficient of 6.5 captures cocoa’s extreme supply inelasticity, with relatively small supply reductions generating outsized price increases (a 10% production loss yields a 1.92× price multiplier, while a 20% loss approaches the 4.0× maximum). The multiplier is applied to baseline price projections of annual growth, a climate risk premium and adjusted for long-run demand elasticity (-0.57).
11
Based on the International Cocoa Organisation (ICCO) historical trends of a 5.1% compound annual growth rate (CAGR) 2000-2020, which excludes the dramatic price spike observed over 2024-2025.
12
Analysis indicates that by 2050, increased drought severity will impact 80% of cocoa production in Ivory Coast and virtually all production in Ghana. Most areas will experience modest increases, but substantial portions will face moderate drought intensification.
13
We included a 2% climate risk premium to capture forward-looking market expectations of climate impacts. Recent research shows that climate risk has significant predictive power for agricultural commodity prices, with investors willing to pay up to 295 basis points annually to access climate risk information. A 2024 study on EU cocoa markets found that extreme drought events alone could increase prices by 110-180% during crisis years by 2050 under climate change scenarios RCP2.6 and RCP8.5, respectively. Again, our climate premium, which compounds to a 209% increase by 2050, is broadly consistent with these estimates. Our climate premium is also consistent with estimates from sovereign bond markets, where countries highly exposed to climate risk face risk premiums of 1.13% to 2.75%, and with growing evidence that physical climate impacts are materially priced into commodity and capital markets. While bond risk premia aren’t directly transferable to commodity pricing, they indicate the scale of climate risk being priced into markets. The NGFS (2024) further notes that investors are now adjusting expected returns across asset classes to account for nature-related physical risks such as deforestation, biodiversity loss and food system disruption.
14
Our deforestation analysis focuses on systematic, gradual climate impacts, meaning it may underestimate costs from acute climate risks, including extreme weather events. The 2024 cocoa crisis, which triggered 400% price increases, shows how acute climate shocks can generate economic impacts far exceeding our model’s projections. Similarly, El Niño-Southern Oscillation (ENSO) events have caused yield losses of up to 89% in major cocoa-producing regions.
15
Our model includes a demand elasticity adjustment that provides some tempering effect as high prices reduce consumption. We use a long-run demand elasticity of –0.57 based on economic research on global cocoa markets. Cocoa’s limited substitutability keeps demand relatively inelastic, meaning price increases largely persist because there is no alternative for buyers to turn to. Our model assumes static production systems, with no adoption of drought-resistant cacao varieties or irrigation.
16
As a robustness check, we tested a Bayesian weighting approach that dynamically adjusts scenario probabilities based on system stress indicators (forest loss rates, rainfall reduction intensity). This approach results in a 2050 cocoa price of USD 81/kg versus USD 68.1/kg in our main model – a difference of 20% – suggesting our central estimates may be conservative. The Bayesian approach helps quantify uncertainty about the severity and timing of climate impacts while confirming our core finding that deforestation-driven climate impacts pose substantial economic risks to cocoa production.
17
We used 2022 export data and assumed static imports from 2022 levels for all years into the future.
18
From the Trase Earth dataset we extracted the trade volume (in tonnes) and multiplied this by our price estimates for different years, broken down into normal market growth, climate premium and deforestation components.
19
Listed in order of export volume from biggest to smallest.
20
All values used in the intervention analysis are present-value adjusted. Present value calculations employed a 3% discount rate over 25 years (2025-2050), with annual additional costs calculated as import volumes (tonnes) × 1000 × deforestation price impact (USD/kg), discounted to 2025 present value using standard financial formulas: PV = 1/(1+r)^n, where r is the discount rate and n is the number of years from the base year. USD 256 billion here, when present-value adjusted, results in a value of USD 146 billion.
21
The interventions include Regreening Africa, which focuses on FMNR in Ghana and Rwanda and has an average implementation cost of USD 115 per household every six years, as well as the Northern Congo Agroforestry Project, which includes cocoa-banana agroforestry at USD 1005 per hectare, and subsistence-type agroforestry at USD 861 per hectare, which are one-off costs.
22
We defined our target intervention area based on the Congo Basin area deforested over 2003-2017. We used the geographic bounds from Smith et al. (2023), which encompass the Congo Basin forests whose loss affects rainfall in cocoa-producing regions and for which we based our climate-economic model on. We extracted grid cells (Smith et al. Figure 1a) with non-negligible tree cover loss (>5%) over the period 2003-2017. This resulted in an intervention area of 427,477 km2 (or 21.7% of the Congo Basin broadleaf evergreen forests). We calculated population sizes by overlaying WorldPop spatial data and extracted the population density (people/km2). Based on this, we calculated an average population density for our intervention area. Surveys report that the average household size in the region is 5 people. Using this together with our people/km2, we were able to estimate how many households are in our intervention area for targeting.
23
Benefit-cost ratios (BCRs) were calculated as present value of avoided EU import costs divided by present value of intervention investments, with economic viability defined as BCR ≥ 1.0.
24
The analysis calculates the potential reduction in deforestation-driven cocoa price increases under varying intervention success rates (50%, 70%, 100%) to determine what portion of those projected price increases can be prevented, while maintaining full program costs regardless of outcomes. For example, a 50% success rate means that interventions successfully prevent 50% of projected deforestation (and therefore 50% of the associated modelled price impacts), but 100% of program costs are still incurred.
25
Our estimates are likely conservative because we have only included Ivory Coast, which accounts for approximately 50% of cocoa production in Africa, meaning the total economic impact of regional deforestation on EU importers could be larger when including other major producers such as Ghana, Nigeria and Cameroon.

Deforestation in Brazil’s Cerrado reduces soy production and threatens supply chains

November 17, 2025 by Joanne Bentley-McKune

Key points

Brazil’s tropical savanna – or Cerrado – has faced extensive clearing of native vegetation in recent decades, largely for soy production. Agricultural expansion leads to drying, which reduces productivity. This drives farmers to clear more land, further accelerating degradation.
Our new analysis found that when farmers clear native vegetation for soy, the climate impacts extend far beyond the cleared plots. These reduce yields at the regional scale and outweigh the gains from new farmland by 3:1. However, individual farmers who clear land still profit from their expansion, revealing a critical challenge for conservation policy.
Based on our calculations, if no land had been cleared for soy in the Cerrado since 2008, the region would have produced an additional USD 9.4 billion of soy – nearly 8% of the region’s soy output between 2013 and 2023.
Even more modest land conservation shows benefits. Avoiding just 10% of Cerrado clearing would have generated almost USD 1.0 billion in additional production. A 25% avoidance would have generated USD 2.35 billion, and a 35% avoidance would have generated USD 3.29 billion.
Importers’ supply chains are heavily exposed to regions damaged by clearing. China faces the biggest absolute threat, sourcing from areas where clearing has destroyed USD 5.0 billion of annual soy production capacity over 2013-2023, followed by Spain, the Netherlands and Germany.
However, Germany’s soy imports are concentrated in actively high-clearing municipalities. Each tonne Germany imports is linked to more local production loss than other buyers. Implementing deforestation-free supply chain measures could protect soy productivity – every million tonnes that Germany shifts toward zero-deforestation suppliers would preserve USD 43 million in regional productivity.
EU supply chains sourcing from recently cleared areas face non-compliance risks under EU regulations prohibiting imports from regions deforested since 2020. France, Romania and Portugal may be particularly exposed.
Brazil – and soy-importing countries – face a critical window for action. We find a threshold below which vegetation protection delivers maximum climate benefits. Nearly every actively-clearing municipality still retains this advantage.

Soy-driven deforestation is drying Brazil’s Cerrado

Brazil’s tropical savannas, locally known as the cerrado, are the country’s second-largest biome after tropical forests. The Cerrado includes grasslands, woodlands and Brazil’s upside-down forest, an extensive underground root system that stores more than five times the carbon found in its above-ground vegetation. This remarkable root network enables plants to survive droughts and fires by accessing deep water sources and nutrients stored below the surface.

In recent decades, the region has faced extensive clearing of native vegetation for agriculture. At least 46% of the Cerrado’s native vegetation has been cleared for pasture or crops. Brazil is the world’s largest producer and exporter of soy, which accounted for 14.5% of total exports between January and September 2025.¹Soy is also the second-largest direct driver of deforestation in Brazil, after cattle ranching.

The Matopiba region, an acronym for the Maranhão, Tocantins, Piauí and Bahia states, is considered the Cerrado’s newest ‘agricultural frontier’. Here, farming is expanding into previously uncultivated land. The soybean area increased by 253% between 2000 and 2014, at the expense of 50% of the region’s native vegetation.

In 2023, deforestation in the Cerrado reached 1.1 million hectares – more than twice that of the Amazon in the same year. Rates have eased more recently, though deforestation continues. Despite the extent of deforestation in the Cerrado, the region has been overlooked in environmental policies.²

Deforestation intensifies drought, which undermines soy production

Locally, clearing land interrupts evapotranspiration, undermining the Cerrado’s natural moisture recycling system and worsening heat stress. At a regional level, replacing native vegetation with cropland significantly alters the climate by disrupting the systems that carry moisture to Brazil and neighbouring countries, known as climate teleconnections (Box 1). As a result, land use change in the Cerrado impacts rainfall across South America.

Average annual evapotranspiration in the Cerrado decreased by approximately 44% from 2006 to 2019, while temperatures increased by around 3.5°C. Less evapotranspiration means the air holds less moisture, leading to fewer clouds and less rain. This, in turn, makes the land dry, causing a positive feedback loop.

The region experienced an unprecedented drought in 2024, which a scientific attribution study has confirmed would have been impossible without human-caused climate change, exacerbated by deforestation.

Box 1: How does deforestation impact rainfall?

As well as supporting biodiversity and sequestering carbon, forests regulate the Earth’s climate by maintaining its temperature and fresh water flows.

Forests move water in a process called evapotranspiration: trees draw up groundwater through their roots and release it through their leaves, returning the water to the atmosphere, where it turns into clouds and falls as rain. This creates a natural cooling system. Plants recycle 80–90% of rainfall back into the air in a feedback loop that sustains the global water cycle and cools the planet.

The water vapour generated by trees is carried by atmospheric currents and creates rainfall both locally and further away. This kind of long-distance climate link is called a teleconnection.

Deforestation disrupts this natural system, as evapotranspiration cannot take place when trees are cleared. Plus, without the cooling effect of evaporation, the solar energy that would normally drive evapotranspiration creates hot, low-pressure zones that alter regional wind patterns. In some parts of the world, losing a forest-rainfall teleconnection may present a “more imminent threat even than global warming”.

The Amazon’s ‘flying rivers’ are a well-known example of a forest-rainfall teleconnection. Less-studied but equally important teleconnections exist in the Congo Basin in Central Africa, which contains the world’s second-largest tropical rainforest, and in Brazil’s Cerrado.

In the Southern Brazilian Amazon – a soy cultivation region bordering the Cerrado – deforestation has been shown to reduce rainfall, shortening the growing season and undermining the region’s soy and beef production, which is largely rain-fed. A 2021 study estimated that if weak deforestation policies continue in the region, soy and beef revenues could fall by an estimated USD 186 billion by 2050. This dwarfs the profits that would be lost by conserving forests under stronger governance – around USD 19.5 billion.

A recent modelling study across five states in the Amazon and Cerrado showed that if deforestation‑induced disruptions to rainfall hadn’t occurred since the early 1980s, soybean yields would have been about 6.6% higher annually between 2011 and 2020.³ This is despite improved agricultural efficiency during that time, emphasising the overwhelming negative effect of altered rainfall on yields.

New analysis shows the impact of Cerrado deforestation on Brazilian agricultural productivity

New Zero Carbon Analytics analysis explored whether the drying caused by clearing land to plant more soy creates hidden productivity losses that counteract the benefits of expansion. We explored this using Trase Earth data on soy production, yield, exports and price from 840 municipalities in the Cerrado between 2013 and 2023, and combined this with rainfall and aridity data.⁴

Trase defines soy deforestation as “the soy area in the target year that overlaps with deforestation… in the five years prior to soy detection.” Given our study period of 2013-2023, this means our deforestation data captures forest loss from 2008 onwards (the five years before our earliest observation year) through 2022.

The Cerrado region would have produced 8% more soy from 2013-2023 without deforestation

Our analysis shows that soy-driven deforestation in the Cerrado is making the region drier.⁵ Greater soybean clearing was found to have dried out the local moisture balance in all municipalities since 2008. Areas with more vegetation loss experienced more arid conditions, confirming scientifically what farmers often observe anecdotally: clearing trees leads to less rainfall and moisture locally.

If no land had been cleared for soy in the Cerrado since 2008, our calculations show that the region would have produced an additional USD 9.4 billion of soy – equivalent to nearly 8% of the region’s soy output over the study period.⁶

We also calculated the amount of soy that would have been produced if 10%, 25%, 35% and 50% less land had been cleared for soy, giving an indication of the production benefits of conserving the Cerrado. Avoiding just 10% of clearing across our study region would have generated an additional USD 938.8 million of soy between 2013 and 2023, implying that nearly USD 1 billion of additional soy could have been produced if modest conservation actions were put in place (Figure 1).

Figure 1

More ambitious conservation scenarios could have resulted in proportionally larger benefits: avoiding 25% of clearing would have preserved USD 2.35 billion in additional agricultural value, while avoiding 35% would have approached USD 3.29 billion.⁷

These targets are realistic. Municipalities in our dataset that saw reduced clearing between 2008 and 2022 cut expansion by 56%, on average. Almost all (91%) of these municipalities maintained or increased production, demonstrating that reducing clearing does not limit output in the vast majority of cases.⁸

Intensifying existing cropland or adopting agroforestry may be better options economically than clearing more land. Better seed, improved management, double-cropping, and integrating trees (e.g. windbreaks, alley cropping) can improve yields and stabilise local moisture.

Losses were twelve times worse in wet years than in dry years

The impacts of clearing vary dramatically with weather conditions.⁹ During wet years with above-normal rainfall, we found that clearing 1,000 hectares for expansion caused regions to lose 14,627 tonnes of soy production. During dry years, the same clearing caused only 1,213 tonnes of lost production – a 12-fold difference.

This pattern is counterintuitive, but might be explained by a critical mechanism: during wet years, when farmers expect higher yields, cleared land cannot retain the extra rainfall that should boost productivity, while forested areas capture and store it.¹⁰ ¹¹

The extreme losses from a single wet year could wipe out multiple years of profits from expansion. These findings also suggest that traditional economic models that use average impacts may severely underestimate the actual financial risks of land clearing.

Models show that individual farmers may see profit from clearing land, but losses multiply at the municipal level

Our analysis revealed a paradox: land clearing for soy is profitable for individual farmers, but economically destructive at the regional level. At the municipal scale, clearing native vegetation created a 3:1 productivity loss between 2013 and 2023 – for every tonne of soy produced on new land, three tonnes were lost from existing fields due to climate spillovers.¹²

Yet, individual farmers still profited because they externalised most spillover costs. Farmers captured all the gains from their cleared land, while losses were distributed across all farms in the municipality, proportional to farm size (see Box 2).¹³ Individual farmers may view land clearing as profitable, yet unknowingly be participating in a system that reduces their long-term economic returns.

Box 2: An individual farmer scenario

Consider a soy farmer who expands their operation from 500 to 600 hectares by clearing 100 hectares of cerrado. From this new land, the farmer expects to produce about 300 additional tonnes of soy annually. If soy is priced at, say, USD 400 a tonne, they would expect to generate USD 120,000 in extra revenue each year.

However, our analysis shows that, on average, clearing 100 hectares reduces total municipal soy production by 837 tonnes annually through climate spillover effects. If the farmer’s 600-hectare operation is part of, say, 10,000 hectares of soy farmland in the municipality, the farmer bears roughly 6% of these regional losses – about 50 tonnes annually on their existing 500 hectares, or USD 20,000 in lost revenue each year.

The farmer gains 300 tonnes and loses 50 tonnes annually on average – a net gain of 250 tonnes.

The extreme risk of wet years

In a single particularly wet year, spillover losses could potentially wipe out multiple years of expected gains. Our analysis reveals that during wet years – when farmers may expect their best profits – the same 100 hectares of clearing costs the municipality 1,452 tonnes in lost production. The farmer’s 6% share of this loss equals 87 tonnes, worth USD 34,800 in a single year. During dry years, losses drop to just 7 tonnes, worth USD 2,700.

The financial reality

Over a decade with an equal amount of wet and dry years, losses would total USD 187,400. These losses would reduce the farmer’s expected returns over the decade by USD 1,012,60, or 16%.

Short-term gains vs. long-term losses are a challenge for conservation policy

Studies of farmer attitudes in the Cerrado state of Tocantins and the Matopiba agricultural frontier found that farmers were sceptical toward zero-deforestation policies, with producers expressing concerns about external interference and questioning the motivations behind conservation. Interviews with soy producers in Matopiba found that their decision-making tended to be economically motivated, clearing land when profitable opportunities arose and in anticipation of future restrictions. This resistance reflects tensions between local autonomy and external regulatory frameworks, as well as legitimate concerns about economic impacts on rural communities.

These studies reveal a challenge for sustainability initiatives, which often struggle to compete with the immediate profit seen from expansion. Farmers resist conservation measures because they view them as costly, yet deforestation ultimately reduces agricultural profitability for the region. Changing perspectives – from seeing conservation as limiting agricultural profit to recognising that it can enhance it – requires evidence that demonstrates the financial benefits of conservation-compatible development and for the evidence to be communicated in a way that speaks to individual farmers’ priorities and experiences.

Strategically intensifying existing farmland using improved technology and management practices offers the potential for better agricultural returns compared to continued expansion. The Amazon Soy Moratorium – an agreement whereby traders avoid purchasing soy from areas deforested after 2008 – demonstrated that soy can expand without driving deforestation and may, in fact, be more profitable in the long term.

