Development of sustainable and fair agriculture is unavoidable for a better future, but hardly reaching the first mile of supply chains today. Indeed, feeding an ever-growing population without deforestation or biodiversity depletion and while managing climate change consequences requires the agricultural sector – including smallholder farmers – to adopt climate-smart and regenerative practices.

When it comes to adopting sustainable practices in the AFOLU sector (Agriculture, Forestry, and Other Land Use), many view voluntary carbon markets as a promising solution to fuel practices’ adoption at scale. Large-scale carbon programs appear particularly interesting in specific countries, such as India, where 90% of the farming population is composed of smallholders.

KEY challengeS

An International Development Bank thus approached Ksapa and an on-site consulting services company to undertake a Scoping Study providing (i) a state-of-play of voluntary carbon markets within the national context, prepared by the local consulting company, and (ii) recommendations, prepared by Ksapa, to support the national government in exploring solutions enabling smallholders to benefit from voluntary carbon markets (VCMs) development.

In this report, recommendations provided had to comply with targets and criteria outlined by the development bank and the national government:

  • Provide potential solutions to design an initiative linking smallholders to carbon markets to seize the unique opportunity brought by VCM market development outlooks in the next decade to bring multiple environmental & social impacts
  • With the objective of increasing smallholders’ revenues and strengthening agricultural supply chains
  • As well as fostering rural development
  • Identify additional funding for smallholder-inclusive development projects
  • And developing a robust pipeline of large smallholder-focused agricultural projects than will drive transition of agricultural supply chains at scale for material impact
  • Last but not least, build solutions that would be usable for other externalities valuation or for regulatory carbon markets

OUR APPROACH

Considering the complexity of such endeavors, in terms of diversity of stakeholders or issues to tackle, Ksapa recommended early on to structure a co-development process involving the international bank and the national government, and potentially other stakeholders and experts, as a strong accelerator to explore the different issues and solutions highlighted.

Ksapa’s report has thus been structured in the same way, first identifying challenges to tackle to then frame the potential solutions.

1. challenges identification

Ksapa kicked-off the process by listing, clarifying, and defining the main challenges to be resolved during the co-development process. Ksapa outlined these challenges based on a comprehensive review of publicly available reports, Ksapa’s experience in the space, and by conducting interviews with major stakeholders in the development of smallholder carbon projects, of which:

  • Public carbon project developer
  • Carbon engineering company
  • Independent carbon expert
  • Carbon platform developer
  • Carbon standard

2. RECOMMENDATIONS FRAMING

  • First, by highlighting key issues and challenges to be resolved, Ksapa outlined some principles and guidelines critical to create the conditions for driving change of practices at scale for the benefit of smallholders.
  • Building upon the review and analysis of the key challenges, Ksapa identified several potential solutions interesting to further investigate. The recommendations provided offer a wide range of solutions, with different level of complexity with regards to design, structuring, and implementation of the solutions.
  • The main solutions identified include clarification of regulatory framework (especially on rules enabling to limit uncertainty and unleash private investment with social and environmental rules), partnerships implementation, development of own regulated carbon platform, development of public authorities led projects, support to research, or innovative blended finance approaches
  • Across solutions, the specific role of the government is emphasized. In this respect, each solution puts forward the government’s role as regulator, promoter, developer, field implementer, and finance catalyzer respectively.
  • Furthermore, Ksapa also provided some recommendation regarding the co-development process for the establishment of the carbon initiative. Ksapa proposed to structure a multistakeholder coalition process, driven by the international bank, the government, relevant national agencies, and complemented by selected external experts and to provide insights and advisory to the coalition.

RESULTS & NEXT STEPS

Ksapa mobilized its internal expertise navigating complex environments, leveraged its experience on carbon projects, and its extensive network of partners to provide the client with a comprehensive understanding of the challenges underlying the materialization of the intended carbon initiative, as well as a clear guidance on the possible solutions that should be explored.

Building upon this Scoping Study, the development bank has many tools and options to drive a co-development process, through a technical assistance facility to build the capacity of stakeholders and kick-start the constitution of the multistakeholder coalition.

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Adrien Covo
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