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Agriculture and the clean development mechanism

  • Larson, Donald F.
  • Dinar, Ariel
  • Frisbie, J. Aapris

Many experts believe that low-cost mitigation opportunities in agriculture are abundant and comparable in scale to those found in the energy sector. They are mostly located in developing countries and have to do with how land is used. By investing in projects under the Clean Development Mechanism (CDM), countries can tap these opportunities to meet their own Kyoto Protocol obligations. The CDM has been successful in financing some types of agricultural projects, including projects that capture methane or use agricultural by-products as an energy source. But agricultural land-use projects are scarce under the CDM. This represents a missed opportunity to promote sustainable rural development since land-use projects that sequester carbon in soils can help reverse declining soil fertility, a root cause of stagnant agricultural productivity. This paper reviews the process leading to current CDM implementation rules and describes how the rules, in combination with challenging features of land-use projects, raise transaction costs and lower demand for land-use credits. Procedures by which developed countries assess their own mitigation performance are discussed as a way of redressing current constraints on CDM investments. Nevertheless, even with improvements to the CDM, an under-investment in agricultural land-use projects is likely, since there are hurdles to capturing associated ancillary benefits privately. Alternative approaches outside the CDM are discussed, including those that build on recent decisions taken by governments in Copenhagen and Cancun.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5621.

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Date of creation: 01 Apr 2011
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Handle: RePEc:wbk:wbrwps:5621
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  11. Pagiola, Stefano & Arcenas, Agustin & Platais, Gunars, 2005. "Can Payments for Environmental Services Help Reduce Poverty? An Exploration of the Issues and the Evidence to Date from Latin America," World Development, Elsevier, vol. 33(2), pages 237-253, February.
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  14. Larson, Donald F. & Ambrosi, Philippe & Dinar, Ariel & Rahman, Shaikh Mahfuzur & Entler, Rebecca, 2008. "A Review of Carbon Market Policies and Research," International Review of Environmental and Resource Economics, now publishers, vol. 2(3), pages 177-236, November.
  15. Larson, Donald F. & Breustedt, Gunnar, 2007. "Will markets direct investments under the Kyoto Protocol ?," Policy Research Working Paper Series 4131, The World Bank.
  16. Antle, John & Capalbo, Susan & Mooney, Sian & Elliott, Edward & Paustian, Keith, 2003. "Spatial heterogeneity, contract design, and the efficiency of carbon sequestration policies for agriculture," Journal of Environmental Economics and Management, Elsevier, vol. 46(2), pages 231-250, September.
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