Global soy supply chains are found to be heavily exposed to damage from clearing Brazil’s Cerrado

Soy production is heavily concentrated in three regions globally: 40% of soy is from Brazil, 28% is from the US and 12% is from Argentina. This means the global soy trade is tightly interconnected. There is limited flexibility for importers to switch suppliers without displacing other buyers.

Current patterns of soy expansion in the Cerrado are economically unsustainable and undermine the stability of the entire global supply. The world is facing finite agricultural frontiers and accelerating ecosystem damage. Supporting deforestation-free supply chains and investing in forest conservation could safeguard the productive capacity of existing suppliers and ensure long-term, stable soy supplies.

Sourcing from regions that suffered the most production losses shows supply chain vulnerability

China currently buys around three-quarters of Brazil’s soy, making it Brazil’s biggest trade partner for the commodity. The EU is the second-largest export destination, accounting for around 7%. Because most of Brazil’s recent soy expansion has been in the Cerrado, these buyers are highly exposed to clearing-linked risk, particularly for sourcing in the Cerrado’s Matopiba region.

Sourcing from regions where productivity is being undermined by deforestation means greater uncertainty in future soy availability and upward pressure on costs. To compare the risks in each country’s supply chain, we assessed which importing countries were most exposed to hidden productivity losses between 2013 and 2023. We identified the regions each country sources from and calculated the value of the soy that was never produced due to clearing-induced losses in each region (Figure 2).

Figure 2

China has, by far, the highest absolute exposure to clearing-linked production losses, partially because it is the largest importer, followed by Spain, the Netherlands, and Germany. China sources from Cerrado municipalities where land clearing destroyed almost USD 5 billion worth of soy production capacity from 2013 to 2023, equivalent to around half of the total value lost over the period.¹⁴

Without efforts to restore degraded land, this hidden productivity loss is permanent. This figure only reflects clearing during our study period; decades of prior deforestation mean total productivity losses are substantially larger.

Box 3: China’s food supply chain security depends on Brazil’s Cerrado conservation actions

As the top importer of Brazilian soy, China’s supply chain faces mounting risks from continued deforestation in its sourcing regions. China’s supplies are geographically concentrated, amplifying risk. Our analysis showed that 60% of China’s import volume from the Cerrado¹⁵comes from just three states: Mato Grosso (29.7%), Goias (20.1%) and Bahia (10.1%).¹⁶

Brazil’s deforestation protection policies, and how thoroughly they are enforced, will have a big impact on the future exposure of China’s supply chains. To give an idea of the scale of this impact, we modelled three future scenarios for the municipalities China sources from with different deforestation rates, and projected how much production capacity could be destroyed by 2033 (Figure 3):

Recent trend: If the average clearing rate from 2013 to 2022 continues (361.2 kilohectares per year), another USD 3.8 billion in productive capacity will be eliminated in China’s sourcing regions by 2033. This would bring the total productivity loss in the regions since 2013 to USD 8.7 billion.
Historical average: A return to the higher average clearing rates seen from 2008 to 2022 (435 kha/year) would mean additional productivity destruction reaches USD 4.5 billion, totalling USD 9.5 billion.
Policy failure: If conservation policies are weak and deforestation accelerates to rates projected by a recent analysis, at approximately 2.3 times historical rates (1,019 kha/year),¹⁷ China’s sourcing regions could face an additional USD 10.6 billion in productivity destruction, for a total exposure of USD 15.5 billion by 2033.

Figure 3

Changes to trade dynamics have amplified China’s soy supply chain exposure

China’s supply chain exposure has intensified with recent trade dynamics. US-China trade tensions drove Brazilian soy’s share of Chinese imports up to 71% in 2024, while US exports to China fell to zero from May 2025, down from 21% in 2024.¹⁸ ¹⁹Simultaneously, the EU’s new Deforestation Regulation (EUDR) may redirect deforestation-linked soy toward non-EU markets, such as China.

As EU buyers claim deforestation-free supplies, China risks inheriting a portfolio of suppliers from precisely the regions experiencing the highest productivity losses. These losses create supply chain fragility rather than immediate shortages. Degraded landscapes are less resilient to climate shocks, meaning droughts, floods or heatwaves that would be manageable in intact ecosystems can cause significant production disruptions. China’s concentrated dependence on these degraded regions amplifies vulnerability.²⁰

Brazil’s Soy China initiative is an opportunity to secure supply

Brazil and China’s new ‘Soy China’ initiative – a dedicated supply chain meeting Chinese sustainability standards – presents an opportunity to address productivity risks. The framework could allow China to demand deforestation-free sourcing, backed by economic self-interest. Our findings confirm that conservation and soy output are not only compatible but that reducing deforestation is essential for sustaining long-term productivity.²¹

Countries that source soy from high-clearing areas have the most to gain from investing in conservation

Countries sourcing soy from the Cerrado region can enhance their supply chain security by investing in conservation efforts – preventing the deforestation that puts their imports at risk – or by shifting their supply chains to forest-positive suppliers. Examining which countries source the most soy from heavily-cleared areas provides an indication of which countries could benefit the most from investing in Cerrado conservation to enhance their supply chain sustainability.²²

For each major importer, we estimated the soy output lost between 2013 and 2023 in the municipalities it buys from, then divided this by the amount of soy the country imported. This gives a per-tonne exposure intensity: higher values mean more sourcing from heavily-cleared areas and greater vulnerability to continued productivity losses.²³

Germany ranks highest. For every tonne of soy Germany imports, its sourcing regions lost USD 43 of productive capacity between 2013 and 2023 due to deforestation. Germany’s soy purchases are concentrated in municipalities that are actively clearing the Cerrado, which means each tonne imported is linked to more local production loss than other buyers.²⁴

However, countries that source heavily from regions affected by clearing are well-positioned to lead supply chain sustainability efforts. Every million tonnes that Germany shifts toward forest-positive suppliers would preserve USD 43 million in regional productivity (Figure 4).

Germany is followed by Saudi Arabia (USD 28/tonne), Spain and Romania (each USD 25/tonne), and Japan (USD 23/tonne). China has the largest total exposure (Figure 2) because of its high import volumes but a lower intensity (USD 11/tonne).²⁵

However, sourcing patterns are highly overlapped: Germany sources from municipalities where 98.7% of productivity benefits from conservation investment would be shared with other importers, primarily China. This creates a collective action challenge where conservation benefits are shared but costs may fall on individual investors, making coordinated funding more viable than unilateral action. Addressing deforestation-driven productivity losses therefore requires coordinated action, such as multilateral conservation mechanisms, supply chain consortia such as the Soy Moratorium or policy mechanisms such as the EU’s Deforestation Regulation (EUDR).

Figure 4

Box 4: For the EU, the economics favour Cerrado preservation as deforestation regulations ramp up

Our analysis reveals that EU importers have already absorbed at least USD 2.47 billion in hidden productivity losses from Cerrado deforestation over our study period. This cost will only grow without intervention to drastically reduce deforestation, our data, together with other studies, show.

Historical assessments estimate that the EU-soybean trade with Brazil and Argentina caused a cumulative loss of natural capital or ecosystem services of USD 1.7 trillion between 1961 and 2008, underscoring the long-term economic toll of land conversion.

Trade dynamics amplify this: EU–US tariffs announced this year have made US soy a costlier and less reliable option for European buyers. The European Commission imposed an additional 25% duty on US soybeans, which will take effect on 1 December 2025, as part of its retaliatory tariff package. This will raise import costs for EU buyers and reduce the competitiveness of US supply in the EU market.

At the same time, China dominates global soy demand, accounting for 60% of global imports, which intensifies competition for remaining export volumes and limits Europe’s leverage in securing a stable, low-risk supply.

EU exposure to deforestation regulations

The EU Deforestation Regulation (EUDR) prohibits EU countries from importing commodities from land that has been deforested since 31 December 2020. It was officially signed into law in June 2023 and is only anticipated to be fully implemented by December 2026.

Examining where EU countries sourced their soy from in 2022 and calculating their per-tonne exposure intensity gives an indication of how hard it will be for member states to comply with the EUDR. (2022 is the most recent trade data in our dataset reflecting 2017-2021 deforestation – just four years before and one year after the cutoff for deforestation-free imports.) .

Romania shows the highest exposure (USD 72/tonne), suggesting its supply chains were particularly linked to new clearing immediately before the EUDR cutoff. France has the highest absolute exposure of EU countries (USD 45.8 million), while large-volume importers like Spain and the Netherlands show lower intensities (USD 9/tonne and USD 7/tonne, respectively), indicating more diversified sourcing away from recently-cleared municipalities.

These patterns suggest that EU countries face differential EUDR compliance challenges. If those with high 2017-2021 exposure intensities have maintained similar sourcing patterns post-2020, they will require more substantial supply chain restructuring to meet EUDR requirements.²⁶

There is a critical window for intervention

We found that the relationship between land clearing and climate impacts changes as clearing occurs. The first hectares of clearing cause the most severe climate disruption. Then there is a turning point, after which additional clearing causes progressively less additional damage.²⁷

This threshold has implications for conservation strategy. Below the turning point, each hectare of vegetation loss creates large increases in local dryness, making conservation efforts highly effective at preventing climate damage.

Nearly all municipalities that experienced clearing during our study period remain below this critical threshold,²⁸meaning policies prioritising Cerrado protection could effectively prevent further damage. Once municipalities cross the turning point, additional conservation delivers much smaller climate benefits, as most of the damage has already occurred.

Brazil faces a present but shrinking policy window: its advantage of being below the threshold will be permanently lost as clearing intensifies and interventions give diminishing returns.

1
Comex Stat database, accessed 31 October 2025.
2
The study’s authors attribute the Cerrado being overlooked in the Soy Moratorium to “differences in public awareness, national politics and narratives, changes in trade relationships, leadership and sunk investments”.
3
The study is comparing yields on farms between (a) a scenario where deforestation did not reduce regional rainfall and (b) the present scenario where deforestation has reduced rainfall. The yield gap represents the lost productive potential of the current agricultural system due to the climate change that the system itself helped cause.
4
We used CHIRPS v3.0 rainfall maps to calculate the average annual rainfall at a spatial resolution of 0.05 degrees for each Brazilian municipality (2013–2023) by overlaying the rasters on official municipality boundaries and averaging the values inside each polygon. We then calculated anomalies relative to each municipality’s 1991–2020 baseline (we followed the World Meteorological Organisation (WMO) definition of climatological standard normals of 30-year averages, using the current 1991–2020 normal as baseline). Our aridity index, the standardised precipitation evapotranspiration index (SPEI), was based on monthly precipitation and potential evapotranspiration data from the Climatic Research Unit of the University of East Anglia at a spatial resolution of 0.5 degrees. Annual average values were calculated for each municipality for each year.
5
To assess land clearing’s impact on local aridity, we compiled panel data of municipalities in the Cerrado with yearly measurements of climate (SPEI, precipitation anomalies, see footnote 4) and land-use (land cleared for soy). Each municipality has repeated annual observations, which creates a hierarchical data structure (years nested within municipalities). We employed a linear mixed-effects model fit by restricted maximum likelihood (REML) to leverage this structure, as it appropriately accounts for the non-independence of observations from the same municipality. This approach allows each municipality to have its own baseline (random intercept) while estimating the overall effects of clearing and climate on aridity. We performed extensive diagnostic checks to ensure the reliability of the mixed-effects model. The model converged with REML criterion = 493.5. Together, our fixed predictors explain nearly half of the variation in SPEI (marginal R² = 0.488), and incorporating municipality‐level random effects raises explained variance to over two-thirds (conditional R² = 0.682), indicating that both clearing and local heterogeneity account for a substantial portion of SPEI variability. Greater soybean clearing systematically dries out the local moisture balance (SPEI) across all 840 municipalities.
6
Based on the 72% of municipality-years for which trade price data is available. The 8% figure represents the share of total production value. In volume terms, the foregone production of 34.2 million metric tonnes represents approximately 7% of total soy volume produced in the study region over 2013-2023. The difference between value and volume percentages reflects variation in soy prices across municipalities and years.
7
We looked at every municipality, year by year, and recorded how much cerrado was cleared for soy each year. For each location, we compared each year to the previous year and flagged it as a “reduction year” only when clearing went down (and the previous year had some clearing). For reduction years, we calculated the percent cut as “last year’s clearing minus this year’s, divided by last year’s”. The dollar figures we report are modeled gains calculated by estimating the tonnes of production “saved” by avoiding clearing (using our production-loss-per-kilohectare coefficient) and multiplying by the observed municipality-year prices, then summing across years. These are gross revenue numbers (they don’t subtract conservation costs) and assume behaviour doesn’t shift elsewhere. When we show an “all-wet” version, it’s the same calculation valued with the wet-year penalty.
8
To assess feasibility, we compared clearing rates and production levels between early (2013-2017) and recent (2018-2023) periods for each municipality in our sample. Among the 311 municipalities (51% of the sample) that reduced clearing between these periods, we calculated the percentage change in both clearing rates and production to determine whether output was maintained.
9
In our model, the interaction term (soy clearing × relative anomaly) allows the effect of land clearing on SPEI to depend on climate conditions. This tests whether clearing impacts are amplified during extreme wet or dry years. The negative clearing × anomaly interaction result in our model means that clearing has a stronger drying impact in anomalously wet years, when cleared landscapes lose moisture more rapidly, while in already dry conditions the marginal loss per hectare is smaller.
10
Our panel models are associational. The inference that clearing reduces local moisture availability is consistent with the negative SPEI association and robustness checks (municipality and year fixed effects, clustered standard errors, exclusion of top-decile municipalities), but we do not claim causal identification and cannot fully rule out time-varying confounders (such as technology or infrastructure upgrades).
11
Results are not driven by the very largest municipalities: excluding the top decile by soy area leaves the wet-year interaction negative and slightly larger in magnitude (−0.00612 to −0.00661). A stricter municipality fixed-effects model confirms the main drying effect but renders the interaction statistically weaker; we therefore emphasise the robust drying result and present wet-year amplification as a sensitivity consistent with the mixed-effects specification.
12
To do this, we built a municipality-by-year panel for 2013–2023 with (i) total soy production in each municipality and (ii) soy-driven clearing accumulated over the prior five years. We then compared years within the same municipality, controlling for municipality traits that don’t change over time and for shocks common to all municipalities in a given year. This tells us whether years with more recent clearing ended up with higher or lower total municipal production. Because the outcome is total production, the estimated effect automatically nets the output from new fields and any spillover losses (or gains) on existing fields – i.e., it’s a net effect per 1,000 hectares cleared. For dollar figures, we convert the implied tonnes using the observed municipality-year Free On Board (FOB) prices. We report standard errors that allow for correlation within municipalities (and years) and show robustness to outliers and to wet/dry conditions.
13
Illustrative area-to-tonnes conversions assume 3 t/ha for newly cleared soy area (close to the panel median yield). Substituting the observed median yield leaves conclusions unchanged and only rescales the illustrative totals. All tonne-to-USD conversions use municipality-year volume-weighted FOB prices.
14
This represents foregone production in China’s sourcing regions, not a direct cost to Chinese importers, but a measure of how much productive capacity has been lost in the areas where China sources its soy, and therefore the risk to China’s supply chain. China may not be the only importer sourcing from each region.
15
China sources Brazilian soy from 2,381 municipalities across 23 states nationwide, but our analysis focuses on 840 Cerrado municipalities.
16
24.7% of China’s imports came from the Matopiba region.
17
The paper estimates that the Cerrado loses 26.5 million hectares by 2050 under current Forest Code, which works out to 1,019 kha/year.
18
Bloomberg Intelligence report: Global Agriculture, Trade War Threatens US Chain as Opportunities Head South (2025). Accessed 13 October 2025.
19
China and the US are reported to have discussed expanding farm trade, including soy, in October 2025.
20
Brazil can still meet China’s volume demands in the near term. The risk is not immediate supply shortage, but rather systematic degradation of the productive base. As landscapes lose productivity, maintaining output requires either expanding clearing (worsening climate impacts) or accepting yield declines, meaning soy production in the region becomes increasingly vulnerable to disruption.
21
Brazil’s dependence on China as the single-largest buyer also places Brazil’s export programme at risk of shifts in Chinese demand or policy, trade disputes or economic slowdown.
22
In our calculations of the total value of lost production (above), countries that import the most will rank highly because they have a large import volume. Looking at which countries have sourced the most from highly-impacted regions results in a per-unit conservation benefit, showing which countries can most effectively work to protect their imports, regardless of volume.
23
We quantified municipality-level soy productivity losses from deforestation using fixed-effects panel regression models covering 840 Cerrado municipalities over 2013-2023. We converted losses to monetary values using municipality-specific FOB prices (USD/tonne) and matched these to country-level import flows using Trase supply chain data. To calculate country exposure, we allocated municipality losses to importing countries proportionally based on trade volumes. The exposure intensity was calculated as each country’s cumulative attributed losses divided by its total import volume. These values represent foregone production in source regions due to clearing, not direct costs to importers.
24
52% of Germany’s imports came from the Matopiba region – the active agricultural frontier.
25
While total exposure (USD millions) shows scale, USD/t shows how clearing-exposed each imported tonne is.
26
These results indicate supply chain risk profiles based on historical patterns rather than providing definitive EUDR compliance assessments. If EU countries shifted their supply chains between 2017 and post-2020, their EUDR exposure may differ from these estimates.
27
We estimated linear and quadratic coefficients for deforestation, which revealed an inflection point in the relationship between clearing and aridity. Below this inflection point, additional deforestation drives increasingly severe drying effects; beyond it, the marginal impact on SPEI decelerates, suggesting a plateau in sensitivity once forests are already heavily reduced.
28
Of the municipalities that experienced deforestation during our study period, only two exceeded the inflection point and entered the “plateau-response zone”. In these few municipalities, efforts might shift toward restoration strategies, such as reforestation or agroforestry, to rebuild moisture-regulating capacity.

