The world community has pledged nearly USD 30 billion to adaptation financing. By 2020, additional financing via the Green Climate Fund—to be equally distributed between mitigation and adaptation—is slated to reach USD 100 billion.

Streck et al., 2012

Adapted from Streck, C. 2012,

Extra facts

  • Many funding sources for agricultural adaptation and mitigation activities are available outside of United Nations Framework Convention on Climate Change (UNFCCC) mechanisms.
  • Climate financing efforts that benefit smallholder farmers include those establishing results-based incentives (Payment for Environmental Services (PES), carbon markets), facilitating access to finance (credit schemes, low-interest loans), reducing or redistributing risks (insurance, guarantees) and creating incentives for external private investments (public, private partnerships (PPPs), supply chain interventions, labelling and certifications).

Adaptation Finance

  • In developing countries, annual agricultural sector adaptation costs are estimated by the World Bank to be USD 2.5 to 2.6 billion a year between 2010 and 2050. A higher estimate, from the UNFCCC, is that incremental investments and financial flows required for agricultural adaptation will total USD 7 billion a year in 2030 (FAO 2010).
  • International financing opportunities for agricultural adaptation include the Adaptation for Smallholder Agriculture Programme (ASAP) of the International Fund for Agricultural Development (IFAD), the Strategic Climate Fund (SCF), the Global Facility for Disaster Reduction and Recovery (GFDRR), the Global Environment Facility (GEF) and grants and loans channelled through the Asia and Africa development banks.
  • An increasing number of countries fund agricultural adaptation, but national-level agricultural development funding generally remains low. For example, the share of agriculture in official development assistance fell from 19 to 3 percent between 1980 and 2006 (FAO 2010). Fewer than a quarter of the African Union countries that pledged under the Maputo Declaration to devote 10 percent of their national budgets to agriculture by 2008 achieved the target by 2009 (CAADP-NEPAD 2009).

Mitigation Finance

  • The UNFCCC estimates that USD 12.25 to 14 billion a year in additional investment and financial flows is required for agricultural mitigation in 2030 (FAO 2010).
  • The most important benefit for farmers participating in voluntary carbon markets is not cash payments, but access to extension systems that improve crop yields and incomes (Shames et al. 2012).

REDD+ Finance

  • In 2009, the Copenhagen Accord committed USD 3.5 billion of fast-start finance to the 2010 to 2012 readiness phase of REDD+ (Reducing Emissions from Deforestation and Forest Degradation). REDD+ today represents 13 percent of climate finance (Nakhooda and Caravani 2011).
  • By 2011—despite USD 4.17 billion in pledges—only USD 446 million had been allocated to specific countries to implement their approved REDD+ projects (Angelsen et al. 2012). Of the USD 446 million that was approved between 2008 and November 2011, USD 252 million has been disbursed.
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Methods, caveats and issues

  • There is considerable uncertainty about mitigation finance and carbon markets, and about the potential role of agricultural mitigation in carbon markets. Achieving significant financing for agricultural mitigation requires not only national and international cooperation, but also the reduction of barriers for smallholder participation in carbon markets (Lipper et al. 2011).
  • Significant limitations of carbon market financing for smallholders have been identified, including financial obstacles due to high upfront project costs, weak local institutions and infrastructure, the low price of carbon and the multi-year period between project implementation and credit verification stages (Shames et al. 2012).
  • Measurement, Reporting and Verification (MRV) of emission reductions and removals is one of the key issues for agricultural mitigation financing, as the costs and types of MRV systems tend to differ according to the finance source and timing (FAO 2009). While short-term finance is readily available, disbursements are slow and there is no sufficient long-term strategy to meet the financial needs of REDD+ (Angelsen et al. 2012).
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