Developing a pathway for food systems transformation

July 14, 2025 by ZCA Team

Key points:

Despite contributing a third of global GHG emissions, there is no comprehensive pathway to reduce emissions from food systems that outlines clear targets and timetables for countries to work towards.
Considerable trade-offs and co-benefits in the agrifood system complicate the creation of a holistic framework. Few net-zero agrifood scenarios consider all elements of social, economic and environmental sustainability, taking into account affordability, rural economies or cultural elements. Existing pathways for reducing emissions in food systems, such as the FAO roadmap for achieving SDG 2 without breaching the 1.5°C threshold, fail to consider biodiversity, health and other targets.
Many key targets already exist, either as globally agreed-upon goals, adopted by up to 196 countries, or science-based targets established in academic literature. Our research assessed 55 targets relevant to food and agriculture that provide some direction for countries, but exist in a confusing landscape with gaps, overlaps, differing levels of quantification and no legal enforceability.
To develop a useful pathway for food systems, a full set of targets needs to be agreed and integrated into a comprehensive pathway based on the latest data to minimise trade-offs and maximise co-benefits.

Route to action: The need for a pathway for food systems transformation

Food systems contribute to over 30% of global greenhouse gas emissions, yet there is no comprehensive pathway – comprising a series of targets and timelines – to reduce these emissions to net zero while meeting goals on nature, health and nutrition. Research has shown that reducing emissions from the global food system is necessary to keep warming to 1.5°C or 2°C.

The International Energy Agency’s 1.5°C roadmap for the energy sector has provided clear targets and timetables for energy transition, spurring higher ambition, better-informed implementation and accountability. For example, the IEA roadmap, which limits warming to 1.5°C, reiterates that “declines in demand are sufficiently steep that no new long lead-time conventional oil and gas projects are required, and no new coalmines or coal mine lifetime extensions,” providing a technical basis for countries to strengthen calls for a fossil-fuel phase-out. The roadmap quantifies this as 75% less investment in fossil fuels through 2035.

Updates to the roadmap since the initial version have also lowered projections for fossil gas demand. Developing a similar approach for food system transformation based on quantitative analysis of emissions reductions needed would help provide a framework for global action.

However, the food and agriculture systems are deeply intertwined with other sectors, resulting in impacts on biodiversity, human health and nutrition, global trade, and economic and social frameworks that need to be considered. In particular, food systems are highly dependent on healthy ecosystems and biodiversity, for example, for pollination of plants, regulating the water and maintaining soil health.

A useful global pathway for the food system must therefore consider and meet goals in multiple areas encompassing climate, nature, health and socioeconomic impacts in a way that balances competing needs.

At COP28, 160 countries endorsed the UAE declaration on sustainable agriculture, resilient food systems, and climate action, and called for the inclusion of agriculture and food systems into national climate plans, known as Nationally Determined Contributions (NDCs), and other strategies before the convening of COP30. Assessing the success of these inclusions will require a global set of indicators to measure them against.

Existing pathways fall short

Existing attempts to develop a comprehensive pathway for the food sector have so far been insufficient. Notably, the FAO released its roadmap to achieving the UN’s Sustainable Development Goal (SDG) 2 without breaching the 1.5°C threshold at COP28 in 2023. The plan incorporates many key targets and indicators, but falls short of outlining a holistic and transparent approach. This is due to its omission of the need to reduce production and consumption of animal-sourced products, promotion of global agricultural intensification and lack of key nature and biodiversity targets.

Additionally, existing studies fail to consider the complexity of the agrifood system and often only assess trade-offs across a few areas rather than integrating all areas at once. A 2025 review found only seven food system studies (of the 36 assessed) covered environmental, economic and societal sustainability. The EAT–Lancet Commission on healthy diets from sustainable food systems is highlighted as one global-level study that incorporates environmental and societal dimensions of sustainability, but falls short on the economic dimension by not focusing on affordability. It models the implementation of a healthy reference diet, with significantly lower consumption of meat and dairy in most regions, that enables us to remain within the safe operating range of six key Earth system processes from the planetary boundaries framework.

Relevant targets exist across disconnected policies and literature

While no existing pathway comprehensively encompasses all areas of the food system, there are already many targets. A review of targets suggests that there are, at a conservative estimate, over 55 relevant to sustainable food systems, encompassing environmental, social, health, economic and other sustainability metrics.

The majority of these are from globally agreed-upon frameworks, such as the Paris Agreement, the Sustainable Development Goals (SDGs) and the Global Biodiversity Framework (GBF).

Fig. 1: Relevant targets exist, but lack cohesion

Most currently agreed targets include a timeline for meeting goals (the majority for 2030, 2050 or 2100) and are quantified via different indicators. Some goals are only partly quantifiable or not quantifiable at all, which poses challenges in tracking their progress. There are also overlaps between the different indicators, particularly across the SDGs and GBF.

Compliance with these targets is not legally binding or enforceable. However, some targets fall under legally binding agreements, such as the Paris Agreement, where certain actions are required. Under the Paris Agreement, countries are required to submit increasingly ambitious climate action plans – NDCs – every five years, with the next set of updated plans to be submitted by the end of 2025. Already, countries have been submitting more ambitious NDCs, which are slowly shrinking the emissions gap required to limit warming to 1.5°C or 2°C degrees. Although legal imperatives are useful to enforce change, the majority of international agreements – for climate and other issues – are not legally binding. Meanwhile, other models of generating collective action have also had success, such as the IEA Net Zero Roadmap mentioned above, the C40 Cities group of 97 cities driving climate action, and the Powering Past Coal Alliance, whose government and corporate members are committed to phasing out coal.

Outside of global policy or diplomatic frameworks, other targets come from recommendations in academic literature, mainly the EAT-Lancet Commission and the Planetary Boundaries framework, and have not been formally agreed upon by national governments. These include goals encompassing more controversial areas, such as reducing the production and consumption of animal products. Despite there being no globally agreed target, 92% of experts “agree that reducing emissions from the livestock sector is important to limiting temperatures to a maximum of 2°C above pre-industrial levels.”

Despite the wide range of existing targets, there remain other areas that need to be further developed or where targets are missing altogether. For example, indicators for the Global Goal on Adaptation (GGA) are in the process of being further defined, from the 490 currently proposed, which span food and agricultural production among other areas. Doing so will also help countries develop their National Adaptation Plans (NAPs) – which 71 countries have submitted.¹

Crucially, there are no globally agreed-upon financial targets to help mobilise the necessary resources to support sustainable food system initiatives worldwide, though there is appetite from the private finance sector to invest in this transformation.

Agrifood systems are hugely underfunded, posing challenges to implementing change. The Climate Policy Institute suggests USD 1.1 trillion is required annually to align agrifood systems with climate and development targets. A 2023 report from the UN Environment Programme Finance Initiative indicates a funding gap of up to USD 350 billion per year by 2030 for such transformations.

Already, the agricultural sector accounts for an average of 26% of total damage and losses from climate-related disasters. At the same time, protecting nature can help build resilience and reduce damages caused by climate impacts on food and agricultural systems, while also providing mitigation benefits, for example, via agroforestry practices and planting of cover crops.

Though not on track, targets have spurred key policies

Even with targets in place, implementation is lagging. Though more NDCs now include agrifood systems, less than half of agrifood system emissions are being targeted by concrete mitigation actions in NDCs, pointing to a significant implementation gap. Only a few indicators under SDG 2 to end hunger have been met or are on track to be met, including increasing cereal yield and decreasing the mortality rate of newborns and children under five. At the same time, overall hunger levels have risen in the last five years.

However, the introduction of these goals, particularly the SDGs, has spurred the implementation of stronger policies on food systems, resulting in tangible improvements in some countries.

For example, the 2015-2035 Agriculture Development Strategy of Nepal was informed by the SDGs and has contributed to almost doubling agricultural land productivity and decreasing stunting in children from 41.5% to 31.5% between 2010 and 2020.

In Brazil, the SDGs are cited in the renewal of national programmes that target poverty and hunger. Between 2022 and 2023, severe food insecurity in Brazil dropped by 85% and the country is set to leave the UN Hunger Map (for the second time) in 2025. This was partly attributed to the reintroduction of the Bolsa Família Program in 2023, providing conditional cash transfers to low-income families linked to health and education outcomes.

Additionally, the Paris Agreement has been the catalyst for the introduction and implementation of climate laws requiring action on climate change. Since 2015, when the Agreement was adopted, there have been 586 laws enacted or updated around the world, and all 193 signatories to the Paris Agreement have at least one law addressing climate change or the transition to a low-carbon economy. For example, the UK’s Climate Change Act was revised in 2019 to align with net-zero emissions by 2050, in recognition of the Paris Agreement. The UK’s emissions have now fallen 54% below 1990 levels, and in 2024 the country closed its last coal-fired power station.

Integrating these targets into a pathway for the food sector

While global targets on key areas exist and are important in informing policy at the national level, the lack of a comprehensive framework has resulted in a confusing landscape that includes omissions, overlaps and unquantifiable objectives. Importantly, targets on reducing the production and consumption of animal products are missing from global frameworks, while targets on adaptation and resilience require further development.

A coordinated effort is required to turn this mix of targets into a coherent pathway that is clearly defined and actionable for countries and investors. This involves having globally agreed-upon targets for key areas that are currently absent and integrating these in a way that ensures no goal is compromised.

Fig. 2: Agreed and academic targets make it possible to achieve a global net-zero agrifood system

Source: Recipe for a Livable Planet: Achieving Net Zero Emissions in the Agrifood System (World Bank, 2024), page 236

Comprehensive pathways that ensure no goal is compromised will also likely highlight issues with technological approaches that offer a solution to one element of the agrifood nexus but don’t prioritise long-term, system-wide sustainability. For example, agricultural intensification via the adoption of high-yielding crop varieties or novel feed additives may promise efficiency gains in the short term, but can also have negative impacts, such as elevated pollution levels and biodiversity impacts in other parts of the system.

Using the existing agreed-upon targets from global treaties and frameworks, as well as targets from academic literature, can provide a strong basis for countries to act. Ultimately, developing a strong agrifood pathway – in a similar format to the IEA Roadmap – for reaching cross-cutting goals on climate, biodiversity and health sectors requires integrating a wide range of goals and targets using the latest available data and modelling to avoid negative impacts and trade-offs.

1
As of 1 April 2025, 62 developing countries and 9 developed countries have submitted NAPs.

IPBES: Economic and financial systems must evolve to protect biodiversity and support transformative change

January 20, 2025 by ZCA Team Leave a Comment

Key points:

The IPBES Nexus assessment – a first-of-its-kind scientific assessment from an intergovernmental body on the interlinkages between biodiversity, climate, health, water and food – has significant findings on the risks to the financial and economic systems that these connections pose.
In parallel, the Transformative Change Assessment provides insights into the shifts in views, structures and practices needed for deliberate transformative change for a just and sustainable world.
Financial and economic systems need nature to function. Around USD 58 trillion – or over half of the world’s GDP in 2023 – comes from sectors that are moderately or highly dependent on nature, meaning that the increasing degradation of natural resources is putting the way our economy functions at risk.
The negative externalities arising from the fossil fuel, agriculture and fisheries sectors are estimated at USD 10 trillion–25 trillion annually, severely impacting biodiversity, water, food security, health and climate change.
In contrast, investment in biodiversity conservation remains critically low, with only between USD 135 billion and USD 200 billion directed toward improving the status of nature annually from both public and private sources. To tackle the biodiversity funding gap, the financial needs are estimated in the range of USD 300 billion–1 trillion per year.
To protect nature and biodiversity and address the risks posed by climate change, reforms in economic and financial systems are necessary. These will include increasing financial flows to biodiversity, addressing debt crises, fostering greater involvement of the private sector, pricing environmental degradation, reforming harmful subsidies and decreasing inequalities.

The Nexus Assessment, released by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES, sometimes called the IPCC for biodiversity) on December 17, 2024, is the most ambitious scientific assessment ever undertaken of the interlinkages between biodiversity loss, water availability and quality, food insecurity, health risks and climate change. At the same time, IPBES also produced the Transformative Change Assessment, which provides insights into the underlying causes of biodiversity loss and the shifts needed to affect deliberate transformative change for a just and sustainable world. The release of both reports followed negotiations between IPBES’ 147 member states after three years of work by experts and multiple consultations with Indigenous Peoples and practitioners.

The assessments make it clear that economies face substantial risk due to our high dependence on biodiversity and nature – which has largely been a blind spot in the global finance system. Scientists agreed that over half of the world’s GDP – USD 58 trillion in 2023 – is generated in sectors that are moderately to highly dependent on nature, exposing these economic activities to risks from biodiversity loss and ecosystem collapse.

One of the key elements in both reports is the role of economic and financial systems, particularly public and private spending, in supporting or hindering transformative change and the challenges and crises of biodiversity loss, water availability and quality, food insecurity, health risks and climate change (also referred to as the nexus elements). This briefing draws on the findings to summarise how economic and financial systems impact the interlinkages between the nexus elements, and highlights the role finance and economic policy decisions play in securing deliberate transformative change for a just and sustainable world.

The causes of the breakdown: how economic and financial systems contribute to erosion of biodiversity, water, food, health and climate

The Nexus and Transformative Change reports make clear that economic and financial activity is actively contributing to the deterioration of biodiversity and nature, with the Nexus Assessment stating that: “Dominant economic systems can result in unsustainable and inequitable economic growth”.

Current policies and international agreements fail to address the substantial negative externalities and can contribute to harming nature. Societal, economic and policy decisions that focus on short-term financial returns without accounting for the broader costs to nature and other nexus elements lead to unequal outcomes for human well-being. For example, the Transformative Change Assessment points out that current market growth-driven paradigms, embodied by metrics such as Gross Domestic Product, limit our definition of development, ignoring other economic, social (including cultural) and environmental dimensions.

More than half of the global population lives in areas facing significant pressure on one or more nexus elements. These impacts are felt disproportionately by those living in low-income countries and small island developing states, as well as by marginalised groups and Indigenous Peoples. While different countries experience the economic impacts of biodiversity loss to varying degrees, developing countries face higher relative impacts due to financial barriers such as high debt burdens that make it more difficult for them to mobilise financial flows.

The two reports put a value on the impact of economic and financial systems on biodiversity and other nexus elements:¹

The Nexus Assessment calculates that USD 7 trillion per year is invested in economic activities that damage biodiversity. Of this, private sector financial flows directly harmful to biodiversity total about USD 5.3 trillion per year and public flows are around USD 1.7 trillion.
The Transformative Change Assessment collates global public explicit subsidies to sectors driving nature’s decline, finding they stood between USD 1.4 trillion and USD 3.3 trillion in 2023. Agriculture received USD 520 billion-851 billion and fossil fuels received USD 440 billion-1.26 trillion.
The negative externalities arising from the fossil fuel, agriculture and fisheries sectors are estimated at around USD 10 trillion–25 trillion annually, according to figures in both reports, illustrating how severely consumption and production in these sectors affect biodiversity, water, food, health and climate change.
Illegal resource extraction globally, including in the wildlife, timber and fish trades, is valued at USD 100 billion–300 billion or more each year, per Nexus Assessment figures.

In contrast to the trillions of dollars invested in or subsiding harm to the nexus elements, funding for biodiversity sits between USD 135 billion and USD 200 billion according to the Transformative Change Assessment and the Nexus Assessment (see Figure 1).

Figure 1: Financial flows harming biodiversity vastly outweigh funding to improve it

Source: Transformative Change Assessment Figure SPM. 7

Transforming the economic and financial system to preserve nature

Both reports lay out the importance of taking action to transform economic and financial systems to conserve and restore nature. Taking action now could have a business opportunity value of over USD 10 trillion and support 395 million jobs by 2030, according to a recent study cited in the Transformative Change Assessment. The reports outline a number of such actions, several of which are described below.

Increase financial flows to biodiversity, particularly to Indigenous Peoples and local communities

The current economic system fails to comprehensively capture biodiversity’s full value and relies on incentives that only consider how nature benefits humans directly, for example through food and water provision. Despite nature’s role in underpinning economic activity, investment in biodiversity conservation remains low. Only around USD 153 billion-200 billion in annual expenditure is directed toward biodiversity improvement efforts, according to both reports.

This funding is significantly lower than financial flows that cause direct harm to nature. According to the Nexus Assessment, bridging this gap requires additional resources estimated in the range of USD 300 billion–1 trillion per year,² with at least USD 4 trillion needed to meet the Sustainable Development Goals most connected to water, food, health and climate. Promising mechanisms such as green bonds or blue bonds remain underutilised, and other options such as payments for ecosystem services mobilise only USD 42 billion per year from both public and private sources, according to the Nexus Assessment. Likewise, establishing sustainability as a central tax principle and reducing tax avoidance can help generate funds for biodiversity.

Indigenous Peoples frequently experience degraded biodiversity, water, food, health and climate, have difficulty accessing financing and are excluded from decision-making processes. Despite this, Indigenous Peoples and local communities make successful contributions to biodiversity conservation and the sustainable management of resources, highlighting the importance of recognising their rights and roles in decision-making processes. Recognising and supporting Indigenous-led conservation activities and food system management leads to significant benefits across the nexus elements. Successful conservation projects must involve Indigenous Peoples and local communities in all steps of the process, including co-decision and governance. Yet, only a small fraction of biodiversity finance is spent in developing countries, and Indigenous Peoples face challenges accessing funding and finance.

Reform debt to enable highly indebted biodiverse countries to protect nature

Low- and middle-income countries are most likely to feel the economic effects of biodiversity loss and the degradation of water, climate, food, and health. Developing countries also face significant barriers in accessing finance to protect nature and address climate change. Reforms to the financial system, including addressing debt crises, taking into account the need to enable just and equitable transitions and tackling the cost of finance connected to perceived investment risks, could help these countries access adequate and affordable financing.

Foster greater involvement from the private sector

Private finance for biodiversity is lacking, with the private sector accounting for only 17% of investments in nature-based solutions, according to the Transformative Change Assessment. Additionally, what private finance there is gets skewed towards developed countries, with just 5% allocated to least-developed and other low-income countries, according to the Nexus Assessment.

One option to incentivise private investment in biodiversity is to make nature a key financial factor for companies. Furthermore, coalitions with multiple actors, including the private sector, are more effective at creating transformative change in general, showing that they have a role to play beyond simply providing finance.

Put an accurate price on environmental degradation

The current economic and financial systems fail to account for negative externalities from the most polluting sectors, with environmental impacts costing trillions of dollars per year, according to figures from both reports. Different ways to internalise these costs – to ensure they are included in the cost of doing business and reflected in the final price of products and services – could be employed more widely. Examples include water pricing and natural capital accounting, which helps identify and value natural assets, and the application of taxes or fines on environmentally harmful activities.

Eliminate, phase out or reform subsidies to move towards more sustainable practices

Governments spend USD 1.7 trillion a year on subsidies that incentivise biodiversity-damaging activities, according to the Nexus Assessment, and these subsidies have increased by 55% since 2021, according to the Transformative Change Assessment. By eliminating, phasing out or reforming public subsidies that damage biodiversity, water, food, health or climate, business models could be moved towards sustainable practices, taking into account the differing needs of developing countries. For example, some agricultural subsidies support unsustainable food production practices and undermine the livelihoods of small-scale producers. These subsidies could be eliminated, phased out or reformed to better support the consumption and production of sustainable food.

Decrease inequalities to address underlying causes of biodiversity loss

The concentration of wealth and power is an underlying cause of biodiversity loss. These differences in wealth and power exist between countries and also within countries, with the wealthiest segment of the global population consuming and using more resources. Because of these unsustainable practices, the rich drive biodiversity loss both locally and globally. Current power dynamics create structural inequalities within economic and financial systems that act to increase distributional inequity and make justice more difficult. In response to these challenges, the Transformative Change Assessment points to revising multilateral cooperation agreements and trade policies to help overcome global inequalities and create coherent governance for just and sustainable development.

1
Some figures from the Nexus Assessment and the Transformative Change Assessment vary slightly due to different calculation methodologies and definitions in the underlying literature upon which they are based. Multiple analyses coming to similar results supports the validity of the conclusions.
2
The Transformative Change Assessment puts the financing gap at USD 598 billion to 824 billion, showing that these estimates are highly consensual if not exactly identical.

Smallholder farmers, agricultural sustainability and global food security

November 6, 2023 by ZCA Team Leave a Comment

Key points:

Smallholder farms of two to five hectares produce 46% of the world’s food on around one-third of the world’s agricultural land. They are major producers of key global agricultural products, such as rice, peanut, coffee, cocoa, bananas and tea.
Smallholder farms tend to have higher food yields per hectare than larger farms, attributed to dedicating a larger share of their land to food crops (rather than animal feed or fuel), employing family members (which lowers transaction costs and increases labour intensity per unit of land) and high fertiliser and seed use.
Smallholder farms tend to have higher crop and non-crop biodiversity than larger farms. This is due to their use of varied crops and ecological land management practices, including limited insecticide use, more field edges providing a habitat and breeding ground for insects, and diverse land cover types, such as forests, fields and wetlands.
Sustainable and climate-smart agricultural practices are already implemented in many smallholder farming systems. In Africa, organic manure, agroforestry, crop rotation and crop diversification are common practices.
The availability of finance has been identified as one of the most significant variables influencing whether or not smallholder farmers in Africa adopt climate-smart agricultural practices.
Ensuring that smallholder farmers can access modern agrifood chains is critical for ensuring food security, productivity and nutrition.
Growth and investment in smallholder agriculture has significant potential to alleviate poverty for smallholder farmers while supporting global food security.

Smallholder farmers are important for rural and national economies, development and food security

Smallholder farming is the most common type of agriculture in the world.¹ Farms of less than two hectares in size produce around one-third of the world’s food, while those two to five hectares in size produce almost half. Farms of less than five hectares located in developing countries account for more than half of the global production of nine staple crops – rice, peanut, cassava, millet, wheat, potato, maize, barley and rye – demonstrating their importance for global food security. As shown in Figure 1, farms of less than two hectares produce the majority of rice (>80%), peanut (75%), cassava and millet (~60%) globally. Smallholder farmers are also major producers of food that is consumed in their country. For example, smallholders in Tanzania meet around 69% of national food demand, and 2.7 million smallholder farmers in Nepal produce around 70% of their country’s food.

Fig. 1: Share of global production of major food crops in developing countries according to farm size

Source: Subnational distribution of average farm size and smallholder contributions to global food production.² Farms over 50 hectares are largely grazed lands.

The role different size smallholdings play in producing food calories varies by region (Figure 2). In Asia, farms of less than five hectares produce 90% of food calories, whereas in Sub-Saharan Africa, farms of this size produce around half of food calories and farms of 5-15 hectares produce another 26%. By contrast, 70% of food calories in Latin America are produced on larger farms (> 15 hectares), while only 7% are produced on farms of less than five hectares.³

Fig. 2: Calories produced by farms of different sizes in Asia, Latin America and Sub-Saharan Africa

Source: Subnational distribution of average farm size and smallholder contributions to global food production.⁴

Despite their size, smallholder farms are highly productive

Farms of smaller than two hectares produce around one-third of the world’s food on just one-quarter of the world’s agricultural land and those two to five hectares in size produce 46% of food on one-third of agricultural land. Small-scale farms have been found to have higher land productivity – the farm’s output per unit of land area – than larger farms. For example, in Kenya, a farmer farming on less than half a hectare of land produces USD 888 of food per hectare on average, whereas a farmer farming on two hectares of land produces food to the value of USD 330 per hectare.

On average, smallholder farms dedicate a larger share of their land to food crops – rather than animal feed or fuel – compared to larger farms. Around 70% of the calories produced on smallholder farms of less than five hectares are available as food, compared to 55% for the global agricultural system.²

Another reason smallholder farms are able to achieve high productivity is their high labour intensity. Employing family members allows for a higher number of labourers per hectare and keeps labour transaction costs low.

As smallholder farmers need to optimise production on small tracts of land, they also tend to use more inputs, such as fertiliser and seeds, than larger farms.⁵ For example, smallholder rice farmers in Bangladesh apply 181 kg of fertiliser on average per hectare, whereas larger farms only apply around 130 kg.

Though smaller farms are more productive than their larger counterparts in many developing countries, yields could be improved with the adoption of modern technologies and optimised inputs, such as fertiliser, manure and seeds. This ‘yield gap’ – the amount by which yields could be improved – ranges from 11% in East Asia to up to 76% in Sub-Saharan Africa, emphasising the significant potential for farmers in developing countries to contribute even further to rural and national food security.
Reaching this potential is contingent on smallholder farmers having access to and participating in modern food supply chains. For example, smallholder farmers may not have access to roads or transport to get their produce to market, they may lack access to suitable storage facilities to reduce food spoilage, or they may not have access to the technology needed to communicate with buyers or to learn about food safety and quality control requirements.

Smallholder farmers and global food supply chains

Ensuring that smallholder farmers can access modern agrifood supply chains is critical for ensuring food security, productivity and nutrition. Smallholder farmers produce some of the world’s most important agricultural products. For example:

Kenya is the third-largest exporter of avocados to Europe, with up to 6% share of total export volume in 2010. Avocados in Kenya are mainly grown by smallholder farmers and account for 17% of horticultural exports and more than 50% of the value of fruit exports.
Bananas in Sub-Saharan Africa are predominantly grown by smallholder farmers on farms ranging from 0.2 to three hectares and account for around 60% of the total global banana and plantain production area and around 30% of the global output.
Globally, around 73% of all coffee is produced by smallholder farmers. Farms of less than five hectares account for 95% of the 12.5 million coffee farms globally, and farms of less than two hectares account for 84%.
Around 90% of cocoa growers are smallholder farmers, farming on land less than five hectares in size and employing 5-6 million people. Seventy percent of cocoa grown globally is exported.
More than half of the tea produced globally is grown by smallholder farmers. Kenya is the fourth-largest producer of tea globally and 62% of this tea is grown by smallholder farmers.
Tobacco leaf is the largest agricultural export of Malawi (66%) – around 60% of tobacco farmers in the country are smallholder farmers.

Smallholder farms have a potential competitive advantage over larger farms when producing labour-intensive and high-value products, though they face difficulties linking these products to modern value chains. Growth and investment in smallholder agriculture has significant potential to alleviate poverty for smallholder farmers while concurrently supporting global food security.

For example, obtaining an Ecocert Organic Standard certification allowed pineapple growers in Zimbabwe to sell their organic produce internationally. Accessing these supply chains will enhance the farmers’ livelihoods – their pineapples could fetch as much as a 30% premium in European supermarkets. Obtaining this certification was made possible with assistance from organisations including the Committee linking Entrepreneurship – Agriculture – Development (COLEAD), the Embassy of Netherlands in Zimbabwe, the Netherlands-based Programma Uitzending Managers (PUM) and the Netherlands Enterprise Agency (RVO), highlighting the importance of collaboration in facilitating access of smallholder farmers to international food supply chains.

Similarly, smallholder avocado farmers in Tanzania were able to access the European export market through help from the private sector companies Africado and Rungwe Avocado Company, both supported by US food security initiative Feed the Future. Another example is macadamia nuts in Malawi, where a Dutch-Malawian partnership has facilitated the export of sustainably-produced macadamias to the European market.

Smallholder farming is important for GDP

Agriculture contributes substantially to the GDP of many developing nations, with smallholder farming playing a significant role. For instance, in Sub-Saharan Africa, where the majority (up to 80%) of farming is done by smallholder farmers, agriculture contributes 23% to GDP. Agriculture GDP values are even higher for certain African countries – for example, 41% of the GDP of Liberia and 31% of the GDP of Guinea-Bissau is attributed to agriculture.

In Sub-Saharan Africa, more than 60% of the population are smallholder farmers and smallholder farms employ up to 65% of the labour force. Around 73% of the population of Tanzania lives in rural areas, where 3.7 million smallholdings support up to 19 million people. In Malawi, smallholder farmers produce 80% of the country’s food and more than 80% of the working population are employed in agriculture.

Smallholder farmers practise climate resilient and sustainable agriculture

Sustainable and climate-smart agricultural practices are already an integral part of many indigenous farming systems. For example, traditional fallow systems, crop rotation and water harvesting practices in the Sahel aim to improve crop yields and livelihoods, and conserve water. In Nigeria, indigenous knowledge and practices are implemented by farmers to improve agricultural productivity and food availability, including mulching, using organic manure, using locally made pesticide, no-tillage and treating seeds with ash for long-term preservation. In South Africa, subsistence farmers use indigenous knowledge and practices such as planting in different soil types, fertilising soil with manure, selecting seeds by colour and size, and storing seeds in ash in clay pots and baskets to preserve them.

Fig. 3: Climate-smart agricultural practices used by smallholder farmers in Sub-Saharan Africa

Source: Contribution of smallholder farmers to food security and opportunities for resilient farming systems. See our explainer on sustainable agriculture in small-scale farming.

Figure 3 shows 17 different climate-smart farming practices that are used by farmers in Sub-Saharan Africa.⁶ The most widely-adopted practice is using organic manure, followed by agroforestry (where annual crops or pastures are farmed together with trees or shrubs), crop rotation and crop diversification. In Ghana, smallholder farmers use a range of climate-smart agricultural practices, including timely harvesting and storing of produce, crop rotation, appropriate and timely weed and pest control, appropriate fertiliser use, mixed cropping (where two or more crops are grown simultaneously), planting legumes among crops, conservation agriculture (agriculture focused on regenerating degraded lands and preserving arable land) and agroforestry, among others. The primary motivations for adopting these practices are improving household food security, reducing pests and diseases, increasing yields and farm income, and controlling erosion and protecting soil. In Nicaragua, smallholder coffee producers implement agroforestry to reduce production costs, improve livelihoods and diversify income.

Table 1: Comparison of the yield, crop and non-crop biodiversity and efficiency of small farms and large farms

Source: Higher yields and more biodiversity on smaller farms

Smallholder farmers tend to plant a greater diversity of crops than larger farms in order to improve nutrition, mitigate drought risk and for market diversification (Table 1). Smallholder farms also have higher non-crop biodiversity than larger farms, which has been attributed to the use of ecological management practices, such as limited insecticide use, the presence of field edges – which provide a habitat and breeding ground for insects – and diverse land-cover types, such as forests, fields and wetlands. Smallholder farms within and around cities can also improve the environment by reducing urban heat island effects and can improve access to easy and affordable nutritious foods for city dwellers.

Encouraging climate-smart agriculture for smallholders farmers

The availability of finance has been identified as one of the most significant factors influencing whether smallholder farmers in Africa adopt climate-smart agricultural practices. In Malawi, access to credit was found to be a major factor dictating the adoption of climate-smart agriculture. In Ghana, maize farmers farming smaller lands face more credit constraints than those farming larger lands. Both private and public financing approaches are needed to encourage the adoption of sustainable agricultural practices by smallholder farmers, who are often lacking the necessary financial resources.

In Kenya, farmers that are more likely to adopt climate-resilient farming practices are those that sell their produce to markets (as opposed to farming entirely for subsistence) and have off-farm activities related to agricultural supply chains, such as milling their grains to add value to their produce or hiring out their farm equipment. Having individual land tenure rights and having middle to high school education were also found to be factors.

1
Smallholder farmers are small-scale farmers, pastoralists, forest keepers and fishers who manage smaller tracts of land, using mainly family labour and dedicating at least some of the produce to household consumption.
2
This study used data on smallholder farms from 83 countries in Latin America, Sub-Saharan Africa, and South and East Asia, which is where 90% of the world’s farms are located.
3
This estimate is based on 41 major food crops.
4
This study used data on smallholder farms from 83 countries in Latin America, Sub-Saharan Africa, and South and East Asia, which is where 90% of the world’s farms are located.
5
This comparison is between small and large farms within the same country.
6
Fourteen Sub-Saharan African countries were included in the analysis: South Africa, Zimbabwe, Malawi, Zambia, Tanzania, Kenya, Uganda, Ethiopia, Cameroon, Nigeria, Niger, Burkina Faso, Ghana and Senegal.

An introduction to sustainable agriculture in smallholder farming

July 13, 2023 by ZCA Team Leave a Comment

Key points:

Smallholder farmers produce at least one-third of the world’s food
Smallholder farmers are disproportionately experiencing the effects of climate change and are particularly vulnerable to climate shocks, yet it is estimated that they receive only 1.7% of total climate finance
The FAO describes sustainable agriculture as meeting “the needs of present and future generations, while ensuring profitability, environmental health, and social and economic equity”
Various farming approaches can be considered sustainable, such as sustainable intensification, climate-smart agriculture, regenerative agriculture, organic farming and agroecological farming
The WEF recognises that farmers are key to addressing the current ecological and climate crises and need to be supported through the provision of financing and fair economic opportunities in order to embrace sustainable food production practices
Ninety-five percent of climate finance for small-scale agriculture comes from the public sector, including government donors, multilateral development finance institutions and bilateral development financial institutions
Smallholder farmers are vulnerable to production risks, so they need initiatives and investments that are relatively low-risk and that offer short-term returns on investment
Impact-oriented funds, blended finance and green bonds offer finance solutions for climate resilient and sustainable agriculture.

Smallholder farming

More than half of agricultural land globally is degraded, leading to productivity losses of USD 400 billion every year. Projections indicate that globally, agricultural production will need to expand by 60% by 2050 to meet increased demand, and most of this will need to come from increased productivity. Food production also makes up more than a third of greenhouse gas emissions worldwide, of which 58% is from animal-based agriculture (including livestock feed) and 29% is from the production of plant-based foods.

Smallholder farms of less than two hectares in size produce around one-third of the world’s food. Farms of up to 20 hectares produce over half (see the chart below).¹ These farms face various production risks due to a range of factors, including they are small in size, are held under traditional or informal land tenure, are more vulnerable to market shocks, are constrained by low soil productivity and low-quality or marginal lands, feature complex production systems hosting a diversity of plants and animals, face regulatory regimes in the Global North that have strict and ever-changing policies on food security and safety, suffer from isolation and low levels of technology, and may be subject to armed conflict and state fragility.

Small-scale farmers, particularly in developing countries, therefore play a crucial role in ensuring food security despite experiencing major food insecurity themselves. Smallholder farmers are disproportionately vulnerable to the effects of climate change and climate shocks, yet it is estimated that they receive only 1.7% of total climate finance. The World Economic Forum (WEF) recognises that farmers are key to addressing the current ecological and climate crises and need to be supported through the provision of financing and fair economic opportunities in order to embrace sustainable food production practices.

Sustainable agriculture

The Food and Agriculture Organization (FAO) describes sustainable agriculture as meeting “the needs of present and future generations, while ensuring profitability, environmental health and social and economic equity”. Various types of agricultural production can be considered sustainable, and these are discussed below.

Sustainable intensification

The main aim of sustainable intensification is to increase crop and livestock yields and the associated economic activity without negatively impacting soil, water or the integrity of natural ecosystems. In general, this means a move away from the typical seed, fertiliser and pesticide technologies used in modern agriculture to restorative practices that rely more on ecological processes and internal resources. It also means increasing output on existing agricultural land and reducing the loss of natural habitat for agricultural production. Examples of how agricultural systems in both developed and developing countries may be redesigned to fit the principles of sustainable intensification are provided in the table below:

Many argue that sustainable intensification can only be achieved if public investments encourage the adoption of innovations and support farmers by making technologies accessible and affordable. As smallholder farmers are vulnerable to production risks, they need initiatives and investments that are relatively low-risk and that offer short-term returns.

For example, agroforestry, which is one of the tools that can be used in different types of sustainable agriculture and involves planting trees alongside pasture and crops, is being supported by the non-profit research institute CIFOR-ICRAF. Their Trees for Food Security II project trained smallholder farmers in Africa in agroforestry principles and business skills, allowing them to participate more effectively in timber, fruit and fodder value chains while increasing outputs and improving sustainability. Another initiative is designed to demonstrate to smallholder oil palm producers in Cameroon that the use of industrial mills is more efficient than small local mills and could improve their productivity and income. Research supported by research centre CIFOR-ICRAF has shown that pests in Zambia and Malawi that would ordinarily be controlled using pesticides can be managed through the use of low-cost agroecological farming principles.²

Sustainable intensification and climate-smart agriculture (discussed below) are closely interlinked, with sustainable intensification forming the foundation of climate-smart agriculture. Therefore, the constraints, solutions and financing options discussed below under climate-smart agriculture will be broadly applicable to sustainable intensification.

Climate-smart agriculture

Climate-smart agriculture aims to guide agricultural systems towards supporting food security in the context of a changing climate, through “integrating climate change into the planning and implementation of sustainable agricultural strategies”. As climate change presents considerable risk in terms of unpredictable weather patterns, climate-smart agriculture focuses on building resilience in order to respond more rapidly to these risks and reduce the chances of becoming food insecure. It has three broad principles:

Increased sustainable production to meet food security and equitably increase incomes, food security and development
Enhanced resilience to climate shocks and risks through adaptation and resilience building
Development of opportunities to reduce greenhouse gas emissions from agriculture, thereby reducing the greenhouse gases emitted per calorie of food.

Climate-smart agriculture uses existing approaches focused on supporting ecosystem services for achieving these principles, with sustainable intensification being a foundation.³ The tools and approaches that are used will vary depending on the regional context, but some examples include:

Integration of crop, livestock, agroforestry and aquaculture systems
Improved management of pests, water and nutrients, including using nitrogen fertiliser more efficiently
Landscape approaches, which focus on the use of collaborative initiatives in farming
Improved management of forests and grasslands, and the integration of trees into agricultural systems
Reduced tillage and the use of a variety of breeds and varieties
Restoration of degraded land
Manure management, which may include the use of anaerobic bio-digesters.

A recent analysis of climate-smart agriculture on small-scale farms found the common barriers to be poor education, skills and knowledge; potentially high investment costs and delayed benefits; and uncertainty.

The constraints and potential solutions have been summarised in the table below:

Source: Climate-Smart Agriculture on Small-Scale Farms: A Systematic Literature Review

This analysis highlights that knowledge sharing and education, among other factors, are key to realising climate-smart agriculture. Solutions also need to consider that the benefits and costs of agricultural transitions differ in different social groups and contexts.

An analysis by McKinsey identified the approaches that could be taken by government, development partners and the private sector to encourage the adoption of climate-smart agricultural measures for smallholder farmers. Among other things, it recommended the following:

Provision of opportunities for land-use optimisation linked to financing and incentive mechanisms
Redesign of subsidies and tax incentives for the adoption of adaptation and mitigation measures
Design of agricultural lending products that are are linked to the adoption of adaptation and mitigation measures
Investment in infrastructure to reduce postharvest losses and investment to make infrastructure more resilient (such as flood protection)
Improvement of traceability and sustainability certifications for applicable crops
Launch of a results-based payment scheme tied to specific goals
Scaling of investment in research and development of technologies for mitigation and adaptation, such as pest-resistant seeds, biostimulants and livestock breeds.

The World Bank Group is supporting the development of climate-smart agriculture and is committed to working with countries to increase productivity, improve resilience and reduce agricultural emissions. It has developed more than 10 Climate Smart Agriculture Investment Plans, offering financing of over USD 2.5 billion for climate-smart agriculture projects that are aligned with its objectives. Two examples include:

Investment of USD 50 million in a Livestock and Dairy Development Project in Bangladesh
Supporting the design of the USD 50 million second phase of the Smallholder Agricultural Development Project in Lesotho through identifying potential climate change challenges and solutions.

Various green bonds have also been developed to support climate-smart agriculture in the Global South. For instance:

Bank Windhoek has issued green bonds for climate-smart agriculture in Namibia
The Nigerian sovereign bond includes investments in sustainable agriculture and climate-smart farming
The Trust Funds for Agricultural Development (FIRA) supports water efficiency and protected greenhouses in Mexico
The Sovereign Bond Issuance in Egypt supports the development of crop species that are resilient to salinity and temperature increase.

The CGIAR, a global partnership linking international organisations concerned with food security, aims to improve the resilience of small-scale farmers to climate shocks through providing climate adaptation solutions through national innovation schemes. Examples include ‘climate-smart villages’, which identifies villages or regions that are likely to be badly affected by climate change and then connects community representatives and researchers to work together to identify climate-smart solutions.

The African Development Bank Group and the International Fund for Agricultural Development (IFAD) have launched the ‘Mission 1 for 200’ initiative, which aims to “double agricultural productivity through the use of state-of-the-art, climate-smart technology and advice” and “build resilience by helping food systems and farmers adapt to climate change and reducing agriculture’s environmental impact and emissions”.

Organic farming

The aim of organic farming is “to create integrated, humane, environmentally and economically sustainable production systems, which maximize reliance on farm-derived renewable resources and the management of ecological and biological processes and interactions, so as to provide acceptable levels of crop, livestock and human nutrition, protection from pests and disease, and an appropriate return to the human and other resources”. Increasing awareness of the negative impacts on inputs, such as pesticides, on human health and the environment has spurred public interest in organic products. It is suggested that organic agriculture has room to expand globally, and given its various sustainability benefits over conventional farming, such as improved soil and food quality, greater biodiversity, less pollution and greater social benefits, it could contribute greatly to feeding the world.

Organic farming systems can promote food security by using minimal external inputs and promoting environmentally-friendly techniques. They are characterised by the following five features:

Respect for the environment and animals, such as through reduced pesticide pollution and lower nitrate leaching
Promotion of sustainable cropping methods, such as crop rotation and legume intercropping, as well as the promotion of crop and livestock diversity
Use of non-chemical fertilisers and pest/disease/weed control means, such as green fertilisers, compost and animal manures, natural pest control and no prophylactic antibiotics
Production of high-quality foodstuffs, such as those with no pesticide residue
Zero use of genetically modified crops.

There are various advantages of organic farming for small-scale producers, including:

Increased social capital through higher bargaining power and improved access to credit and markets
Saving money due to lower costs of inputs and energy, including potential savings from the use of non-fossil energy
Increased income through the sale of certified organic products at premium prices (10%-300% higher than conventional products)
Increased social interactions between farmers and consumers, greater employment of farmworkers and cooperation among farmers

Some disadvantages include:

Yields are approximately 25% lower than yields from conventional farms⁴
It may not be possible to produce sufficient compost and green manures in certain regions due to landscape constraints
The average return on investment for farmers is around five years
Achieving organic certification requires around three years, and during this time farmers will need to produce organic products but will not be able to sell their products at premium and will also need to endure reduced yields at the same time
Higher labour costs⁵
Challenges with soil nutrient management.

Compared to intensively-managed agriculture, organic farming tends to improve species richness and abundance, although there may not be a major difference between organic farms and small-scale farms made up of different agricultural fields and species. Organic farming has been found to have higher soil carbon levels, better soil quality and less soil erosion than conventional farms. Organic farming, on average, has a lower climate impact than conventional farming, whether considering the carbon footprint per land unit (43% fewer greenhouse gas emissions) or the carbon footprint per product unit (12% fewer greenhouse gas emissions). However, there are some examples of where organic farming performs less well than conventional farming:

As the chart above shows, while organic farming mostly performs better in certain impacts, such as greenhouse gas emissions, it performs less well in others, such as land use. For some impacts, the effects might be mixed – for example, energy use for producing vegetables in organic farming is higher because of certain alternative pesticides that may be used. The eutrophication (enriching a body of water with minerals and nutrients) potential in organic farming is high due to differences in the nutrient release of synthetic fertilisers versus manures.

Regenerative agriculture

Regenerative agriculture has been broadly defined as “a system of farming principles and practices that increases biodiversity, enriches soils, improves watersheds and enhances ecosystem services”. It strongly emphasises the improvement of soil health and the restoration of degraded soils, which in turn enhances the quality of water and vegetation, improves land productivity and restores the carbon content of the soil. Another core feature of regenerative agriculture is the reversal of biodiversity loss.

A wide variety of practices may be promoted under regenerative agriculture, as summarised in the table below:

Source: Regenerative Agriculture: An agronomic perspective

In terms of financing, in Brazil Rizoma-Agro has issued green bonds for regenerative agriculture, while Biotrop has issued green bonds worth BRL 100 million for regenerative agriculture. PepsiCo has issued a 10-year USD 1.25 billion green bond focused on investments into environmental sustainability, including regenerative agriculture.

Agroecology

Agroecology is “the integrative study of the ecology of the entire food system, encompassing ecological, economic and social dimensions”. It offers a framework for supporting sustainable agriculture and food systems that is focused on three aspects:

The scientific aspect, which uses modern ecological knowledge to design and manage sustainable farming ecosystems
The practical aspect, which values the local, empirical and indigenous knowledge of farmers to develop innovative and effective farming practices
The social change aspect, which advocates for changes to the food system that ensure food security for all.

Rather than altering the practices of existing unsustainable agricultural systems, agroecology requires the complete transformation of food and agricultural systems. The way in which agroecological principles are applied will depend on the local context.

The 10 Elements of Agroecology, which is a framework that was developed by the FAO and multiple stakeholders, offers a guideline:

Diversification is key to agroecological transitions to ensure food security and nutrition while conserving, protecting and enhancing natural resources
Agricultural innovations respond better to local challenges when they are co-created through participatory processes
Building synergies enhances key functions across food systems, supporting production and multiple ecosystem services
Innovative agroecological practices produce more using less external resources
More recycling means agricultural production with lower economic and environmental costs
Enhanced resilience of people, communities and ecosystems is key to sustainable food and agricultural systems
Protecting and improving rural livelihoods, equity and social well-being is essential for sustainable food and agricultural systems
By supporting healthy, diversified and culturally appropriate diets, agroecology contributes to food security and nutrition while maintaining the health of ecosystems
Sustainable food and agriculture requires responsible and effective governance mechanisms at different scales, from local to national to global
Circular and solidarity economies that reconnect producers and consumers provide innovative solutions for living within our planetary boundaries while ensuring the social foundation for inclusive and sustainable development.

Source: International Fund for Agricultural Development

For a project to be considered agroecological, it should be:⁶

Increasing resource use efficiency while reducing and/or substituting external inputs
Recycling water, nutrients, biomass and/or energy
Diversifying and integrating different farming sectors (various crops and/or animals)
Facilitating efficiency and recycling, spreading risks, increasing resilience and producing a greater variety of nutritious food.

The Scaling-up Agroecology Initiative is a UN-led platform that aims to support national agroecology processes through policy and technical capacity. The International Fund for Agricultural Development (IFAD) supports the initiative, and of the 207 IFAD-supported projects completed between 2018-2023, around 60% are implementing agroecological principles. The total investment in all IFAD projects in these years was USD 8.25 billion, though more financing was allocated to non-agroecological farming projects. Financing from the Adaptation for Smallholder Agriculture Programme (ASAP) and the Global Environment Facility (GEF) has been key in providing access to funds for agroecological practices – around 87% of projects with ASAP financing and 90% of projects with GEF financing entirely or partially promote agroecology. While the public sector is the primary financing source for both agroecological and non-agroecological IFAD, ASAP and GEF-supported projects, the private sector has played very little role in this financing, highlighting a key financing source to be developed.

Finance for small-scale farms in the Global South

IFAD is a UN-linked international financial institution focused on small-scale agriculture and supporting farmers through projects that provide small-scale farmers with access to finance, markets and technology, including via grants and low-interest loans. Together with finance and policy advisory organisation the Climate Policy Initiative (CPI), it released a report on the climate finance gap for small-scale farming. Climate finance is aimed at “reducing emissions and enhancing sinks of greenhouse gasses, and aims at reducing vulnerability and maintaining and increasing the resilience of human and ecological systems to negative climate change impacts”. The report found that 95% of climate finance for small-scale agriculture comes from the public sector, including from government donors, multilateral and bilateral development finance institutions (see the chart below).

The financial instruments used by the public sector mostly include grants (50%), followed by concessional (low cost) debt (33%) and non-concessional debt (16%). Of these grants, the majority (80%) were provided by governments, while concessional debt was largely issued by multilateral and bilateral development finance institutions. Multilateral development banks also provided the majority of the non-concessional debt.

There are various impact-oriented funds aimed at small-scale agriculture, including:

The Land Degradation Neutrality (LND) Fund, which is an “an impact investment fund blending resources from the public, private and philanthropic sectors to support achieving LDN through sustainable land management and land restoration projects implemented by the private sector”.
The Meloy Fund, which is an “impact investment fund focused on proving the triple bottom line viability of investing in fishing and seafood-related enterprises that will lead to better management and protection of these formerly under-appreciated and undervalued natural assets”.
&Green, which aims to “finance the delinking of major commodity supply chains from deforestation in a way that is commercially viable and replicable” through offering “innovative financial instruments that take away part of the risks of investing”.
Root Capital, which “provides credit and capacity building to small and growing agricultural businesses around the globe”.

Blended finance, which is “the strategic use of development finance and philanthropic funds to mobilise private capital flows to emerging and frontier markets”, is viewed as a finance solution for climate resilient and sustainable agriculture. Blended finance helps reduce both real and perceived risks in an investment, thereby facilitating private capital investment. Between 2014-2019, around 22% of blended finance transactions globally went to rural and smallholder farmers (see the chart below). The median transaction size for smallholder farmers during this period was USD 35 million, though the scale of these transactions has increased in recent years.

Blended finance is helping small-scale farmers through market initiatives such as Aceli Africa, which is supporting loans to agricultural small and medium sized enterprises in Africa. For instance, Aceli’s financial incentives helped Tanzania Commercial Bank provide loans for business to purchase cassava from smallholder farmers. Another example is the African Agricultural Capital Fund, which has made investments ranging from USD 250,000 to USD 2.5 million in small and medium sized agricultural businesses in Africa.

The Commission on Sustainable Agriculture Intensification (CoSAI) commissioned a report that found that around USD 60 billion was spent each year on agricultural innovation in the Global South between 2010-2019, of which 60%-70% came from national governments, 20%-25% from the private sector (mostly related to the research and development and marketing of new products related to mechanisation, crop protection, and seed development and biotechnology), and 10%-20% from development partners, including institutional investors, bilateral and multilateral agencies, and international philanthropies.⁷ Of this funding, less than 7% was directed at sustainable intensification specifically.

1
Small-scale farmers are typically those that produce food on up to two hectares of land in Asia and Africa and up to 15 hectares in Latin America. Small-scale farmers may or may not hold land titles.
2
Conventional pesticides are expensive for these farmers, who often do not have access to adequate protective clothing.
3
Ecosystem services are the basic services that are provided by the natural environment that offer benefits to humans, such as pollination
4
Despite the lower yields, the economic profitability is around 22%-35% higher than conventional agriculture.
5
In certain regions, this could be viewed as an advantage, such as by promoting rural employment.
6
This is according to the International Fund for Agricultural Development Agroecology Framework
7
Examples of innovation funding in the report included research into new seed varieties, training on new agroforestry practices, the adoption of agricultural policies such as fertiliser subsidy reforms, digital marketplaces for agricultural sales and purchases, and the maintenance and management of research institutes or infrastructure, such as the modernisation of slaughterhouses.

Exploring a comprehensive loss and damage facility for African countries

November 9, 2022 by ZCA Team Leave a Comment

Key points:

Africa is responsible for just 3% of all carbon dioxide emissions since the Industrial Revolution but is the most vulnerable continent to the impacts of climate change
These impacts will increasingly exacerbate poverty and inequalities and disrupt livelihoods
Comprehensive loss and damage facilities could be established at the national level in order to address country-specific needs
These would function at multiple levels to cover unavoided and unavoidable, economic and non-economic losses and damages, and would encompass risk and curative (i.e. compensatory) finance mechanisms, with funding obtained through multiple avenues
The finance sources could include philanthropy and solidarity funds, multilateral sources such as grants, loans and multi-donor trust funds, and other finance sources such as carbon levies and taxes, collected and distributed through a formal financing mechanism that is yet to be established.

The politics of loss and damage

Loss and damage – which refers to the negative impacts of climate change that may or may not be reduced by adaptation – is a contentious and highly politicised topic. This is because while developed nations are responsible for most of the greenhouse gases emitted since the Industrial Revolution, the warming caused by them is disproportionately impacting less developed countries that have contributed the least to global warming. For example, Africa is responsible for just 3% of all carbon dioxide emissions over the last few centuries but is the most vulnerable continent to the impacts of climate change.

Though the concept of loss and damage is formally recognised by the UN Framework Convention on Climate Change (UNFCCC) and has always been discussed at COPs, no provision has been made for the financing of loss and damage. Indeed it was a key sticking point in last year’s COP negotiations. Wealthy nations are reluctant to commit to loss and damage funding due to concerns around legal liability, fearing they may become locked into open-ended litigation and compensation for climate-induced disasters. A proposal for a dedicated financing facility for loss and damage at COP last year by the negotiating bloc of the Group of 77 + China – which was supported by many climate-vulnerable and developing countries and civil organisations – was rejected by the US and EU. A formal mechanism for collecting and distributing funds for loss and damage – whether by establishing a dedicated financing facility or placing it in an existing fund (such as the Adaptation Fund) – will be high on the agenda for the Global South at this year’s COP 27 meeting.

Avoidable, unavoided and unavoidable risks

Loss and damage may encompass a wide range of circumstances, including:

Extreme weather or rapid-onset events, such as storms, cyclones, heatwaves and floods
Slow-onset events, such as drought, desertification, increasing temperature, land degradation, sea level rise and salinisation (an increase in concentrations of salt in soil)
Non-economic impacts, such as the loss of cultural heritage, native animals and plants and tradition
Economic impacts, such as loss of lives, livelihoods, homes, agriculture and territory.

These impacts will further exacerbate poverty and inequalities and disrupt livelihoods, and increasingly so as temperatures rise. Some of these risks can be addressed through adaptation measures. If the measure is not available yet but could become available in the future, the risk is considered to be a ‘soft adaptation limit’. An example of this might be the development and implementation of an early warning system for floods in a region that is becoming increasingly flood prone. However, some risks have a ‘hard adaptation limit’, meaning that the available technologies and actions for averting this risk are not feasible. An example of this might be when an island becomes uninhabitable because of sea-level rise.

When considering risk financing mechanisms for loss and damage, it is helpful to think about risks as being situated along a continuum (see Fig. 1, adapted from here) of avoided risks (risks that have or will be avoided through mitigation), unavoided risks (risks that cannot presently be avoided or reduced due to socio-economic constraints) and unavoidable risks (hard adaptation limits). Loss and damage is centered around unavoided and, particularly, unavoidable risks.

The different finance mechanisms available

Risk finance

A comprehensive climate risk management strategy to avert, minimise and compensate for unavoided and unavoidable loss and damage would include ambitious mitigation, adaptation and disaster risk-reduction action. Various risk financing mechanisms based on risk pooling (spreading risk by sharing it across different lenders/insurers) and transfer exist that could be used to address loss and damage:

Catastrophe/disaster risk insurance
- Aimed at developing tailored financing strategies for improving financial resilience to natural hazards
- One example is the National Agricultural Insurance Scheme (NAIS) in India, which aims to mitigate risks related to crop and livestock loss from climate events. The NAIS is funded by a state-owned insurer and receives technical support from the World Bank
- Microinsurance can provide financial support to low-income households following disasters. One example is Acre Africa, a World Bank initiative offering innovative and tailored microinsurance products to help small-scale farmers mitigate against crop failure from adverse weather

National social protection schemes or social funds
- These consist of a wide range of policies and interventions aimed at reducing poverty, inequality and vulnerability, including social protection programmes, contributory social insurance and social health protection
- An example is South Africa’s Working for Water programme, which employs people in public sector projects to conserve water and ecosystems, thereby improving climate change adaptation and disaster risk reduction. The programme is funded by both government and private entities

Contingency finance
- Governments set aside public funds or obtain loans from multilateral financing institutions in order to respond rapidly in the aftermath of a disaster
- If a loan is secured from a development bank, governments will only incur a cost in the event that funds need to be drawn from the loan

Catastrophe-linked bonds
- Risks are transferred from developing countries to the capital markets – financial markets where buyers and sellers trade bonds and other financial assets – in the event of a catastrophe, thereby filling in the financing gap for immediate post-disaster relief from extreme events
- For example, the World Bank issued a catastrophe-linked bond (listed on the Singapore Stock Exchange) to provide support for losses of up to USD 150 million from tropical cyclones in the Philippines

Climate-themed and green bonds
- These are instruments that finance green or climate-themed projects and provide investors with regular or fixed income. Investors hedge against climate risks and receive returns on their investments
- The International Finance Corporation (IFC) – a World Bank institution – has contributed substantially by issuing and investing in green bonds
- For example, in 2021, the IFC invested USD 100 million in Egypt’s first private sector green bond to help finance sustainable projects and the transition to a greener economy

Forecast-based financing
- These are funds that are released for pre-defined actions based on scientific forecasts and risk analysis
- For instance, in Bangladesh, emergency kits are distributed prior to a cyclone.

These risk financing mechanisms are mostly appropriate for avoidable/unavoided loss and damage. However, it is not possible to prevent or minimise loss and damage that go beyond hard adaptation limits (unavoidable loss and damage) – such as many impacts from slow-onset events. For risks that cannot be addressed using these risk pooling and transfer mechanisms, curative finance may be needed:

Curative finance

Loss and damage funds
- These are trust funds that facilitate access to international finance and raise local money for climate change mitigation, adaptation, risk management and compensation
- A significant amount of donor support is required for these funds, which may be sourced from various entities (see the box on ‘where the money comes from’ below)
- An example is Bangladesh’s National Mechanism for Loss and Damage, which is financed through multi-donor trust funds and the national budget

Impact investment funds
- Environmental and climate projects are financed by private and public funds, providing investors with returns on their investment
- An example is Livelihood Carbon Funds, which invest in projects such as mangrove restoration in Africa

Trust funds
- Funds are especially established to deal with a specific need, such as relocation due to climate change
- For example, the Fiji Climate Relocation and Displaced Peoples Trust Fund for Communities and Infrastructure that was developed to respond to displacement due to sea-level rise
- Funding is obtained from a climate and adaptation levy (whereby certain services, incomes and items are taxed) and, potentially, bilateral and multilateral funding.

The finance sources discussed in the box below could be used for both risk finance and curative finance mechanisms.

Where might the money come from?

Philanthropic and solidarity funds

Philanthropic funds
- At COP 26, several philanthropic climate funders, including the European Climate Foundation, Open Society Foundations, and Hewlett Foundation, committed an initial USD 3 million in loss and damage finance as ‘start-up assistance’

Solidarity funds. Here are examples of what solidarity funds could look like:
- The European Union Solidarity Fund (EUSF) – financial contributions are made by EU member states and are administered by a flexible governing mechanism
- Unitaid – finance is obtained through national aeroplane levies, voluntary contributions by countries and philanthropy

Government pledges
- At COP 26, Scotland and Wallonia committed USD 2.5 million and USD 1 million respectively to financing loss and damage
- Denmark committed USD 13 million to loss and damage financing this year.

Multilateral sources

Within the UNFCCC, the Green Climate Fund (GCF) is the only source providing adaptation and loss and damage financing. Approximately 24% of GCF-approved projects refer to loss and damage
Global Facility for Disaster Reduction and Recovery (GFDRR), which is a grant-funding mechanism
Global Risk Financing Facility (GRiF), which is a multi-donor trust fund that provides grants
Multilateral development banks, which could provide assistance in the form of grants (need not be paid back) and loans (need to be paid back)
The multi-donor trust fund of the Climate Vulnerable Forum and the Vulnerable Twenty Group
The World Bank’s International Development Association (IDA), which provides finance via concessional loans and grants and policy advice to developing countries
Official development assistance (ODA) – between 2010 and 2019, 11% (USD 133 billion) of international aid was disaster-related, suggesting that ODA could be an important source of loss and damage finance.

Innovative finance sources

Luxury carbon tax or wealth tax
- Levies and taxes could be added to luxury or high-emissions intensity products or activities, such as space tourism, buying luxury yachts and sports cars and using private jets

Financial transaction tax
- A small levy could be placed on the buying and selling of financial assets, which could provide up to USD 16 billion in revenue.

International airline passenger levy
- A modest fee on international aeroplane tickets could be paid directly into a loss and damage fund

Bunker fuels levy
- The emissions and fuels of cargo transportation by ship and aeroplane could be taxed. The International Monetary Fund (IMF) estimated that a tax of USD 30 per tonne of carbon emitted by aeroplanes and ships (advanced economies only) would have raised USD 25 billion in 2014

Fossil fuel majors carbon levy
- The Carbon Majors report in 2013 found that 63% of emissions in the atmosphere are from coal, gas, oil and cement from only 90 companies
- A global fossil fuel levy could be imposed on these companies and directed into a loss and damage fund that could be supplemented by a one-off fee from each company based on its historical emissions
- For instance, the prime minister of Barbados has proposed a 1% tax on sales revenues for fossil fuels, which could raise USD 70 billion each year

Global carbon tax
- A global system of carbon pricing could help fund loss and damage either through taxation or auction revenues generated from trading schemes, such as the EU Emissions Trading System.

What would a comprehensive loss and damage facility look like for African countries?

Comprehensive loss and damage facilities could be established at the national level in order to address country-specific needs. The facility would need to function at multiple levels to cover unavoided, unavoidable, economic and non-economic losses and damages and would encompass the risk finance and curative finance mechanisms discussed above, with funding obtained through multiple avenues. It would also require close cooperation and coordination among different levels of government, the multilateral system and various sectors across society. A potential loss and damage facility could be broken down into four main components:

Knowledge and capacity development
Resilience building
Funding collection and allocation
Compensation for, and recognition of, unavoidable loss and damage.

Knowledge and capacity development

These are knowledge and technology-sharing measures for averting and minimising loss and damage impacts:

Establish centralised and reliable climate change databases

The database should include high-quality meteorological data, climate projections and warnings and archives of climate events
National governments and research institutes need access to sophisticated technologies such as numerical flood monitoring and flood mapping infrastructure, and improved data collection tools and capacity in order to better understand trends and respond appropriately
These tools would be fundamental for developing early-warning systems for floods, droughts, fires and other climate hazards
This information is also important for climate change attribution.

Build collaborative and inter and trans-disciplinary research

Encourage skills sharing between research institutes and universities in developing and developed nations to ensure that local entities have access to the latest and most sophisticated tools for monitoring events
For example, the University of KwaZulu-Natal in South Africa is working with the Dutch research institute Deltares to develop an early warning system for floods
Increase university funding for research on loss and damage and climate change from international donors and public funding sources.

Strengthen technical capacity building for local governments

Provide local governments with the tools, expertise and capacity to effectively coordinate preparations for and responses to climate disasters
For instance, the Council for Industrial and Scientific Research (CSIR) in South Africa has developed a state-of-the-art online risk profiling and adaptation tool, called the Green Book, for assisting municipalities in assessing risks and vulnerabilities to climate change. The tool is co-funded by the Canadian International Development Research Centre and was produced together with South Africa’s National Disaster Management Centre.

Resilience building

These are physical measures for averting and minimising loss and damage impacts that prioritise climate-resilient interventions:

Investment into projects that promote climate resilience

For example, Access Bank in Nigeria issued a certified green bond that will mostly go towards building coastal flood defenses to protect against sea-level rise.

Construction of physical climate barriers and adaptation measures

For example, the construction of sea walls along Tanzania’s coastline, funded by the US Adaptation Fund and the Global Environment Facility’s Least Developed Countries Fund
Through the Adaptation Fund Climate Innovative Accelerator, grants are being administered for innovative adaptation technologies. An example is Slamdam, an inexpensive technology for protecting people from flooding that is being piloted in Burundi.

Preventative building measures, such as retrofitting houses to improve resilienceFor example, low-cost homes in South Africa were retrofitted with ceiling insulation through a local government project financed by South Africa’s Green Fund, which has a portfolio of investment projects and is managed by the Development Bank of Southern Africa.

Case study 1: Extreme precipitation in Durban, South Africa

Earlier this year, extremely intense rainfall (> 450 mm in 48 hours) led to flash floods and landslides in Durban in South Africa, killing more than 450 people, destroying 4,000 houses, displacing around 40,000 people and causing ZAR 1.7 billion in damages. This event is considered one of the worst natural catastrophes in South African history in terms of economic and human life loss and was made twice as likely due to climate change.

The floods disproportionately affected marginalised communities and the impacts were worsened by pre-existing structural vulnerabilities – a legacy, in part, of centuries of colonialism and apartheid, further exacerbated by current exploitative international relationships and global power imbalances.

South Africa was ill-prepared to respond to the event:

There is no reliable disaster risk database
Local, provincial and national governments have not been proactive in planning and building resilience, which may be due to a lack of coordination, finance, capacity or expertise
Early-warning systems and flood mitigation measures are inadequate, and so no rapid-response system is available.

Other factors compounded the risks from this event, including uncontrolled urbanisation and a lack of land-use zoning enforcement (e.g. stopping people from building below the flood line). In addition, poor education in many communities means that people may not fully understand the danger posed by such an event and may be reluctant to move when asked to. The region is also reeling from the negative economic impacts of the Covid-19 pandemic and socio-economic unrest.

Who paid for the impacts?

Contingency finance from South Africa’s National Disaster Management Centre
Multipurpose cash grants for victims from UNICEF, funded by EU humanitarian aid funding, provided immediate relief
Flood relief funds from nonprofits, financed by donors
The Industrial Development Corporation, owned by the South African government, which is funded through loan and equity investments from commercial banks, development finance institutions and other lenders
Insurance schemes self-funded by individuals and businesses
Provincial government entities, such as the Coega Development Corporation.

In addition to this, a comprehensive loss and damage facility for averting, minimising and compensating for this disaster might cover the following:

Developing an advanced early-warning and rapid-response system
- Acquire funding from international sources, including research grants, to facilitate research
- Facilitate skills and expertise sharing with international experts
Relocating at-risk communities to suitable land above the flood line
- Financed through trust funds set up for relocation
Protecting at-risk infrastructure through flood control mechanisms
- This could be funded through green bonds or impact investment funds.
Providing facilities in anticipation of events
- Allocate forecast-based financing for distribution of health packs or mobile health facilities
Uplifting local communities through resilience measures
- Invest in national social protection schemes and preventative measures (i.e. retrofitting houses to make them flood or rain proof)
- Invest in projects that empower local government to educate and communicate with communities on flood impacts.

Fund collection and allocation

These are approaches for maximising fund collection and allocation for loss and damage impacts:

Diversify funding sources

Design funding options that are not currently in place, such as from innovative sources
Encourage funding to be based on grants and concessional loans (i.e. loans that offer more favourable terms than market-based loans).

Streamline funding acquisition

Maximise overall loss and damage financing through comprehensive risk management frameworks that include a range of funding sources, rather than relying on ex-post (after the event) aid, which is unreliable and difficult to monitor
Diversify social protection measures and the financing thereof
Improve government capacity to undertake international negotiations on loss and damage financing.

Establish trust funds

Multilateral development banks and national development banks have great potential to address loss and damage through trust funds
Trust funds geared towards country-specific needs should be established, such as the Fiji Climate Relocation and Displaced Peoples Trust Fund for Communities and Infrastructure, which was developed to respond to displacement due to sea-level rise.

Develop a dedicated loss and damage financing mechanism

A dedicated financing facility should be established to track and prioritise which aspects of loss and damage need funding
Ensure that the funds are reaching the most vulnerable.

Case study 2: Tropical cyclone Ana in Mozambique

Mozambique experienced extreme rainfall from tropical cyclone Ana this year, displacing 180,869 people, destroying 12,000 houses, damaging 26 health centres, 2,275 km of road and 765 schools, and flooding 37,930 hectares of crops, severely impacting food security. Climate change increased the likelihood and intensity of the rainfall associated with these cyclones, and these events are projected to become increasingly severe with climate change. Mozambique has contributed 0.01% of global carbon dioxide emissions since the Industrial Revolution.

Sixty percent of the population of Mozambique lives along the coastline and is vulnerable to tropical storms. Mozambique ranks 9th out of 191 countries globally in terms of high vulnerability to climate impacts, exposure to risk and lack of coping capacity. Recent military insurgence in some parts of the country, rooted in unemployment, underdevelopment, poor governance and poverty, has led to the death of around 4,000 people and the displacement of nearly one million.

Current funding sources and mechanisms for climate disasters in Mozambique include:

Contingency finance
- This is the main disaster funding source in the country, but it only covers the initial emergency phase and is limited
Donors
- Donations are a significant source of funding for extreme events but are difficult to monitor and predict, in part because there is no centralised monitoring and coordinating mechanism
Emergency loans
- These are organised in advance and can deliver funds in the event of an emergency. However, they are unpredictable, difficult to monitor and require long negotiations that cause delays in recovery and reconstruction
Contingency budget
- The Ministry of Public Works, Housing and Water Resources is the only sector to use a contingency budget, which allocates emergency funds to the recovery of roads and bridges.

How could the response to tropical cyclones be improved under a comprehensive loss and damage facility?

The Disaster Management Fund, which has been created by the Mozambican government to proactively budget for events rather than reallocate funds after the event. This has received funding in the form of a grant from the World Bank

Contingent loans are being discussed by the Mozambican government and World Bank and would provide immediate access to liquidity for emergency response and recovery following a disaster. This is especially important for providing immediate relief while funds are being obtained from other sources
Comprehensive rural insurance schemes, including microinsurance for agriculture, supported through entities such as the Global Index Insurance Facility, a multi-donor trust fund that supports smallholder farmers

Trust funds and loss and damage funds, such as relocation trust funds for those living in high-impact areas

National social protection schemes and other resilience measures for uplifting vulnerable communities. Examples might include retrofitting houses, medical centres and schools to make them storm proof. Investment in infrastructure for protecting communities from storm impacts could be funded through green bonds and impact investment funds

A comprehensive database on disasters as well as a sophisticated early-warning system could be developed with international expertise and financing. This would include means for disseminating information on imminent events, as rural areas are isolated and do not have reliable telecommunications.

Case study 3: Tropical cyclone Ana in Malawi

Together with Mozambique and Madagascar, Malawi experienced intense rainfall and winds from tropical cyclone Ana, affecting around one million people, destroying 115,388 hectares of crops and leaving 114,218 children without school facilities. Climate change increased the likelihood of this event in Malawi and is likely to increase the likelihood and intensity of tropical cyclones in the future. Malawi’s department of disaster management estimated that its four-month recovery plan required around USD 84 million. Malawi has contributed less than 0.01% of global carbon dioxide emissions since the Industrial Revolution.

Malawi is one of the poorest countries in the world, with an economy that is heavily reliant on agriculture, which employs up to 80% of the population. This makes it particularly vulnerable to climate shocks. Around 90% of people live in rural areas and are mostly engaged in rain-fed subsistence and smallholder farming. Around 2.3 million people face food insecurity and require assistance. Armed conflict in Northern Mozambique has also impacted more than one million Malawians.

How were affected communities supported following this event?

By the four-month recovery plan of Malawi’s department of disaster management, which received funding and technical support from humanitarian partners
A ‘flash appeal’ launched by humanitarian partners of the Malawian government, including the Malawi Red Cross, seven national NGOs, 26 international NGOs and 10 UN agencies, all of which aimed to provide assistance for those affected in the immediate aftermath of the event
By Oxfam and its humanitarian partners, who provided immediate relief in the form of cash, food, clean water and sanitation
Provision of health and nutrition kits by UNICEF
By other humanitarian organisations, such as Partners for Reproductive Justice, which provided health kits and mobile clinics for girls and women, and Christian organisations such as the Catholic Development Commission. which provided cash and non-food items, such as blankets and soap.

What are some of the major challenges in responding to, and preparing for, extreme weather events in Malawi?

Because of its high poverty and low level of economic development, Malawi is not resilient to climate disasters
As emphasised by the response to Ana, Malawi is highly reliant on humanitarian aid. The National Resilience Strategy of the Malawian government recognises the need for policy and new approaches to shift away from humanitarian aid and towards response plans and programmes that strengthen resilience to shocks
Though Malawi’s Department of Climate Change and Meteorological Services started issuing weather warnings on radio and television three days before the cyclone, many living in rural areas do not have access to radios or other telecommunications. The Department of Climate Change and Meteorological Services also cites issues including relaying weather information to those who are less educated, difficulties translating technical weather language into understandable formats, and a limited capacity for authorities to take action.

How could the response be improved through a dedicated loss and damage facility?

An analysis by the Loss and Damage Collaboration on a national loss and damage mechanism for Malawi found that:
- Key aspects missing in the loss and damage agenda at the government level include slow-onset events, which have been given no policy priority, and non-economic loss and damage. It suggested these impacts should be monitored and assessed in order to understand them better
- A loss and damage mechanism wouldn’t require the invention of completely new tools and approaches but should build upon existing institutions and frameworks
- The mechanism should include a financing facility that could track and prioritise which aspects of loss and damage need funding with a focus on the most vulnerable

Given the challenges faced by the disaster warning system currently in place, the facility could focus on improving resilience and responses by:
- Developing a comprehensive risk database and a sophisticated early-warning system that can reach rural communities. This could be both national and community-based to reach various sectors of society
- Investing in programmes that help improve the understanding of climate disasters and impacts in communities so that they are better equipped to respond to these events
- Developing multi-level contingency plans in order to improve disaster-response systems
- Strengthening coordination between various sectors of society to manage early response systems

To improve resilience against tropical cyclones, the facility could focus on:
- Developing and improving existing infrastructure to protect against floods and other climate impacts
- Providing facilities in anticipation of events, such as health facilities and shelters
- Relocating at-risk communities to suitable land above the flood line
- Uplifting local communities through resilience measures, such as national social protection schemes

Malawi is the ninth country to join the Africa Disaster Risk Financing Programme (ADRiFi), which, together with African Development Bank and African Risk Capacity (a specialised insurance company established by the African Union), aims to enhance government responses to climate shocks and strengthen the resilience of rural communities
This year, the African Development Bank approved a grant of USD 9.25 million for the financing of the ADRiFi in Malawi. The first part of the grant will come from the African Development Fund, while the ADRiFi multi-donor trust fund will provide the second part of the grant.

Compensation for, and recognition of, unavoidable loss and damage

These are various measures for compensating for and recognising loss and damage impacts that are unavoidable:

Recognition of impacts

Active remembrance of losses, such as through school curricula, museums and exhibitions
- If people are relocated, efforts should be made to maintain a sense of cultural identity
Encourage restorative dialogue
- Official apologies
- Truth and reconciliation conferences
Trauma counselling
Enabling access to abandoned sites.

Compensation for impacts

Support for rebuilding livelihoods and infrastructure
Support for developing alternative livelihoods
- For example, educating people on an alternative skill due to livelihood being lost, such as fishers who can no longer fish due to sea-level rise
Facilitating safe migration and resettlement.

These could be financed through curative finance mechanisms.

Case study 4: The Cape Town water crisis, South Africa

The Western Cape province of South Africa, where Cape Town is situated, experienced three years of consecutive drought from 2015 to 2017, leading to a major water shortage that almost saw the taps run dry for the four million residents of Cape Town. Unlike the tropical storms and floods mentioned in the previous case studies, this is an example of a slow-onset event that, despite having disastrous consequences, is often less likely to be on the political and policy agenda. However, scientists have found that climate change tripled the likelihood of this event and will increase the likelihood of it occurring again in the future. While the current water system in place in Cape Town was designed to provide sufficient water to mitigate drought once every 50 years, climate change has significantly increased drought frequency. This means the system is more vulnerable to drought than previously thought.

The water crisis had severe economic impacts for the region. Industries that were hit particularly hard include agriculture and tourism. The region produces 60% of the country’s agricultural exports and contributes 20% of domestic agricultural production. The estimated loss to agriculture alone during the water crisis was USD 0.4 billion and included the loss of 30,000 jobs. Cape Town is one of the most visited cities in the country and is a tourism hub of Africa, and the water crisis saw major declines in the numbers of overseas tourists visiting the region.

How might a comprehensive loss and damage facility improve the resilience of this system?

Investment in technologies and schemes

The system is entirely dependent on rainfall, making it highly vulnerable
Investment could focus on alternative technologies such as water de-salinisation plants, groundwater extraction and updated integrated urban water management, as well as the updating of existing infrastructure. This could be supported by:
- Technology and information sharing by international experts to help devise an integrated urban water management programme, funded by research grants
- Green bonds and impact investment funds to finance these technologies
- Investment in national social protection schemes, such as South Africa’s Working for Water project, which has already contributed significantly to improving drought resilience through removing alien vegetation from key water catchment areas

Support for farmers and other industries at risk

Investment in preventative measures, such as retrofitting or upgrading farms with improved capacity to store water
Investment in water-saving management approaches and tools
Empowering local governments and other entities to educate communities on water management

Emergency support in the event of another water crisis

Catastrophe-linked bonds
Disaster risk insurance
Contingency finance.

The effectiveness of animal feed supplements in cutting methane emissions

October 19, 2022 by ZCA Team Leave a Comment

Key points:

Various natural and synthetic supplements for reducing methane emissions from cattle, sheep and goats are being developed, each with its own set of positive and negative characteristics
Most supplements have only been tested in feedlots. Effectively administering them to animals on pasture, where cattle, sheep and goats spend most of their time and where most methane is produced, could prove challenging
The methane offset potential varies considerably among studies of the same supplement, highlighting the fact that impacts are difficult to predict
The lifecycle emissions of many supplements are poorly understood, and so a full understanding of their mitigation potential is lacking
Scaling-up the production of some of these supplements in the near-term comes with its own set of challenges.

Methane from ruminant (animals with four-chambered stomachs, including cows, sheep and goats) burps is the single largest human-caused methane source across all sectors, contributing 25%–30% of global methane emissions. Due to urbanisation, a growing human population and an expanding middle class, global demand for milk and meat is expected to increase by 58% and 74% respectively by 2050 compared to 2010. To combat this rise, several measures for curbing methane from burps are being developed.

One of these measures involves feeding ruminants supplements that inhibit methane production in the stomach. Cows eat carbon contained in plants, and this carbon is converted into methane in the stomach by microbes before being burped out. These supplements work either by physically disrupting methane production, or by shifting the composition of the microbial community away from methane-producing microbes.

Though some supplements have shown promise for reducing methane emissions and are already being sold as voluntary carbon credits, questions remain about the scientific credibility, practicality, scalability, safety and efficacy of these products.

Natural supplements

Red seaweed (Asparagopsis) has received a lot of media focus in recent years on the back of trials reporting methane emission reductions of up to 98% (when as little as 0.2% of the diet is supplemented with dried seaweed powder). It is estimated that if just 20% of the beef and dairy market in developed countries incorporated the supplement into feed, up to 15% of global methane emissions from burps could be avoided.

The main active ingredient in the seaweed is a compound called bromoform, which is a methane-production inhibitor and probable human carcinogen – although concerning levels of bromoform have not been detected in the tissue or milk of cows fed red seaweed. These seaweeds are also rich in iodine, excessive amounts of which can cause thyroid dysfunction in humans. Concerns have also been raised about the ozone-depleting properties of bromoform. Levels of the inhibitor vary naturally due to the environment and genetics, which could translate into variation in the efficacy of the product.

Probably the biggest barrier to rolling-out this seaweed supplement in the near term is producing enough of it. Harvesting wild populations alone would be unsustainable, so aquaculture techniques would need to be developed, along with land for growing and drying facilities. Ideally, these facilities would be located near farms to avoid transport and other processing emissions, although growing seaweed does have potential environmental benefits, such as CO2 sequestration, water quality improvement and ocean acidification reduction. The development of these aquaculture facilities could support regional economies by using local labour for seaweed growing and processing.

More modest methane reductions of up to 30% have been achieved using garlic and citrus extract supplements, marketed under the name Mootral. However, this is only based on a few animal trials. In one trial, statistically significant results were only seen after 12 weeks, although the authors attribute this to the refusal of the animals to eat the feed at the start of the experiment. However, no safety concerns have been raised with the use of this product.

The methane offsets from Mootral are being sold as voluntary carbon credits, called CowCredits, which are issued by Verra. With no lifecycle assessment available, and only a small handful of animal trials published in peer-reviewed scientific journals, it is difficult to properly evaluate the offset potential or efficacy of this product.

Methane reductions of up to 30% have also been found when adding nitrate-rich foods into the feed, as this modifies the microbial community. Nitrate has obtained better results in dairy cows than in beef cows, with a lifecycle assessment of the potential net greenhouse gas reductions in the US dairy industry estimating a 5% reduction in CO₂ equivalents. However, a major barrier to nitrate supplements is toxicity from nitrite – a by-product of nitrate metabolism in the stomach.

Synthetic supplements

One supplement that has received regulatory approval in Brazil, Chile and, soon, the EU, and for which there is substantial scientific evidence from animal trials, is 3-nitrooxypropanol, or 3-NOP. It is marketed under Bovaer (a combination of ‘bovine’ and ‘air’). The methane reduction potential averages 30% and lifecycle assessments report 11.7%–14% decreases in whole-farm dairy net greenhouse gas emission intensity when 3-NOP is used. 3-NOP also shows more promising results in dairy cattle than in beef cattle, with the same dose reducing methane emissions more in dairy cows than in beef cows.

The safety risks of 3-NOP to animals and humans are low. However, the compound degrades rapidly in the animal stomach so it needs to be supplied constantly, for example by incorporating it into feed, in order to work. This may be impractical for animals raised outside the feedlot (a yard or building where animals are fed in intensive production systems).

Typical lifecycle of beef cows in pastures and feedlots in the US

To understand how applicable these supplements may be in highly-developed, intensive beef-production systems, we can use the US as an example. The US is the largest beef-producing nation in the world (12.3 million tonnes in 2019), and the production system has a high proportion of cattle finished in feedlots – though Australia and South America are catching up.
In the beef production system in the US, a permanent herd of cattle is kept in order to produce calves (called the calf-cow operation). These cattle typically graze on inexpensive pastures such as grass. Of the calves born to this herd, about 60% will be raised on pasture for anywhere between 10 and 23 months (called the stocker operation) after which they will be finished in the feedlot (called the feedlot operation) for a further 100 to 300 days. The other 40% of calves go directly into feedlots for 240 to 280 days before going to slaughter. It is estimated that the permanent herd is responsible for up to 82% of the methane produced in the beef production system.

Methane production across the different operations of the beef production system

The feedlot issue

One obstacle shared by all the above supplements is that they have only been tested in feedlots. While they could, in theory, be given to cows raised on pasture, the practicality of doing so is likely to prove challenging, as feed is not as carefully controlled in pasture systems as it is in feedlots. Moreover, although some may consider cows raised on pasture to be more sustainable because they are eating fibrous plants that humans and other livestock otherwise cannot eat, pasture-raised cows actually burp more methane than cows that are fattened on more easily-digestible and nutrient-dense grains in feedlots. As most of the world’s cows spend the majority of their life on pasture and generally burp more methane than feedlot cows, an effective feed supplement must be effectively applicable to pasture-raised cattle.

Reducing emissions in pasture-raised animals

For pasture-raised animals, switching to more easily digestible legume forages could help reduce methane emissions. Tannin-rich forages or additives are another natural supplement option that can also be readily used in pasture systems. However, they have more modest reduction potential compared with some of the supplements mentioned above, with results varying greatly depending on the type of tannin. Tannins may negatively impact nutrient and protein digestibility and stomach health, affecting the animal’s ability to convert feed into milk and meat. It has been suggested that 3-NOP (Bovaer) could be supplied in lick-blocks or slow-release stomach devices for cattle on pasture, but the practicality of this has not been assessed. The effectiveness of 3-NOP was also found to decrease when higher amounts of fibre are eaten, implying that even if it were made available to cows on pasture, it may not be effective when low-quality forage is being eaten.

Environmental considerations

Though grain-fed feedlot cows produce less methane than grass-fed pasture cows, supplying these grains also comes with its own environmental impact. Feedlots are also significant sources of hydrogen sulphide (a toxic air pollutant) and major polluters of waterways with ammonia, pathogens and antibiotics. Concerns around increased antibiotic resistance are also growing. However, pasture systems come with their own set of concerns. For instance, if cattle production in the US were to shift from feedlot-based to pasture-based, herd size would need to increase by 30% to maintain present-day numbers because cows would take longer to fatten up and there would be less meat per cow. This shift would also result in greater methane emissions and other environmental costs, such as soil erosion, loss of native vegetation and water eutrophication (when water becomes overly enriched with nutrients, depleting oxygen levels).

Below is a table summarising the attributes of the supplements discussed, including the science (the number of studies and quality of the studies), scalability (how easily could this technology be scaled up for use in the near future), deployability (how readily could the technology be deployed), safety (potential safety concerns to humans, livestock and the environment), reduction potential (the extent to which methane could be reduced) and pasture use (the potential for the supplement to be used in pasture-based systems).

Summary of the supplements

In summary, many of these supplements are only in pilot phases or need more rigorous scientific research, especially animal trials, to fully understand their potential. There are major discrepancies in the methane reduction potentials reported among studies testing the same supplement, suggesting complex interactions of multiple variables, with impacts that are difficult to predict. Perhaps the biggest limitation of most of these supplements is that they have only been tested in feedlots. Controlling and monitoring the consumption of these supplements by cows in pasture systems, which produce the majority of global methane emissions from cattle, could prove particularly challenging, especially considering the palatability of many of them is low.

Ukraine war and the global food system

August 15, 2022 by ZCA Team Leave a Comment

Key points

Russia’s invasion of Ukraine has unsettled an already unstable global food system and placed additional pressure on the global economy
Rising food and energy prices are having ripple effects across the economy, as seen by a jump in inflation, and are deepening the hunger crisis in developing nations
The food crisis will continue if trade disputes persist and no political consensus is found.

The global food system is in the midst of its third major food crisis in 15 years. Droughts in major producing regions, excessive speculation in agricultural markets and demand for biofuels disrupted the market in 2007/8. Between 2010-2012, spiraling oil prices, biofuel mandates and trade barriers triggered a new crisis. This year, extreme weather, the worldwide pandemic and a conflict between two agricultural superpowers have pushed cereal and vegetable oil prices higher than during the 2008 crisis, while the FAO Food Price Index reached its highest level since its inception in 1990 in March 2022.

Together, Russia and Ukraine account for 12% of global calories, supplying 28% of globally-traded wheat, 29% of barley, 15% of corn and 75% of sunflower oil. Russia’s invasion has thrown these supplies into disarray and unsettled an already-fragile global food system. By blockading Ukrainian ports and suspending its fertiliser exports, Russia has put Ukrainian farmers and the region’s food production under extreme stress – for example, an estimated 30%-50% of the country’s wheat fields will not be planted this year, while 20%-30% of winter cereals, maize and sunflower seeds currently planted will not be harvested during the 2022/2023 season.

Market disruption

This has led to substantial global supply constraints for such foodstuffs, causing prices to jump. Wheat prices soared by 68% in May, compared to the January average, while fertiliser costs have risen by 30% since the beginning of 2022, following an 80% spike last year triggered by high natural gas prices (a key component of fertiliser prices) in Europe.

According to the World Bank’s April 2022 Commodity Markets Outlook, high food price inflation has hit several countries across different income divides. The Ukraine conflict has disrupted global patterns of commodity trade, production and consumption in such ways that are likely to keep prices at historically high levels until the end of 2024.

Hunger on the rise

African countries rely heavily on Russia and/or Ukraine for food supplies, having imported 44% of their wheat from both countries between 2018 and 2020. Countries such as Somalia, Senegal and Egypt rely on one or both of Russia and Ukraine for between 50% and 100% of their wheat. Eritrea, for instance, sources all of its wheat from the two countries. Since the start of the year, wheat prices in Kenya have risen by 58%, largely due to the deficit in imports from Ukraine and Russia. These price spikes, along with trade and import disruptions, are having a devastating impact.

The UN has said the war’s impact on the global food market alone could cause up to 13 million more people to go hungry, with Arab and African countries most at risk. The World Food Programme estimates that the number of severely food insecure people (defined as those that have run out of food and gone a day or more without eating) doubled from 135 million pre-pandemic to 276 million at the start of 2022. The ripple effects of the war in Ukraine are expected to drive this number up to 323 million in 2022.

Protectionism intensifying crisis

After months of Russian embargo, Ukraine and Russia reached an agreement on 22 July to enable the resumption of grain and other agricultural commodity shipments from Ukrainian Black Sea ports. However, ongoing Russian provocations on Ukrainian territory have brought the agreement to a standstill. Amidst this uncertainty, the world’s economies have been trying to find solutions to ensure better food access, although these have been undermined by the introduction of protectionist measures – in an effort to secure domestic sufficiency, governments have been stockpiling, restricting food trade and banning fertiliser exports.

Argentina has increased taxes on soybean oil and meal exports and lowered the cap on wheat exports. India has banned wheat exports while Malaysia has halted chicken exports. Export restrictions are generally taken in order to protect the domestic consumer and ensure there are no supply shortages, however they can intensify global food insecurity and cause price jumps – during the 2007/08 food crisis, export restrictions accounted for 40% of the increase in agricultural prices. The scale of current restrictions is greater than in 2007/08, affecting 17.3% of total calories traded globally.

Other governments, such as the US, Ireland, Canada, Mexico and the EU, have suggested increasing food production, which may result in an expansion of cropland. However, according to an analysis of the EU market, increasing cropland is problematic. One driver of the food price crisis is the cost of fertilisers and the fossil fuels used to produce and transport them. Producing more food would need the use of additional fertilisers and fossil fuels, which could exacerbate climate change and biodiversity loss and result in minimal price reductions.

Cooperation and support key

We have more than enough food to sustain us. To appropriately address food security and increase access, experts call for a proactive approach focused on the engagement of governments and international development partners. It is also essential to continue funding the World Food Programme’s emergency-relief efforts. But beyond immediate humanitarian assistance, governments must equip the world’s most vulnerable with the safety nets they require to overcome the current crisis, according to the International Food Policy Research Institute. Measures such as cash transfer programmes and enhanced aid to smallholder farmers, such as access to credit schemes, markets and healthy food, have the potential to strengthen food system resilience in affected regions such as Sub-Saharan Africa and the Middle East.

Meanwhile the G7 has urged all nations to “keep their food and agricultural markets open” and work to maintain free trade flows. Protectionist policies are harmful to the global market and governments must work together to prevent stockpiling. Comprehensive action and consensus on what needs to be done in the medium-to-long term will be critical to avoid a lasting crisis.

IPCC WGIII report: The land sector and climate mitigation

April 6, 2022 by ZCA Team Leave a Comment

This briefing summarises the Working Group III (WG3) of the IPCC’s main insights about the mitigation options with the Agriculture, Forestry and Other Land Uses (AFOLU) sector. The term “land sector” will be used throughout this briefing for clarity. The briefing also summarises the findings on the needs and limitations of land-based carbon dioxide removal (CDR).

Key points

Rapid deployment of mitigation in the land sector is essential in all 1.5°C pathways. It can provide up to 30% of the global mitigation needed for 1.5°C and 2°C pathways.
The sector offers significant near-term mitigation potential at relatively low cost. The global land-based mitigation potential is ~8–14 billion tonnes of CO₂ equivalent (GtCO₂-eq) each year between 2020-2050. About 30-50% of this potential could be achieved under USD20 per tCO2-eq. Options costing USD100 per tCO₂-eq or less could reduce global GHG emissions by at least half the 2019 level by 2030 (SPM C.12). But land-based mitigation cannot compensate for delayed emissions reductions in other sectors.
The IPCC recognises that carbon dioxide removal (CDR) is necessary to achieve net-zero GHG globally. Modelled scenarios rely heavily on forest planting and BECCs as main options to remove emissions from the atmosphere to achieve it.
But, the IPCC is not advocating for large-scale CDR. There are many uncertainties, risks and a lack of social licence for these options. It is still uncertain whether CDR through some land-based measures can be maintained in the very long term because sinks can saturate, for example. CDR cannot be deployed arbitrarily and given the time needed to ramp-up CDR, it can only make a limited contribution to reaching net zero in the timeframe required.
There is a substantial investment gap in the sector. The IPCC estimates that, to date, only USD 0.7 billion a year has been invested in land-based mitigation, well short of the more than USD 400 billion per year needed to deliver the up to 30% of global mitigation effort in deep mitigation scenarios.

The land sector is key to climate mitigation, but only within limits

The land sector is both a carbon source and a carbon sink. It accounted for ~13%-21% of global greenhouse gas (GHG) emissions between 2010-2019. ¹ But the land sector is also a carbon sink, as it draws CO₂ from the atmosphere when plants grow (through the process of photosynthesis). When the sector’s sources and sinks are added up, the land sector is considered a net sink of emissions – removing about 6.6 GtCO₂ a year for the period of 2010-2019. ²

The IPCC clearly states that the land sector has huge potential for mitigation. It can both reduce emissions – for example by changing farming and livestock practices – as well as remove them from the atmosphere, via measures like planting more forests and protecting existing ones. But the sector “cannot fully compensate for delayed action in other sectors”. (SPM C.9)

Overall, the IPCC estimates that the global land-based mitigation potential is ~8–14 billion tonnes of CO₂ equivalent (GtCO₂-eq) each year between 2020-2050, at costs below USD 100/tCO₂. ³ These estimates are slightly higher than those in AR5. Considering both integrated assessment models (IAMs) and sectoral economic potential estimates, WG3 states that “land-based mitigation could have the capacity to make the sector net-negative GHG emissions from 2036 although there are highly variable mitigation strategies for how [its] potential can be deployed for achieving climate targets”. ⁴ There are many options that can help reduce and remove emissions (Box 1). Most of the options to reduce emissions are available and ready to deploy, whereas CDR needs more investment. ⁵

The IPCC does not use the term ‘nature-based solutions’ (NbS), but ‘land-based mitigation measures’. When evaluating the mitigation potential within the sector, it discusses 20 measures, both supply and demand-side (Box 1). However, when it analyses mitigation pathways, it only includes a few options because of how climate models are currently built (see the role of CDR in mitigation pathways section for more detail).

Box 1. What are the main ways the land sector reduces and removes emissions between 2020-2050?

Forests and other ecosystems have the highest potential for carbon mitigation, according to global sectoral models. Protecting, managing and restoring these ecosystems is likely to reduce and/or sequester up to 7.4 billion tonnes of CO₂ equivalent each year between 2020 and 2050. ⁶ Crucially, the IPCC finds that protecting ecosystems has the highest potential. The report also stresses that halting deforestation and restoring peatlands is vital to keeping temperature rises below 2C.

Agriculture and demand-side measures provide the second and third highest potential for mitigation, potentially reducing and/or sequestering up to 4.1 and 3.6 billion tonnes of CO₂ equivalent a year respectively between 2020 and 2050. ⁷ For agriculture, the measures that have the greatest potential are soil carbon management in croplands and grasslands, agroforestry, biochar and rice cultivation, as well as livestock and nutrient management. On the demand-side, it’s shifting to healthy diets and reducing food waste and loss.

Land sector mitigation measures can have important co-benefits, but only if done properly. For example, “reforestation and forest conservation, avoided deforestation and restoration and conservation of natural ecosystems and biodiversity, improved sustainable forest management, agroforestry, soil carbon management and options that reduce CH₄ and N₂O emissions in agriculture from livestock and soil, can have multiple synergies with the sustainable development goals.” ⁸

But there are many risks and trade-offs. Large-scale or poorly planned deployment of bioenergy, biochar, and afforestation of naturally unforested land. (high confidence) for instance, can compete with scarce resources, such as agricultural land. ⁹ This can threaten food production and security and reduce adaptive capacity. The use of non-native species and monocultures (e.g. planting one type of tree) in forest projects can also lead to biodiversity loss, and negatively impact ecosystems. ¹⁰ There are also risks in relation to land’s ability to continue to act as a carbon sink in the future, which can reduce land sector measures’ capacity to mitigate emissions. ¹¹

Joint and rapid effort is key to achieving high levels of mitigation in the sector, the IPCC says. But there has been a lack of funds to support these efforts. The IPCC estimates that, to date, only USD 0.7 billion a year has been invested in the sector, well short of the more than USD 400 billion per year needed to deliver the up to 30% of global mitigation effort envisaged in deep mitigation scenarios.¹²

What does the IPCC say about the scale of land-based CDR?

Mitigation potential of different CDR options

CDR is defined by the IPCC as “human activities that remove emissions from the atmosphere and durably store it”. Thus, CDR excludes uptake of emissions not directly caused by humans. CDR can help in several phases of mitigation:

Reducing net CO₂ or GHG emission levels in the near-term
Counterbalancing residual emissions from hard-to-transition sectors like industry and agriculture to help reach net-zero CO₂ or GHG emissions targets in the mid-term
Achieving and sustaining net-negative CO₂ or GHG emissions in the long-term if deployed at levels exceeding annual residual emissions. ¹³ Therefore, offsets are discussed in the report as a way to counterbalance residual emissions, highlighting that hard-to-abate sectors could have more social licence to rely on CDR. ¹⁴

Currently, the only widely practised CDR methods include afforestation, reforestation, improved forest management, agroforestry and soil carbon sequestration. ¹⁵ Figure 1 presents the options that can be deployed on land as well as in the oceans. The IPCC discusses these options, presenting a summary of their mitigation potential, risks, co-benefits and costs. (Table 1 in the appendix) However, the IPCC does not go into detail on all options. For example, it mentions that the choice of feedstock for BECCS could lead to positive or negative impacts, but does not explore all feedstock options and their related consequences.

Figure 1. CDR methods across Land sector and Oceans (IPCC- WG3 Chapter 12, p.37)

The role of CDR in mitigation pathways

The WG3 report looks at what the science says about mitigating the climate crisis. As established in most scientific literature, achieving net zero by mid-century is the safest way to stay Paris aligned. There are, however, many different routes to net zero. Thus, the scope of this report is to chart the options, limits, benefits and trade-offs of pursuing a net-zero emissions society. To do this, the IPCC reviewed more than 3000 pathways, including over 1200 scenarios, to develop five “Illustrative Mitigation Pathways” (IMPs) and two high-emissions pathways for reference.

The report finds that “CDR is a necessary element to achieve net-zero CO₂ and GHG emissions, and counterbalance residual emissions from hard-to abate sectors”. ¹⁶ It is also a key element in scenarios that are likely to limit warming to 2°C or lower by 2100”. ¹⁷ All of its IMPs use land-based CDR, which is dominated by BECCS, afforestation and reforestation. ¹⁸

In most scenarios that limit temperatures to 2°C or lower, the IPCC predicts cumulative volumes of CO₂removed between 2020-2100 could reach (all median values): ¹⁹

BECCS – 328 GtCO₂
Net CO₂ removal on managed land (including afforestation and reforestation) – 252 GtCO₂
Direct Air Capture Capture and Storage (DACCS) – 29 GtCO₂

To put this into perspective, the remaining carbon budget assessed by WG1 from the beginning of 2020 onwards is 500 GtCO₂ for limiting warming to 1.5°C with a 50% chance of success. ²⁰ The IPCC also predicts that mitigation measures in 2°C or below pathways can significantly transform land all around the world. These pathways are “projected to reach net-zero CO₂ emissions in the land sector between the 2020s and 2070, with an increase in forest cover of about 322 million hectares (-67 to 890 million ha) [an area almost as big as the US and India combined] in 2050 in pathways limiting warming to 1.5°C with no or limited overshoot”. ²¹

Delaying action will result in larger and more rapid deployment of CDR later, especially if there is a temperature overshoot. Then, large-scale deployment of CDR will be needed to bring temperatures back. ²² Since IAM pathways rely on afforestation, reforestation and BECCS, delayed mitigation can lead to a lot of changes in land use, with negative impacts for sustainable development. ²³ The IPCC points out that “strong near-term mitigation to limit overshoot, and deployment of other CDR methods than afforestation / reforestation and BECCS may significantly reduce the contribution of these CDR methods in scenarios limiting warming to 1.5 or 2C”. ²⁴ “Stronger focus on demand-side mitigation implies less dependence on CDR and, consequently reduces pressure on land and biodiversity”. ²⁵ It adds that: “Within ambitious mitigation strategies…, CDR cannot serve as a substitute for deep emissions reductions”. ²⁶ To put this into perspective, the market for carbon offsets today, which include these CDR measures, reduce global emissions by about 0.1%, according to the Energy Transitions Commission.

But while most scenarios in WG3 still rely on CDR to achieve net-zero, the IPCC is not advocating for large amounts of it. Instead, the reliance on CDR reflects the state of climate modelling and research (see box 2 in appendix). The IPCC discusses the uncertainty, risks and lack of social licence for CDR, such as concerns that large-scale CDR could obstruct near-term emission reduction efforts or lead to an over-reliance on technologies that are still in their infancy. ²⁷ It stresses that there is uncertainty about how much CDR will be deployed in the future and the amount of CO₂ it can remove permanently from the atmosphere. ²⁸9 This is because some measures in the land sector cannot be maintained indefinitely as these sinks will ultimately saturate, while trees can also be cut down, burnt or die prematurely. ²⁹

Box 2. A word about climate models and the potential and limitations of land sector mitigation

Since the last IPCC reports, there have been more assessments of the total mitigation potential of the land sector. ³⁰ These can be split into:

Sectoral models: These estimate the potential of the sectors and/or individual measures. But they rarely capture cross-sector interactions, making it difficult for them to account for land competition and trade-offs. This could lead to double counting when aggregating sectoral estimates across different studies and methods. ³¹ They usually show higher mitigation potential as they include more land-based mitigation options than IAMs. ³²
IAMs and integrative land-use models (ILMs): IAMs assess multiple and interlinked practices across sectors, and thus account for interactions and trade-offs (i.e. land competition). IMLs combine different land-based mitigation options, which are only partially included in IAMs. Both have extended their coverage, but the modelling and analysis of land-based mitigation options is new compared to sectoral models. Consequently, “[Land sector] options are only partially included in these models, which mostly rely on afforestation, reforestation and BECCS”. ³³
Currently, most models do not consider, or have limited consideration of, the impact of future climate change on land. ³⁴.And there is still uncertainty about land’s ability to act as a sink in the future and how this will impact mitigation efforts. ³⁵ Bottom-up and non-IAM studies show significant potential for demand-side mitigation. ³⁶ (see Table 2 in the Appendix)

When evaluating the potential of different land-based mitigation measures, AR6 uses mainly sectoral models and compares to IAM’s, when available. But, AR6 still relies on IAMs/ILMs to devise mitigation pathways. This can be problematic in two main ways:

Climate change impacts on land and future mitigation potential: Given the IPCC WG1 finding that land sink efficiency is decreasing with climate change, relying too much on land to remove CO₂ from the atmosphere could be problematic. This could create a false sense of security and allow for land mitigation to be used as an excuse for not making deep emissions cuts. This is key as many corporations are relying on offsetting emissions in the land sector instead of reducing them.

Unrealistic CDR projections (over-reliance on BECCS and afforestation and reforestation): The volumes of future global CDR deployment assumed in IAM scenarios are large compared to current volumes of deployment. This is a challenge for scaling up. Similarly, the lack of representation of other options makes it difficult to compare different measures and envisage a different future that alters the contribution of land in terms of timing, potential and sustainability.

Appendix – Mitigation potential of different CDR measures

1
Chapter 7, p.4. This is different from emissions of the entire food system, which are estimated to account for 23-42% of global GHG emissions in 2018 – Ch.12, p.4. For sinks there is also a error of aprox +/- 5.2
2
Chapter 7, p.4. This is different from emissions of the entire food system, which are estimated to account for 23-42% of global GHG emissions in 2018 – Ch.12, p.4. For sinks there is also a error of aprox +/- 5.2. Chapter 3, p.42 : But there are still large uncertainties on net CO₂human emissions and its long-term trends. Currently, national GHG inventories (NGHGI) tend to overestimate the amount of CO₂ absorbed by sinks when compared to other global models. There is a gap of ~5.5 GtCO₂ a year between NGHGI and Bookkeeping models and dynamic global vegetation models. The difference largely results from different definitions of what “anthropogenic” means, which leads NGHGIs to estimate that more CO₂ is taken up by sinks.
3
Chapter 7, p.41. The bottom end represents the mean from IAMs and the upper end the mean estimate from global sectoral studies. The economic potential is about half of the technical potential from AFOLU, and about 30-50% could be achieved under USD20 tCO2-eq-1. Note that the IPCC uses a different methodology for individual AFOLU options than for the total sector potential.
4
Chapter 7, p.42. “Economic mitigation potential is the mitigation estimated to be possible at an annual cost of up to USD100 tCO2 -1 mitigated. This cost is the price at which society is willing to pay for mitigation and is used as a proxy to estimate the proportion of technical mitigation potential that could realistically be implemented.”
5
Chapter 7. 42
6
SPM, p.43
7
SPM, p.43
8
SPM, p. 53
9
SPM, p. 55
10
Chapter 7 of WGIII provides an overview of 20 mitigation measures, evaluating the co-benefits and risks from land-based mitigation measures, estimated global and regional mitigation potential and associated costs according to literature published over the last decade.
11
Chapter 7.4
12
Chapter 7, p.6. This is based on land-based carbon offsets (i.e. money from the Clean Development Mechanism, voluntary carbon standards, compliance markets and reduced deforestation).
13
SPM, p. 48
14
The IPCC evaluates previous offsets measures, such as REDD+, offsets within emissions trading systems, among others in chapter 7;Chapter 3, p. 14-15
15
SPM, p. 47
16
Chapter 12, p. 35
17
Chapter 12, p. 35
18
Chapter 12, p.4 and p. 55
19
Chapter 12, p. 5
20
Summary for policymakers, p. 6
21
Chapter 3, p. 6
22
Smith et al. 2019; Hasegawa et al. 2021
23
IPCC 2019, Hasegawa et al. 2021
24
Chapter 12, p. 56
25
Chapter 3, p. 7
26
Chapter 12, p. 38
27
Chapter 12, p. 39
28
Chapter 12, p. 3
29
Chapter 3, p.7
30
Chapter 7, p.40
31
Chapter 7, p.40-42
32
Chapter 3, p. 64
33
Annex III- p.29; Chapter 7, p.86
34
Chapter 7. 42
35
Chapter 7. 116
36
Chapter 3, p. 7